The capitalist crisis in the Eastern Bloc

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The text we’re publishing here is the report pre­sented to the Fourth Congress of Revolution Internationale. The aim of the report isn’t to bring us up to date with the present state of the economic crisis in the eastern bloc, but to help deepen the following question: how can we say that the crisis in the eastern bloc is the same capitalist crisis which is hitting all the countries in the world? In what way and for what reasons are the manifestations of this crisis different from the forms taken in the developed countries of the western bloc?

The second part of the report Looks at the hist­orical aspect of this question, particularly with regard to the USSR: by examining the way that Russian capital arrived late on the world arena, and the methods it used to develop its imperialist strength in the context of decadent capita­lism, it tries to show how the manifestations of the crisis in the USSR are an extreme expression of the contradictions of capitalism.

This is why, in the first part of the report, we touch on the question of the scarcity of capital, which is a manifestation of world capital’s gene­ral crisis of overproduction in the weaker and more militarized countries, particularly the countries in the Russian bloc.

In publishing this report, we’re presenting to our readers the present level of the debate inside our organization about the general characteristics of capitalist decadence in the east, and how they are manifested in today’s open crisis.

Overproduction and scarcity of capital

The mere relationship of wage-laborer and capitalist implies:

1. That the majority of producers (the workers) are non-consumers (non-buyers) of a very large part of their product, namely, of the means of production, and the raw material;

2. That the majority of producers, the workers, can consume an equivalent for their product only so long as they produce more than this equivalent, that is, so long as they produce surplus-value or surplus-product. They must always be overproducers, producers over and above their needs, in order to be able to be consumers or buyers within the limits of their needs.” (Marx, Theories of Surplus Value, Vol. II, p.520)

Faced with this contradiction, which is inherent in the very operation of capitalist exploitation, capitalism could only find a way out by selling to extra-capitalist sectors, in order to realize the surplus value contained in its commodities and perpetuate its accumulation, thus pursuing its development on an enlarged scale.

At the beginning of industrial capitalism, crises were localized crises of overproduction which took place on the scale of existing markets, and which were only resolved by the penetration of new pre-capitalist markets (exports, colonizations).

But the development of the market,ie the disposal of the capitalist surplus-product, has an absolute limit: the limitation of the world market. At the end of the nineteenth century, when the imperialist powers were completing the dividing up of the globe, the remaining pre-capitalist markets were controlled and protected by one or other imperia­lism. It was no longer possible to discover new markets which would have allowed capital to dispose of its surplus-product and thus palliate the crisis.

Capitalism entered into a permanent crisis of overproduction. Through the interplay of compet­ition, this overproduction tended to generalize to all commodities, but also to wherever capita­list relations of production predominated -- ie all over the world, once the world market was completed. Capitalism was now in its decadent phase.

Scarcity of capital: a consequence of generalized overproduction

The first factions of the bourgeoisie to make their national revolution, to create the national framework needed for the development of accumula­tion (England, France, USA etc), also grabbed hold of the essential areas of the world market. Thanks to these markets, which were in permanent extension during the ascendant period, they were able to carry through an accumulation of capital which allowed them to develop their industriali­zation, to raise the organic composition of their capital, to reach ever-higher levels of produc­tivity.

Once the world market was completed, it was also saturated: there was a world overproduction of capital and competition between the different capitals became more and more intense. Those who arrived too late, who were unable to safeguard their national independence, who didn’t have an external market at their disposal, who hadn’t accumulated enough capital in the ascendant period, were in the decadent period condemned not only to being forever incapable of making up for lost time, but also to seeing this gap between themselves and their more powerful rivals grow and grow. When competition got fiercer, when the race for higher productivity got more frenetic, they just didn’t have enough capital to be able to compete against the big capitalist powers that were much more favorably placed than they were. They were faced with a situation of scarcity of capital, condemned to ‘underdevelopment’. They could only survive by putting themselves under the protec­tion of a more powerful capitalism, which would use them simply as a reservoir of industrial or agricultural raw materials, or as a source of labor-power. They weren’t allowed to go through a real development of the productive forces, since this would only have made them added competitors on an already cluttered world market.

