Once again: the class nature of the Russian state

The Marxist method

"History knows transformations of all sorts." (Lenin)

The question of the class nature of Russia has been a central issue in the Marxist movement for decades. Now, with the collapse of the USSR and the movement in the direction of capitalism, this question assumes an even greater importance. It is not possible to grasp the processes that are taking place in Russia from the point of view of formal logic and abstract definitions. In elementary chemistry, a simple litmus test is sufficient to reveal whether a substance is acid or alkaline. But complex historical processes do not admit such a simple approach. Only the dialectical method, which takes the process as a whole and concretely analyses its contradictory tendencies as they unfold, stage by stage, can shed light on the situation. Endless mistakes occur when we attempt to base ourselves on chemically pure abstractions instead of real historical processes. Thus, we know what a trade union and a workers' party is supposed to look like. But history knows of all kinds of weird and wonderful variants, of the most monstrously bureaucratised trade unions and corrupt reformist parties. A workers' state is roughly like a trade union in power. Under conditions of extreme backwardness, such a state can experience a process of bureaucratic degeneration. Stalinism, as Trotsky explains, is a peculiar variant of Bonapartism—a regime of proletarian Bonapartism.

It is not uncommon to hear even experienced Marxists refer to the Soviet Union, China and Eastern Europe as "workers' states". This is an unforgivable misuse of Marxist terminology. As early as 1920, as we have seen, Lenin gave Bukharin a rap over the knuckles for referring to Russia as a "workers' state". He insisted that it was necessary to add "with bureaucratic deformations". Of course at that time these were comparatively mild deformations. Russia was a relatively healthy workers' state then. There is no comparison with the ghastly bureaucratic-totalitarian monster that emerged under Stalin. Suffice it to recall Trotsky's remark that, if you leave aside the nationalised planned economy, then the state in Stalin's Russia could only be compared to a fascist state. To describe that monster as a workers' state without further qualification is simply an abomination.

The demand for an immediate answer to the question "workers' state or capitalism" seems to have the virtue of clear definition and even political firmness. But in nature, as in society, the attempt to impose a final solution when dealing with unfinished processes is the source, not of clarity, but of endless confusion and mistakes. When it is a question of transitional formations, demands for a black and white, "either...or" solution reveal, not intellectual rigour, but only a formalistic frame of mind which, in its haste to "solve" a problem by applying an external definition in a thoughtless fashion, does not deal with the real processes at all. Nor are formal analogies much use here. What is taking place in Russia has no real precedent in European history since the fall of the Roman empire. If the movement towards capitalism is finally accomplished, it would signify the destruction of all the gains of the October Revolution. This did not occur, for example, with the French Revolution, where the gains of the Jacobean-plebeian movement were liquidated by the Thermidorian reaction in 1794. Thereafter, the movement in the direction of reaction went very far—from Thermidor to the Directorate, Bonapartism, the restoration of the Empire and a new aristocracy, and even the restoration of the Bourbon monarchy on English and Prussian bayonets after 1815. Yet through all these changes, the basic socio-economic gains of the Revolution of 1789-93 remained intact. The fundamental question was the new property relations raised on the foundation of the breaking up of the big feudal estates and the establishment of a mass of small peasant proprietors.

Likewise, the political counter-revolution carried out by the Stalinist bureaucracy in Russia completely liquidated the regime of workers' Soviet democracy, but did not destroy the new property relations established by the October Revolution. The ruling bureaucracy based itself on the nationalised, planned economy and played a relatively progressive role in developing the productive forces, although at three times the cost of capitalism, with tremendous waste, corruption and mismanagement, as Trotsky pointed out even before the war when the economy was advancing at 20 per cent a year. The problem which we now face was also faced by Trotsky in the 1920s and 1930s, when he had the task of analysing the phenomenon of Stalinism. For certain ultra-lefts, the problem was a simple one. The Soviet Union, in their opinion, was already a new class society as early as 1920. All further analysis was therefore superfluous! There was a fundamental difference between this formalism and the careful dialectical method of Trotsky. He painstakingly traced the process of the Stalinist counter-revolution through all its stages, laying bare all its contradictions, analysing the conflicting tendencies both within Soviet society and within the bureaucracy itself, and showing the dialectical interrelation between developments in the USSR and on a world scale.

Here is how Trotsky describes his own method of analysis:

"To define the Soviet regime as a transitional, or intermediate, means to abandon such finished social categories as capitalism (and therewith 'state capitalism') and also socialism. But besides being completely inadequate in itself, such a definition is capable of producing the mistaken idea that from the present Soviet regime only a transition to socialism is possible. In reality a backslide to capitalism is wholly possible. A more complete definition will of necessity be complicated and ponderous.

"The Soviet Union is a contradictory society halfway between capitalism and socialism, in which: (a) the productive forces are still far from adequate to give the state property a socialist character; (b) the tendency toward primitive accumulation created by want breaks out through innumerable pores of the planned economy; (c) norms of distribution preserving a bourgeois character lie at the basis of a new differentiation of society; (d) the economic growth, while slowly bettering the situation of the toilers, promotes a swift formation of privileged strata; (e) exploiting the social antagonisms, a bureaucracy has converted itself into an uncontrolled caste alien to socialism; (f) the social revolution, betrayed by the ruling party, still exists in property relations and in the consciousness of the toiling masses; (g) a further development of the accumulating contradictions can as well lead to socialism as back to capitalism; (h) on the road to capitalism the counter-revolution would have to break the resistance of the workers; on the road to socialism the workers would have to overthrow the bureaucracy. In the last analysis, the question will be decided by a struggle of living social forces, both on the national and the world arena.

"Doctrinaires will doubtless not be satisfied with this hypothetical definition. They would like categorical formulae: yes—yes, and no—no. Sociological problems would be certainly simpler, if social phenomena had always a finished character. There is nothing more dangerous, however, than to throw out of reality, for the sake of logical completeness, elements which today violate your scheme and tomorrow may wholly overturn it. In our analysis, we above all avoided doing violence to dynamical social formations which have no precedent and have no analogies. The scientific task, as well as the political, is not to give a finished definition to an unfinished process, but to follow all its stages, separate its progressive from its reactionary tendencies, expose their mutual relations, foresee possible variants of development, and find in this foresight a basis for action." (Leon Trotsky, The Revolution Betrayed, pp. 254-6.)

The problem of the class nature of the Soviet Union occupied Trotsky's attention right up to his death. Right to the end, he was always extremely conditional on the question of the future evolution of the USSR, while maintaining a principled position on the defence of the Soviet Union in the war. He did not expect the Stalinist regime to last as long as it did. True, in his last work Stalin, he did suggest that the regime might last for decades in its present form, but the book was unfinished at the time of his assassination, and he was unable to develop this idea further. After the war, in a series of works, which, at the time only reached a very small audience, I attempted to develop and extend Trotsky's analysis of proletarian Bonapartism. (See particularly The Marxist Theory of the State, the Reply to David James, and later on, the documents on the Colonial Revolution written in the 1960s and 1970s).

What defines the class nature of the state from a Marxist point of view is undoubtedly property relations. However, here too, the relation is not automatic, but dialectical. The state is not the direct expression of the ruling class—whether it is the bourgeoisie or the working class. Under certain conditions, the ruling clique can manoeuvre between the classes and eliminate the existing property relations. This was the case with the army caste in Syria, Burma, Ethiopia, Afghanistan, as I believe only our documents were able to explain. Now in Russia and Eastern Europe we have a peculiar variant of the same process, but in reverse.

The unusual variant of Bonapartism in Stalinism can only be explained by the fact that the state has raised itself above society. Trotsky predicted that the bureaucracy, particularly its upper layers, would inevitably seek to guarantee its power and privileges by transforming itself into a ruling class. Within a particular historical concatenation of circumstances, the pro-bourgeois wing of the bureaucracy has, for the time being, gained the upper hand. Leaning on world imperialism and the nascent bourgeoisie—the millions of crooks, spivs, and black marketeers, who already existed in the pores of Soviet society—they have already gone a long way in this direction, without provoking a civil war. This is a peculiar mechanism for the carrying out of the counter-revolution. But it is no more peculiar than the "workers' state" from which it arose, or the peculiar way in which the regimes of proletarian Bonapartism established themselves in Eastern Europe, Africa and Asia.

Up to the present time, and contrary to what Trotsky had anticipated, the bourgeois wing of the bureaucracy has partially succeeded in carrying out the counter-revolution in a "cold" way. Partially, but not entirely. The process is not complete. On the basis of the frightful economic and social collapse, not only the working class, but a section of the bureaucracy is beginning to swing the other way. It is possible that this process could lead eventually to civil war. This perspective depends on the movement of the working class, and also partly on which way the army will react. This question cannot be determined in advance. It will depend on a whole series of factors on the national and international scale.

Of course, we have the classical models of revolution and counter-revolution which are familiar to anyone who has read a few lines of Lenin. But there are many other variants known to history. In the nineteenth century, the transition from feudalism to capitalism in Japan was accomplished through the mechanism of the bureaucracy, which, under a peculiar set of circumstances, shifted from one class basis to another without a revolution or civil war. Of course, the transition to capitalism was not a pure one—there were many elements of feudalism in it, which were only eliminated (in another peculiar variant) by the US occupying forces after 1945, under the pressure of the Chinese Revolution. All these events further illustrate the enormous complexity of the question of the state. In 1989 in Eastern Europe, the old regime collapsed without a whimper. In the same way, under certain conditions, it is possible that a bourgeois regime in the West could collapse when confronted with a massive movement of the working class which draws behind it a big section of the petty bourgeoisie. History indeed knows all kinds of transformations!

Successive approximations

As Marx long ago explained, there is no such thing as a supra-historical blue-print. It is necessary to take the material objective reality as it is and then explain it. That is the method of Marxist philosophy. It is not only necessary to see objective reality as it is, but to explain the process that brought it into being, the contradictions encompassing it, the law of social movement which it represents and the future processes of contradictions and change which will envelop it. Its process of birth, development, decay and the changes which will destroy it.

In In Defence of Marxism, Trotsky outlines the way in which a Marxist would pose the question of the class nature of the Russian state:

"(1) What is the historical origin of the USSR? (2) What changes has this state suffered during its existence? (3) Did these changes pass from the quantitative stage to the qualitative? That is, did they create a historically necessary domination by a new exploiting class?" (Trotsky, In Defence of Marxism, p. 68.)

There were many turning-points on the road of the bureaucratic counter-revolution in the period 1923-36. This was by no means a preordained event. The final victory of Stalin was not determined in advance. As a matter of fact, up till 1934, Trotsky held the position that it was possible to reform both the Soviet state and the Communist Parties, a position that led to frequent conflicts with the ultra-lefts. Trotsky's dialectical method was one of successive approximations, which followed the process through all its stages, showing concretely the relation between the class balance of forces in Russia, the different tendencies in the Communist Party and their relationship to the classes, the evolution of the world situation, the economy, and the subjective factor. It is true that he varied his analysis at different times. For example, he initially characterised Stalinism as bureaucratic centrism, a formula which he later rejected in favour of the more precise proletarian Bonapartism. These changes do not reflect any vacillations on Trotsky's part, but only the way in which his analysis accurately followed the process of bureaucratic degeneration as it unfolded.

The method of our analysis of the present events in Russia is in no way different from that of Trotsky. There is not the slightest doubt that the movement towards capitalism in Russia not only exists, but has gone quite far. However, from the standpoint of Marxist analysis, this does not exhaust the problem. The question is: has the process of capitalist restoration reached the decisive point where quantity becomes transformed into quality? Put another way: do we consider that the new property relations have established themselves unequivocally, in such a way that the process is irreversible? Or, on the contrary, is it possible that the movement towards capitalism can be reversed? Upon the answer to this question many things hinge. It is therefore necessary to approach the question very carefully indeed. To determine the class nature of the Russian state it is not sufficient to refer to the percentage of the economy in private hands. It is necessary to analyse the process as a whole, to lay bare the relations between the different class forces involved, and show how the central contradiction is likely to be resolved.

It is possible to have a workers' state with 100 per cent private ownership of the means of production, and also to have a bourgeois state with 100 per cent state ownership. The former was the case with the Paris Commune. The first workers' state in history did not even nationalise the Bank of France, an omission which, as Marx explained, was one of its most serious errors. Even in the first phase of the Russian Revolution, the Bolsheviks did not proceed immediately to nationalise industry. There was workers' control through the soviets, and for about 12 months most of industry remained formally in private hands. The same contradiction would have existed if the capitalist counter-revolution had overthrown the Soviet power. Incidentally, this was a real possibility for a decade after October. Only the correct policies of Lenin and Trotsky prevented it. If Bukharin's position had triumphed, there could have been a capitalist restoration even in the 1920s. This fact is sufficient, on the one hand, to show how the historical process is not at all automatic or predestined, as economic determinists imagine, and on the other hand reveals the decisive role of the subjective factor.

To put the question more clearly still, if Hitler had succeeded in defeating the Soviet Union, what would have happened? The victors would have imposed a fascist regime in the USSR, with a programme of the most savage capitalist counter-revolution. But they could not succeed in carrying this out all at once. They would have had to proceed gradually, as Trotsky predicted, beginning with agriculture, then light industry, and finally denationalising the decisive sector of heavy industry. Even then, it was likely that a big proportion of heavy industry would remain in the hands of the state, which, despite this, would be a bourgeois state from start to finish. These examples are sufficient to demonstrate the correctness of the general proposition that, in order to determine the class nature of a state, it is not enough merely to publish the statistics of ownership. It is also necessary to determine the direction in which society is moving, and, in Lenin's phrase, to say "who shall prevail?" In our view, it is not yet possible to give a definitive answer to these questions.

