Sunday, July 13, 2008


By Jock Haston

RCP Conference Documents, 1946, pps 16-33

August 4th, 1946.

The class nature of the USSR, its evolution and degeneration is certainly the most difficult social phenomena that Marxists have had to explain for many years. Only our movement, the Trotskyist movement, has made a serious attempt to give that scientific explanation.

It was Trotsky who sounded the alarm when the degeneration which had already commenced under Lenin – when Stalin first took the helm – began to take a serious turn. It was Trotsky who explained the problem theoretically and charted the actual degeneration as it took place. Ours is the contemporary Marxist movement, we were trained above all, on an understanding of the problem of the Russian Revolution and the degeneration of the Russian state.
Most of the novel theories regarding new forms of class oppression and state functions were evolved by ex-Trotskyists turning away from the revolutionary movement. Outside the Trotskyist movement there has been no serious attempt to destroy revisionist schools with scientific criticism. Only the Trotskyist movement has seriously taken pains to explain the political and philosophical theories of those revisionist schools. We should not, therefore be taken by surprise at novel interpretations of Russian society, its economics and evolution. Yet the movement still seems full of surprises.

The most recent “surprise” was dropped like a bombshell into the RCP in the form of the ideas expounded and defended by our Minority at the last Central Committee held on the 7th July, and since repeated at a London aggregate on July 13th. These debates revealed ideological divergences from the Trotskyist position on the art of the Minority (Comrades Goffe, Healy, Lawrence, Finch and their supporters) which we have never heard before in the Trotskyist movement; at least not in the British party. Ideas in relation to Russian society that we had heard expounded only by the most ignorant Stalinists, were put forward and hotly defended by our comrades.

The comrades of the Minority alleged that the Central Committee resolution on the Russian question was a deviation from the Trotskyist position. And what des this deviation consist of? It consists of the statement that Russia has both capitalistic and socialistic features and a description of some of these capitalistic features.

The comrades don’t mind Russia being called a “degenerated” or “deformed” worker’s state, or even a “profoundly deformed” worker’s state. There we still have agreement. They balk somewhat at the statement that there exist capitalistic as well as socialistic features. They most definitely refuse to allow the description “capitalistic” to go further than covering petty handicraft economy and their petty market exchange. To go further than this, our comrades allege, is to fall into a new deviation!

For us, all the various forms of petty bourgeois enterprise and accumulation, which find their expression within and between the collective forms on the basis of trading, etc, or which arise from petty trading and black marketing, all these are taken for granted as part of the duel process. In the final analysis, these, as all other capitalistic relations in Russian society, flow from the backwardness of technique. But these primitive capitalist forms of production and exchange play a negligible role in the economy as a whole.

Breaking through the pores of planned economy, these primitive but persistent capitalist forms pf production and distribution will only be eliminated with the higher level of technique and culture. For the purpose of our present discussion it is necessary only that their existence and characteristics be kept in mind. We are only concerned with other aspects of the problem in which the degeneration towards capitalist relations find expression in the social differentiation that has arisen on the basis of nationalised property.

To describe “goods” produced by the state as “commodities”; to describe labour employed by the Russian state and paid wages as “wage labour”; to describe the differentiation that arises from those social relations as ”capitalistic”. (or the state, insofar as it defends these relations, as a “capitalist” state) as in paragraph 2 of the CC resolution – all these definitions are sacrilege, comrades, our Minority tell us, and constitute a deviation from Trotskyism!

Ideas and conceptions which we have propounded together with these comrades for years, they suddenly toss overboard and replace, them with what turns out t be nothing but the crudest Stalinist conceptions. All this in the name of Trotskyism, of defending our orthodox position!

We are faced apparently, not with a simple mistake on the part of those comrades, from which they will surreptitiously withdraw – as they have withdrawn from so many positions in the past! (although even such a fresh withdrawal is not excluded). We are faced with a whole new school of thought (?) for the Trotskyist movement which will have t be refuted and destroyed no less completely than the Burnham, Shachtman and other false schools of thought on the Russian question.


We list below some of the ideas put forward and defended by the Minority. Let us hope that they will stop in their tracks and retreat and not (as they must if they pursue their ideas to the end) produce a new “Das Kapital” on economic laws in socialist society!

The Minority state:

1) That the state products in Russia are not commodities but “goods”; which term, when elaborated by the comrades themselves, means that they are produced for use and not for exchange.

2) That the law of value, insofar as this relates to the exchange of “goods” does not apply in Russia.

3) They deny that the circulation of money in Russia is a capitalistic relation, ie that money is a measure of value, means of exchange and medium of payment.

4) They deny that there is wage labour in Russia.

5) They deny that the state in Russia occupies the same relation to the national economy as the individual capitalist occupies in relation to the single enterprise, and that it expropriates surplus value from the workers.

6) They deny that any of these economic relations referred to in paragraph 2 of the C resolution are capitalistic relations; and declare that it is false to say that insofar as the state protects these capitalistic relations, it is a “capitalist state.”

7) They declare that to state that the Russian workers are wage slaves is t deny the existence of a workers’ state, since the ruling class cannot be slaves.

8) They deny that the bureaucracy exploits the Russian workers and peasants economically.

To crown these absurdities they declare that if one insists that these relations do in fact exist, and do in fact have the class character designated to them by the CC resolution, then it is impossible to talk of a degenerated workers’ state: what you have is “state capitalism”.

What then is the class content of the degeneration of the Soviet Union? The Minority refuse to tell us. Bureaucratic deformation is followed by more bureaucratic deformation, or profound bureaucratic deformation. But the class content of this deformation, of this we are not told.

It is not a question of the workers’ state being saddled with a hump on its back that is growing bigger. Such an organic analogy is useful only if properly understood. But when it leads comrades to ignore and deny the necessary conclusions of a class character, then it must be replaced by a more precise organic or social picture.

