Note: Since this article was written, changes whose rate was unimaginable back then have taken place. Less than two years after it was published, the Soviet Bloc came to an end in a process which started in mid-1989 and culminated with the dismantling of the Berlin Wall in November by large crowds. In December 1991, the Soviet Union itself came to an end, split apart into its then-constituent republics. This was to be the fate of Yugoslavia as well. Nevertheless, the key points of the article remain totally relevant, given how many on the “left” (and even elsewhere on the political spectrum) continue to maintain that the Soviet Union represented some sort of socialism, which they see as surviving in Cuba and North Korea, and that it and the nations in its former bloc underwent a restoration of capitalism following the events of the tumult years. In fact, the Soviet Union never represented anything except a form of capitalism, something which requires an understanding of the content of capitalism, rather than its various forms and appearances. All that has happened has been a move towards a restoration of more traditional forms of capitalism, i.e. private ownership of enterprises vs. state ownership. And even this process did not start with the collapse of the Soviet Union and its bloc, but had already been going on well before that, indeed well before the advent of Gorbachev to power. For an extensive reading on how state capitalism was imposed following the second stage of the Russian Revolution, the Bolshevik seizure of state power in November 1917, see The Bolsheviks and Workers Control, 1917-21 by Maurice Brinton. An interesting discussion of state capitalism in the context of the Russian Revolution, especially with regard to Lenin’s explicit espousal of state capitalism, can be read here. A more detailed and much-better-elaborated discussion of an alternative society than the words “world communism” can convey by themselves can be found in the conclusion to a May 2012 article by “Straw” regarding the Occupy movement and the fetishism of money. I also refer the reader to my May 2013 article regarding resistance to extinction.

Jeff Strahl, March 10, 2014.

Major changes in the Soviet economic structure were adopted on June 30, 1987. These alterations should once and for all do away with any illusions that the Soviet Union is anything but another sleazy multinational corporation battling for global dominance.

Since the early 1920s, virtually all businesses have been state-owned monopolies. But now, Soviet individuals will be permitted outright ownership of their own business, as long as it's small, and they employ family members only (what perfect wage slaves). Restaurants and repair services are typical of such ventures.

Managers of the various state-owned enterprises will now have far more independence regarding financing, marketing, wages, production decisions and (definitely not least) disposition of profits. Certain enterprises will be able to carry on foreign trade independently of Moscow bureaucrats. Abel Aganbegyon, one of Gorbachev's principal economic advisers, told reporters "profit will become the main economic indicator." (Christian Science Monitor, 11/21/86 p.1) Unprofitable businesses, up to 13 percent of enterprises, will be allowed to sink.

Joint ventures with foreign firms will be encouraged, primarily in order to boost exports. Eleven U.S. firms, led by Pepsico. have already signed up, and fifteen others are talking about it. Non-Soviet partners will now be able to own up to 49% of the venture, and will be protected from state confiscation, companies would not have to comply with Soviet production plans, and the foreign partner could repatriate its share of profits. Investors are promised tax benefits and labor peace, i.e. no strikes. (San Francisco Examiner, 3/8/87 p.D14) All this represents a move way beyond making one-at-a-time construction or trade deals with Western businesses, the previous policy.

And, in perhaps the most dramatic break with the past, the prices of consumer goods will be adjusted to reflect the cost of production. Leonid Abalkin, an economist who wrote the blueprint of the new policies for Gorbachev, said in an interview that price subsidies for items like food will be ended in two or three years, after a campaign to overcome fear of the change. (San Francisco Chronicle, 714187 p.10) Nikolai Shmaiyov, a leading Soviet economist, wrote in an article appearing in the Wall Street Journal, 8/26/87, p.20: "The economic situation will have to depend directly on profit, and profit cannot fulfill its function until prices are liberated from subsidies. Over the centuries, humankind has found no more effective measure of work than profit. Our suspicious attitude toward profit is a misunderstanding, the cost of the economic illiteracy of people who thought that socialism would eliminate profit and loss. The criterion of profit under socialism simply tells whether you are working well or not. It is even possible that we should consider creating economic free zones." (London Times, 7/27/87, p. 10) Reminder: as Karl Marx pointed out very well, profit cannot be traced to the difference between revenues and costs, but is a result of the extraction of surplus labor time from human workers.