The situation of scarcity of capital in these countries is therefore something that is relative to the most developed capitals. It is one of the manifestations of the growing gap between the ‘rich’ and the ‘poor’ countries.

From the economic point of view, in the decadent period when competition becomes more and more intense, it is the most powerful pole of accumula­tion which tends to reduce the others to ‘under­development’, to a scarcity of capital. The most powerful national capital tends to attract capi­tal towards itself, because it tends to be the most productive, the most capable of innovating. (For example, today, the oil producing countries prefer to invest in the big imperialist metropoles rather than develop their own national production.)

This situation of saturation in the world market jeopardizes those who haven’t made sufficient investments to remain at the level of competivity necessitated by the market. While in the nine­teenth century Britain represented the future of capitalist development, today it is exactly the reverse: it’s the situation of the under­developed countries which indicates the future of capital.

Thus, in the framework of the Western bloc, the European countries and Japan have lost their national autonomy and find themselves more and more dependent on the USA; faced with the immen­se destruction of the world war, they had to appeal to American capital to reconstruct their economies.

From the economic point of view, the develop­ment of capital tends toward a growing inequality between the most powerful pole of accu­mulation and the rest of the planet, which is plunged into increasing misery, the majority of the population suffering from absolute impoverishment. During the crisis, at the end of the spectrum there’s nowhere to invest because markets are clogged up and there’s no way of making investment bear fruit; at the other end, there’s no capital to invest any­way.

Accumulation and destruction of capital

We’ve seen that, by definition, “the workers can consume an equivalent of their product only so long as they produce more than this equivalent...They must always be overproducers.” But the capitalist must realize this surplus-product on the market if he is to continue the cycle of accumulation. With the decadence of capitalism, the extra-capitalist markets have been reduced to their simplest expression, ie, virtually to nothing, either through proleta­rianization or pauperization. Surplus-value can only be realized in exchange with other ca­pitalist spheres, ie, at the expense of other capitalists. The most privileged capitalists are the most developed ones because, being more productive, they can sell at lower cost. Competition becomes intense.

This situation becomes a fetter on the process of accumulation: the necessity for each capi­tal to maintain the process of accumulation pushes global capital into bigger and bigger contradictions, culminating in crises and a destruction of capital, a disaccumulation which takes place:

-- through competition, which, in a crisis, culminates in a massive devaluation of the commodities thrown onto the market. The ca­pitalist whose product is too expensive is forced to sell at a loss to realize even a part of his initial investment.

The inability to invest in an already satu­rated market pushes capital towards massive speculations in which it sterilizes itself, while at the same time the attempt to create artificial markets leads to galloping inflation, which expresses a constant devaluation of capital.

-- through military production. The only way to protect one’s markets and open up others is to resort to the army, to military force. In decadence, the economy is subjected to military necessities. The war economy is a necessity because war has become capital’s mode of survival. Competition moves from the economic to the military terrain. But at the level of global capital, arms production is a destruction of capital because, contrary to the means of production or the means of con­sumption, it doesn’t allow for the reproduction of capital.

-- through resorting to an all-pervasive, un­productive statist system. Capitalism, torn by increasingly violent contradictions, can only maintain the unity of its productive apparatus through administrative palliatives which are totally unproductive and consume capital without reproducing it.

At the same time, more and more explosive social contradictions make it necessary to develop a huge repressive sector which is also totally parasitical (police, judiciary, unions, etc).

Thus, in the period of capitalist decadence, while a few national capitals manage, with increasing difficulty, to continue their accumu­lation, this only takes place at the expense of global capital which more and more goes through a process of destruction of capital, culminating in crisis and imperialist war.