Trotskyists have always held that in Russian society there are two class forces at work: socialist and capitalist, These two social systems express themselves in the state as a dual power, each struggling for mastery, each trying to devour the other.

The socialist relation, which for us is the decisive relation, and upon which we base our class characterization of the Russian state, is state property, with the planned system of production and the monopoly of foreign trade, which resulted from the Russian revolution of 1917 and the expropriation of the ruling class.

All the other social relations – soviets, workers democracy, and proletarian accounting and control, proletarian equality, etc., - all have been destroyed by the Stalinist bureaucracy, which has substituted essentially capitalistic relations in place of these socialist relationships. The new constitution and the more recent “reforms” of that constitution prepare the political bases for the bourgeois counter-revolution.

Socialist relations are devoured and replaced by other kinds of relations in the process of degeneration. We call the capitalist relations. The Minority refuse t do so. And in this, whether they like it or not, they will find themselves in the company of Shachtman. Behind the terminological differences lies a theoretical appreciation of the class character of the Russian state and of its degeneration.

In this bulletin we can only touch on some of these issues. Nevertheless, what we may say will be sufficient to indicate the magnitude of the Minority’s revisionism.


In the resolution of the Central Committee, we begin with a statement of our traditional position on the contradictory nature of the Russian state:

“The CC reaffirms the basic programmatic conception of the Fourth International as they relate to the Soviet Union, to the dual nature of the system of society in the USSR as a transitional regime between capitalism and socialism and which therefore has both capitalist and socialist forces at conflict with each other.”

Having stated the class nature of the contradiction, we then proceed to describe important features (by no means all) of the Russian state which express the capitalistic germs, or that side of the contradiction. We do this in Paragraph 2 as follows:

“It declares that the payment of wage labour, the production of commodities, the circulation of money, and the differentiations which exist on the basis of these capitalistic social relations, gives a capitalist character to the state (which occupies the same position in relation to the actual economy as the capitalist occupies in relation to a single enterprise) in the first stages of even a healthy proletarian revolution,. In this sense, the capitalist state exists but without a capitalist class, insofar as the state in Russia is bureaucratic, degenerated and totalitarian, which encourages the degeneration towards capitalist differentiation, the capitalist characteristics of this state assume tremendous and growing proportions…”

But those features, capitalistic as they are, are not decisive for us in determining the basic class character of the Russian state. The concluding sentence of Paragraph 2 makes this absolutely clear:

“Nevertheless n the basis of these features it is erroneous to draw the conclusion that Russian economy is a state capitalist economy.”

The basic character of the Russian state is determined according to the method taught by Trotsky: according to the property forms and relations that resulted from the Russian Revolution and which still exist. This is laid down in paragraph 3 as follows:

“The fundamental class nature of the USSR as a workers’ state that degenerated in the direction of capitalism is established for us on the basis of the nationalisation of land, of the basic means of production, and monopoly of foreign trade in the hands of the state. These remain the fundamental gains of the October Revolution of 1917, and are the economic premise for our class characterization.”

Later we will elaborate on the other sections of the CC resolution, but in view of the opposition centred on the first three paragraphs, we here confine ourselves to an exposition of the ideas on which there exists a conflict.


The comrades claim that paragraphs 2 and 3 bridge two positions: capitalist and socialist. We can only reply that we have been ding this since the Trotskyist movement arose in opposition to Stalinism. Yes, comrades there is a contradiction expressed in paragraphs 2 and 3 of our resolution. This is expressed in its general form in paragraph 1. But that contradiction was not coked up in our minds overnight: it exists in real life in Russian society and has existed since 1917. if our critics have given lip service to the existence of this contradiction in the past, without understanding it; if they have converted a profoundly dialectical conception of Russian society into a vulgar sophism and mere phrasemongering, that is not the fault of our teachers. Nor is it our fault. We have done our best to explain the problem.

In the “Revolution Betrayed” Trotsky deals with the contradiction in a passage which we will introduce at this stage in the discussion – although we will return to it again, because it states the problem exactly as we understand it and state it. It answers the opponents of the Trotskyist conception exactly as we would answer them:

“The state assumes directly and from the very beginning a dual character: socialisitic insofar as it defends social property in the means of production: bourgeois insofar as the distribution of life’s goods is carried out with a capitalitistic measure of value. Such a contradiction may horrify the dogmatists and scholastics: we can only offer them our condolences. (Our emphasis)

Trotsky may have written this (in 1936) for the benefit of the RCP Minority ten years later!


The leading argument of our comrades is that all capitalist laws and categories are eliminated in Russia because of the plan. Comrade Finch, supported by the other Minority members of the CC, said that production of gods by the state in Russia was not commodity production, was not production for sale on the market, but on the contrary was production for use! He promised to write us a thesis on this within a few days, but we are still waiting.

Throughout the “Revolution Betrayed” Trotsky talks of the production and sale of commodities in Russia. Even Stalin understood this question, although only a little better than our Minority! Trotsky quotes Stalin (1935) in the “Revolution Betrayed” as follows:

“The stability of the Soviet Valuta, is guaranteed primarily by the immense quantity of commodities in the hands of the state put in circulation at stable prices.”

The only thing which is correct in this statement is that the state put an immense quantity of commodities into circulation. All that is mistaken in it (which is answered by Trotsky on Page 30 of the “Revolution Betrayed”) is taken over lock, stock and barrel by the Minority!

Nor des the argument, developed by Comrade Goffe, that only during the NEP did you have widespread commodity production, help their case in any degree. In 1936 Trotsky pointed out:

“The growth of commodity circulation under the restored market has been very rapid”!