These changes are profound. But they are not just new policies adopted by Mikhail Gorbachev's regime. Rather, they culminate a long, irresistible trend toward the complete integration of the Soviet zone into the world market.

In fact, the Soviet Union never ceased to be a part of the capitalist world. The 1917 Revolution ousted Czarist feudalism. However, world conditions, especially the failure of the global revolutionary wave, the relative underdevelopment of Russia, and the Bolsheviks' warped view of what constitutes socialism meant that a truly new social system could not be instituted. Lenin believed that "Socialism is nothing but state capitalist monopoly made to benefit the whole people" (Selected Works) This was to be done "with human nature as it is now, with human nature that cannot dispense with subordination, control and managers" (ibid.)

What resulted was naturally state capitalism. The state acted as the abstract capitalist, controlling the means of production, and exchanging wages with workers in return for their labor-power. The consequence was (and is) the reproduction of the means as an expanding value , a sum of money or its equivalent. (i.e., the accumulation of capital) This is the essence of capitalist society, not the private ownership of property, or lack of planning, or any other superficial criteria which the multitude of social democrats and leninists always bat about. "Capital does not consist in the fact that accumulated labor serves living labor as a means for new production. It consists in the fact that living labor serves accumulated labor as a means of preserving and multiplying its exchange value" (Wage-Labor and Capital by Karl Marx, p. 30)

Soviet planners have always taken steps to ensure that their system as a whole ran a profit, even though losing ventures were subsidized and full employment maintained. And, as in the West, Soviet industrial policy is growth for growth's sake, which entails massive ecological destruction. Arguments to the effect that the Soviet Union is or ever was socialist, or at least non-capitalist, have taken many ridiculous turns through the years, including Stalin's arguments during the 30's that capitalist production was still in force in the realm of consumer goods, but not in producer goods. Somehow, he had commodities exchanging with socialist use values. I wonder what he'd say about Pepsi's Soviet-made products.

Regardless of protestations to the socialist nature of their society, Soviet planners have sought expanded trade with the West since 1919, when a branch of the Soviet National Bank was opened in London. Though they were initially rebuffed almost everywhere (exceptions: Germany's government and American magnate Armand Hammer), foreign trade and investments were booming by the 30's. Ford, International Harvester and G.E. constructed major factories inside the Soviet Union during that period.

After the Second World War, the Soviet Union and the East European nation-states that it militarily dominated were excluded from the reconstructed world market via the Cold War. The one exception was Yugoslavia, which has chartered a course independent of the Soviet Union since 1948. By the early 1960's, however, ideology was being: shoved aside by the irresistible forces of the world market. Trade links between East and West kept growing, as market-seeking capitalists in economically-expanding Western Europe made connections with bureaucrats in Eastern Europe, a region which has traditionally traded with the West, particularly Germany and France. At the same time, attempts were made within the East bloc to modify central planning and thereby make enterprises more competitive. But these attempts were strenuously resisted by territorial bureaucrats, as exemplified by the ouster of the "reformist" Khrushchev in 1964 and the repression of the Czech experiment in 1968.

During the early 70's, American capital got into the act. The detente policy pursued by Nixon was heartily promoted by U.S. corporate big-wigs, who were already noticing shrinking profits at home and increased competition for world-wide markets. IBM, Pepsi, Chase Manhattan (which set up its Moscow office on Karl Marx Square) and many other Fortune 500 companies jumped on the bandwagon. European and Japanese businesses began making direct investments in Eastern Europe, and participated in major projects within the Soviet Union, such as the Fiat-built auto factory in Togliattigrad. Yugoslavia's supposedly self-managed socialist structure meanwhile got completely integrated into the global machine via exports of labor power, direct Western investment and international bank loans.