Dealing with the mechanics of a bourgeois counter-revolution in Russia, Trotsky explains:

"Bourgeois society has in the course of its history displaced many political regimes and bureaucratic castes, without changing its social foundations. It has preserved itself against the restoration of feudal and guild relations by the superiority of its productive methods. The state power has been able either to co-operate with capitalist development, or to put brakes on it. But in general the productive forces, upon a basis of private property and competition, have been working out their own destiny. In contrast to this, the property relations which issued from the socialist revolution are indivisibly bound up with the new state as their repository. The predominance of socialist over petty bourgeois tendencies is guaranteed, not by the automatism of the economy—we are still far from that—but by political measures taken by the dictatorship. The character of the economy as a whole thus depends upon the character of the state power." (Trotsky, The Revolution Betrayed, p. 250.)

We have a duty to say what the class nature of the Russian state is. But this must be approached from a dialectical, not a formal point of view. Here too we are dealing with a process that is not yet finished, and therefore it is impermissible to demand a finished, once and for all definition. It is necessary to see the process as a whole, and to determine at what point the decisive break occurs. In the historical examples already mentioned, the answer is quite clear. When the workers of Paris smashed the old state apparatus, they took political power into their hands and began the task of transforming society. Had the Commune not been overthrown by the Versaillese reaction, it would have inevitably moved to expropriate the capitalists. The contradiction between a workers' state and an economy in the hands of the exploiters had to be resolved one way or another. In France it was resolved when the bourgeois joined hand with monarchist reaction to crush the Commune. In Russia, the Bolsheviks used state power to carry out the expropriation of the landlords and capitalists.

The same decisive break could be seen in the opposite process. The victory of Hitler over the Soviet Union would have been the result of a terrible military defeat. The victorious fascists would have destroyed the old state apparatus and replaced it with a new one which would answer to their needs. It is true that a part of the old Stalinist bureaucracy would have collaborated, and been incorporated into the Nazi state, but this does not alter the fact that the change would have been accomplished by the most violent struggle imaginable. Is it possible to maintain that a similarly decisive change has taken place now?

At what point can one say that a qualitative transformation has occurred? If the majority of the economy, including all the decisive sectors, were firmly in the hands of private owners, this would represent a fundamental change. The law of motion of a planned economy would be replaced by those of the market. We would be in an entirely different situation. At present, it is true, the old order has broken down, but, although strenuous efforts are being made to move in a capitalist direction, nothing stable has yet been put in its place. This means that the whole situation remains incomplete, fluid and unstable.

Understanding the problem

When analysing the development of society, economics must be considered the dominant factor. The superstructure which develops on this economic base separates itself from the base and becomes antagonistic to it. The essence of the Marxist theory of revolution is that economy is ultimately decisive because in the long run the superstructure must come into correspondence with the existing property relations. Once we abandon the criterion of the basic economic structure of society, all sorts of superficial and arbitrary constructions are possible. However, the bare affirmation that, in the last analysis, the class nature of the state is decided by property relations is insufficient.

In the Preface to the Critique of Political Economy, Marx explained that the sum total of the relations of production constitutes the real foundation upon which all aspects of social life—the state included—are grounded. Property relations is merely a legal expression for these relations of production. However, this relationship is neither direct nor automatic. If that were the case, revolutions would not be necessary. The whole history of class society proves that this is not the case. On the contrary, for long periods the superstructure can stand in open contradiction to the demands of the productive forces. Nor does the state at all times directly reflect the ruling class in a given society, as we saw in the first part of the present work. The relationship is complex and contradictory, in other words dialectical.

The Soviet Union is a good example of this dialectical relation. The nationalised planned economy was in contradiction to the bureaucratic state. This was always the case. Even in the period of the first Five-Year Plans, the bureaucratic regime was responsible for colossal waste. This contradiction did not disappear with the development of the economy, but, on the contrary, grew ever more unbearable until eventually the system broke down completely.

The crisis of Stalinism had nothing whatsoever in common with the crisis of capitalism. The latter is the result of the anarchy of the market and private ownership. To this must be added the limiting character of the nation state, which has outlived its usefulness and become a gigantic fetter on the productive forces. This explains why every country, even the biggest superpower, is compelled to participate on the world market. This was predicted in advance by Marx. It is also the reason why the idea of socialism in one country is a reactionary utopia.

In contrast, the crisis of the Soviet Union was the result of the incompatibility between a nationalised planned economy and a bureaucratic totalitarian regime. Different illnesses require different treatments. The solution of the crisis of capitalism demands the ending of the anarchy of private property and the market. In a sense, this has already been partially achieved (although under capitalism it can never be really resolved) through the big monopolies. Inside one of these giants, there is planning of sorts. They make use of the most modern production methods and can even calculate the market for their products with amazing accuracy, making use of computers and other advanced technology. The phenomenon of "just in time" production shows what would be possible under socialism on the basis of a democratic plan of production.

However, the advent of the monopolies, as Marx foresaw, does not abolish the central contradictions of capitalism, but only gives them a sharper and more extensive character. The anarchy of capitalism is not done away with, but reappears in the struggle between the giant monopolies for a bigger slice of the world market. In this, the monopolies are aided by the national state in which they are based. The word "multinationals" is really a misnomer. Although their operations are global, they have not lost their character as national entities. Nobody thinks that General Motors is not an American firm, or Mitsubishi a Japanese one. However, the phenomenon of globalisation—which is only another way of expressing the domination of the world market—is a de facto admission of the need for a world planned economy, for world socialism. This is what Marx meant when he wrote that:

"In the case of the world market, the connection of the individual with all, but at the same time also the independence of this connection from the individual, have developed to such a high level that the formation of the world market already at the same time contain the conditions for going beyond it." (Marx, Grundrisse, p. 161, emphasis in original.)

The international division of labour is a fact. But under capitalism it assumes a monstrous unplanned, chaotic character. The most glaring manifestation of this is the so-called North-South Divide and the staggering debt of the underdeveloped world, which is currently more than $1,900 billion. The division of the world into rival trading blocs is yet another manifestation. The global activities of the banks and big monopolies will pave the way in the next period for a global slump, which may be of similar proportions to the 1929 crash. This is implicit in a situation where powerful monopolies are fighting for markets in every continent; where vast amounts of capital can flow freely from one continent to another at the press of a button; and where the speculation in derivatives on a world scale amounts to trillions and trillions of dollars. The attempt to avoid crises through the derivatives market will ultimately give rise to a deeper crises on far wider scale than in the past.

The necessity for a planned economy, therefore, flows directly from the present situation of world capitalism. It is the only way in which the contradictions can be resolved. But the attempt to reimpose a capitalist regime in Russia by no means flowed as a natural conclusion from the crisis of Stalinism. There was nothing inevitable about it. Here the subjective factor played the dominant role. It is a crushing comment on the degeneracy of the Stalinist ruling caste that, 80 years after October, they preferred to push the Soviet Union back to capitalist barbarism rather than hand power back to the working class. This was a development which the author of the present work had thought ruled out. And indeed for a whole period it was ruled out. As long as the productive forces in the USSR continued to develop, the pro-capitalist tendency was insignificant. But the impasse of Stalinism transformed the situation completely.

Why did the bureaucracy last so long?

In order to explain the present evolution of the bureaucracy in Russia, Eastern Europe, China and the other regimes of proletarian Bonapartism, it is first necessary to understand how the latter arose historically. Proletarian Bonapartism arose out of the impasse of the productive forces on a world scale under capitalism, and the delay of the proletarian revolution in the West. Under these conditions, the crisis of capitalism found its expression in a general tendency towards statisation of the productive forces. The world-wide tendency towards statisation asserted itself in the period of the postwar economic upswing in capitalism in the encroachment of the state in the advanced capitalist countries (Keynesianism, "mixed economy", etc.). Together with the huge expansion of world trade, this was one of the factors which enabled the capitalist system, partially and for a temporary period, to overcome the limitations of the system, achieving results that have no precedent in the history of capitalism. Now it seems that the process has been thrown into reverse. This fact was a striking indication of the limits of private ownership. It was the main reason for the survival of the Stalinist regimes for a much longer period than anyone could have expected.

The tendency towards statisation of the productive forces, which has grown beyond the limits of private ownership, was manifest in the most highly developed economies and even in the most reactionary colonial countries. There is no possibility of a consistent, uninterrupted and continuous increase in the productive forces in the countries of the so-called third world on a capitalist basis. Production stagnates or falls. In the ex-colonial world, the national bourgeoisie, having come to power on the backs of the masses, was compelled to carry out measures of nationalisation. Every one of the bourgeois demagogues—Nasser, Nkrumah, Kenyatta, Nehru, Sukarno, Nyrere—described themselves as "socialists". This fact is a reflection of the impasse of capitalism in the modern epoch, its inability to solve the problems of society, particularly in the backward economies of Asia, Africa and Latin America.

During the 1950s and early 1960s, the Soviet planned economy maintained high rates of growth. The bureaucracy felt itself to be a progressive force. Its self-confidence was reflected in Khrushchev's speech at the 22^nd Party Congress in 1961, when he boasted that the Soviet Union would overtake the USA in all fields within 20 years. The working class, despite all the crimes of the bureaucracy, was prepared to tolerate it temporarily because it was still playing a relatively progressive role in developing the productive forces.

In the period from 1948 to 1975, world capitalism temporarily succeeded in overcoming its central contradictions through the development of world trade, and, to some extent, through measures of "state capitalism". However, as predicted by the Marxists, Keynesian policies inevitably led to an explosion of inflation. Partial statisation did not solve the problems and merely created new contradictions. The realisation of this fact has produced a swing in the opposite direction in the past period. This, in turn, is the expression of the fact that the entire postwar model of world capitalism, which for a period gave spectacular results, has exhausted itself. The attempt to go back to more "normal" methods will produce further convulsions on a world scale. We should remember the effects of the classical policies of balanced budgets and sound finance in the period between the wars.

In its desperate search for a field of investment, the bourgeoisie resorts to what is, in effect, the looting of the state through the privatisation of the nationalised industries and public utilities. Far from representing a progressive development, this is an expression of the dead end of capitalism. Of course, in the short term, spectacular profits are made by the big monopolies, but only at the cost of further closures, sackings, cuts in living standards and state expenditure, which must mean a further reduction of the market and aggravation of the crisis. The enthusiasm of the bourgeoisie for these policies is proof of the old saying, "whom the gods wish to destroy, they first make mad".

Not content with the results of this policy at home, they seek to inflict it on the whole world. The same search for a field of investment leads them to compel the ex-colonial countries to go down the same road of denationalisation. In the past, the colonial bourgeoisie was able to balance between imperialism and the deformed workers' states in Russia and China. Now this is impossible. They are forced to open their markets to predatory imperialism. Their national industries are sold off for a song, not to local capitalists, but to the big multinationals. This will prepare a mighty explosion against capitalism and imperialism in the coming period.

Every action has an equal and opposite reaction. This law applies not only to physics but to some extent to society also. The drive towards privatisation will reach its limits. This is already beginning to happen in Britain. At a certain stage, the tendency towards statisation will reassert itself. Nevertheless, for the last ten years or so, the reaction against statisation appeared to give results, coinciding with the boom of 1982 to 1990. This had a profound effect on the evolution of Russia and Eastern Europe.

Trotsky always showed the dialectical relationship between the rise of Stalinism in Russia and the development of world capitalism. He explained that the Thermidorian reaction in Russia would have led to the restoration of capitalism, if capitalism had not shown itself to be exhausted on a world scale. In the 1930s, the striking successes of the first Five-Year Plans coincided with the greatest slump in the history of capitalism. Although capitalism recovered in the period following the second world war, achieving annual growth rates of 5 to 6 per cent in the USA and Western Europe, and even more in Japan, the Soviet economy achieved even higher averages—ten or 11 per cent, without recessions, unemployment or inflation.

Under these circumstances, the regime of proletarian Bonapartism in Russia was able, not only to survive, but to consolidate itself. It acted as an important point of reference, together with China, to the masses of the ex-colonial world.

However, for the reasons already outlined, the system of bureaucratically controlled planned economy reached its limits by the mid-1960s. The rate of growth in the USSR declined continually throughout the 1970s. This was also the case with the other more industrialised deformed workers' states of Eastern Europe. Despite its earlier successes, proletarian Bonapartism did not solve the problems of society. In reality, it represented a monstrous historical anomaly, the result of a peculiar historical concatenation of circumstances. The ruthless pressure of imperialism, which did not shrink from using the services of the most barbarous forces in society, brought about the collapse of the proletarian Bonapartist regimes in Mozambique, Angola and Afghanistan. The Mengistu regime in Ethiopia foundered on the rock of the national question, the Achilles' heel of all Stalinist regimes throughout history.

The situation in China was different. Starting from a more backward basis, the Chinese bureaucracy faced a position far more similar to that of the Stalinist regime in Russia in the 1930s. The difference is shown by the fact that Beijing is developing the productive forces at a far faster rate than any other country in the world. This means that it is still able to play a relatively progressive role. Although there are important elements of capitalism, the bureaucracy maintains an iron grip on the state. Paradoxically, this is what makes China such an attractive proposition to foreign investors, although that can easily change into its opposite in the coming period.

For the time being, the rapid growth of production is the explanation of the relative stability of the Chinese bureaucracy in contrast to the situation in Russia and Eastern Europe. The ruling elite feels confident in its historic mission. It is motivated, in part of course by the desire to preserve and augment its power, income and privileges, but also by the aim of creating a modern and powerful China (under its control, naturally). The successes of the Beijing regime gives some hope to the rulers of North Korea, Cuba and even perhaps Vietnam, where there has been little or no movement towards capitalism. China remains a point of reference for these regimes. If it were to go towards capitalism, these would also collapse. Yet, this seems unlikely as long as the "old men" remain in control. In common with all the ex-Stalinists, they are guided by purely empirical considerations. They have taken note of the disaster in Russia, and have no intention of going down that road. However, the death of Deng opens up a new struggle as the various wings of the bureaucracy vie for supremacy. As with Russia, the future development of China will be determined by the outcome of this conflict.