This situation is expressed in increasingly totalitarian functioning of capital, the other side of which is the growing impoverishment of humanity and waste of the productive forces.

Only by destroying the relationship between capital and labor, which lies at the heart of all this poverty and inequality, will the proletariat be able to put an end to the reign of barbarism and liberate the productive forces which hold the promise of communist abundance, the end of capitalist scarcity.

Decadent capitalism in the USSR

At the end of the 19th century, the Russian Empire was the bastion of feudal forces, an objective barrier to the progressive development of capital. While the Russian bourgeoisie was able to create a modern productive apparatus, it still wasn’t strong enough to clearly impose its political power and sweep away the feudal barriers which paralyzed its development.

In these conditions, Russian capital developed too late and too weakly to be able to compete with its European rivals, who were in the process of dividing up the world. It was all too late: the places had already been taken, and Russia’s principal asset was the gigantic internal market it had inherited from the feudal Tsarist Empire. However, at the beginning of the 20th century, when the pre-capit­alist markets were getting narrower and narrower, and competition was becoming more acute, the Euro­pean and Japanese capitalists were casting hungry eyes at this feudal Empire lying fallow for capit­alism, and began to nibble away at it (as in the Russo-Japanese war of 1905).

With the completion of the world market, a new epoch opened up, marked by the outbreak of the 1914-18 war and the proletarian revolution of 1917. The Russian bourgeoisie was shaken by the war and swept away by the revolution.

1928 saw the completion of the Stalinist counter­revolution, marked by the adoption of the theory of socialism in one country and by the putting into action of the first five year plan. But, for the Russian bourgeoisie, it was in any case too late: scarred by the problems of its youth, it had missed the boat in the ascendant period of capitalism and had not accumulated enough capital to compete with its rival imperialisms on the economic level. It was faced with the problem of scarcity of capital, which would forever be a fetter on its capitalist development. It was con­demned to underdevelopment in relation to the dominant capitalists (USA, Britain, Japan, etc).

However, if Russia today has been able to beco­me the dominant capital of an imperialist bloc in a world divided into two by the rivalry between the USA and the USSR, it’s because the USSR had certain assets which allowed it to survive in the period of decadence.

The USSR’s assets in the period of decadence

The Stalinist bourgeoisie inherited a number of acquisitions which it didn’t help to create:

1. An important internal market inherited from the Tsarist Empire. Even though, after the First World War the USSR no longer possessed Poland, the Baltic countries, Finland, Korea and Bessarabia, what remained was by no means negligible and represented a gigantic extra-capitalist market composed of mi­llions of peasants and artisans. The USSR remained the biggest country in the world geographically speaking, and was rich in mineral resources,

2. A national independence maintained by the Tsar’s Empire, then the frontiers defended by the prole­tariat as its bastion. Thus the Stalinist counter­revolution inherited an independent national fra­mework that had been protected from the rapaciousness of the big imperialist powers.

3. Before 1914, Russia had been, in spite of everything, the fifth world power. However, its importance was based on its immense size and population: in 1913, its national income was only one fifth that of the USA’s, and it produced less coal, iron and steel than France. It was the strongest of the underdeveloped countries.

However, these assets were only taken advantage of because the USSR under Stalin made rapid use of the ‘recipes’ that were most adapted to the survival of its capital in the period of deca­dence. It did this for two essential reasons:

a. the specificities of its history and

b. the weakness of its economy.

These “recipes” had already been widely tested by the warring powers of World War 1. These powers had a tendency to forget these “recipes” with the illusions of the reconstruction period which followed. These “recipes” are made up of two inseparable elements: state capitalism and the war economy.

State capitalism

Already weak before 1917, the private bourgeoisie in Russia no longer had any important economic role following the revolution of 1917. Since the counter-revolution developed through the state, it was natural that the state should ensure the responsibility for the management of Russian capital.

