Lenin and Marxist Economics


8-17-09, 9:30 am

Original source: People's Democracy (India)

All Lenin’s theoretical contributions to Marxist economics were meant as interventions in the struggle for correct revolutionary practice; they were not dissertations developing Marxist economics as such. The contributions are far-ranging, but are located within a common perspective that characterized Lenin, namely his view of the revolution as a concrete project. This required the delineation of a road map between “the here and now” and the revolution; an examination of the relationship between the proletariat and the other classes in society; and also the perception of the revolution as a process that unfolded through stages. This view of the revolution as a concrete project underlay Lenin’s theorization of the revolution in a “backward” society like Russia. At a later stage, it also enabled him, on the basis of his understanding of imperialism, to theorize a world revolutionary process (which he argued, during the First World War, had come on the historical agenda), by unifying the two main revolutionary strands of the twentieth century: the proletarian revolutionary strand of the advanced countries, and the national liberation (or the democratic revolution) strand of the oppressed and “backward” countries.   Marx’s theoretical opus, arguing that the development of capitalism created the conditions for its own revolutionary supersession by socialism, had clearly visualized this revolution as occurring in the advanced capitalist world. In their writings on colonialism, Marx and Engels did anticipate the possibility of an anti-colonial revolution in countries like India, but did not explore the relation of such revolutions in the periphery to the socialist revolution. Late in his life, Marx had turned his attention towards Russia, and had agreed with Vera Zasulich that a direct transition was possible from the Russian village commune system (mir) to socialism, but only if socialism triumphed in Europe to help the process.   Lenin, while also stressing the centrality of the European socialist revolution, visualized an interlinked world revolutionary process where even countries less capitalistically developed could move through stages towards socialism, helped by the European socialist revolution, no matter where the revolution occurred first (the “chain” in which capitalist imperialism tied the world, he argued, would break at its “weakest link”). The exact class-nature, stage and tasks of the revolution in each country, and how it would progress, had to be worked out, even for countries with underdeveloped capitalism.   For Russia, Lenin believed that the village communes had disintegrated, making way for capitalist development, so that the Zasulich vision of a direct transition from mir to socialism had lost relevance. The development of capitalism was proceeding apace in Russia, because of which the working class had emerged as the main revolutionary force. The Russian bourgeoisie, having arrived late on the scene, and threatened by the working class, was incapable of carrying forward the democratic revolution, in particular the overthrow of Czarism and the seizure of feudal estates, as the bourgeoisie had done in France for instance during the French Revolution. Hence, the working class had to do the job of the bourgeoisie, of leading the democratic revolution, and moving on to socialism, rallying to itself at each stage substantial sections of the peasantry (the composition of the peasant allies differing from one stage to the next).   Pre-war writings

Much of Lenin’s economic writings of the pre-war period were meant to establish this perception. Since the Narodnik economists had been arguing that the narrowness of the home market in Russia, arising from the poverty of its people, made capitalist development impossible in that country, Lenin, given his argument that Russia was developing capitalism, to the point that the mir had been effectively destroyed, engaged in a theoretical debate with them where he used Marx’s expanded reproduction schemes.   Lenin made three basic points: first, the market was simply the outgrowth of the process of division of labor in the economy. When we move from a situation where the peasant household also engages in craft production to one where peasants specialize in agriculture and a separate group of producers undertake craft production, we ipso facto have the emergence of a market. Secondly, there may be imbalances in the production undertaken by different branches, some producing in excess of demand and others producing less than demand, but such imbalances giving rise to crises are an inherent feature of capitalism. The system proceeds through crises rather than being rendered an impossibility because of them. Thirdly, the imbalance between production and consumption is a hallmark of capitalism, which keeps the workers at an abysmal standard of living. To argue from this that the system cannot develop at all is illegitimate, since the aim of production in capitalism is not to cater to consumption. Indeed, the department 1, producing means of production of various kinds, can and does grow quite independently of the department 2, which produces the means of consumption, by catering to its own internal requirements that keep growing because of the rising organic composition of capital.   