Simultaneously, East bloc money began flowing westward. Hungarian, Romanian and Czech funds were invested in such diverse ventures as Canadian tractor factories and Dutch truck-leasing firms. And the Soviets weren't far behind. The increased scale of Soviet overseas business activity was noted by Fortune Magazine in its February, 1977 issue, in an article entitled "The Communist lnternationale Has a Capitalist Accent". Among the enterprises reviewed were the Soviet banks in London, Paris, Zurich and Singapore, shipping lines which carry more cargo on the transAtlantic run than any other line, and the Soviet oil company Nafta, which has gas stations in Britain and Belgium. Shortly after this article was printed, a British company making radar equipment for NATO was rescued from bankruptcy by a loan from the Soviet Narodny Bank of London.

All this activity required lots of money. Consequently, East bloc nations began making more and more trips to the bank. Foreign indebtedness soared, best illustrated by Poland's situation. This in turn meant even more frantic efforts by the "socialist" nations to boost their trade so as to earn hard currency internationally-accepted denominations such as dollars and German marks -- in order to pay off debts. This they sought to do by buying production machinery from the West to improve the productivity of aging factories, and by trying to squeeze more out of the workers.

Structural reform continued to be stymied in the Soviet Union by reluctant bureaucrats. But barriers fell like matchsticks in Eastern Europe. This process has gone the furthest in Hungary, where little remains to distinguish its system from the West European mode. Janos Fekete, head of Hungary's National Bank, says "whether you're a capitalist or Communist, a dollar is a dollar." (Christian Science Monitor, 2/27/87) After almost two decades of reforms, Hungarian companies compete with each other and conduct foreign trade, individually-owned ventures abound, and foreign manufacturers like Levi Strauss operate plants. In Budapest, a bond market is operating, and Citicorp Bank has opened a branch, competing with, among others, 20 local banks. Political activity is stifled as usual, but if you mind your own business you're left alone. At the same time, the foreign debt has risen to $11 billion, working class living standards have plummeted, and a select few are making a fortune.

This trend is continuing throughout the bloc. In 1983, East European interests owned over 500 companies in the West, with over $10 billion in assets. Meanwhile, Pepsico's Pizza-Hut is operating outlets in Bulgaria, and Polish dockyards are constructing ships for Western clients. In June,1986, Poland joined the International Monetary Fund. And in April, 1987, Polish planners recommended the set-up of a market in stocks and bonds, the selling of shares in state enterprises, the legalization of private ventures in industry, and the set-up of joint ventures involving the state and local private interests. (San Francisco Chronicle, 4/7/87 p.20)

Meanwhile in China, Mao is being replaced by Mac (as in big Mac) and commodity culture in all its disgusting flavors. In Vietnam, old-line officials are being ousted in favor of "pragmatists". And in "liberated" Third World nations like Mozambique, Cuba and Nicaragua, which are hailed by Western leftists, scientific management, austerity, competitiveness and the attraction of investors are today's buzzwords.

In 1978, a Soviet film entitled "The Right of First Signature'' praised increased international. trade. It features a trade official who resembled Leonid Brezhnev's son, who wins over an American businessman by quoting the Bible, and beats back the CIA's effort to block expanded trade.

In 1986, this theme was: repeated in a Soviet pamphlet, "The USSR in the World. Economic Structure". According to it, "one-fourth of Soviet: enterprises are in various degrees engaged in export production."

12% of Soviet national income is accounted for by exports, about the same as the U.S. and up from 3% in the early 60's. The pamphlet stresses the mutual benefits of trade, and provides along list of profitable joint ventures and the problems engendered by blocking free trade. "No one has succeeded over a long period of time in opposing the course of world development and the objective requirement of production and international exchange" (p. 58, emphasis added).