Already heavily tied to the Tsarist state (an ex­pression of the weakness of the Russian private bourgeoisie), Russian industrial capital was, with the counter-revolution, totally in the hands of the Stalinist state. Russian state capitalism is the direct product of the counter-revolution. The state was the only structure capable of de­fending the USSR’s economic and military interests against the other imperialisms.

The war economy

The Stalinist bourgeoisie had only just defini­tively consolidated itself (1928) when the crisis of 1929 came along to rock world capitalism and destroy any illusions in the possibility of econo­mic exchange between the USSR and the rest of the world. Russian capitalism was too weak to defend its interests on the world arena at the economic level.

In the face of growing imperialist tensions between the great imperialist powers hunting for new out­lets, in the face of the military threat posed by Germany and Japan, the USSR could only preserve its independence through a massive recourse to the war economy, which became its only guarantee for survival (as an independent imperialism).

Given the weakness of its economy, there was only one way it could carve out a place on the world market: through imperialist war. Towards the end of the 1930’s the USSR began to actively prepare for this, subordinating the whole economic acti­vity to its needs of war.

But while these measures allowed the USSR to keep its place on the world arena, they were in no way a solution to the crisis of capitalism, which derived from the saturation of the world market. All they could do was to push the contra­dictions of the system to a higher and even more explosive level. They are stigmata of decadent capitalism all over the world. However, in the specific case of Russia, their precocity, their brutal and far-reaching character allowed the USSR to emerge as the second imperialist power in the world, at the expense of those who weren’t able to adapt so well, or so quickly, to the new conditions opened up by the First World War.

The development of Russian capital in the period of decadence

During the 1930’s, Russian capitalism did not escape from the convulsions of the world crisis. It merely insured its survival through total protectionism and a semi-autarkic development. How was this development possible, In fact, even according to the most pessimistic estimations, the USSR tripled its production between 1929 and 1940.

First of all, we can point out that, if you start from very little, it’s a lot easier to double or triple production. But, more important, the USSR was able to take advantage of its internal extra-capitalist market and the quantity of manpower at its disposal.

However, given the weakness of Russian capital, accumulation didn’t take place through classic economic exchange, but through the most brutal pillage of the extra-capitalist sectors and the ferocious exploitation of labor power, all of this guaranteed by the terror carried out by the state. Millions of peasants were deported to labor camps, where their brutal exploitation pro­vided both the capital needed for industrial in­vestment and almost free work-force. The pro­letariat was exploited in an absolute manner, through Stakhanovism imposed by terror. In its isolation, Russia was turned into a vast concentration camp.

The whole of production was oriented towards the means of production (86% of investment in the first five-year plan); then, from 1937, towards war production. The Russian ‘model’ of development was in fact a model of underdevelopment (this is why it’s mainly the underdeveloped countries which have followed in the same path). It corresponded to the impossibility of realizing through exchange the surplus value required for accumulation. Since it was so weak, Russian capital was forced to short-circuit this process: its development wasn’t guaranteed by its economic force, but by its police force.

Despite this development in the 1930’s, concretised in the war economy, Russia remained an economically weak country: it was the game of alliances and its wealth in cannon-fodder which allowed the USSR to pull the chestnuts out of the fire of World War II.

In 1945, the USSR came out of the war with a ravaged economy (20 million dead, 31,850 factories destro­yed, etc), but also with considerable gains such as its hold over Eastern Europe and, later on(1949), over China.

But, while Russian imperialism was the most power­ful figure in the new bloc, it wasn’t the most developed capital in the bloc. East Germany, Czechoslovakia, or even Poland were more competi­tive than Russia. There again, it wasn’t through classical exchange that the USSR was able to draw from these countries the capital it needed for its reconstruction: it was, once again, through pillage (dismantling of factories, deportation of the work­force, pure and simple annexations). Even if this policy was softened after the death of Stalin, owing to the necessity to reinforce the bloc as a whole and under the pressure of social events (East Germany 1953, Poland and Hungary 1956), the exchange set up within COMECON was a forced ex­change: the USSR imposed its low-quality products on its partners, paid them for their products in roubles (a non-convertible currency on the world market) and made them pay for Russia’s products at western rates. It also raised credit from its vassals which were not reimbursed and which were used to develop its economy (9.3 billion roubles from 1971 to 1980).