How much privatisation?

The different possibilities for capitalist restoration in Russia were set forth by Trotsky in The Revolution Betrayed:

"A collapse of the Soviet regime would lead inevitably to the collapse of the planned economy, and thus the abolition of state property. The bond of compulsion between the trusts and the factories within them would fall away. The more successful enterprises would succeed in coming out on the road of independence. They might convert themselves into stock companies, or they might find some other transitional form of property—one, for example, in which the workers should participate in the profits. The collective farms would disintegrate at the same time and far more easily. The fall of the present bureaucratic dictatorship, if it were not replaced by a new socialist power, would thus mean a return to capitalist relations with a catastrophic decline of industry and culture." (Leon Trotsky, The Revolution Betrayed, pp. 250-1.)

What strikes one is the brilliant way in which Trotsky anticipated the main lines of what is taking place in Russia at the present time. Yet there are also important differences. The class balance of forces in Russia is entirely different now. For example, Trotsky was convinced that the peasantry would be the main social support for capitalist restoration, whereas the opposite is the case. Here again, the reason is that the Stalinist regime survived far longer than Trotsky thought possible. The advances made possible by the nationalised planned economy led to the disappearance of the peasantry altogether. The rural population of Russia, as we have shown, now consists almost entirely of agricultural proletarians who have no interest in going back to small private plots of land. The prospect of working long hours on unproductive small plots of land (a monstrous aberration from an economic standpoint) does not appeal to them—more so since the rural population consists mainly of older people. As Gorbachov found out when he attempted a timid agrarian reform, there are very few takers for such an offer. Since then, the situation has not changed substantially. As The Economist complained: "After two years of radical reform, the lives of 27 million people on 26,692 state and collective farms has scarcely been touched." And the same journal pointed to some pessimistic historical analogies: "Alexander II, liberator of the serfs, was blown up. Pyotr Stolypin, Nicolas II's great reformatory prime minister, was shot..."

It is true that, ultimately, the question of property relations must be decisive in determining the class nature of a state. However, as we have seen, the correlation is not always an automatic one. At decisive turning-points, the way in which a given socio-economic formation will go is decided by a struggle between conflicting class forces. In the process, all kinds of peculiar transitional variants are possible which do not admit an easy appraisal precisely because of their transitional, that is, unfinished, uncompleted character. That the process of capitalist restoration in Russia has begun is self-evident. Indeed, it has gone quite far. But that does not exhaust the matter. At every stage, it is necessary to take stock of the situation. To what extent has the attempt to move in the direction of capitalism succeeded? Under the pressure of imperialism, the Russian government has privatised a large number of enterprises. Nevertheless, the West remains sceptical. This scepticism is graphically expressed in the absence of serious levels of investment from the West. Thus by the end of 1994 foreign investment in Russia was no more than that invested in Estonia!

All kinds of claims are being made concerning the degree to which privatisation has been carried out. It is not always easy to establish the true situation. For example, it is usual to quote the percentage of GDP represented by the private sector, but, on the one hand, the definition of a private company is frequently unclear, including all kinds of co-operatives and other firms that are partly or mainly state owned, and, on the other hand, these percentages are artificially high because of the slump of state owned industries.

The programme of denationalisation began, logically, with small workshops and what is nowadays called the service sector. The Economist (12/3/94) reported that "by the end of 1993, in many areas of the country, virtually all shops, restaurants, workshops and so on were in private hands". The denationalisation of bigger enterprises begun in December 1992 when stakes in 18 firms were "sold" in exchange for privatisation vouchers which were given free to every Russian. On paper, 8,010 middle-sized and large enterprises were privatised in this way during 1993. Between them, they employed 8.3 million workers, or about two-fifths of Russia's manufacturing workforce.

However, the picture is not so simple as these figures would suggest. In February 1993, Moscow News complained that "half the registered small businesses have never done any work at all. Another 30 per cent barely make ends meet, and only 3.4 per cent believe they are thriving". As far as the big enterprises are concerned, Grigory Yavlinsky, head of the pro-reform group Yabloko, pointed out the peculiar nature of this type of privatisation: "What's happened so far is not privatisation, it's collectivisation, which puts the workers and managers in charge of their enterprises. Their interest is in increasing wages, not investment. This is a new problem created by this style of privatisation." Anatoly Chubais, former minister for privatisation, admitted in the paper Privatising Russia, that workers and managers often end up with more than 70 per cent of the shares, and concludes that "concessions to the managers do not appear large on the surface, but in truth they are simply enormous".

By February 1994, 80 per cent of small enterprises had been sold and up to 14,000 medium and large-scale companies were due to be privatised. "However," wrote John Lloyd in the Financial Times (22/3/94), "the financial condition of the privatised enterprises is generally no better than that of their state counterparts (sometimes worse), and the sell-offs have been attended by corruption in some 30 per cent of the cases (according to those who have seen security service estimates)."

How far has the process of denationalisation gone? The most complete set of figures on privatisation are those published by the annual Transition Report of the EBRD, which is specifically devoted to "measuring and defining" the transition to a market economy in Eastern Europe and the countries of the former Soviet Union (FSU). The 1995 report includes very detailed statistics on all the major indices of the economies of the ex-Stalinist states up to the end of 1994. We cite it in preference to the report published in mid-1996, because it contains a more detailed breakdown of the different kinds of privatisation. The amount of privatisation has increased in the last 12 months, but not so much as to change the overall picture. We publish the 1996 statistics in appendix three.

The share of the private sector of the GDP, as estimated by the EBRD in mid-1995 varied considerably, from 70 per cent in the Czech Republic and 65 per cent in Estonia to 35 per cent in the Ukraine, 30 per cent in Uzbekistan and Moldova, 25 per cent in Azerbaijan and Kazakhstan, and a mere 15 per cent in Belarus, Tajikistan and Turkmenistan. The figure given for the Russian Republic was 55 per cent, but closer scrutiny show that this figure is misleading. In all these states decisive sections of the economy remain in the hands of the state. On the other hand, what passes for privatisation is a very peculiar animal in many cases. In order to prevent bankruptcy and closure, the bureaucrats of large enterprises have combined with the workers to "buy" the firm, and the very next day demand subsidies from the state to keep it open. It is not quite clear in practice what the difference is between the situation of such firms before and after privatisation!

The 1995 EBRD report distinguished very carefully between real private ownership ("pure" private sector) and other forms of privatisation such as worker-manager buy-outs, which they do not regard as genuinely capitalist concerns. Frequently, these companies, though formally part of the private sector, are still heavily enmeshed in the state, involving little or no private capital. The fact that this is not just a detail is shown by the fact that the EBRD keeps special tables to show the difference between the private sector and the "non-state" sector. (See appendix three.)

Thus, in Russia, the "non-state" sector in 1994 was estimated to account for 62 per cent of GDP, but the real private sector was only 25 per cent. The figures for the Ukraine were even more striking—the "non-state" sector was put at 41 per cent in 1993, but the real private sector amounted to a mere 7.5 per cent (the 1995 figures were not available, but there is no reason to suppose that the proportion would be much different). In Belarus, where privatisation has hardly advanced at all, the percentage of the workforce employed in the "non-state" sector in 1994 was put at 40.2 per cent, but the figure for the real private sector was only 6.2 per cent. The situation in Latvia was very different. Here the non-state sector is mainly composed of private concerns: the figures of those employed in the non-state sector (58 per cent) differed only slightly from those in the private sector (53 per cent).

The red factory directors

The relatively large number of firms which took advantage of the voucher system to stage worker-management buyout schemes represented a manoeuvre on the part of the managers to hang onto their jobs. This was confirmed by The Economist article which concludes that: "Privatisation has merely legalised the grab for property by the 'red factory directors.' Instead of trying to make their companies more competitive, these peoples main aim is to strike a deal with their worker-shareholders that no manager will be sacked so long as business continues as usual."

The main interest of the industrial wing of the bureaucracy is to maintain control of their enterprises at all costs. The problem is that, if the reform programme had been carried out, many of these factories would be closed. The real position of these bureaucrats was well summed up by an article in Russian Labour Review: "Entranced at the thought of becoming capitalists, the managers are often dismayed at the prospect of becoming the major share-holders in bankrupt piles of scrap metals." (Russian Labour Review, issue 2, p. 33.)

Privatisation was intended to improve the competitivity of the enterprises and boost production. It has had the opposite effect. The voucher system cannot raise capital. Nor does it mean the spreading of ownership over a large number of people. Most people sold their vouchers as quickly as possible to get money for food. Thus, in place of inefficient and corrupt state monopolies, we have the creation of even more inefficient and corrupt private monopolies. This is a recipe for disaster. The huge amount of inter-enterprise debt, and the certainty of large scale unemployment if big firms are allowed to go bankrupt, means that, given the composition of the Duma, and the actual balance of forces, the state would continue to plug the gap with huge subsidies. Unless and until this problem is resolved, the situation will remain unviable.

The figures for the composition of ownership in Russia published by Earle, Estrin and Leshchenko in 1995 show that, out of 439 industrial firms chosen at random, 110 were owned by the state, 140 were workers' co-operatives, 40 had been taken over by the managers, and only 35 were owned by private capitalists, either Russian or foreign (outsiders), and a further 45 were new enterprises (de novo). The state maintained a majority share in 30 per cent of the firms, despite privatisation. Workers and managers hold 51 per cent of the shares in nearly 70 per cent of all privatised companies. The 1995 EBRD report of privatisation in Russia, Hungary, Poland and the Czech Republic concludes that:

"The four countries examined have adopted very different approaches to privatisation, and this has yielded different government structures within the privatised enterprise sector. Several tentative conclusions, largely confirmed by the evidence presented above [see appendix three], can be drawn about these structures. First, state ownership, with large insider ownership, has remained important in most countries. Second, insider ownership, with dominant employee stakes and reportedly managerial control is extensive in Russia, and to a lesser extent in Poland. Third, outside ownership has emerged on a large scale in the Czech Republic, and to a smaller scale in Hungary, but dominant foreign ownership is more common in Hungary and this is more likely to be concentrated ownership with stronger control rights." (EBRD Report, 1995, p.132.)

The thing to see here is the extreme caution with which the strategists of capital approach the situation, which they clearly characterise as a process of transition which has not yet been completed. The picture that emerges is of a hybrid economy in which the capitalist elements are struggling to assert themselves over the state sector, which retains a powerful presence. The process has proceeded in an uneven fashion, being further advanced in the Czech Republic, Hungary and, to some extent Poland, but the situation in Russia, which is the decisive question, is still far from being resolved in a satisfactory way from the standpoint of international capital.

The 1996 EBRD report says:

"The Russian voucher-based privatisation rounds during 1993-94 led to the ownership transfer for more than 15,000 medium-to large-scale enterprises, employing more than 80 per cent of the industrial labour force. This voucher-based scheme gave preference to management and employees and has only to a modest extent resulted in increased performance pressure on management from outside owners... The cash-based second phase of the privatisation got off to a slow start in the first three quarters of 1995... While a number of high profile sales were undertaken ... the circumstances under which the auctions were held were in some cases the source of significant controversy... The pace of privatisation slowed in the first half of 1996."

The 1996 report includes a table which attempts to establish a rough estimate of how far down the road of capitalist restoration the economies of Russia and Eastern Europe have gone. Inevitably, the criteria used are somewhat arbitrary. For example, the percentages for the private sector are based entirely on output. This gives a distorted impression since it leaves out of account both the numbers employed and the value of assets of the firms under consideration. But without this information it is not possible to obtain a precise idea of the relative weight of the different sectors in the national economies. Moreover, it does not take into account the collapse of production in the state sector which would normally include large-scale heavy industry, and therefore gives an exaggerated weight to the service sector, small businesses and the like. Thus, the statement that in most of these countries more than half the GDP is produced by the "private sector", while it is significant, is not at all conclusive.

The most interesting part of the report is the table which attempts to establish how far the movement towards capitalism has gone. The authors specify four separate criteria for the success of the transition to capitalism: 1) percentage of output produced by the private sector 2) functioning of the market 3) the role of the financial sector and 4) reform of legal system. The countries are listed in four columns and given points out of four. So to have a fully functioning capitalist economy, a country should get four out of four. None of them do. The Czech Republic, Hungary and Estonia come very close, but all the others have some problem or other, and the majority are still quite far off from an adequate score. Despite the rudimentary and rather arbitrary character of this chart, it still shows that, even now, the process of capitalist restoration remains incomplete in the big majority of the former Stalinist states.

Let us take the first column. Category one (1) means "little private ownership"; (2) means that the process of denationalisation has only just begun; (3) means that more than 25 per cent of large-scale enterprises are privatised or "in the process of being privatised"; and (4) means that more than 50 per cent has been denationalised. This means that, out of the 25 countries listed, in all but three of them (Czech Republic, Estonia and Hungary), of large-scale enterprises, the state sector still amounts to more than half the total. The second column (small-scale privatisation) reveals a very different picture. No fewer than 14 countries scored four points here. This shows conclusively that the big majority of the private sector in Eastern Europe and even in Russia still consists of small businesses. The large percentage share of the private sector in total output (in Russia it is 60 per cent) is therefore mainly an expression of the catastrophic fall of production in the key heavy industrial sector. But this is decisive for the long-term success of the economies and in particular for jobs.

The table also shows that the pace of capitalist restoration remains extremely uneven. In some countries it has scarcely begun (Belarus, Azerbaijan, Tajikistan, Turkmenistan). The Ukraine also lags behind. In others, including Russia, it has gone further, but the report strikes a note of caution, warning that "Despite impressive advances in market-oriented reform, further major challenges lie ahead in much of the region, including in those countries that have moved the furthest in their market-oriented transition, such as those that have become members of the OECD (the Czech Republic, Hungary and Poland)..." It adds that "the scale of the restructuring problem inherited from the old regime is vast, and the adaptation of production patterns and methods to the conditions of a market economy may take many years. Access by private investors in the region to long-term finance for investment remains limited". Moreover, it notes that in agriculture the situation remains "largely unchanged".