On page 115 of “Revolution Betrayed” the Old Man wrote:

“In the year 1935 (note the dates well, comrades of the Minority, and note especially the economic definition) “the system of planned distribution gave way to trade…”

“The raising of the productivity of labour, in particular through piecework payment, promises in the future an increase in the mass of commodities…”

“A raising of the productivity of labour on the basis of commodity circulation means at the same time a growth of inequality…”

One could go on quoting from the Old Man for pages, but for the present enough. No wonder the promises of the comrades to rush into print have not been kept!


It is clear, or ought to be, from an earlier quotation from Trotsky, that the consequences ensuing from the distribution of life’s goods with a “capitalistic measure of value,” must be capitalistic consequences. Not only do our comrades of the Minority deny, however, that those consequences are capitalistic – they even deny that in Russia, distribution takes place according to the law of value and thus with a capitalistic measure of value! This repeated denial that the law of value applies in Russia insofar as this is an exchange of commodity equivalents, is an innovation in the Trotskyist movement.

Comrades Goldberg and Healy expressed their conception of the problem at the London aggregate as follows:

Comrade Goldberg: In capitalist societies the law of value applies. Value exchanges in equivalent quantities. But in Russia the law of value does not apply, goods exchange not in equal quantities, but in unequal quantities.

Comrade Healy, arguing in favour of this case, and to demonstrate that goods exchange at unequal values, said that the coal mines in the Urals have lost money for years, but the Soviet government has made up the deficit… from central funds.

It did not occur to Comrade Healy that it is precisely because of the low level of technique that the Russians cannot escape the law of value, that the coal mines received the subsidy. The function of the government subsidy is to enable coal to be sold below its value. Comrade Healy apparently forgot that the British government subsidises food to the tune of millions for the same purse, and according to the same law of value. (And please don’t tell us about the capitalists’ rake-off – for this is another question.)

Perhaps it is as well to restate the elements of the Marxian law of value at this stage of the discussion, for our opposition have shown an amazing ignorance of that law.


The law of value expresses the fact that gods or commodities exchange according to the amount of labour used up in their production, or embodied in them. This law (as was the existence of that part of the product we now call surplus value) was known in its general form before Karl Marx, to the classical capitalist economists. But not completely. It had for them, many unsolved aspects, facets and contradictions. Marx subjected the classical theory to criticism and established what kind of labour produces value. Not the special labour of the miller, the spinner or the steel worker, that special concrete kind of labour produces use-value. Human labour in the abstract: it is this kind of labour that gives to a useful article its exchange value. And this labour must be socially useful labour.

“The value of a commodity represents human labour in the abstract, the expenditure of human labour in general” says Marx in “Capital”. “Unskilled labour counts only as simple labour intensified, or rather, as multiplied simple labour, a given quantity of skilled labour being considered equal to a greater quantity of simple labour.”

“Just as a commodity is something twofold, use-value and exchange value”, wrote Frederick Engels, “so the labour embodied in it is two-fold determined: on the one hand, as definite productive labour: on the other, as the simple expenditure of human labour power, precipitated abstract labour. The former produces use-value, the latter exchange values; only the latter is quantitatively comparable (the differences between skilled and unskilled, composite and simple labour confirm this)”. In this division economics was for the first time, given a scientific definition of the labour that creates value.

Classical bourgeois economy was helpless in face of the following contradiction: since it is claimed that only equal values are exchanged, how can the worker receive the full value of his product if it is admitted that this product is divided between worker and capitalist?

It was Karl Marx who solved this contradiction, and demonstrated that despite the fact that the capitalist buys commodities at their value and sells them at their value, he gets more value out of the transaction than he puts into it. Marx did this by showing that the capitalist buys one commodity which has a property peculiar to itself, in that, this commodity, in the process of its use, is a source of new value, is a creation of new value. This commodity is labour power. But the capitalist does not buy the labour of the worker, or his product, as had previously been held by classical bourgeois economists. The capitalist buys the power to labour, and for a definite time.

By substituting labour power for labour, Marx was able to reveal the process which led to the creation of surplus value by the worker, and its appropriation by the capitalist. Surplus value, over and above the amount of value which the capitalist gave the worker, or exchanged with him in the form of wages, for the use of his labour power.

The capitalist did not buy the labour, or the product of the worker, Marx explained. He bought the power to labour; and he bought this power to labour for a definite number of hours. After the worker had used his energy in productive labour for a definite portion of time (say a half) for which the employer had bought his labour power, he had created sufficient values to replace or exchange for the means of subsistence supplied to him by the capitalist in the shape of pay. Marx terms this portion of the labour, necessary labour. The other portion of labour (the other half), Marx terms surplus labour. All new values created in the labour process after the necessary labour has been used up and during the period of surplus labour Marx termed surplus value, from which profit and capitalist accumulation arose.

This theory, the theory of surplus value, was the really great contribution of Karl Marx to political economy which, for the first time raised economics from its blind grasping and shed a scientific light n the economic process.

This aspect of Marxian economics (the theory of surplus value) need not concern us for the moment, in further discussing the law of value. Although the denial of our Minority that surplus value is extracted from the workers in Russia will be dealt with later. Nor will we concern ourselves here with the differentiation of surplus value into relative and absolute surplus value because it has n importance for our present discussion.

In practice, the tendency of commodities is to exchange above or below their value. It is not in the given commodity transaction that the law finds exact confirmation and expression, but on the average exchange transaction in economy as a whole. Commodity exchange, we know, dates back more than 6,000 years in Babylonia. To the extent that economic laws are at al valid, that is to say from the beginning of exchange down to the present time, the Marxian law of value holds good.