As we can see, the USSR doesn’t control its bloc through its economic power, but through its milita­ry power. It thus profits fully from the reality of decadent capitalism which, all over the world, has tended to displace economic competition onto the military level. The USSR’s only guarantee for survival is its coercive military and police po­wer. This determines the whole orientation of its economy towards a war economy. But this sort of meddling with the law of value, even though it’s the precondition for the survival of Russian capital, pushes the USSR into a number of insur­mountable contradictions which can no longer be hidden by the heavy, totalitarian state apparatus needed to keep the process of accumulation in mo­tion. The very development of the Russian state is the expression of these insolvable contradic­tions.

The crisis in Russia today

Having arrived too late on the world arena, the USSR is, from the economic point of view, a weak country suffering from a chronic shortage of capi­tal. It’s a military colossus on an economy of clay. Its economic strength is more quantitative than qualitative: in 1977 the USSR was 26th in the world league table (not counting the OPEC countries), just ahead of Greece. If the gross national product of France was £3,500 per capita, in Russia it was £1,400.Within its own bloc, Russia is behind East Germany (£2,170), Czechoslovakia (£1,550) and Poland (£1,510). In one hour, a Russian worker produces an added value of 3 dollars, a French worker 8 dollars, and an American worker 10 dollars.

Foreign trade

In these conditions, we can see why Russia’s balance of payments with the west is always in deficit, taking the form of a 16.3 billion dollar debt to the west at the end of 1977. But, even in relation to the COMECON countries, the USSR is seeing a continual deterioration of its position. The reconstruction of these countries’ economies after World War II led to a deficit for the USSR, which became percep­tible at the end of the 1950’s. Between 1971 and 1974, the USSR’s balance in relation to these countries was definitely negative; the situation was altered artificially by the rise of raw mate­rial prices (mainly oil), but today Russia’s situ­ation is deteriorating again.

But the USSR’s economic weakness doesn’t only appear in its balance of trade: it can also be seen in the structure of its foreign commerce, which is typical of an underdeveloped country.

The USSR is essentially an importer of manufactured products and an exporter of raw materials: with COMECON, raw materials make up 38.7% of its exports, while manufactured products make up 74% of its impports. With the west, the situation is even clearer: raw materials make up 76% of its exports, manufac­tured products 70% of its imports. It’s only with the underdeveloped countries that the USSR trades more like a developed country, but here 50% of its exports are made up of military materials.

The war economy

All these elements highlight the weakness of Russian capital, its under-developed character. In such a situation, which takes the form of a chronic cri­sis, the only way Russia can hold down a place on the world market is through the war economy, through the development of its military potential. What maintains the unity of the eastern bloc is the power of the Red Army. Economic potential is mo­bilized first and foremost towards military needs, through the war economy.

The rivalry between the two blocs is concretized at the military level, not the economic level.

On the economic level, Russia is beaten in advan­ce. On the military level, it can only compete with the west by mobilizing the essential parts of its economy for the army. While the USA devo­tes 6% of its budget to the army, the USSR, in order to retain credibility in the arms race, of­ficially devotes 12% of its budget (in fact, at this level, the official figures are a permanent lie: for the USRR, 20% would still be a very cau­tious estimate). It is impossible to dissociate the civil industrial sectors from the military industrial sectors (for example, tractor factories also produce tanks). Absolute priority is given to military production: in supplies, mobilization of factories and the work-force, transport, maintenance, etc... The Russian economy is an en­tirely militarized economy.