Thus, the strategists of international capital see many difficulties ahead. They say that the consolidation of capitalism will take "many years". But in this space of time there can be all sorts of developments, both internally and externally that can affect the process. The experience of the market economy is already provoking a reaction. The recent scandal in Albania, where the collapse of a "pyramid scheme" led to the ruin of a huge number of people, is an example of this. This in turn has provoked mass demonstrations throughout Albania, and an uprising in the towns in the south of the country. This explosion, which could easily lead to the overthrow of the pro-bourgeois regime, is indicative of the processes taking place in the former Stalinist states. (See Revolution in Albania, by Alan Woods, London, March 1997)

Most importantly, a severe recession in world capitalism will hit these economies very hard. "For the transition to be successful (in the sense that it helps promote development), it must be accompanied by stabilisation," says the report. But that is not likely to happen, as the events in Albania demonstrate. On the contrary. The insistent demand for "restructuring" is shorthand for the wholesale destruction of large-scale industry and consequent mass unemployment. These regimes will pass through one convulsion after another on the economic, social and political plane.

Is capitalist restoration possible?

Is it therefore excluded that a "normal" capitalist regime might succeed in Russia? Theoretically, it is not excluded. But it is necessary to pose the question not theoretically but concretely. Under what conditions would it be possible? If the working class remains passive; if the bourgeois government can push through the present phase of its "reform" programme; if Russia could tolerate unemployment in excess of 25 million without a social explosion; above all, if we are on the eve of a new period of capitalist expansion on a world scale comparable to that of 1948-74—then, almost certainly, Russia could enter into a phase of capitalist development which would rapidly turn her into one of the mightiest countries in the world. The same would apply to China, perhaps even more so. But these are very big "ifs" indeed!

True, the process has gone further in some of the countries of Eastern Europe, particularly the Czech Republic, Hungary and Poland. Here the decisive role is being played by the "Communist" leaders who have capitulated to the bourgeoisie and are doing the dirty work. The imperialists are quite sanguine about this. Their attitude is: if the Communists are doing our work for us, let them get on with it! We can always kick them out later on, when they are discredited.

At the moment the CP leaders in Poland and Hungary are acting as the agents of the bourgeois, but that can change too, especially if there is a slump in the West, or a sharp break with the market in Russia. However, if the present situation continues to exist for three or five more years, it would give time for capitalist relations to gell. The decisive section of the bureaucracy has switched to capitalism and the "Communist" Party leadership has accepted the position. In effect, the bourgeoisie rules through the "Communist" Parties in Hungary and Poland. This in spite of the fact that the masses voted Communist in order to oppose capitalism. They wanted to have a socialist regime but on a democratic basis.

However, there are important differences between Russia and Eastern Europe. Whereas the latter saw "communism" as something imported from without, for the Russian workers, the only tradition they possess is that of Bolshevism and October. It is part of their history. In Eastern Europe the Stalinist regime lasted just over 40 years. In Russia, the memory of the Revolution and its achievements is twice as long, more than enough time for it to sink deep roots in the collective consciousness. For all these reasons, the bourgeoisie regards the CPRF as a different sort of animal to the parties in Eastern Europe. More importantly, the Russian working class can exercise an enormous pressure upon it. This is what causes most apprehension in the West. It is possible that, if Zyuganov comes to power, he will attempt to carry out a "Polish" policy. In fact, he was recently reported to have said that he was willing to reach an understanding with Yeltsin. But for the reasons we have mentioned, it is by no means sure that he could do it.

From the standpoint of Marxist theory, a new ruling class can only emerge and establish itself on condition that it develops the means of production. We have shown that the reason for the collapse of Stalinism was that it was no longer able to achieve growth rates higher than the advanced capitalist economies. Towards the end it did not develop the means of production at all. This meant that it was doomed. Historically, as Marx explains, the bourgeoisie plays a progressive role because it develops the economy, thus laying the material foundation for a higher form of human society—socialism. That is the sole justification for its existence.

The same is true of individual capitalists. Marx regarded them as merely the repositories of the productive forces. Their role was to use the surplus value extracted from the workers to invest in new production. The fact that they did so out of greed, and that they brutally exploited the labour of children and so on, was secondary. As long as they developed the productive forces they were carrying society forward. But what is the position in Russia? In the past six years there has been no development of production in Russia but the biggest collapse in world economic history.

It might be argued that this is only a temporary state of affairs, and everything will be as right as rain in the long run. But as Keynes once said, in the long run, we're all dead! There is no sign of a recovery in Russia despite all the promises. In 1996, there was a further fall of 6 per cent despite the fact that the bourgeois economists were predicting a 10 per cent growth. Naturally, the present fall cannot continue indefinitely. No economy can permanently move downwards. Some sort of recovery may take place some time in 1997 or 1998. But in the first place it is likely to be quite feeble. In the second place, any growth must be set against the horrendous collapse of the last six years. As The Economist sarcastically put it in its Yearly Report for 1997, anything that is thrown off a cliff will tend to bounce! Sooner or later, some kind of equilibrium must be re-established. But what sort? Given the extreme weakness of the nascent bourgeoisie and the general chaos and decline, it will almost certainly be of a very unstable character.

The productive forces of Russia were artificially constrained by the bureaucratic system. They had developed to a tremendous extent thanks to the nationalised planned economy, but were effectively sabotaged by the bureaucracy. The only way the problem could have been solved was through the democratic control and administration of the working class, as Lenin had intended. This could have been achieved on the basis of the advanced economy that existed in the 1980s. But the bureaucracy had no intention of going down that road. The movement towards capitalism did not arise from any economic necessity, but out of fear of the working class, and as a way to safeguard the power and privileges of the ruling caste.

The crisis of Stalinism manifested itself in a falling rate of growth. But can the nascent bourgeoisie do any better? That is the decisive question. We have already shown the colossal achievements made by the nationalised planned economy over decades, in spite of the bureaucracy. By 1980, a tremendous productive potential existed, which the bureaucracy was unable to develop. This is our starting point. The question that arises is: is the bourgeoisie capable of realising that potential? If the answer is affirmative, then we would have before us the prospect of a capitalist Russia which would rapidly challenge the USA as an economic power. Russian capitalism would not be a regime of decline as Trotsky predicted, but a mighty and prosperous superpower, and the October Revolution and the planned economy that issued from it would be mere episodes, the real significance of which was to prepare the way for the triumph of the market. But that is a supposition that remains to be proved.

Russian capitalism will stand or fall on its ability to develop the economy and above all raise the productivity of labour. How can this be done? Historically the main way of achieving an "economy of labour time" was by investing in labour-saving devices (machinery). This was, of course, not done out of any idealistic motives, but in the search after profit and in order to get an advantage over competitors. The contradiction is that, by increasing the amount of constant capital in relation to variable capital, the capitalist is faced, sooner or later, with the tendency of the rate of profit to fall. But that is another matter. Suffice it to say that the progressive function of capitalism consists precisely in this: that it leads to a greater economy of labour time through the general introduction of new machinery and techniques.

We have seen that Stalinism, on the basis of a nationalised planned economy, created a colossal productive potential, but was unable to use it because of its inherent contradictions. But what is the situation now? There is very little investment in production. The nascent capitalists show no interest whatsoever in investing in productive activity, but instead engage in speculation, swindling, robbery, murder and above all the systematic plunder of the state. There can be no talk of increasing labour productivity on this basis. In fact, production has collapsed.

Such sections that are reviving are almost exclusively in the service sector and are mainly on a very primitive basis, like selling goods in the street, or small businesses, often of a dubious character, which sprout and disappear overnight. There has even been a partial return to barter. This does not signify a move towards capitalism (Marx points out that the establishment of a money economy, and thereby the abolition of barter, is the prior condition for a capitalist economy on even the most primitive basis), but is simply another symptom of chaos. Paradoxically, the prior condition for the success of the nascent bourgeoisie is the destruction of whole swathes of Russian industry. Of course, we know all the arguments about creative destruction and the rest of it. But the fact is that if these plans are put into effect, it will spell calamity for the Russian economy.

Domination of world economy

The most decisive question in the long run is the world economy. Russia is far more dependent upon world markets than ever before. More dependent by far than the former Tsarist regime. On the face of it, Russia is the ideal country for foreign investors. It is potentially a big market, with a highly skilled and educated workforce on ridiculously low wages—the equivalent of seven dollars a month for a skilled worker—and has vast natural resources. Yet we are faced with a paradox. To the present time, the amount of direct foreign private investment in Russia has been extremely low. True, after Yeltsin's election, the attitude of Western investors has changed somewhat. The level of foreign private investment doubled in 12 months from $1 billion to $2 billion. But this result is not as good as it seems. Even at this level, the investments remain very feeble. Just compare them to China's incoming foreign investment—$40 billion in 1996 alone, and a total of $120 billion in the last decade, more than 20 times the figure for Russia.

These figures refer to company investment. To this must be added bank lending, but that does not amount to much, and money spent on the Stock Exchange. That has certainly been booming of late, but this is of a highly speculative nature—gambling on stocks and shares and the purchase of government bonds—which does not necessarily provide any real benefit to the Russian economy. For example, the sale of government bonds provides the Russian authorities with cash to pay its debts, but does not assist in developing the productive forces, and must be paid back with interest. Far from representing productive investment, it is a huge drain.

Even if they did invest, they are only really interested in certain sectors, mainly oil and raw materials. Russia has indeed got vast reserves of oil, gas and all sorts of minerals. On the basis of a genuinely socialist planned economy, it could be the richest country on earth. But what the acceptance of the West's advice would do, would be to put Russia in the position of a backward third world economy that imports consumer goods and exports raw materials. That would suit the imperialists and multinationals very well. But the Russian bureaucracy and army, and even that section of the nascent bourgeoisie which had inherited the big industries, would not be so pleased! In the most optimistic scenario it would mean that certain areas would get investment but the rest would remain backward and poor—just as before 1917.

The foreign monopolies indeed have their eyes fixed on Russia's oil, gas and raw materials. But even if they invest here, with the exception of coal, few of these sectors employ much labour. Gas is particularly capital-intensive. So investments here will not create many jobs. On the other hand, the West is using the IMF to force Moscow into allowing the unprofitable big firms to go bankrupt. Millions of workers are employed in these industries. The pressures of the IMF threatens to cause an explosion. That is why the Russian government has been dragging its feet. Foreign capital is notoriously fickle, especially in the present epoch. It can flow in and out with amazing rapidity. At the moment the international bourgeoisie are pleased with Russia. At last things appear to be going their way. They imagine that, after Yeltsin's victory, the Communists are finished and the working class is out of the picture. They are purely empirical in their judgements, and they are wrong. The situation in Russia can change in 24 hours. Just when they are congratulating themselves that everything is settled, there can be an absolute explosion which will blow their illusions sky-high.

The question is: why is the investment in Russia so low? The answer was given recently by the general director of the Moscow office of Deutsche Morgan Grenville, the German-owned investment bank as follows:

"'I do not think anything has changed so drastically in Russia in the past few weeks. It is simply a question that a new year has come and fund managers have made new asset allocations,' he said. 'But we do not think that economic reform is irreversible in Russia, and that is why it is critical that the president remains at the helm.'" (Financial Times, 10/1/97, my emphasis.)

These comments express the attitude of the strategists of capital very clearly. At the moment the dominant tendency is in the direction of capitalism, but it is not complete and may be reversed. The strategists of capital are realists. They know this very well. That is why they do not invest and also why they are pressurising the Russian government to proceed with a suicidal policy.

The central problem remains investment. Where is the nascent bourgeoisie going to obtain its capital? It cannot get it from the peasantry, because the peasantry no longer exists. What we have in Russia is a rural proletariat, which has no interest in transforming itself into a class of small proprietors. They are mainly old people. The young men, for decades, joined the army and were in no hurry to return to the village after they were discharged. Most of those left have got used to the collective system which at least gives them a certain security. That is why the plans for land privatisation have had almost no echo in the countryside, although they were first put forward by Gorbachov.

Bourgeois economists traditionally attach a great deal of importance to savings as another source of investment. Through the banks, building societies and pension funds, they have access to a large amount of money from millions of small savers, all from the working class and the middle class, which they use for investments. A high rate of saving has therefore historically been an important element in the process of capital accumulation. In the Soviet Union, there was actually a very high rate of saving. This mainly reflected the lack of consumer goods which people wanted to buy.

It has been estimated that if the Soviet car industry had produced enough cars, the level of car ownership in Russia would have been higher than in Britain in the early 1980s. The cars were not produced because the bureaucracy had other priorities, but the purchasing power was there. But what about now? Cars are still not being produced in anything like enough numbers. Foreign cars are being imported—mainly expensive Mercedes for the Mafia capitalists who pay in dollars. But the rouble savings of ordinary people have been wiped out by inflation. Quite apart from the disastrous human consequences, it does not develop the economy, but completely undermines the internal market by destroying the purchasing power of the masses and liquidating an important potential source of capital for investment.

If the bourgeoisie could really establish a firm control of Russia and achieve something resembling stability, it could attract foreign investment. There is no reason why not, considering that Russia has a large, educated working class with extremely low wage rates. After all, they invested heavily in Tsarist Russia, and they are investing large amounts in China at the present time. The difference is that they feel (wrongly) that their investments in China are safe (they thought the same about Tsarist Russia!). But why do they not invest in Russia? They do not invest in Russia precisely because they believe that their investments would not be safe.