In the first stages of communist society, it will not be possible to immediately abolish all capitalist rights, laws and methods. It will not be possible to abolish all capitalist relationships in production and distribution, and substitute socialist relationships immediately in their stead. This law of value, which has operated down through the ages wherever and whenever men exchange their labour in one form or another, will still continue to operate in the first stages of socialist or communist society. The founder of scientific socialism was the first to explain that in the first stages of socialism the exchange of labour would still take place according t the law f value.


The seizure of power by the working class and the stratification of the means of production will abolish the capitalist appropriation of the surplus. At this point, production really begins for the first time, to become social production; controlled socially and democratically by the working class. But capitalistic production still exists in the distribution of the social product. Capitalist right, capitalist principle – the law of value – will still exist in the first stage of socialist society. Karl Marx wrote in the “Critique of the Gotha Programmne”:

“What we have to deal with here is a communist society, not as it developed on its own foundations, but, on the contrary, as it emerges from capitalist society; which is thus in every respect, economically, morally and intellectually, still stamped with the birthmarks of the old society from whose womb it emerges. Accordingly the individual producer receives back from society - after the deductions have been made – exactly what he gives back to it what he has given to it is his individual amount of labour, for example, the social working day consists of the sum of the individual labour hours; the individual labour time of the individual producer is the part of the social labour day contributed by him, his share in it. He receives a certificate from society that he has furnished such and such an amount of labour (after deducting his labour for the common fund), and with this certificate he draws from the social stock of means of consumption as much as costs the same amount of labour. The same amount of labour which he has given to society in one form, he receives back in another.

Here obviously, the same principle as that which regulates the exchange of commodities, as far as this is exchange of equal values. Content and form are changed, because under the altered circumstances no one can give anything except his labour, and because, on the other hand, nothing can pass into the ownership of individuals except individual means of consumption. But, as far as the distribution of the latter among the individual producers is concerned, the same principle prevails as in the exchange of commodity-equivalents, so much labour in one form is exchanged for s much labour in another form.

Hence equal right here is still in principle – bourgeois right, although principle and practice are no longer in conflict, while the exchange of equivalents in commodity exchange only exists on the average and not in the individual case.

In spite of this advance, this equal right is still stigmatized by a bourgeois limitation. The right of the producers is proportional to the labour they supply; the equality consists in the fact that measurement is made with an equal standard, labour.
(Emphasis in the original)

Take note what we repeat, comrades of the Minority: “The same principle prevails as that which regulates the exchange of commodities, as far as this is exchange of equal value… so much labour is in one form is exchanged fr an equal amount of labour in another form.” Is this not the law of value, operating in the first stages of socialism, no less than it operates under capitalism? Yes! The situation has been transformed: “Content and form are exchanged”, “Principle and practice no longer in conflict.” Why are they no longer in conflict? Because no one can give anything except his labour. The capitalist as such (having been expropriated), no longer has the opportunity to exploit the worker, he has no capital through which he can dominate production. He also can, and must, give his labour if he wants to live. The class inequality in relation to means of production between worker and capitalist has been abolished. Equal rights prevail. But this equal right is still “stigmatised by a bourgeois limitation.”

“The right of the purchasers is proportional to the labour they supply: the equality consists in the fact that measurement is made with an equal standard, labour.”

Thus, the law of value applies to everyone in practice for the first time! Only in the higher stages of communist society will it be possible to abolish the bourgeois limitation of the exchange of labour according to the law of value and for society t inscribe on its banners the socialist law: “From each according to his ability, t each according to his needs.”

Even the theoretical equality visualised by Marx, does not in fact exist in the Soviet Union. The whole tendency, on the contrary, is for the “old crap” to revive, including the practical violation of equal right. This is dealt with in the concluding section of this article. But let it be noted here that the law of value operates in Russia, they have just as consistently failed to explain what laws do operate – if any - to regulate the exchange of “goods”. Perhaps the comrades will tell us in writing: what laws operate in the exchange of “goods” between one government trust and another, between the trusts and the consumers, the state as employer and the worker as producer? We would be very pleased to be informed of the economic laws of this process.


Mney, Engels explained, is already contained in embryo in the concept of money, only in developed form. Only when products are no longer exchanged as value, said Trotsky, will money cease to have a function as measure of value, and wither away, together with the state.

Once the exchange of commodities becomes more diversified and evolved above the stage of simple barter, it becomes necessary to measure the value of commodities by a common standard. Money arose to fulfill that function of a common standard: money became the “universal equivalent.” All commodities expressed their relation to each other through money, as price. We are not concerned here with dealing with all the diversified functions of money in its various forms of capital or the laws of that movement. We are concerned only with money as a measure of value, means of payment and exchange.

In the “Revolution Betrayed” Trotsky makes the following statement:

“The dynamic Soviet economy, passing as it does through continual technical revolutions, and large-scale experiments, needs more than any other continual testing by means of a stable measure of value.”

In Russia, as in capitalist Britain, labour is not yet measured by a direct and absolute measure, time, but by the old, indirect, relative fluctuating capitalistic measure: money. Thus arise wages and prices – or more precisely, wages and prices continue with all their capitalistic implications. When the exchange of labour in one form for an equal quantity of labour in another form disappears, and is replaced by socialist distribution, only then, comrades of the Minority, will the law of value not apply in Russia, or anywhere else.

Let us ask our comrades once again: what law determines the ratio in which shoes exchange for socks, or motor cars or any other commodity or product exchanges for money? Let the comrades explain the economics of this process. If it is not the law of value that determines the ratio, let them explain what function money has in these transactions except as a measure of value.