Lenin’s discussion of the market question was no doubt influenced by Tugan Baranovski, who had argued that capitalism was characterized by “production for production’s sake” and had believed in Say’s Law; but to see Lenin as merely echoing Tugan’s argument is erroneous. He himself remarked that the dynamics of capitalism he sketched, by putting numbers to the reproduction schemes, was not meant to capture “reality”: since the Narodnik economists had argued the “impossibility of capitalism,” it was enough for him to show its “possibility” which is what he did. (He was producing in other words a “counter-example” to the Narodniks). It follows that Oskar Lange’s later criticism, that the entire Marxist discussion on the market question at the turn of the century was marred by the fact that it simply put numbers to reproduction schemes, without postulating a plausible investment behavior, and therefore settled nothing, does not really apply to Lenin who was interested only in rebutting the Narodnik argument about the impossibility of capitalism. He succeeded in this, and in the process also drew attention, like Tugan-Baranovski, to the fact that capitalism could grow by finding markets for itself through a rise in organic composition of capital (so that department 1 largely produced for itself) even as the wage-bill, and hence the department 2 languished. (Kalecki was to argue later that military expenditure by the State could play the same role as the rise in C/V in providing a market for department 1).   The fact that capitalism was developing in Russia despite the Narodniks’ insistence on its impossibility was shown by Lenin in his classic study The Development of Capitalism in Russia. The implications of this for the forthcoming Russian Revolution were spelt out in his Two Tactics of Social Democracy in the Democratic Revolution, where he argued that “the bourgeoisie is incapable of carrying through the democratic revolution to its consummation, while the peasantry is capable of doing so” (under the leadership of the proletariat). Hence “the proletariat must carry the democratic revolution to completion, allying to itself the mass of the peasantry in order to crush the autocracy’s resistance by force and paralyze the bourgeoisie’s instability. The proletariat must accomplish the socialist revolution, allying to itself the mass of the semi-proletarian elements of the population, so as to crush the bourgeoisie’s resistance by force and paralyze the instability of the peasantry and the petty bourgeoisie.”   Central to this conception was a distinction between the different agrarian classes, and the role they played in the process of agrarian change. In societies embarking late on capitalist development, the bourgeoisie, though incapable of breaking up feudal estates, as the consummation of the democratic revolution required, could enter into an alliance with the erstwhile feudal lords to develop what Lenin called a “semi-feudal capitalism” of which the “junker capitalism” of Germany was an example; this was in contrast to “peasant capitalism,” which represented a more broad-based, more vigorous, and less oppressive capitalist development, that would ensue with the break-up of feudal estates. The bourgeoisie’s incapacity to follow the “peasant capitalist” path meant that the democratic aspirations of the peasantry could be fulfilled only under the leadership of the proletariat.   Lenin, at that time, had argued for the “nationalization of land” as the sequel to the break-up of feudal property, which would rid the producers of the burden of “absolute ground rent,” and hence encourage accumulation; it was only at the time of the Bolshevik Revolution that he changed his position to argue that the break-up of feudal estates should lead to the distribution of land to the peasants, something which the Left Social Revolutionaries, heir to the Narodnik tradition, had been demanding.   The issue of class differentiation within the peasantry, also central to the conception of the two-stage revolution, was to occupy him much, since the relevance of this conception went far beyond Russia, and it underlay the Comintern’s analysis of “backward” societies. In his preliminary draft theses to the Second Congress of the Comintern, Lenin put forward a criterion based on labor-hiring to distinguish between different peasant classes, which was to form the basis of all subsequent analyzes of the issue, including the celebrated one by Mao Zedong.   Imperialism and war