Marx explained the process whereby free competition begets monopoly. But monopoly in turn prepares the way for state ownership. The spectacle of the big Russian monopolies enriching themselves at the expense of the people will provoke a burning sense of anger. It is not like the West where people have had generations to get used to capitalism. They might not like what flows from it, but most people regard it as inevitable and almost natural. They do not normally question the capitalists' God-given right to own industry and exploit labour. But in Russia things are different. For generations the people have got used to a society where the means of production were in the hands of the state, and the state, at least nominally, was supposed to stand for the interests of the working people. The big majority believe that the owners of the privatised enterprises are just crooks who have stolen the people's property. And this is entirely correct. Capitalism has no legitimacy in the eyes of the working class. This is a very important difference with the West, and one that can have enormous consequences in the next period.

The present regime does not represent progress but a monstrous regression. The horrors of corrupt gangster capitalism are impressed upon people's minds every day that passes. They brings new meaning to the words of Engels: "It is the Darwinian struggle for existence transferred from Nature to society with intensified violence. The conditions of existence natural to the animal appear as the final term of human development." (MESW, Socialism Utopian and Scientific, by Engels, Vol. 3, p. 143.) Looking back on the present period from a broader historical perspective, it will be seen that the temporary aberration was not the October Revolution, but Stalinism and the rotten regime of Mafia capitalism that attempted to replace it.

Can the Russian bourgeoisie play a progressive role?

Socialism means that the development of industry, technique, science and culture stand on a higher level than the most developed capitalist society. In that case, there is no question of society reverting to a more backward system such as commodity production. Such elements of small commodity production that remained would gradually disappear and be replaced by superior socialist forms. Compulsion would not be necessary to the degree that the small farmers and businessmen see for themselves the immense advantages of the new economic formations. This picture of a workers' state is correct, but it is only an abstraction. The workers' state that was established in Russia in 1917 was not on a higher economic level than Britain and the USA, but on a very primitive basis. Under the circumstances, the specific weight of the bourgeois and petty bourgeois elements was enormous. As long as the working class, represented by the Bolsheviks, maintained control of the state, the pressure of the bourgeois NEPmen and their allies, the wealthy peasants could be kept at bay. Nevertheless, the danger of capitalist restoration was very real, as Lenin and Trotsky repeatedly warned. By the end of the civil war, the process of social polarisation began to create an alarming situation:

"The peasantry," wrote Trotsky, "was becoming polarised between the small capitalist on the one hand and the hired hand on the other. At the same hand, lacking industrial commodities, the state was crowded out of the rural market. Between the kulak and the petty home craftsman there appeared, as though from under the earth, the middleman. The state enterprises themselves, in search of raw material, were more and more compelled to deal with the private trader. The rising tide of capitalism was visible everywhere. Thinking people saw plainly that a revolution in the forms of property does not solve the problem of socialism, but only raises it." (Trotsky, The Revolution Betrayed, p. 26.)

Lenin had warned many times of the danger that the petty bourgeois masses in Russia could link up with foreign capital, creating a formidable restorationist block. That is why he and Trotsky fought implacably in defence of the state monopoly of foreign trade which Stalin and Bukharin originally wanted to abolish. The victory of the Stalin faction over Bukharin's Right Opposition signified the defeat of the bourgeois restorationist trend, but did not remove the danger. The conflict between the nationalised property forms established by October and the nascent bourgeoisie at that time was solved in favour of the former. The decisive section of the Stalinist bureaucracy, in order to defend its power and privileges, leaned on the support of the working class to crush the kulaks and NEPmen. But, under the given conditions, this did not mean the restoration of a regime of workers' democracy, but, on the contrary, the consolidation of a bureaucratic totalitarian state.

The defeat of the nascent bourgeois elements was achieved by the most monstrous Bonapartist means such as the madness of forced collectivisation which alienated the peasants and disorganised Soviet agriculture for generations. Stalin imagined that it was possible to eliminate the danger of capitalist restoration by administrative means and naked force. This was an illusion. The real danger to the nationalised planned economy came from the extremely low level of the productive forces, low labour productivity and general poverty and, above all, from imperialist encirclement, where the main enemies of the Soviet Union enjoyed a higher level of economic development, despite the crisis of world capitalism.

Within the edifice of bureaucratic planning, the NEPman elements had not disappeared, but worked in a disguised way. In the absence of workers' control and administration of industry, society and the state, to repeat Marx's phrase, "all the old crap" revived. The dual nature of the transitional state, in which elements of socialist planned economy coexisted with bourgeois norms of distribution, inequality and corruption, acted as a fertile breeding ground for all kinds of swindling and theft which, even at the time of the first Five-Year Plan, swallowed up a large and growing part of the surplus produced by the working class.

"Capital comes initially from circulation," writes Marx, "and, moreover, its point of departure is money." (Marx, Grundrisse, p. 253.) Marx explains that capitalism, in its most primitive and underdeveloped forms, usurers' and merchant capital, makes an appearance long before the objective conditions for the establishment of the capitalist mode of production have arisen. In pre-capitalist societies, however, the phenomena related to merchant capital do not play a productive role.

When society had not yet reached the level when commodity production was possible as the norm, trading peoples like the Phoenicians, Carthaginians and Jews appeared at the margins of the economy, appropriating the surplus produced by other, less developed peoples through exchange. In the ancient world, these activities were closely identified with cheating, robbery, kidnapping and piracy. They arose in the "interstices" of society, where they acted as a disintegrating influence on the existing socio-economic order. In the ancient world, whenever it got a hold, merchant capital hastened the dissolution of the old gens society and inevitably led to slavery. Later on, in the Middle Ages, usury and merchant capital played a similar role in undermining feudalism:

"With semi-barbarian or completely barbarian peoples, there is at first interposition by trading peoples, or else tribes whose production is different by nature enter into contact and exchange their superfluous products. The former case is a more classical form. Let us therefore dwell on it. The exchange of the overflow is a traffic which posits exchange and exchange value. But it extends only to the overflow and plays an accessory role to production itself. But if the trading peoples who solicit exchange appear repeatedly (the Lombards, Normans, etc. play this role towards nearly all European peoples), and if an ongoing commerce develops, although the producing people still engages only in so-called passive trade, since the impulse for the activity of positing exchange values comes from the outside and not from the inner structure of its production, then the surplus of production must no longer be something accidental, occasionally present, but must be constantly repeated, and in this way domestic production itself takes on a tendency towards circulation, towards the positing of exchange values." (Marx, Grundrisse, p. 256.)

And he further developed this idea in the third volume of Capital:

"The development of commerce and merchant's capital gives rise everywhere to the tendency towards production of exchange-values, increases its volume, multiplies it, makes it cosmopolitan, and develops money into world-money. Commerce, therefore, has a more or less dissolving influence everywhere on the producing organisation, which it finds at hand and whose different forms are mainly carried on with a view to use-value. To what extent it brings about a dissolution of the old mode of production depends on its solidity and internal structure. And whither this process of dissolution will lead, in other words, what new mode of production will replace the old, does not depend on commerce, but on the character of the old mode of production itself. In the ancient world the effect of commerce and the development of merchant's capital always resulted in a slave economy; depending on the point of departure, only in the transformation of a patriarchal slave system devoted to the production of immediate means of subsistence into one devoted to the production of surplus-value. However, in the modern world, it results in the capitalist mode of production. It follows therefrom that these results spring in themselves from circumstances other than the development of merchant's capital." (Marx, Capital, Vol. 3, pp. 326-7, my emphasis.)

Marx describes the Jews existing "in the pores of Polish society", in the sense that they were not part of the existing feudal mode of production, but acted as middlemen, buying and selling, and lending money to the nobility and peasants. In the Middle Ages, usurers' capital remained as an unproductive hoard. Thus, capital appears first on the stage of history as an unproductive phenomenon which does not arise out of the existing mode of production, but penetrates it from without and gradually undermines it. The degree to which it succeeds in this depends on the solidity of the existing order. In the early stages of feudalism, to the degree that usurers' and merchant capital existed, it could not lead to the dissolution of an economic system which was still developing the means of production. But at a later stage, in the epoch of feudal decay, these elements played a central role in hastening the collapse of the existing society.

Feudalism was essentially based on the production of use-values, not commodities. There was no need for self-sufficient feudal estates to trade with each other. Primitive forms of capitalism (merchant and usurers' capital) insinuated themselves in the "pores" of the feudal economy, fulfilling an important role in relation to trade. The Jews fulfilled a need in the general economy that could not be fulfilled by anyone else—as professional traders. Moreover, Marx explains that in underdeveloped societies "commercial profit does not only assume the shape of outbargaining and cheating, but also arises largely from these methods". (Marx, Capital, Vol. 3, p. 386.)

At this stage in its development, capital does not create any wealth, but acts as a mediator—a middleman—playing a role in circulation which cannot be played by the existing system of production. In the Soviet Union, the system of bureaucratic planning created numerous bottlenecks which had an increasingly paralysing effect upon circulation. This was one of the main brakes on the economy, which would have ground to a halt had it not been for the corrupt and illegal practices known as blat, which circumvented the official channels, thus permitting goods to circulate more rapidly—at a price. This phenomenon existed from the earliest period of the Five-Year Plans, as Victor Serge points out:

"We now come to the unique domain of blat, a Russian slang term which signifies 'combination.' From the bottom of economic life to its summit the combination reigns. Heads of trusts, directors of banks or of plants, administrators of state commerce, administrators of colkhozes or of artels, store managers, employees—all resort to it every day. All the wheels of the colossal machine are oiled and fouled by it. Its role is as great as that of planning, because without it the plan would never be realised. The combination of a multitude of departments makes up for the insufficiency of wages, for the defects in statistics, for administrative negligence, for bureaucratic unintelligence; it piles miracle upon miracle. A shoe-factory director receives, in accordance with the plan, a permit for a ton of leather to be taken from the neighbouring tannery in February. The tannery, even though it conforms with the directives, answers that it finds it impossible to deliver these raw materials before March. The production plan of the shoe factory is going up in smoke; but our director is not upset by it. He expected that. 'Look here, old man,' he will say to his colleague from the tannery, 'you wouldn't pull a trick like that on me, would you?' 'Certainly not, we only need to get together on it. Service for service, eh? The tanners are lacking shoes, dear comrade; couldn't you have five hundred pairs for me within the fortnight?' In the end, the tanners will be shod—not so well, to be sure, as their factory director and his family, whose boots the whole town will admire; and the shoe plant will execute its plan, which will bring its directors premiums, a banquet, etcetera. It will be clearly perceived, when the problem of transporting the raw materials from one plant to the other arises, that there are neither cars nor trucks available, for entirely peremptory reasons; but here again the beneficent combination will intervene. Railway men and lorry-drivers will find that it pays." (Victor Serge, Destiny of a Revolution, pp. 43-4.)

Parasitic middlemen

The phenomenon described here bears a striking similarity to the activities of the parasitic middlemen in pre-capitalist society. It does not flow from the nationalised planned economy, but from the isolation of the Revolution in conditions of appalling backwardness and the bureaucratic regime that arose from the loss of political power by the working class. These elements—blat, corruption, swindling, black marketeering—far from dying away, actually grew with the development of the Soviet economy, absorbing an ever increasing amount of the surplus and cancelling out the gains of the planned economy. In the same way that usury and merchant capital dissolved and undermined pre-capitalist society from within, so the alien bureaucracy, that "parasitic excrescence on the planned economy" gradually undermined the system. In just the same way, a parasite can eat away and eventually kill the host animal upon which it feeds.

These illegal practices were identified with a large and growing underworld of crooks, spivs and speculators which existed in the "pores" of Soviet society. Just as the Jewish middlemen existed in the "pores" of Polish feudalism. They were not part of the nationalised planned economy and did not arise from it, but represented a cancerous tumour and a parasitic excrescence on it. This was a graphic expression of the glaring contradiction between the needs of the nationalised planned economy and the suffocating grasp of bureaucratic control. The Soviet middlemen, the embryonic expression of the nascent bourgeoisie, played no role in production, but became necessary to "oil" the works which were increasingly disrupted by bureaucratic bungling, sabotage and red tape.

In return for this "service", the middlemen extracted a high and increasing tribute from society in the form of swindling, cheating and robbery which absorbed an ever growing part of the surplus value. Here, from the beginning, there were two contradictory but mutually inseparable elements: on the one hand, the bureaucracy which held political power and controlled the state, on the other hand, a large number of actual criminals, black marketeers, spivs and speculators who competed with them for a slice of the surplus value. The bureaucracy for a long time tried to keep these elements under control by administrative means, fearful that this unbridled looting of the state could undermine the whole system of planned economy, and with it, their own privileged position. Hence, we had the contradiction of the introduction of the death penalty for economic crimes at a time when the USSR was said to be "building communism". But no amount of arrests, imprisonment and shooting could eradicate a disease which was the inevitable result of a corrupt totalitarian regime. After all, it was only the difference between "legal" and "illegal" theft!

Here we have a phenomenon which closely parallels the historical process of the primitive accumulation of capital described by Marx in precapitalist societies. But there is a difference. The capital accumulated in the Middle Ages by the merchants and usurers was originally unproductive. Derived, as Marx explains, from cheating and "outbargaining" outside the productive process, it ended up as an unproductive usurer's hoard. However, with the rise of capitalism in the fifteenth and sixteenth centuries, the usurer's hoard formed the basis for the process of capitalist accumulation proper, first as mercantile capital, and at a later stage as industrial capital. This was the period of capitalist ascent, when the bourgeoisie on a world scale played a relatively progressive role in the development of the productive forces.

Without doubt, the cheating and plundering of the nationalised economy by the hordes of "Soviet" crooks and speculators played a similar role to the activities of the middlemen under feudalism. However, this is not the sixteenth century, but the epoch of imperialist decay. On a world scale, capitalism no longer finds itself in a period of general historical advance but, on the contrary, in a period of downswing in which "booms" have an increasingly sickly and unstable character, and recessions are increasingly prolonged. This is the decisive factor in the equation when we consider the prospects for capitalist restoration in Russia.