A military effort like this can only take place at the expense of the economy itself. Military production has the particular characteristic that it doesn’t allow for an ulterior development of the productive forces. It’s based on the destruc­tion of capital (when you consider that the Third World’s meat-imports in 1977 represented no more than 82% of the price of one nuclear submarine and that the USRR has dozens of them, you can get some idea of the scale of waste involved). How­ever, this immense waste is the USRR’s only gua­rantee of survival. It allows it to impose, through terror, draconian sacrifices on the working class and, again through force, through the tribute it extorts from its European vassals, to bring in the capital it needs to keep up the process of accumulation.

However, with the intensification of the crisis in the 1960’s, the economic and military pressure from the west also grew more intense. This pressure took the form of a change of bloc by China, Egypt, Iraq, etc, and of impulses towards independence, such as were rapidly silenced by the Red Army in Czechoslovakia. Given the low level of Russia’s trade with the West (3% of its national income), it can’t be said that Russia imported the crisis. For Russia, competition is first and foremost on the military level: faced with this pressure from a west tormented by the crisis, it had to strengthen its military potential even more, and thus destroy its own capital even more. This pushed the USSR into its own capitalist contradictions, into even more profound dis­tortions of the law of value. This situation tends to translate itself into a disaccumul­ation of capital which can no longer be compensated by the revenues of imperialism. This is why the world crisis, which appeared in the west in the mid-sixties, in Russia took the form of the dramatic aggravation of an already permanent crisis.

Faced with a scarcity of capital, the USSR has throughout its history, had to make a series of draconian choices, and has always decided in favor of its military potential. But this has only further weakened its economy, showing that the scarcity of capital is a vicious circle from which the USSR cannot escape. Thus, its strategic choices in favor of the aerospace and nuclear industries, vital to the development of its nuclear strike force, could only be made at the expense of other crucial sectors of the economy. We can see this today in Russia’s growing tendency to fall behind on key areas such as computers, biology, metals and new alloys, etc. In international competition, the Russian economy has become weaker, as can be seen by the fact that Japan has recently overtaken it as the second biggest economic power (ie. in quantitative terms). This situation serves to counter-weight Russia’s military strength and forces it to make even greater sacrifices to maintain its military credibility.

The priority given to the war economy can only take place at the expense of investments aimed at modernizing sectors that aren’t linked to the production of arms. In all these sectors, there is a very low level of mechanization; this scarcity of constant capital means that a large work-force has to be used. Thus, in agriculture, where 20% of the active population works (as opposed to 10% in France and 2.6% in the USA) , the lack of modern equipment -- tractors, silos, fertilizers, etc -- leads regularly to agricultural shortages. This forces the USSR to make more purchases on the world market, which in turn aggravates the diff­iculties of the Russian economy.

Scarcity of labor power

In the USSR, bare hands replace non-exist­ent machines, as in all the underdevel­oped countries in the world. However, and this is the difference, Russia’s hegemony over its bloc has allowed it -- and the necessities of imperialist rivalries have obliged it -- to develop heavy industry and other sectors crucial to its military strength. This creates a profound disequilibrium between the various economic sectors, between those linked to the army and others. But a capitalist economy is a whole: in order to make steel, you have to not only extract iron minerals, but also coal: you have to then transport the steel, work on it, etc: you have to feed the workers, and for that you need to supply agricult­ural products... Unfortunately for the Russian bourgeoisie, it can’t invest in every­thing at the same time. There is only one way it can make up for the deficiency of capital in these sectors: by using and abusing labor power, on pain of seeing a total paralysis in the economy. In the mines, in the fields, in the shipyards, men must replace machines. Thus, 36% of the active population in Russia are employed in agriculture and building, as opposed to 19% in France and 10% in the USA. This expresses itself in the low productivity of Russian industry, and, given the enormous demands made by the form of its economic development, by a scarcity of labor power.