Furthermore, "cooperation with Western industrial firms enables Soviet enterprises to utilize more fully the advantages of the international division for the purpose of increasing output and raising the efficiency of production, making goods more competitive and expanding exports of machinery and equipment. " (p. 48,) Western companies, meanwhile, can "decrease production costs" and be assured of a "stable market" Everybody benefits. All the ruling elites, that is. The Wall Street Journal couldn't make a better case for the internationalization of capital. Not surprisingly, the Soviet Union applied in August,1986 for membership in the General Agreement on Trade and Tariffs, a group which attempts to regulate capital's global trade machinery.

Gorbachev's current policies indicate that the Hungarian experiment is being imported into the imperialist homeland. The consequences are already here. Contrary to claims by the Spartacist League, Alex Cockburn and other apologists, the Soviet Union has economically dominated Eastern Europe for years. Soviet purchases have been paid for with Rubles, which are useless except for buying more Soviet goods. East European purchases of Soviet products, on the other hand, are paid with hard currencies. Quite an unequal trade. More recently, Soviet planners stepped up the exploitation by raising the price of gas and oil exports to Eastern Europe from subsidized low levels to world market rates. And now, Soviet purchasers have began rejecting East European manufactured goods delivered under trade agreements if they fall below a certain level of quality, and have reserved the right to seek alternative sources (i.e. the West). This will put extra pressure on Eastern Europe to "modernize".

Western commentators laud Gorbachev's efforts to "improve" Soviet society, that is to make it more like the alienated labor-consumption nightmare we have in the West. For the working class in the East bloc, it means more battles to just maintain living standards. Strikes in the "socialist" nations date back to the Leningrad-Kronstadt general strike of 1921, brutally repressed by Lenin and Trotsky. Many work stoppages and incidents of civil strife have taken place through the years, including the 1956 events in Hungary, the massacre of Novocherkask in 1962, and the 1980 strikes in Soviet auto factories. The Solidarity experience, rooted in a government austerity drive whose intent was to help pay Poland's foreign debt, demonstrates what may be coming.

In Yugoslavia, 65 strikes took place during one week in March in response to a wage freeze and other austerity measures, while inflation flirts with the 100% level. After the government warned workers it will use military force to restore order, it gave in on some demands. (Christian Science Monitor, March 20 and 26, 1987) Similarly, workers in Hungary responded to a December, 1986 wage freeze with unrest, leading the government to freeze prices as well. The working class appears less and less duped by the illusion of "socialism", and may be tempted by the pressures of restructuring to try for the real thing.

Fear of widespread unemployment resulting from failures of inefficient enterprises and lay-offs intended to streamline production has been a major stumbling block to restructuring. But last year, Hungary decided to let goners be goners. And on March 26th, 1987, the Soviet government announced that a Leningrad building enterprise employing 2000 has gone bankrupt (San Francisco Chronicle, 3/27/87 p. 38). This time, affected workers will get other jobs. But the president of the Club of Rome, a global capitalist think-tank, reported that last Fall, Gorbachev told him, "one of the most important things you can do is to tell us how to prevent endemic unemployment in a humanitarian way." (Christian Science Monitor, 2/23/87 p. 23) A Soviet newspaper reported in March '87 that a quarter of a million people are out of work in the republic of Azerbaijan. (San Francisco Chronicle, 3/30/87 p.17) More generally, Soviet economists estimated over a decade ago that the introduction of "scientifically-based norms" could lead to an unemployment rate of 7% to 22%. (Critique, No.1, Spring 1973). Need we point out the improvement in technology since then?

Some commentators, including Armand Hammer (still around) and many in the "peace" movement, think that East bloc changes and growing East-West trade will lessen global tensions. How soon they forgot that, right before World War I, Germany's best trade partners were Britain and the U.S. War is the continuation of business competition by other means, and the changes now occurring may very well mean more players trying to get in on a game that already has too many participants. Hence, increased global economic competition, especially within the context of a growing world-wide crisis, may very well be the spark to set off a war. Rather than count on businessmen, whether they wear pin-striped suits or proletarian-like gray, we should set our own agenda: world communism.

(this article by "Jack Straw" was first pubished in Angry Workers Bulletin, January 1988)