Historically, capitalism emerges as a large number of small capitals. Starting with the period of primitive accumulation of capital, in the fourteenth and fifteenth centuries, the bourgeoisie in the West gradually passed through all the phases of co-operation, manufacture and finally modern industry. However, Russian capitalism did not pass through the classical phases of capitalist development and could not do so. In common with the weak bourgeoisies of colonial countries, it came on the stage of history too late. It was entirely dependent on big foreign capital. This would be even more so today. Just as the weak Russian bourgeoisie at the end of the nineteenth century could not merely repeat the stages already experienced by Western Europe centuries earlier, so the nascent bourgeoisie today will not be permitted to accumulate capital in a slow, organic way. This is ruled out by the existence of the world market and the law of combined and uneven development. More than ever, it will be compelled to participate on the world market, where its products are hopelessly outgunned.

The imperialists are putting heavy pressure on Moscow to press on with the so-called reform programme, irrespective of the consequences. This is a crazy policy, even from the standpoint of the nascent bourgeoisie. The West has taken this line because they realise that the process of capitalist restoration in Russia is incomplete and are anxious that it should be pushed to a conclusion. But the idea of completely dismantling state-owned industry, allowing big factories to go to the wall, creating mass unemployment with all the social convulsions that it would mean, is utterly irresponsible.

Likewise the demagogy about liberalisation and opening up the Russian economy are policies which would amount to handing over Russia's wealth to imperialism on a plate. It makes no sense at all historically. Britain, Germany, France and America all had a protectionist policy until they were strong enough to defeat their rivals on the world market, whereupon they became converted to the virtues of "free trade". And the state sector played a key role in all these economies, especially in the period of capitalist upswing from 1948 to 1974. State intervention also played a crucial role in Japan, which is always held up as a model. Yet Russia is being pushed into carrying out a policy in the opposite direction, which will have extremely negative effects on the economy. Of course, this is a matter of indifference, not only to the imperialists but also to the nascent bourgeoisie whose wealth is acquired in an entirely parasitic way.

The model adopted by the Chinese Stalinists was much more intelligent from this point of view. Beijing has learned from the Russian experience, and is determined to avoid it. The bureaucracy maintains an iron grip on the state, and permits capitalism to exist in certain areas while the decisive sectors of industry remain in state hands. Of course, this mixed development creates all kinds of new contradictions and cannot last indefinitely. With the death of Deng, a struggle is opening up between the different factions of the bureaucracy, the result of which it is difficult to foresee. But the contradiction must be resolved one way or another. Ultimately, either the capitalist sector will overcome the elements of nationalised planned economy, or the opposite process will occur. This depends to a great extent on what happens to the world economy in the next few years.

The fate of the Russian economy will not be resolved by the activities of street vendors, small businessmen, stock exchange speculators or MacDonalds. That is no kind of base for a huge nation of 150 million people with a big industrial base in the last decade of the twentieth century. No. Russia's will be determined by the power of its industries and technology. Russian capitalism is already highly monopolised because it arises from the denationalisation of big state-owned companies. Many of these firms are not really viable in terms of the world market. Is it possible to achieve better results on such a basis? One would have to be a bit naive to believe that.

In the Middle Ages and in the early period of capitalism, primitive accumulation was achieved in a number of ways. Usually this entailed the brutal expropriation of whole populations and classes involved in pre-capitalist economic modes of activity—the native population of North and South America, the Negro slaves on the plantations, the peoples of the colonies in general, the dissolution of the monasteries under the banner of the Reformation, and so on. But the main source of primitive accumulation was the peasantry. First the peasants were fleeced by the medieval trader and usurer. Later they were openly robbed in the Enclosure Acts and the Highland Clearances in Scotland. Thus, as Marx says, Capital came onto the scene of history "dripping blood from every pore".

Of course, Marxists cannot have a sentimental attitude to this question. Despite its brutal exploitative character, capitalism ultimately played a progressive historical role, because it developed industry, agriculture, science and technique to unheard-of heights. That was its sole justification from a scientific point of view. As we have seen, the Bolsheviks took power in a backward country with a shattered economy. The material basis for socialism was absent in Russia, but existed on a world scale. The delay of the international revolution compelled them to face up to the problem of how to begin to develop the economy in isolation.

Lenin originally contemplated quite a long period in which the private sector would continue to play an important role. Since the working class did not possess a sufficient cultural level or experience to run industry, he proposed that the capitalists be allowed to continue to run their factories, while obeying Soviet laws on wages and conditions, and the workers would operate a system of workers' control. The state would be firmly in the hands of the working class, and would hold in its hands a number of key economic levers, through the nationalisation of the banks and the centralisation of credit, for example. This is what he called "state capitalism". The private sector would continue to exist, but under the strict control of the working class. Gradually, through workers' control, the workers would acquire the necessary experience to be able to manage without the capitalists. But long before this, Lenin expected that the workers of Europe would come to their aid.

Lenin was even prepared to allow big foreign companies to invest and open factories in Russia, for example to open up Siberia with its huge resources. But none of these plans came to fruition. The reason was that the Bolshevik regime represented a mortal danger to world imperialism. Far from investing in Soviet Russia, they did their best to overthrow it. When direct armed intervention failed, they resorted to an economic blockade. This is not the place to go into the debates which occurred at that time on the subject of industrialisation. Suffice it to say that the question of the relationship between the proletariat and peasantry occupied a central place. Cut off from the world market by the imperialist blockade, the only possible source of obtaining funds for investment in industry was the peasantry.

In the classical period of primitive accumulation, the nascent bourgeoisie of England used terrible violence against the peasantry in the notorious Enclosure Acts. This did not prevent them from holding up their hands in horror when the Bolsheviks were compelled to requisition grain to feed the starving towns in the period of War Communism. As we have seen, these temporary emergency measures were replaced by the NEP in 1921. A private market in grain was established, and the peasants were required to pay a tax in kind. The rightwing policy of leaning on the kulaks advocated by Stalin and Bukharin enormously strengthened the capitalist tendencies in the countryside. Trotsky and the Left Opposition warned of the danger in this. They advocated a tax on the rich peasants and measures of socialist industrialisation, Five-Year Plans and a policy of gradual collectivisation.

The weakness of the workers' state and the strengthening of the nascent bourgeoisie in the person of the kulaks and NEPmen placed the Revolution in grave danger. Finally, in a panic reaction, Stalin broke with Bukharin and carried out a policy of forced collectivisation and the "liquidation of the kulaks as a class". This led to a catastrophe, as we have seen. Under Stalin the funds for industrialisation were achieved partly by squeezing the peasants, and partly also by squeezing the working class. In a sense, this played a similar role to "primitive accumulation" but under a deformed workers' state. The surplus was not appropriated by private capitalists but by the state. While a portion of it was absorbed by the bureaucracy for its own consumption, all sorts of luxuries and perks, the bulk of it was ploughed back into industry.

Can it be assumed that the elements of primitive accumulation in Russia will play the same role in developing the productive forces as did usurer's and merchant capital in the period of capitalist ascent? Experience speaks against such a possibility. Russian capitalism has revealed itself from the outset as corrupt and degenerate. It is Mafia capitalism, and continues to operate as such. Its main concern is not the development of the productive forces, but robbery, swindling and cheating. Its methods include kidnapping, murder and extortion. Along this road lies not progress, but only barbarism.

It is futile to complain, as Western commentators frequently do, that what is required is not this capitalism, but some kind of "normal" capitalism, healthy, progressive and democratic. Such a "normal" capitalism has never existed. Indeed, the search for social norms is in general a waste of time. Social phenomena must be analysed concretely, as they arise in a given historical context. Just as it is impossible to understand the monstrous deformed workers' state of Stalinism on the basis of the abstract norm of a "workers' state" in general, so it is impossible to shed light on what is now happening in Russia by referring to the texts of Adam Smith and Ricardo. Both Stalinism and Mafia capitalism are products of concrete historical conditions nationally and internationally. The deformed workers' state was an expression of the historical backwardness of Russia and the isolation of the revolution. Mafia capitalism is an expression of the fact that the Russian bourgeoisie has arrived too late to play a progressive role, and that, on a world scale, the capitalist system has exhausted itself.

The economy is decisive

To sum up our argument, so far: the following factors have had a decisive influence on events in Russia:

• 1) The bureaucracy found itself in an impasse and unable to develop the means of production on the old basis.
• 2) A long period of isolation resulted in the complete decay of the bureaucracy.
• 3) After decades of Stalinist totalitarianism, the proletariat was disoriented.
• 4) The temporary passivity of the working class as a result of 3).
• 5) The delay of the socialist revolution in the West.
• 6) The historical "accident" of the boom of 1982-90, which created the illusion that capitalism could offer a way out.
• 7) This gave a temporary access of confidence to the imperialists, who exerted pressure on Gorbachov to move in a capitalist direction.
• 8) The exhaustion of the model of "mixed economy" in the advanced capitalist countries resulted in a temporary reversal of the tendency towards statisation on a world scale.
• 9) The absence of an independent movement of the Russian workers, combined with the intense pressure of world imperialism, strengthened the pro-capitalist wing of the bureaucracy, and prevented the emergence of a proletarian wing as anticipated by Trotsky before the war.
• 10) The relative independence of the proletarian Bonapartist state enabled the leading clique around Yeltsin to manoeuvre between the classes and sections of the bureaucracy, initially leaning on world imperialism, in an attempt to move towards capitalism.
• 11) In this way, we have a contradictory hybrid situation, in which the bourgeois government of Yeltsin, under the pressure of imperialism, is striving to complete the transition to capitalism.
• 12) This peculiar process is not yet completed. The result will be decided by the struggle of contradictory forces in Russian society and the state.
• 13) The result of this will be determined by the class balance of forces in Russia and events on a world scale.

Marxism explains that the key to historical development in general is ultimately determined by the development of the productive forces: of the growth of industry, agriculture, science and technique, of the productivity of labour. The collapse of Stalinism was the direct result of the fact that the bureaucracy, at a certain point became transformed from a relative brake on the development of the productive forces to an absolute barrier. By the 1980s, the USSR was no longer achieving higher rates of growth than the advanced capitalist countries. This was a sentence of death. However, the question of the dynamics of growth has a relative character. The Soviet economy was slowing down relative to the West, which was experiencing a temporary period of boom in 1982-90. This was a decisive element in the equation. The position could have been entirely different if capitalism had been in the throes of a depression as in the 1930s, when the Soviet economy was advancing at a rate of 20 per cent a year.

No less than a workers' state, a bourgeois regime will stand or fall on its ability to carry society forward. The victory of capitalism over feudalism was guaranteed by the higher productivity of labour, and the development of the economy. From a Marxist point of view, this alone is what defines a given regime as historically progressive or otherwise. The viability of a capitalist regime in Russia depends, ultimately, on its ability to develop the means of production. This, in turn, is directly linked to the general perspectives for the world economy. Under conditions of capitalist downswing, when the main economies are only capable of achieving a growth rate of 1-3 per cent in booms, as against 5-6 per cent in the period of the postwar upswing, the outlook for Russia is not encouraging.

Under such conditions, the attempt to move towards capitalism will inevitably be accompanied with new social and economic convulsions. The immediate prospect is for a wave of factory closures and mass unemployment, as the big state firms are allowed to go bankrupt. The accumulation of capital under such conditions presupposes the driving down of wages to below their value, with a further fall in living standards and consumption for the majority, thus creating new and insoluble contradictions. The narrowness of the internal market would have to be compensated for by a fierce drive to export. But the traditional markets for Russian goods in Eastern Europe are increasingly being diverted to the West. Most Russian goods can compete with Western imports neither in price nor quality. On the other hand, with the partial exception of oil and other raw materials, the markets of Western Europe are virtually closed to them.

The same Western observers who exaggerated every defect of the Soviet economy, and deliberately suppressed all its successes (a game they have been playing even more obsessively in the last period) remain stubbornly silent about the glorious achievements of the market in the last period. But, whichever way you look at it, the balance sheet is disastrous. In particular, the collapse in Russia resembles the effects of a catastrophic defeat in war, or, more correctly, in two wars. Not since the Dark Ages after the collapse of the Roman Empire has Europe seen such an economic catastrophe in peacetime. If we take the real GDP of Russia in 1989 as 100, the figure for 1994 was 49 per cent. That means a drop of more than half in five years. If we remember that the fall in the USA in the period 1929-31 was 30 per cent, it is possible to get an approximate idea of the unprecedented nature of the collapse. Nor is Russia the worst case. In the same period, the economy of Kazakhstan had a negative growth of 56 per cent; Ukraine, 57 per cent; Moldova, 58 per cent; Tajikistan, 60 per cent; Armenia, 63 per cent; Azerbaijan, 65 per cent; and Georgia, an astonishing 83 per cent.

The degree of industrial collapse in Russia today is, in fact, considerably greater than in 1945 (more than 50 per cent of the national wealth has been lost as compared to 18 per cent in 1945). When we turn to the figures for share of industry in GDP in 1993, as compared to 1989, the unprecedented collapse of the productive forces in this period emerges with full force. Industry's share in the economy fell by 26.4 per cent in Albania, 22.5 per cent in Armenia, 23.5 per cent in Bulgaria, 21.3 per cent in Georgia, 19.4 per cent in Poland and 11.1 per cent in Russia. There was an increase in the parasitic service sector in most of these countries (but even that fell by 10 per cent in the Ukraine, 12.7 per cent in Georgia and 25.4 per cent in Armenia). The big increase in the share of agriculture in Armenia, and to some extent the Ukraine, can only be explained by a partial return of sections of the population to subsistence farming in conditions of general economic collapse.