Is the ratio of exchange to be explained according to the subjective desires of the bureaucracy? Stalin, we know, at one time believed that it was; that value and its money measure could be exchanged and altered according to the will of the bureaucracy – and introduced the differential price, the elastic rouble! But the reality that underlies all exchanges and expresses itself as the law of value son began to knock at the door, and corrected this stupid mistake, Stalin learned that “gods” could not be exchanged in an arbitrary manner, at unequal values. Stalin learned that if the economy of the country has to be stabilized while money continues to play a role, it can only be stabilized if money really functions as a stable measure of value.


Our Minority comrades deny that the wage labour relation in Russia is a capitalistic relation, that it is part of the dual capitalistic-socialist nature of the Russian society. Indeed, they strongly deny that wage labour exists in Russia. They claim that if the Russian workers are wage slaves, they cannot at the same time be the ruling class; therefore Russia cannot be a workers’ state. The restatement of this elementary proposition by us today, expounded and defended in our publications for more than 15 years, has now according to them, become the platform of a new petty bourgeois tendency. They deny that the Russian worker sells his labour power as a commodity.

Then only economists who have put forward these conceptions are Stalinist economists. And they did so because they believed them, but with the object of deceiving the working class. They appear to have succeeded in this even in the ranks of the Trotskyist movement!

The payment of wages, because it takes place in Russia, does not transform the worker receiving wages, into something other than a wage labourer, even though the transaction takes place on the basis of statified property. As we have seen above, the law of value continues to operate even in the first stages of a socialist society. The payment of wages is the price or money equivalent of the labour power of the workers. It still remains the price of labour power in Russia today – even though no capitalist class dominates the means of production.

In view of the tremendous amount of theoretical and agitational material written by the Bolsheviks on this question, with which our comrades have undoubtedly at east a working acquaintance, how can they bring themselves down in the mess they are in? Lenin speaking on the immediate tasks of the Soviet Government, explaining how, why and by what methods, the Soviet Government had to utilise the technical skill of the capitalist specialists, had this to say;

“The vast majority of the saboteurs are ‘coming into our service’ but the best organizers can be utilized by the state either in the old way, in the bourgeois way (i.e. for high salaries), or in the new way, in the proletarian way (i.e. by creating the conditions of national accounting and control from below, which would inevitably and automatically subordinate the specialists and enlist them for our work).

Now we have to resort to the old bourgeois method and agree to pay a very high price for the services of the biggest bourgeois specialists. All who are familiar with this subject appreciate this, but not all ponder over the significance of the measure that has been adopted by the proletarian state. Clearly such a measure is a compromise, a departure from the principles of the Paris Commune and of every proletarian state, which calls for the reduction of all salaries to the level of the wages of the average worker, which call for a struggle against careerism, not in words, not in deeds.

Moreover, it is clear that such a measure not only implies the cessation – in a certain field and to a certain degree – of the offensive against capital (for capital is not a sum of money, but a definite social relation) it is also a step backward on the part of the socialist Soviet government which from the outset proclaimed and pursued the policy of reducing high salaries to the level of the wages of the average worker…

To conceal from the masses the fact that the enlistment of bourgeois specialists by means of extremely high salaries is a retreat from the principles of the Paris commune would be tantamount to sinking to the level of bourgeois politicians and to deceiving the masses…”
(Our emphasis)
Vol 7, Selected Works, page 322-323.

“It is clear” we want to repeat this passage because of its importance in the present dispute “that such a measure (paying high wages – JH) not only implies a cessation – in a certain field and to a certain degree – of the offensive against capital (“for capital is not a sum of money but a definite social relation) IT IS ALSO A STEP BACKWARD… (Backward to what comrades of the Minority? To formless degeneration or to bureaucratic collectivism? Or a step backwards to capitalism? – JH) on the part of our socialist government which from the outset proclaimed and pursued a policy of reducing high salaries to the level of wages of the average worker.”

Writing in the “Revolution Betrayed” Trotsky quoted from “Pravda”:

“The worker in our country is not a wage slave and is not a seller of a commodity called labour power. He is a free workman” (PRAVDA)

And Trotsky comments:

“For the present period this unctuous formula is unpermissable bragging. The transfer of the factories t the state changed the situation of the worker only juridically. In reality, he is compelled t live in want and work a definite number of hours for a definite wage..”

“…In order to raise this level, the state now resorted to the old methods of pressure upon the muscles and nerves of the worker. There grew up a corps of slave drivers. The management of industry became superbureaucratic. The workers lost all influence whatever upon the management of the factory. With piecework payment, hard conditions of material existence, lack of free movement, with terrible police repression penetrating the life of every factory, it is hard indeed for the worker to feel himself a ‘free workman.’ In the bureaucracy he sees the manager, in the state, the employer. Free labour is incompatible with the existence of a bureaucratic state.”

The task of slave drivers is to drive slaves. Juridically these slaves are also the controllers of the state and thereby the nationalised means of production. In reality they have access only through the bureaucratic state. In reality, the fact that the workers are compelled to sell their labour power for wages in order to live, converts them into wage slaves.

“…Wage labour does not cease even under the Soviet regime to wear the humiliating label of slavery. Payment ‘according to work’ – in reality payment to the advantage of the ‘intellectual’ at the expense of physical, and especially unskilled, work – is a source of injustice, oppression and compulsions for the majority, privileges and a ‘happy life’ for the few.”

This statement of Trotsky’s: that wage labour in Russia still bears the humiliating label of wage slavery is of exceptional importance because of the horror of our Minority when we speak of wage slavery. Instead of frankly acknowledging that capitalist laws, and therefore capitalistic relations still exist in Russia, in fact are increasing and menacing the remaining socialistic forms of property, the Stalinists distort and hide the truth. They miseducate the working class as to the real material, dialectical, transition, by the use of reactionary sophisms.

Again let us repeat: the nationalisation of property transformed the situation for the worker only juridically. In reality – and we base ourselves on reality - the worker is compelled to sell his labour power and remains a wage slave. The revisionist conceptions of our Minority have nothing in common with Marxian economics. Ideologically it has its roots planted not in Trotskyism but in the sophisms of Stalinism.