This phenomenon is further strengthened by the fact that the internal imbalances of the Russian economy are expressed in a brutal tendency towards state capitalism (the only way of maintaining cohesion in the face of these explosive contradictions). This in turn is characterized by a terrible bureau­cratic inertia, by a chaotic situation in the supply of raw materials and spare parts to factories.

These two aspects lead the heads of enterprises to employ a swollen number of workers, out of fear of failing to meet the plan and to make up for the fact that production lines are often slowed down by lack of supplies, or by lack of spare parts to repair them. By maintaining a reservoir of labor power you can catch up on pro­duction targets when supplies do arrive. You can make maximum use of the assembly lines and you can use your plethora of maintenance workers to repair parts when there’s no replacement for them. All this means that, in 1975, the ‘ancilliary’ sectors of enterprises accounted for 49% of those working in industry.

This situation compels the Russian bour­geoisie to use labor power in an extensive manner, by institutionalizing the ‘double’ working day (supplementary hours, moon­lighting), by resorting to unpaid working days, by using the labor power of women (93% work) and the retired (in 1975 4,400,000 supplemented their pension with a wage).

The scarcity of labor power has its corollary in full employment. However, this full employment cannot mask the real underemployment of labor power, which expresses itself in the low productivity of the Russian economy. Full employment, in Russia, expresses the same thing as unemployment in the western countries: the underemployment of labor power, ie. decadent capitalism’s inability to use the resources of living labor.

Scarcity on the internal market

The necessity to lower the costs of prod­uction forces the Russian bourgeoisie to mount a constant attack on the most malleable and most important productive force: labor power. Their one aim is to lower real wages.

Faced with a shortage of labor power, which implies a constant pressure on the overall wage bill, the bourgeoisie is unable to use a sharp dose of unemployment and has to resort to the following draconian measures to reduce costs:

-- rationing, which is typical of a afar economy.

-- stability or reduction of prices, art­ificially imposed by the state in its auth­oritarian manner; this means that goods are sold on the internal market at prices below production costs.

This system allows the bourgeoisie to get cheap labor power, but it also means:

-- very low living standards

-- shortages of supplies in the shops. Since solvent demand (distributed in the form of wages and subsidies) is higher than the official value of consumer goods put on the market, this leads to long queues in front of the shops and profound discontent in the population, to a forced saving of money which has no real use, and to strong inflationary pressures.

-- the creation of an important black market, and a tendency towards bartering.

The shortages in the shops are further accent­uated by the general bad functioning of the Russian economy:

-- 15% of production is unsaleable or defective.

-- distribution is anarchic and products are poorly adapted to the needs of the market; in a context of general scarcity this leads to stocks of unsold, unusable material.

-- an agriculture in chronic deficit

All this means that people simply have to save their money (although this shouldn’t be overestimated -- it largely corresponds to the absence of consumer credit). This is some­thing that has greatly increased since 1965, showing that there is growing austerity via rationing.

This situation is the product of the priority given to the development of producer goods in industry, at the expense of consumer goods (87% of industrial investment as against 13%). However, owing to the backwardness and dis­equilibrium of Russian capitalism, this scarcity of commodities also affects the production of pro­ducer goods, since there are deficient supplies of raw materials and spare parts.

However, the pressures of the world market and the internal market are tending to break out of the barriers constituted by the distortions in the law of value which are the basis of the Russian model. Thus, the saturation of the world market has meant the appearance of major unsold stocks in Russian industry, and the pressure of demand on the home market has accelerated the growth of the black market. The black market has flourish­ed over the last few years, and here the law of value operates openly, leading to a fall in savings since 1975 and to growing inflationary pressures.

