Communists and their Opponents, 1914-45
These optimistic words were written soon after the outbreak of the First World War, which had already led to a deep and permanent split in the international socialist movement. The divisions became even greater with the October Revolution in Russia in 1917.
Although Hilferding did not resist the war, and was no friend of Lenin or the Bolsheviks, the impact of Finance Capital was substantial, and sustained. Many of its principal themes were taken up by Rosa Luxemburg, in her Accumulation of Capital (Luxemburg 1913 [1951]) and by Nikolai Bukharin, whose Imperialism and World Economy (Bukharin 1915) was the major direct influence on V.I. Lenin’s much better-known Imperialism: the Highest Stage of Capitalism (Lenin 1916 [1968]). After the Bolshevik revolution in October 1917, Lenin’s text soon became the principal authority on these matters in the Marxism of the newly established Third International (Howard and King 1989: ch. 13).In fact the basic ideas of Hilferding, Bukharin and Lenin were broadly similar, and owed much to the work of contemporary liberal anti-imperialists, especially J.A. Hobson. They all identified a direct link between imperialism and the economic contradictions of advanced European capitalism, in Hobson’s case a strong tendency to underconsumption in the metropolitan countries resulting from the maldistribution of income; Kautsky had made a similar case as early as 1884 in his analysis of the French colonisation of Indochina. Luxemburg took the argument even further, using Marx’s two-sector models of accumulation to claim - wrongly - that the continued expansion of any capitalist economy was in principle impossible without constant access to new non-capitalist markets.
When the First World War overwhelmed the international socialist movement, Kautsky sought desperately to show that imperialist conflict was not inevitable, pointing to the strong possibility of an ultra-imperialism, a sort of global cartel of the leading capitalist powers that would agree to the peaceful partition of the world and to a harmonious division of the spoils of imperialist penetration.
Bukharin and Lenin denied that this was possible, invoking the law of uneven and combined development. Just as cartels were weakened and eventually destroyed by differences in the cost levels and rates of technical progress in individual companies, they argued, so international agreements between imperialist powers would founder on the conflict between new and dynamic capitalist states and the less progressive, longer-established powers with a large vested interest in the status quo. The core principle of Communist political economy between the wars, derived from Lenin’s Imperialism, was the claim that capitalism had reached a new, final and extremely dangerous stage in its history, in which the means of violence monopolised by the state were used by capitalists to suppress the working class at home and to extend their reach across the globe. In the 1930s this crystallised into the Stalinist conception of state monopoly capitalism, or stamocap, which was depicted by writers such as Eugen Varga as the last, most decadent and easily the most vicious stage of the capitalist mode of production.This carried very clear implications for the economic prospects of not just the advanced capitalist nations but also the backward, dependent, colonial or semi-colonial regions. Marx himself had argued that imperialism was indispensable in spreading capitalist relations throughout the globe. He claimed that non-European societies lacked internal dynamism, so that imperialism was essential to introduce progress (Warren 1980). Luxemburg took a very similar position, which was stridently denied by Communist theorists after 1917. Capitalism was no longer a source of progress, they argued, but instead represented an insuperable barrier to successful industrialisation, using its military and economic power to retard development in backward areas. Only through adopting the Soviet model could colonial peoples hope to achieve any substantial social progress.
This Soviet model itself was largely improvised, since Marx and Engels had provided little or no guidance on the economic operations of a post-capitalist economy.
In the Second International, too, the economic problems of socialism were essentially assumed away, since it was supposed that the development of capitalism itself would solve them. Hilferding’s assertion that the proletariat need only seize the six largest Berlin banks was typical, and entirely unhelpful. Bourgeois writers like Enrico Barone, who claimed that rational economic calculation under communism would inevitably require the implementation of capitalist economic principles, were not taken seriously until Oskar Lange’s advocacy of market socialism in the late 1930s. Such arguments were in any case of very doubtful relevance to the central problem faced by Soviet Russia, which was how to introduce modern industry into a backward and overwhelmingly peasant society sufficiently rapidly to allow it to resist a new invasion by hostile capitalist powers. After 1917 there were genuine debates on the course that the new Communist regime should follow, and significant advances in the theory of socialist growth were made by theorists such as Evgeny Preobrazhensky and G.A. Feld’man until the early 1930s, when the Stalinist dictatorship made further serious intellectual activity impossible (Howard and King 1989: ch. 15; 1992: chs 2-3). After 1945, Western Communists drew on the Soviet experience to set out a development strategy for the ex-colonial nations.Some social democrats, like Kautsky, were early and sustained critics of the Soviet model while others, like Otto Bauer, took a more favourable position. In the 1920s Hilferding identified a new stage of development, organised capitalism, in which the most objectionable features of competitive capitalism had been superseded by the growth of monopoly, increased trade union power, and government regulation of the market in the interests of the working class. In effect Hilferding had (belatedly) made his peace with the revisionists, though his expectations of a gradual and peaceful path to socialism through piecemeal reform were very soon shattered by events (Howard and King 1989: ch.
14). In 1929 the Polish socialist, Henryk Grossmann, foreshadowed the economic breakdown of capitalism with an elaborate version of the falling rate of profit model that Marx had set out in Capital, volume III (Howard and King 1989: ch. 16).In the 1930s the length and severity of the Great Depression and the rise of fascism stimulated interest in Marxian crisis theory throughout the capitalist world, including (at long last) the United States (Howard and King 1992: chs 1, 5). Marx’s recognition of the need for surplus value to be realised through the profitable sale of commodities, and his dismissal of Say’s law as “childish babble”, seemed to place him on the same side as John Maynard Keynes. One of Keynes’s most prominent disciples, Joan Robinson, wrote a book-length comparison of Marx and Keynes, not always to the latter’s advantage (Robinson 1942). She had come under the influence of the Polish social democrat Michal Kalecki, who had discovered the main features of Keynes’s theory independently, and was an admirer of the Marxian work of Luxemburg and Mikhail Tugan-Baranovsky.
Meanwhile Bauer had produced the first mathematical model of underconsumption, which was introduced to a wider readership by Paul Sweezy, an American with Keynesian sympathies. Sweezy’s Theory of Capitalist Development was probably the most important English-language text on Marxian political economy to appear in the twentieth century (Sweezy 1942 [1970]). Rejecting both the falling rate of profit theory and the necessity of expressing the analysis in labour value terms, Sweezy argued that underconsumption was the principal cause of realisation crises (crises of effective demand). It was offset to some extent by the growth of unproductive consumption, including the huge sales costs of monopolistic corporations, and by increasing state expenditure, above all on war and preparations for war. The broad outlines of the post-1945 theory of monopoly capital, and the closely related critique of military Keynesianism, were already evident here.
Another Austro-Marxist, Max Adler, took a rather different line. Influenced by his compatriot Emil Lederer, Adler argued that permanent mass unemployment was a necessary consequence of the continuing and rapid development of capitalist technology. In the unlikely event of a new upswing in the world economy, Adler maintained, only a part of the unemployed would be employed again. The continued operation of the capitalist system was now possible only by eliminating millions of workers from production and reducing the wages of the others. This, he concluded, was a fatal measure that would intensify the crisis rather than overcoming it. Thus the growth of technological unemployment was reinforcing the tendency towards underconsumption (Adler 1933).