The capitalistic character of the wage relation is repeatedly argued by Trotsky in the same book:

“The rouble is the ‘sole real means’ for the realisation of a capitalist principle of payment for labour, even though on the basis of socialist forms of property.”

On the same page – 81 – Trotsky says:

“Although at first glance the return of the Soviet Government, after the final and irrevocable triumph of socialism’ to piecework payment might seem a retreat to capitalist relations, in reality it is necessary to repeat here what was said about the rehabilitation of the ruble: It was not a question of renouncing socialism, but merely of abandoning crude illusions. The form of wage payment is simply brought into better correspondence with the real resources of the country. ‘Law can never be higher tan the economic structure.’”

At first glance it may seem a retreat to capitalist relations, Comrade Lawrence; in reality, the capitalist relations were there all the time, and it was simply a question of abandoning crude illusions. In these arguments of both Lenin and Trotsky the capitalistic nature of the wage relation (and especially the wage differential) is sufficiently clear to refute, in the most authoritative way, the false arguments of our comrades who deny the capitalistic nature of the wage relation. It is time for the Minority t abandon the crude illusions which are fitting to a miseducated Stalinist worker, but not to the cadre elements of te Fourth International.


Comrade Healy waved the “Revolution Betrayed” at the London aggregate to prove that the formulation in paragraph 2 of the CC resolution, which read as follows: “which (the state) occupies the same position in relation to the national economy as the capitalist occupies in relation to the single enterprise.” was torn out of context, and thus a forgery. Read the whole section, said Comrade Healy, and you will see that this refers to the subjective factor: to the personal ability and qualities of the bureaucracy to direct the state industries. Phrasemongering is one of the worst ailments that can affect a revolutionary. Here is an example of how Comrade Healy swallowed the phrase but did not understand the content.

In the CC resolution we explain that the payment of wage labour, commodity production, and the circulation of money, are capitalistic relations and given the state that defends those relations, capitalist characteristics. All the modifications that it is theoretically and practically essential to make, are made in Paragraph 3. For the purpose of drawing conclusions from these relationships, we are a hundred times correct to say that the state occupies the same relationship to the national economy as the capitalist occupies in relation to the single enterprise. Trotsky explains in the “Revolution betrayed” that the functions of money as capital, usurious, commercial and industrial, are transferred to the state (the universal merchant, creditor, and industrialist) in a modified form.

The transfer of the means of the production to the state, insofar as it does not lead immediately to socialist production and distribution, also transfers the function of the capitalist to the state. The elimination of individual capitals and the competition and anarchy of individual production modify these functions to a considerable degree. But the state is the controller of capital; it is the controller of money; it is the controller of the ms of commodities – the products of the working class; the state pays the wages of the worker; it hires him, fires him, and tells him what to produce and how to produce it, and where to produce it. In all these functions it occupies the same elation to the national economy as the individual capitalist occupies in relation to the single enterprise. Modification of the capitalist function of the state in the sphere of both production and distribution, which the workers were still able to bring about at one time through the pressure of workers control - even these modifications are no longer operative. The anti-socialistic nature of the state – its capitalistic nature, is therefore reinforced.

The worker must work to live. He has access to the means of production only through, and with the benevolence of the state. The state pays the worker, not for 8 hours of labour, but say for 4 hours of labour (more or less, but certainly not the full value of his labour). In this way it pays the worker on outright capitalist lines and with an outright capitalist measure, less than the value he produces. On the other hand it sells the worker “goods” (!) which he can buy only from the state at their full value, or more precisely: above their value. Surplus value is piled up, therefore, just as in capitalist countries. State production and trading in Russia reveals itself to be much closer to a gigantic “truck shop” than to communist or socialist society. This is especially true because of the bureaucratic control.

The statements of the Minority comrades (Goldburg and Goffe in particular) that there is no appropriation of surplus value in Russia, is really too absurd for words. There is no confusion of terms here but a specific denial that surplus value is extracted from the labour of the workers as social phenomenon. Not only does the Russian state appropriate surplus value, but it extracts a bigger proportion of surplus value than is extracted from the workers by the capitalists in the capitalist countries. Proof? Look at the rate of capital accumulation in Russia and compare it to the rate of capital accumulation in any other part of the world. For years we have pointed to the fact that this is the most gigantic and rapid capital development in history. Apart from the elimination of all the waste and destruction of commodities which arises from capitalist competition, which is very important and a definite tremendous social advance, the accumulation takes place, not by accident, but on the basis of economic laws established by Karl Marx. This is a necessary accumulation, and with certain modifications – which would result from a democratically and not bureaucratically directed plan – would take place in a healthy workers’ state.

But what of the economic surplus devoured by the bureaucracy? This surplus is as great, if not greater, than the surplus consumed by the ruling class (and its bureaucracy) in capitalist society. To control and devour this surplus, the bureaucracy waged a ruthless war against the Kulak and the small industrialists of the NEP. It continues to wage a ruthless war against the remnants of these elements at the present time. Even within the ranks of the bureaucracy itself, a struggle goes on for the distribution of this surplus, it oppresses the masses with ever greater brutality.

The bureaucracy is concerned with protecting and defending state property only for one reason: because on the basis of state property, with the state controlled in the bureaucratic vise, and the production and distribution relations that result from this situation, it is able to devour a growing portion of the surplus product of the national labour.


The denial by the Minority comrades that the bureaucracy, through their control of the state machine and thus their control of production, exploit the workers economically, is really ludicrous.

Lenin, when introducing the policy of paying the specialists high salaries, explained that these high salaries were a form of tribute. People who have the capacity to extract “tribute” from the mass of the producers are also, thereby, able to exploit.