Lenin saw the first world war as a climacteric for capitalism, which heralded the arrival of the world revolution on the historical agenda. Marx’s famous remark that at a certain stage of the development of a mode of production, the property relations characterizing it become “fetters”  upon the further development of productive forces, had naturally raised the question: how do we know when this “fetters” stage has arrived? Or, more generally, when can a mode of production be said to have become historically obsolete? The “revisionist” tradition in German Social Democracy had argued that this obsolescence would manifest itself in a tendency towards the “breakdown” of the system; and since there were no signs of such a “breakdown,” the working class had to reconcile itself to the fact that capitalism would continue, that it should struggle only to improve its economic lot within the system, and that Marxism accordingly had to be “revised.” The revolutionary tradition in Germany epitomized by Rosa Luxemburg argued against this that the system did inevitably head for a “breakdown”; but in the process it accepted the problematic of the revisionists that the proof of the obsolescence of the system lay in its tendency towards a “breakdown.”   Lenin broke with this problematic and saw the war as epitomizing the “moribund” nature of capitalism. It gave workers a stark choice: they had either to kill fellow workers across trenches or turn their guns against their capitalist exploiters (whence the Bolshevik slogan “turn the imperialist war into a civil war”). He developed his theory of imperialism both to explain the war and to define the moribund nature of capitalism of which the war was an expression.   Lenin’s theory of imperialism is much misunderstood. The commonest misunderstanding is to attribute to Lenin an underconsumptionist position and the view that imperialism is a device to counteract this tendency. It is because of this interpretation that several authors later argued that Keynesian demand management of the post-second world war period had made Lenin’s theory of imperialism obsolete. But Lenin, though intellectually indebted to Hobson, was not an underconsumptionist like the latter. Indeed Lenin’s theory is not a “functional” theory of imperialism at all, i.e. imperialism is not perceived by him as providing an antidote to any particular tendency of capitalism.   For Lenin, imperialism is monopoly capitalism. The process of centralization of capital leads to the emergence of monopolies in the spheres of production and finance, which in turn reinforce each other to the point where a small financial oligarchy, straddling the spheres of finance and industry, decides on the disposal of vast masses of “finance capital.” These oligarchies are nation-based and integrated with their nation-states, creating a “personal union” among those presiding over industry, finance, and the State in each of the advanced capitalist countries. The competition which always exists between capitals, now takes the form of rivalries for the acquisition of “economic territory” between these powerful financial oligarchies, each backed by its nation-State. The acquisition of “economic territory” is not just because of its actual usefulness as markets or sources of raw materials or spheres of financial investment; it is because of its potential usefulness from which rivals have to be kept out. And when the quest for “economic territory” has succeeded in dividing up the entire world, only re-division remains possible, which can be effected through wars. The era of imperialism, which is monopoly capitalism, is characterized by wars.     Lenin’s concept of finance capital has been variously criticized: that it is based on a confusion between “stocks” and “flows”; that it oscillates between Hobson’s notion of “high finance” (characteristic of Britain where financial and industrial interests were rather distinct) and  Hilferding’s notion of  “finance capital,” or “capital controlled by banks and employed in industry” (characteristic of Germany where industrial and financial interests coalesced). These criticisms however miss the point of Lenin’s theory. The “stocks” and “flows” distinction assumes significance only within an underconsumptionist perspective, where capital exports in the sense of an export surplus financed through an extension of credit can be a source of boosting aggregate demand. In short, “flows” matter from the point of view of aggregate demand; capital exports as a reflection of portfolio choice, with no accompanying export surplus, do not affect aggregate demand. Once we detach Lenin from underconsumptionism, this criticism that he did not distinguish between stocks and flows ceases to matter. Likewise, since Lenin sought to characterize a whole phase of capitalism, covering the specificities of a number of countries, his use of somewhat elastic and overarching concepts can scarcely invite criticism.   His theory, though extremely simple in its economic conception, and almost unexceptionable within its context (on which more later), was rich in capturing the variety of relationships of domination that imperialism entailed. The attempt at repartitioning of an already partitioned world took complex forms (leaving aside war): colonies, semi-colonies, undermining the sovereignty of nominally independent countries, and acquiring hegemony over even (apparently hegemonic) colonial powers like Portugal. Lenin’s theory opened up the world of international relations to Marxist analysis.   