The figures for investment tell the same story. Only in one case (Slovenia, which started from a low base) has the level of gross domestic investment recovered the levels of 1989. Bulgaria, Latvia and Lithuania fell by more than half. Poland, Belarus, Georgia and Uzbekistan by one-third. If we further examine the breakdown of what investment there is, the parasitic nature of the nascent bourgeoisie immediately becomes evident. The share of the private sector in total investment is extremely small in every case. The state still provides the lion's share. This is true even in the Czech Republic, where state-sector invested three times as much as the private sector in 1993, the last year for which the figures are given. In Lithuania and Estonia the figures for private investment were 1.3 per cent and 1.6 per cent of GDP respectively. In Russia, private investment was less than 1 per cent of GDP, while the state sector amounted to 24.9 per cent.

The hope of the pro-bourgeois elements that they would be bailed out by foreign investment has not been fulfilled. With the exception of the Czech Republic, Hungary, and, to some extent, Poland, there has been next to no foreign investment in these economies. The total foreign investment in the Russian Republic, with a population of 160 millions is almost the same as Poland, with 38 millions. On a per capita basis, this is equivalent to the grand total of 11 dollars for every Russian man and woman. Total foreign direct investment (FDI) in Russia between 1989 and 1994 was a derisory $1.6 billion. In the same period, China received $82.5 billion.

What these figures mean is that Western investors are not investing in Russia because they have no confidence in the future. True, these figures do not include such things as aid from Western governments and loans from the IMF and World Bank, which also do not add up to much. Nevertheless, Russia is increasingly dependent on handouts from the West—a very fragile base on which to proceed, since this "assistance" is made on the basis of political expediency and the short term political calculations of the imperialists, which can change at any time.

Until the day after the 1996 presidential elections, the IMF was clearly turning a blind eye to the manifest failure of the Russian economy to meet its criteria, in order not to embarrass their man, Yeltsin in the run up to the election. But this policy of writing off the debts of the Moscow government was already causing a rift inside the IMF even at that time. One sector was opposed to making more concessions, and wanted to apply further pressure to force Yeltsin to speed up market reform regardless of the social consequences, another wing was becoming alarmed at the threat of social upheavals which can destroy the reform altogether. In the event, a compromise was arrived at, whereby Russia was given the promised credit, but payments were made on a monthly basis. In this way, international finance capital keeps the situation under control. By administering aid as a nurse administers liquid nourishment to a sick patient through a drip-feed, drop by drop, they are in a position to cut off the supply at any moment.

The scepticism of the IMF is well-founded. The economic projections of the reformers are hardly reliable. In 1994, less than half the taxes projected were actually collected. On the other hand, the level of inter-enterprise debts is staggering. No wonder the multinationals are not keen to invest in Russia! Their real attitude is shown by the constant fall of the rouble. The 1995 state budget was based on an average rate of 3,800 roubles to the American dollar (in itself, a catastrophic fall), but this level was already overtaken on the 13^th January 1995. The present rate of exchange is about 5,000 roubles to the dollar.

Meanwhile the economy continues stubbornly in recession. Economic output continued to fall throughout 1996. GDP fell by a further 6 per cent. Industry was down by 5 per cent and agriculture by 7 per cent. Investment fell by 18 per cent. According to one independent estimate, investment in Russia is now less than one-fifth the level of 1989. On the other hand, unemployment shot up from less than 6 per cent to 9.3 per cent. Consumer prices rose by 21.8 per cent. While workers' disposable incomes stagnated or fell, the richest 10 per cent of the population got 34 per cent of cash incomes (up from 31 per cent in 1995).

The economic collapse is causing increasing concern even among capitalist observers, although the government still pretends that things are improving. "How can there be signs of social stabilisation when the productive base of the economy is shrinking and the social safety net is collapsing?" asked Nikolai Petrov, an analyst at Carnegie Endowment in Moscow. "There are no signs of improvement and it seems strange for our chief statistician to look for such signs when the crisis is obviously deepening." (Morning Star, 5/2/97.)

Class contradictions and the state

Trotsky was convinced that a capitalist counter-revolution could only come about as a result of civil war. He wrote:

"The October Revolution has been betrayed by the ruling stratum, but not yet overthrown. It has a great power of resistance, coinciding with the established property relations, with the living force of the proletariat, the consciousness of its best elements, the impasse of world capitalism, and the inevitability of world revolution." (Leon Trotsky, The Revolution Betrayed, p. 252.)

And again:

"If—to adopt a second hypothesis—a bourgeois party were to overthrow the ruling Soviet caste, it would find no small number of ready servants among the present bureaucrats, administrators, technicians, directors, party secretaries and privileged upper circles in general. A purgation of the state apparatus would, of course, be necessary in this case too. But a bourgeois restoration would probably have to clean out fewer people than a revolutionary party. The chief task of the new power would be to restore private property in the means of production. First of all, it would be necessary to create conditions for the development of strong farmers from the weak farms and for converting the strong collectives into producers' co-operatives of the bourgeois type—into agricultural stock companies. In the sphere of industry, denationalisation would begin with the light industries and those producing food. The planning principle would be converted for the transitional period into a series of compromises between the state power and individual 'corporations'—potential proprietors, that is, among the Soviet captains of industry, the émigré former proprietors and foreign capitalists. Notwithstanding that the Soviet bureaucracy has gone far toward preparing a bourgeois restoration, the new regime would have to introduce in the matter of forms of property and methods of industry not a reform, but a social revolution." (Ibid., p. 253.)

It is not the first time in history that a profound social transformation has occurred without civil war. There have been times when a given regime has so exhausted itself that it fell without a fight, like a rotten apple. One example is what occurred in Hungary in 1919 when the bourgeois government of Count Karolyi collapsed and handed power to the Communist Party. Something similar happened in Eastern Europe in 1989. The Stalinist regimes were so demoralised that they gave up without a fight. In Poland Jaruzelski just handed over the power to the opposition. This did not occur without the intervention of the masses, who, incidentally, did not want a capitalist restoration. But in the absence of the subjective factor, the pro-capitalist elements were able to fill the vacuum and derail the movement on capitalist lines. In Poland and Hungary this was done with the aid of the CP leaders.

So far, Trotsky's prognosis concerning civil war appears to be contradicted by what has happened in Eastern Europe and Russia. But it is far from clear how this process will end. In reality, at every stage, the movement towards capitalism has encountered obstacles and resistance. It has not all been in one direction. The attempted coup of1991 and the storming of the White House were not peaceful occurrences. The conflict between different wings of the bureaucracy was expressed, not in the language of parliamentary debate, but in that of tanks and machine guns. This fact alone is sufficient to show that the contradictions within the bureaucracy are not at all secondary ones.

Marxism approaches social phenomena from a class point of view. What is the class character of the bureaucracy in Russia at the present time? It is impossible to answer this question unless we proceed from the fact that this is a transitional stage, in which the fundamental contradictions have still not been resolved in one sense or another. The whole point is that, in the present stage, the bureaucracy is riven with contradictions which, at bottom, have a class character. A section of the bureaucracy, which certainly comprises the majority of the top layer, is in the process of transforming itself into capitalists. Another layer is reflecting the opposition of the masses to Mafia capitalism. While others are waiting to see how things will develop.

The question which must be answered is: Does the nascent bourgeoisie control the state? If we recall the words of Marx and Engels in the Communist Manifesto that "the executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie", we have to say that this description does not fit the present set-up in Russia very well. Clearly, the relationship here is a lot more complex. The reason for this is that the Russian nascent bourgeoisie is still in the process of formation. It has not yet succeeded in decisively setting its stamp upon society as a whole. It is still fighting to establish itself. Many of the elements still have a provisional character. The situation is not at all fixed but entirely fluid, and can move in a number of different directions. Nothing is yet definitely settled.

What is the state? If we apply the classical definition of armed bodies of men, then it is not at all clear that the Russian army, police and security forces are controlled by the nascent capitalists. All these organs are in crisis. The "reform" has brought one disaster after another. There cannot be much enthusiasm for the reformers there. True, the top brass have done all right. But the junior officers have not, let alone the other ranks. In the storming of the White House in 1993, the army held back till the very last moment, as Yeltsin admits. Can this really be presented as a firm control of the armed forces by the Yeltsinites? Far from it! The position in the police and security organs is not likely to be much better. The rest of the bureaucracy is split. Although he is the elected president, Yeltsin's base is really quite narrow. A minority are pro-bourgeois but the great majority are waiting to see what will happen. They will back the winning side—as usual. In other words how they will move depends on the class balance of forces.

Through all the shifts and turns of the past six years, the old state apparatus remained basically intact. Such changes as were made were largely of a cosmetic character. Yeltsin attempted to disband the KGB, out of fear that it would be inclined to back a hardline coup against him in the future. Such fears are not without foundation. The KGB had been renamed the Inter-Republican Security Service and incorporated into the Russian Ministry of Security and Internal Affairs. However, it is impossible for Yeltsin to disband the state security service, even if the names are changed. The old network remains intact, and continues to function at all levels, inside and outside Russia. This indicates that, despite the change of government, the same old Stalinist state apparatus remains in place, in the shape of the bureaucracy of the state, the army caste, the police, and the KGB. In fact, the bureaucracy is extraordinarily tenacious in clinging to its positions. Let us recall that even after 1917 Lenin pointed out that, beneath a thin veneer of Soviet varnish, the same old Tsarist officials remained.

These officials are always ready to sell themselves to the highest bidder—liberal or conservative, socialist or fascist—as long as their privileged position is safeguarded. For this reason, it is a mistake to see the bureaucracy as something fixed. The mandarins can easily switch from one position to another and back again. Only a genuine regime of workers' democracy can eliminate the bureaucracy. This was attempted in 1917, but ultimately failed because of the extremely low material and cultural base which did not permit the masses to participate in the administration of industry, society and the state, as Lenin had envisaged. The old bureaucracy survived like a tumour on the body of the workers' state which eventually undermined it.

With astonishing ease, a large part of the former "Communist" leaders have swung right over to capitalism. However, if they do not get the anticipated results, a section of these can just as easily swing back again. It is true that some bureaucrats have done well out of privatisation. But many more have done badly. Even those managers who have manoeuvred to take over their own firms now find themselves faced with bankruptcy. Depending on how the situation unfolds, a section of the bureaucracy, at a given moment, may lean on the working class to strike blows against the nascent bourgeoisie.

The present Russian state is a hybrid formation, with elements of a bourgeois state grafted onto the old bureaucratic apparatus. The same old functionaries, with the same interests, outlook and prejudices, sit in the same offices, watching developments, some with expectations, others with growing alarm. It is necessary to underline that this was not a workers' state, but a hideously deformed workers' state—a regime of proletarian Bonapartism. After generations of totalitarian rule, the privileged elite was completely corrupted. A Bonapartist regime, by its very essence, rises above society and acquires a great deal of independence.

Lenin's statement that history knows all kinds of peculiar transformations has a direct relevance to the strange way that regimes of proletarian Bonapartism were established in ex-colonial countries since 1945. Here it is necessary to distinguish between the state in developed capitalist countries where it has a relatively stable and fixed character, and the state in less developed ex-colonial nations. At least in the past, the bourgeoisie in the advanced countries had a role to play and looked forward confidently to the future. It played a genuinely progressive role in developing the productive forces. It has had generations to perfect the state as an instrument of its own class rule. The army, police, civil service, middle layers and especially all key positions at the top—heads of civil service, heads of departments, police chiefs, the colonels and generals are carefully selected to serve the needs and interests of the ruling class. With a developed economy and a mission and a role to play they eagerly serve the "national interest" i.e. the interest of the possessing class—the ruling class. However, the situation is completely different in the backward capitalist regimes which emerged from the colonial revolution.

In countries like Syria, Burma and Ethiopia, the state which emerged after the expulsion of imperialism was not fixed and static. With certain differences, the same was true of Afghanistan. In all these countries, the weakness and incapacity of the bourgeoisie gave a certain independence to the military caste. Hence the endless military coups and counter-coups. But in the last analysis they reflected the class interests of the ruling class. They could not play an independent role. The struggle between the cliques in the army reflected the instability and contradictions in the given society. The personal aims of the generals reflected the differing interests of social classes or fractions of classes in society, the petty bourgeois in its various strata, the bourgeoisie, or even under certain conditions the proletariat.

Bonapartist regimes do not rest on air but balance between the classes. In the final analysis they represent whichever is the dominant class in society. The relation of the state to the productive forces in the last analysis determines its class character. Sometimes the armed forces of different fractions or factions of armed forces, can reflect different fractions of the ruling class and even the pressures of imperialism, primarily American imperialism. But, up to now, they have always reflected the interest of the ruling class in the defence of private ownership.

However, Marxism finds in the development of the productive forces the key to the development of society. On a capitalist basis there is no longer a way forward, particularly for Africa, Asia and Latin America. That is why army officers in backward countries, intellectuals and others, affected by the decay of their societies could under certain conditions switch their allegiance. Switching from capitalism to proletarian Bonapartism actually enlarged their power, prestige, privileges and income. For a time, they became the sole commanding and directing stratum of the society, raising themselves even higher over the masses than in the past. Instead of being subservient to the weak, craven and ineffectual bourgeoisie they became the masters of society. This peculiar transformation actually occurred in the above-mentioned countries in the postwar period. In fact, there have been even stranger variants, such as in Guyana, where the former CIA agent Forbes Burnham at one point moved to nationalise the whole economy.

Is such a development possible in Russia? That depends on whole series of factors, above all the development of the world economy. However, we can point to the following elements in the situation which suggest an affirmative answer. First, the impasse of Russian capitalism, which has already been explained; second, the absolute rottenness of the Mafia bourgeoisie, which is incapable of carrying society forward; third, the highly unstable and volatile situation inside the Russian armed forces, including the general staff, which is being continually shaken up by scandals, sackings and other changes; fourth, the tradition of a nationalised planned economy and centralism which must be a fond memory for many in the officer caste. This tradition and the memory of past glories are a pole of attraction every bit as powerful as the existence of the USSR and China was for the army generals in Syria and Afghanistan. Under certain conditions, therefore, it would certainly be possible that the Russian generals might decide that "enough is enough" and lean on the workers to strike blows against the nascent capitalists.