This exploitation is not, however, exploitation which arises from the ownership of the means of production, and therefore cannot be defined scientifically as class exploitation, which is based upon the ownership of means of production and property. It is exploitation which exists on the basis of state ownership of the means of production, and arises from the backwardness of Russian technique and culture; upon the basis of the division of labour and bureaucratic control. No group that has control of the distribution of the articles of consumption ever forgets itself. Inherent in the very conception of bureaucratic control is the conception of inequality, and this of exploitation.

The ability to extract “tribute”, and to defend privileges because of their special position in the division of labour and control of the state machine, means that the bureaucracy has access to the best products designed to satisfy human needs and desires. All this is topped by the most degrading and revolting form of exploitation: the buying into personal service of the labour of the workers!

Frederick Engels once explained that political power is also an economic power. “Force”, he wrote , “(that is state power) is also an economic power.” It is for this reason that the proletariat struggles for the political dictatorship of the proletariat.

Once the power has passed out of the hands of the proletariat – into the hands of the bureaucracy; once the workers no longer control the state, and the economy of the country is no longer subject to workers’ control, without a new revolution, in the long run the triumph of capitalism is inevitable.

In addition to the bureaucratic exploitation that arises from the division of labour, however, a growing section of the bureaucracy is more and more occupying a place in Russian life that has an entirely capitalist relation: extracting surplus value from the labour of the producers through money investment. To deny the existence of this fact or to deny the class character of the function, is to desert Marxian economics altogether.

According to Marx, as we have noted previously: in the first stages of socialist society, bourgeois right still exists in relation to the distribution of the means of consumption, but, as the result of the social character of production, “nothing can pass into the ownership of individuals except individual means of consumption.” It is clear that in Russia, however, that if this situation existed theoretically in the war communist stages of the revolution, it certainly is not true today. Money in Russia is something more than a mere measure of value. It is something more than a means of consumption. To perform the function of mere measure of value contributed in one form to society, and thus a measure of the means of consumption that may be drawn to repay that contribution, a labour certificate would be sufficient. Money could be replaced by any other token.

Because of the backwardness of the technique, however, the Bolsheviks were forced to retain the old capitalist elations on this score too. In his notes for the draft of the revised programme of the Bolshevik Party, Lenin speaks of “while (temporarily) not abolishing money…”. The Bolsheviks tried only to impose certain administrative measures to prevent money functioning in its most vicious form of private capital.

In the conditions of Russian society, therefore, money remains what it is in capitalist society: “the social incarnation of human labour, the real measure of labour, the general means of circulation.” Al the administrative regulations that have been introduced have already been - or are being – amended one after another so that money may find its expression as usurious capital. Money in Russia, not used up in exchange for means of consumption, is accumulated as savings. Savings in the state banks, which return an interest of 2.5%, savings which are invested in state bonds at 4% or more, are something more than means of consumption: they are usurious capital, or “interest bearing” capital.

We are not referring to the few miserable roubles that the workers are compelled to save by state regulation or state pressure; such savings have similar social characteristics to the savings of workers in capitalist countries. We refer to the voluntary savings of the bureaucrats, the managers and technicians, the intellectuals and the scientists; to those elements in Soviet society who earn 30, 40 and 50 and more times the wage of the average worker. These savings, returning an interest which is extracted from the surplus value created by the workers, function as interest bearing capital and introduces a new social (class) relationship that did not exist in the past.

A complete analysis of the various forms of state loan is extremely interesting but not essential to this discussion. For the purpose of attracting or “catching up” as great an amount of “surplus” cash that exists in the hands of the workers and which cannot be exchanged for commodities, the state issues the lottery loan. As a rule these loans are not interest bearing. They operate like a sweepstake; but with this difference that the ticket money is returnable after a certain number of years. The prizes in high sums of money go to the lucky ticket holders, being drawn from the interest that would accrue from the invested ticket money as a whole.

The “middle class” or “upper middle class” (note the parenthesis, please comrades) type of investors are offered more favorable terms for the loan of their money. To them the various state loans pay, as a general rule, a higher interest than is paid in developed capitalist countries on state bonds. The Chairman of Lloyds Bank made a statement in his annual report some years before the outbreak of war, that those Russian binds were among the most stable and highest interest paying government bonds in the world. It is interesting to note in this connection, that the more stable the Russian regime became, the less Russian economy became an economy of crisis, the lower the interest paid out on money loaned – the rate of interest dropped – as it drops in capitalist economy.

However, these questions, dealing as they do with the development of this aspect of the capitalist relations need not be subjected to a complete investigation for the purpose of this discussion; nor, unfortunately, for that matter, are they capable of complete investigation in view of the almost total absence of figures for a number of years.

It is necessary only to draw the attention of the comrades to the fact that the “bourgeois state” – as distributor – now begins to assume additional bourgeois characteristics in other aspects of its functioning – as producer. For this policeman protects not only the capitalistic privileges and rights in distribution, but also protects the growing capitalist –directly exploitative – relations in production; and has introduced al the necessary laws – saving laws, investment laws, etc – to make this protection a perfectly legal function. The social differentiation which arises from the growing differentiation in the payment prepares the conditions for a class transformation even in relation to the last remaining conquests of 1917.


The bureaucrat, as a bureaucrat, whose livelihood depends upon his position in the productive or distributive process and thus in the division of labour itself, performs a different social function from the bureaucrat as investor in state bonds. In the former case, bureaucrat as bureaucrat: his social function and access to products of consumption is essentially dependent upon the political control of the state machine and on his contribution of labour in one form or another to the social pool. In this case the parasitic function of the bureaucrat, his lack of a stable economic base is clear: he is hired and fired according to the shifts that take place within the ranks of the bureaucracy as a whole, and has no guarantee for the future – for himself or his family.