Lenin had attempted in 1908 to explain revisionism in the European working class movement, by suggesting that the influx of petty producers, dispossessed by capitalist competition, into the ranks of the proletariat, brought with it an alien ideology that constituted the soil for revisionism. But in Imperialism, taking a cue from some remarks of Engels, he explained revisionism in terms of a section of the working class, and in particular its trade union leadership, getting bribed, out of the “superprofits” earned by the monopoly combines. Lenin’s position here must be distinguished from later arguments based on “unequal exchange”,  which have gone much further in claiming that the advanced country proletariat is part of the exploiting segment itself: he not only restricted the perceived beneficiaries of imperialist exploitation to a narrow stratum, but linked the phenomenon to monopoly. Theories of unequal exchange that do not invoke monopoly are ill-founded: they lack validity if the metropolis and periphery are not specialized in particular activities, but they cannot explain such specialization in the absence of monopoly. The Leninist emphasis on monopoly is a more fruitful approach to the issue, even if the circle of beneficiaries is sought to be widened beyond the narrow stratum.   In Imperialism, Lenin had criticized Karl Kautsky’s invoking of the possibility of the joint exploitation of the world through peaceful agreement by internationally united finance capital as “ultra-imperialism”. His argument had been that any such agreed division of the world among the different finance capitals, assuming it came about, would reflect their relative strengths at the time; but uneven development, endemic to capitalism, would necessarily alter these relative strengths, giving rise to conflicts that would burst into wars. “Ultra-imperialism” could only be an interlude of truce between wars. Many have argued on the basis of post-war experience that the Kautskyan perception rather than the Leninist one has come to pass, and inter-imperialist rivalries have become less intense under Pax Americana.   Two points however have to be noted here: first, we have of late not a unity among different nation-based and nation-State-aided finance capitals, as Kautsky had visualized, but a new international finance capital, and hence a new imperialism, which is a product of further centralization of capital and the removal of restrictions on cross-border capital flows, i.e. of the process of globalization of finance. What we have today in short is a new phenomenon that transcends altogether the Kautsky-Lenin conjuncture. Secondly, the emergence of international finance capital, while restraining wars among imperialist powers, has not prevented wars. The types of wars have changed but wars persist in all their viciousness. The present conjuncture is different from Lenin’s, but his opus remains the benchmark against which it has to be analyzed.   Post-revolutionary writings

Lenin’s voluminous post-revolutionary writings remain immensely significant and require separate and more exhaustive treatment. As the Civil War ended, the period of “War Communism” gave way to the “New Economic Policy,” which opened up the possibility of a capitalist tendency that had to be kept in check through the proletarian State retaining control over the commanding heights of the economy. This emphasis on the centralized State as a bulwark against capitalist restoration has been seen by many as containing the seeds of the subsequent decay of the system. Lenin accordingly has been seen as the conscious progenitor of the centralized system that got perfected in the Stalin era. But this is a misreading of Lenin whose basic libertarian vision of socialism never deserted him, even as the centralized State apparatus was being built  to protect the beleaguered Soviet Union after the prospects of a German revolution had faded and Lenin was beginning to look eastwards to China and India.   This libertarian vision, outlined in The State and Revolution written in August 1917, which visualizes the proletarian State as withering away from the very day of its formation, was reiterated in October 1917 in his remark: “we can at once set in motion a state apparatus consisting of ten, if not twenty, million people.” Even at critical moments, after circumstances had forced him towards a centralized state apparatus, his interventions, such as against the militarization of trade unions, sprang from this libertarian vision. And even after Soviet democracy had ceased to exist, Lenin was concerned that the Party at least must not become a centralized bureaucratic force, whence his “last struggle”, for taking steps to prevent the bureaucratization of the Party. He saw with great clarity and prescience that the pursuit of “democratic centralism” (the organizational principle of the Leninist party) in a society emerging from feudal autocracy can easily degenerate into bureaucratic centralism. The image of Lenin as apotheosizing centralism against the libertarian promise of socialism is a false one.