It is a mistake to regard the state as something fixed for all time. The present Russian state is riven with contradictions, and as such, is unstable. It is far more similar to the states in Asia, Africa and the Middle East than a modern capitalist state. It can swing in all kinds of directions depending on the pressures that are put on it. Social development in general proceeds through contradictions. What greater contradiction can there be than the fact that 80 years after the October Revolution, there can be a movement back to capitalism? And this is taking place precisely when the market is everywhere demonstrating its inability to take humanity forward.

Contradictory tendencies in the bureaucracy

In its upper layers, the bureaucracy reflects the pressures of the nascent bourgeoisie and, above all, world imperialism, the lower layers that of the working class. This contradiction is reflected in the struggle between the different factions of the bureaucracy, which sometimes flares up in violent confrontations such as the assault on the White House, and at other times remains more or less submerged, but is visible in the rise and fall of different individuals and groups. That is why the strategists of capital follow with such careful attention all the twists and turns of the obscure power struggle in the Kremlin. It is the outcome of this struggle which will determine the nature of the state. But this cannot easily be predicted in advance. It is determined by a multiplicity of factors, both internal and external. The way in which the Russian state will evolve is not yet decided by history. The bourgeois wing which has gained control of the government is striving towards restoration, but they have not yet succeeded in carrying it out. The situation is not fixed, but tremendously volatile. It can move in any direction.

One of the most difficult tasks of Marxists analysis is to establish at precisely what point quantity becomes transformed into quality. For example, at what point exactly did the Stalinist political counter-revolution triumph? It took Trotsky a number of years, during which he changed his formulations more than once, to answer this question. After six years, the movement towards capitalism has succeeded in creating a serious social base. According to some estimates, the nascent bourgeoisie is something like 10 per cent of the population, with a further 10 per cent dependent on their activities in one way or another. One-fifth of the population of Russia is a not inconsiderable force. Although most of them consist of "human dust"—crooks, spivs, black marketeers, petty bourgeois—they have vested interests to defend, and access to large supplies of arms. They are like feudal barons with their bands of armed retainers.

Against these forces, we have the millions of workers who vote for the CP and its allies—roughly one-third of the total. Moreover, the class balance of forces can never be reduced to a purely arithmetical relationship. The core of the Communist Party's support lies in the heavy industries, where huge numbers of workers are concentrated in big enterprises. Many of these are owed large amounts of back pay. They have seen their living standards destroyed and their families reduced to poverty, while the new rich flaunt their wealth under their noses.

The imperialists are applying intense pressure on the Moscow government to press on to the next stage of so-called reform. This would entail a decisive severing of the link between industry and the state, the cutting off of state funds to privatised enterprises which would be allowed to go to the wall. This would mean mass unemployment and economic dislocation on an unprecedented scale. It would make the collapse of the recent past look like a tea-party by comparison. In giving this "friendly advice", the West is not at all concerned with the interests of Russia. It is dictated exclusively by the desire to make the movement towards capitalism irreversible; to make Russia "safe" for Western capitalism. However, it is more likely to have the opposite effect. Such a plan must lead to social convulsions and an explosion of the class struggle. In reality, this has already begun.

The result of this battle will probably decide in which direction Russia will go. We may venture the following hypothesis: if the Russian proletariat does not move (and such a supposition can be ruled out in advance), or if the workers fight and suffer a series of decisive defeats, and if the government then succeeds in pushing through its programme, this could well represent a decisive turning-point in the situation. But, in the first place, the result of this struggle is not a foregone conclusion. Once the mighty Russian working class throws its weight onto the scales, all bets are off. Secondly, even if the counter-revolutionaries succeeded in pushing through the plans of the IMF, this would signify a new disaster for the Russian economy, which, whatever else it succeeds in doing, will not usher in a period of stability.

The outcome of this situation cannot be predicted in advance. It is not at all ruled out that, after a period of terrible social convulsions, a bourgeois regime—that it, inevitably, a regime of bourgeois Bonapartism—could be installed over the bones of the proletariat. That would be the most unfavourable variant from a general historical point of view, but would not at all mean that revolution would be off the agenda. After an inevitable period of demoralisation and despair, the working class would recover, especially in the event of an economic recovery, and once again move into action, but this time without illusions in the blessings of a market economy.

Ultimately, the victory of capitalism in Russia will be determined by the existing property relations. The process of capitalist restoration has begun, but it is not yet decisively resolved, and will not be resolved until the struggle between the antagonistic groups and classes has been fought to a finish—one way or another. Is it correct to say that the movement towards capitalism is already irreversible? The strategists of capital do not think so, and neither do we.

Trotsky long ago predicted that the bureaucracy would not be satisfied with the perks and privileges derived from control of the nationalised industries, but would seek to transform themselves into property owners in order to consolidate their position and pass on their wealth to their children. That prediction has proven to be correct. But he did not confine himself to this general observation, but went far deeper in his analysis of the different trends in the bureaucracy.

The bureaucracy is not a "Thing-in-itself". It exists in a given society, and can reflect different class interests. In the 1920s, there was a section of the bureaucracy that stood close to the kulaks and NEPmen and was in favour of capitalist restoration. The spokesman of this trend was one of the Old Bolshevik leaders, Bukharin. Of course, he did not consciously aspire to restore the old regime. But unconsciously, he was reflecting the pressures of the bourgeois elements. On the other hand, Trotsky and the Left Opposition stood consciously for the defence of the interests of the proletariat. Stalin, who had no real idea where he was going, balanced between the different wings, but represented the millions of officials in the state, industry and Party, who were seeking to enlarge their own power and privileges.

Who will dispose of the surplus product?

In his important last work, Stalin, Trotsky provides a profoundly scientific analysis of the struggle between the bureaucracy and the nascent bourgeoisie in the period 1924-29. These lines, unfortunately not sufficiently known to Marxists, shed a lot of light on the struggle that is now unfolding before our eyes in Russia:

"The kulak, jointly with the petty industrialist, worked for the complete restoration of capitalism. Thus opened the irreconcilable struggle over the surplus product of national labour. Who will dispose of it in the nearest future—the new bourgeoisie or the Soviet bureaucracy?—that became the next issue. He who disposes of the surplus product has the power of the state at his disposal. It was this that opened the struggle between the petty bourgeoisie, which had helped the bureaucracy to crush the resistance of the labouring masses and of their spokesman the Left Opposition, and the Thermidorian bureaucracy itself, which had helped the petty bourgeoisie to lord it over the agrarian masses. It was a direct struggle for power and for income.

"Obviously the bureaucracy did not rout the proletarian vanguard, pull free from the complications of the international revolution, and legitimise the philosophy of inequality in order to capitulate before the bourgeoisie, become the latter's servant, and be eventually itself pulled away from the state feed-bag." (Trotsky, Stalin, p. 397.)

Here we have, in a few words, a marvellously precise account of the class basis of the struggle between different layers of the bureaucracy. The conflict consists of the struggle for the expropriation of the surplus value, which, in turn, gives to whoever possesses it control of the state. The difference between the bureaucracy and the nascent bourgeoisie can thus be reduced to two different ways of appropriating the surplus value. But this is not a secondary question. The bourgeoisie directly appropriates surplus value on the basis of private ownership of the means of production. The bureaucracy derives its power, income and privileges from state ownership. Indeed, the only progressive function it played was in defending state ownership, although, as Trotsky pointed out, it defended the USSR far less than it defended its own privileges. Nevertheless the interests of the bureaucracy which depends on the nationalised economy for its position were in conflict with the aspirations and interests of the nascent bourgeoisie.

Despite this, Trotsky was careful to place a question mark over the future of the Soviet state. He did not exclude the possibility at a certain stage that the process of bureaucratic counter-revolution would lead to the overthrow of the property relations established by the October Revolution:

"The counter-revolution sets in when the spool of progressive social conquests begins to unwind. There seems no end to this unwinding. Yet some portion of the conquests of the revolution is always preserved. Thus, in spite of monstrous bureaucratic distortions, the class basis of the USSR remains proletarian. But let us bear in mind that the unwinding process has not yet been completed, and the future of Europe and the world during the next few decades has not yet been decided. The Russian Thermidor would have undoubtedly opened a new era of bourgeois rule, if that rule had not proved obsolete throughout the world. At any rate, the struggle against equality and the establishment of very deep social differentiations has so far been unable to eliminate the socialist consciousness of the masses or the nationalisation of the means of production and the land which were the basic socialist conquests of the revolution. Although it derogates these achievements, the bureaucracy has not yet ventured to resort to the restoration of the private ownership of the means of production." (Ibid., pp. 405-6.)

Trotsky did not provide a finished, once-and-for-all analysis of the class nature of the Soviet state, but left the question open as to which direction it would finally take. This would be determined by the struggle of living forces, which was in turn inseparably connected with developments on a world scale:

"It is impossible at present to answer finally and irrevocably the question in what direction the economic contradictions and social antagonisms of Soviet society will develop in the course of the next three, five or ten years. The outcome depends upon a struggle of living social forces—not on a national scale, either, but on an international scale. At every new stage, therefore, a concrete analysis is necessary of actual relations and tendencies in their connection and continual interaction." (Trotsky, The Revolution Betrayed, p. 49.)

The bureaucracy was never a homogeneous social formation. It does not even have the degree of cohesion possessed by the bourgeoisie and the proletariat. It is a large and extremely heterogeneous social formation. Between the elite and the local Party secretary there was always a considerable difference. In the event of a revolutionary movement of the working class, the lower ranks of the bureaucracy would come over in large numbers to the side of the revolution. But even in the higher reaches of the bureaucracy, there were always contradictory tendencies. Trotsky warned that the bureaucracy would betray the Revolution, that they would seek to guarantee their income and privileges by converting themselves into proprietors. But only the top layers would benefit.

On the one hand, there is a bourgeois government which is attempting with might and main to push in the direction of capitalism. But it is encountering resistance at many different levels. This is far from a straightforward process! Yeltsin has established a "bourgeois democracy" which is nothing of the sort. On the other hand, there is a corrupt Mafia capitalism which presides over a frightening economic collapse. There is ten times more corruption than before. And superimposed upon all this mess is the same old bureaucracy. More than before, in fact. In the Russian Federation there are 1.8 times more bureaucrats than in the USSR—with 130 million fewer population.

It is true that some bureaucrats like Chernomyrdin have done well out of privatisation. But many more have done badly. Even those managers who have manoeuvred to take over their own firms now find themselves faced with bankruptcy. The Chernomyrdin wing of the bureaucracy wants the privilege of ownership, another wing would prefer to cling to the old system, while between the two extremes there are a mass of middle-ranking and lower officials who are unsure, and will back whatever side appears to be winning.

Before the war, Trotsky spoke of the Butenko and Reiss factions in the bureaucracy. Butenko was a Soviet functionary who went over to the fascists, whereas Ignace Reiss, an officer of the GPU, declared for the Fourth International before he was murdered by Stalin's agents. What Trotsky meant was that, within the ranks of the bureaucracy, there were a whole range of tendencies, from open counter-revolutionaries like Butenko up to genuine Leninists like Ignace Reiss. He added that the former were much more numerous than the latter, especially in the upper reaches. But not even Trotsky could have foreseen the ghastly degeneration of the Stalinist bureaucracy.

The prolongation of the bureaucratic regime for almost three generations had profound effects on all classes and strata of Soviet society. The degeneration of the upper layers—now the grandchildren of bureaucrats "born in the purple", as they used to say of Byzantine emperors—went far further than Trotsky, or we, had ever thought possible.

By the physical extermination of the Old Bolsheviks, Stalin succeeded far more than we realised in extirpating the old traditions and breaking the umbilical chord connecting the working class to the ideas of October. At least two generations grew up in the nightmare regime of Stalinist totalitarianism. Lacking all experience or knowledge of the democratic and internationalist ideas of real Leninism, their consciousness was thrown far back. This partly explains the temporary disorientation of the Russian workers in the last period. This is an important element in the equation, and one that we did not sufficiently appreciate at the time.

Nevertheless, it would be completely wrong to assume that the traditions of Bolshevism have been entirely eradicated from the psychology of the Russian workers. On the contrary. In contrast to Eastern Europe, where Stalinism, in addition to all its other crimes, was seen as a foreign import associated with national oppression and rule from Moscow, Bolshevism is the only real tradition of the Russian proletariat, schooled in three revolutions, the civil war, the Five-Year Plans and the heroic struggle against Hitlerism. The fact that, despite everything, the mass of the Russian workers still look to the "Communist" Party is a striking proof that the idea of communism and October still lives in the hearts and minds of millions. As Lenin frequently pointed out, the mass of workers learn from experience. They have just passed through a very hard school indeed! And now they are beginning to draw conclusions. Suffice it to recall that the miners only a few years ago were supporting Yeltsin. This is precisely how the class learns. The example of the Russian miners, many of whom had illusions in "the market" and who have now voted overwhelmingly for the Communist Party, is significant.

Despite everything, there has not yet been a turning-point which would decisively alter relations between the classes. The relative passivity of the working class, as a result of decades of Stalinism, has been the decisive factor that has conditioned the whole situation, as we have pointed out many times. But the vote in the December 1995 election served notice of an important shift in the mood of the masses. Even more significant, the mass strikes of miners, teachers and other sections, demanding payment of back wages, show that the temporary passivity of the class is drawing to a close. At a certain stage, probably not far off, the class will move into action against the hated Mafia capitalism and the section of the nomenklatura which rests upon it. From that moment, the whole situation will be transformed.