But with the growing development of bureaucrat as investor, a new (class) relation to the means of production has commenced. Part of his livelihood depends, no longer upon his privileged position in the state machine or the division of labour, but upon invested money, money as capital, and the interest that accrues from that invested capital.

In the “Revolution Betrayed” Trotsky wrote:

“One may argue that the bureaucrat cares little what are the prevailing forms of property, provided only they guarantee him the necessary income. This ignores not only the instability of the bureaucrat’s own rights, but also the question of his descendents… Privileges have only half their worth if they cannot be transmitted to one’s children. It is not enough to be the director of a trust; it is necessary to be a stockholder. The victory of the bureaucracy in this decisive sphere would mean its conversion into a new possessing class.” (Our emphasis – JH)

The bureaucracy, as such, has not formed itself into a new possessing class. To say that it has is un-Marxist and scientifically unsound, insofar as Marxism bases itself on the division of labour and the ownership of property as the basis of classes. But it is clear that out of the ranks of the bureaucracy there is being exuded a new possessing class, which: 1) has gained a definitely new and more privileged position in relation to the means of production and the distribution of national wealth; and, 2) has consolidated these new privileges of a directly capitalist character, and can pass them down to their families through the bourgeois right of testament. This aspect of the degeneration has not been sufficiently investigated by us, and in view of the new laws that have been introduced legalizing the inheritance of money investments, is clearly a subject to which our movement will have t devote more attention.

In drawing attention to this factor as a subject for serious scientific investigation and constant review, the Central Committee resolution is one hundred percent imbued with the spirit of the Marxist movement as it has existed for a century.

Merely to demonstrate the facts and subject them to Marxian economic analysis, is to refute the un-Marxian denial by our Minority that the Russian working class is economically exploited by the bureaucracy.

Let our Minority weep and wail that to poke our nose into this subject is to begin a new “revision”. We are far from afraid that the Marxist method is s faulty that we cannot investigate such a new and fundamentally important phenomenon. But let them deny the facts. Let them not revise all Marxist conceptions of economics because they fear such investigation. These questions are taboo for them only because they have swallowed the phrases without assimilating the ideas and methods of Marxism, and above all, because they are afraid of the new phenomenon.

This form of accumulation, of course, has been present since the early days of the Russian Revolution and was recognized as a peculiar form of state capitalism. But it undoubtedly had a different social weight and significance in the early days than it is gaining today. It appears to the writer that this form of accumulation has much greater dangers to the socialist future of Russia than the primitive accumulation that takes place in the countryside and in the free market.

If one takes into consideration the historical tendencies towards stratification on a world scale, and the fact that Russian stratification survived the test of a tremendous war, it seems theoretically correct to assume that there is no reason why a new capitalist class in Russia cannot arise and dominate the economic life of the country without destroying state property as such; but on the contrary, through investments in state bonds. If the present investment and inheritance trend continues, it is possible for sate property to be transformed into a juridical function, while in reality, a new class of money capitalists, of rentiers who batten on the labour of the working class, have taken over the means of production.

Trotsky believed that failing a new proletarian political revolution, the bourgeois norms of distribution would lead to the break-up of the state trusts which would be converted into privately owned trusts. He did not believe that a class of “state capitalists” would arise on the basis of state property in Russia. Nevertheless, he formulated his ideas with sufficient elasticity so as not to exclude even this form of degeneration. In the “Revolution Betrayed” he wrote:

“to the extent that, for the benefit of an upper stratum, if (the state – JH) carries to more and more extreme expression bourgeois norms of distribution, it is preparing a capitalist restoration. This contrast between forms of property and norms of distribution cannot grow indefinitely. Either the bourgeois norms must in one form or another spread to the means of production, or the norms of distribution must be brought into correspondence with the socialist property system.”

This idea is further elaborated in the section of the “Revolution Betrayed” under the sub-head: “THE QUESTION OF THE CHARACTER OF THE SOVIET UNION NOT YET DECIDED BY HISTORY.” In opposing the theory that the Russian bureaucracy could be characterized in 1936 as a class of state capitalists, Trotsky argued that:

“…The bureaucracy has not yet created social supports for its domination in the form of special types of property. It is compelled to defend state property as the source of its power and its income. In this aspect of its activity it still remains a weapon of proletarian dictatorship.

“The attempt to represent the Soviet bureaucracy as a class of ‘state capitalists’ will obviously not withstand criticism. The bureaucracy has neither stocks nor bonds. It is recruited, supplemented and renewed in the manner of an administrative hierarchy, independently of any special property relations of its own. The individual bureaucrat cannot transmit to his heirs his rights in the exploitation of the state apparatus…”

The evolution of Russian society, however, shows that the “special form of property” evolved by the bureaucracy is precisely “state property.” State stocks or bonds which bring back an interest of 4% are undoubtedly property “of a special type”. Moreover, the individual bureaucrat can now “transmit to his heirs” the rights “to the exploitation” of state property through these interest bearing bonds.

History has not, however, had its final word to say on the question of whether a new capitalist class can stabilize itself on the basis f this form of property. It has, nevertheless, clearly testified to the fact that the bureaucracy seeks every legal, as well as illegal means to enlarge its share of the surplus product; to consolidate its privileges for generations by incorporating these privileges into the legal structure of the country.

Meanwhile, the numerical growth and cultural development of the proletariat prepares the forces which in the long run, is certain to come into revolutionary collision with the bureaucracy. It is not possible at the present stage, to give a final and conclusive answer as to how the social antagonism between the two class forces will develop in the curse of the next decade. The outcome depends upon the clash of living forces, not only in Russia, but on the arena of the international class struggle.

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