Inflation in the USSR

The official indices of prices in the USSR are remarkably stable (100 in 1965, 99.30 in 1976). Doesn’t inflation exist in these countries? Here again, the very functioning of the domestic market tends to mask inflation as it’s understood in the west (especially in its classic manifest­ation: price increases) As a matter of fact, this inflation takes different forms on the official market:

-- increased subsidies to consumer products, in order to maintain artificial prices.

-- accentuated rationing, leading to longer and longer queues outside the shops.

-- excess money, sterilized in savings accounts (130 billion roubles).

The inflationary factors in Russia are:

-- an excess of soluable demand over supply, which leads to the creation of a black market where inflation is genuinely reflected (there the rouble is worth of its official value).

-- unprofitable investments (eg. huge amounts invested in unfinished shipyards).

-- the enormous weight of the unproductive sectors, especially armaments (officially 12% of GNP).

-- the pressures of the world market via foreign trade.

This inflationary pressure is so strong that the Russian bourgeoisie can now no longer hide it: huge increases succeed each other at a faster and faster pace: tax is 100%, silk 40%, crockery 80%, clothes 15%, jewels 110%, automobiles 50% for the most sought after models. These are just some of the increases decided by the state on 1 January 1977, without taking into account the disguised increases, such as the withdrawal of a cheap product and the circulation of a more expensive equivalent, or the brutal price rises on the kolkhoz market (the agricultural collectives) and the black market.

Contrary to what the Stalinists and Trotsky­ists might say, when they declare that inflation in the USSR is due solely to the crisis of the western countries penetrating Russia via its foreign trade, it’s essentially the USSR’s internal contra­dictions which are behind this inflationary process, since commerce with the west only represents 3% of its national income.

In the particular situation of Russia, inflation, expresses the excess of demand over supply, whereas it’s the other way round on the world market. Is this contra­dictory? No, because the particular situation of Russia is precisely due to the fact that, given its lack of competivity, the world market has always seemed saturated as far as it’s concerned. The situation in Russia is still the product of the world economic crisis which is expressing itself on the world market.

In these conditions, could Russia’s unsaturated domestic market serve as a real outlet for its economy? Not really, because in Russia prices are lower than costs (a deficit which can only be made up by extor­ting capital from Eastern Europe). For the domestic market to serve as a real outlet prices would first of all have to be adjusted to world market prices: in fact, this is what lies behind the recent price rises. But this means moving towards an inflation­ary spiral, through growing pressure on the wage bill, and brings with it the threat of major social explosions. In fact, the important priority given to producer goods in the Xth national plan is even more an expre­ssion of the crisis of department I (producer goods) in relation to the saturation of the world market.


The USSR cannot escape from the world crisis of capitalism. On the contrary, it fully expresses the reality of decadent capitalism:

-- impossibility of a real development of the productive forces.

-- brutal tendency towards state capitalism.

-- war economy.

In fact, all these traits express the perm­anent crisis of capitalism. The specific characteristics of the crisis in the USSR, far from signifying the absence of crisis in such countries, express the depth and perm­anence of the crisis there. They are the proof of the explosive contradictions which shake the Russian economy.

In order to maintain its independent exist­ence, Russian capital can only try to cheat the law of value and the law of exchange more and more. But this kind of cheating cannot for long mask the reality of capital and its contradictions: the law of value is more and more tending to shatter the formal framework which is presently distorting it.

With the threat hanging over it, the USSR is more and more compelled to find new markets to pillage in order to keep going. It’s more and more pushed towards war as a solution to the crisis.

But these contradictions, while they appear to be more brutal, aren’t different from the ones shaking capitalism all over the world; every­where, the law of value is doing its work; everywhere, capital is coming up to the limit of its outlets.

In many ways, the USSR shows the direction which capital everywhere is following: increasingly totalitarian control by the state, the insane waste of the war economy, etc.

In the East as in the West, the economic crisis in undermining the foundations of capitalist production and creating the condition for the social crisis which, by bringing the contradiction between capital and labor to boiling point, created the conditions for the communist revolution.

June 1980