Workers' power league
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Workers’ Power League - Sweden:


When we are investigating the specific characteristics of a certain social formation, it is necessary to look at the actual production relationship within the society, in order to be able to decide the degree of development, the role within the global production order and other aspects of the society. With the help of all the information we can get on the function of the economy - shortly, the way products are produced and consumed - we must learn which laws rule the economy and thereby, the development of the whole society. With the help of such investigations we can also more closely define the position of different classes, the social strata within production, the class situation in terms of a future revolution and the possibilities of class alliances.

If we do not apply Marxist method, but proceed from a ready-made theory and try to find its specific characteristics in a social formation, we will - with great probability - not understand anything of what happens or will happen in the society. The fact is, that every social formation includes several modes of production, and therefore it must be easy to find fragments or elements of the mode of production one is specially looking for. An "analyst" who is desperately searching for capitalist features in the social formation of the Soviet Union, and an another "analyst" whose purpose it is to draw the differences between capitalism and the Soviet system into the light, will both find what they are looking for; but none of them will have answered the question: What mode of production is dominating? Let us leave behind us the Maoist, who discovers the local grocery market in a Polish village, and the fact that enterprises in the Soviet actually produce a surplus and who, because of his desire to regard the Soviet Union as a capitalist state, proclaims it to be so. Let us leave be hind us the Trotskyite, who discovers The Plan and happy with this proclaims the USSR to be a "Workers’ State". Let us instead try to investigate the economy of the so-called "socialist countries".

Every society (since archaic communism) has needed production in order to be able to consume: and every society since then has been a class society. In none of all the class societies in history, has production been arranged according to the needs of the people. On the contrary, the economy has been ruled by other forces. Today in capitalist societies, we can see how the economy is ruled by the profit motive of private companies, and how they try to adjust the consumption patterns of the people to Suit the profit motive. The causes of this are to be found in the division of the class society into a ruling and a ruled class and the ther irresistable necessity of the ruling class to remain in power.

The function of the economy

In the statebureaucratic countries the economy is planned. This means that the production goals are determined with the help of, and through, an administrative apparathus. The main planning authority is often called the "State planning commission" or something of the sort, and its task is to collect economic data as a basis for the planning, define the goals for production and coordinate these goals because of changes in the economic/political situation. The plan, or rather the several plans, valid during differing periods of time, consist of orders and work directives for the departments, branch organizations and companies. The directives can be directly connected to production, such as decisions about quantity, weight or volume etc., or as production incentives eg: a certain surplus of sold production. Another important instrument for directing the economy is the fixing of prices. The prices of important industrial and consumption products are determined at a central level, while the prices of many products of less importance are determined on a lower level, in some cases even by the company itself. But all prices can be regulated centrally with the help of negative or positive sales taxes, which vary from product to product.

The fact that products exist does not mean that they are commodities. A commodity is a product which is sold or exchanged on a market. What determines a commodity’s price on the market is its value, or equivalently, the socially necessary work which is needed to create the product. Of course work is needed to create products even in a statebureaucratic society, but for the great majority of such products, a market does not exist where they can be sold or exchanged. "The state owns all enterprises and does not have to buy from itself."1 "If the transport of steel from the steel works to the machine-shop or coal from the coal mines to the steel works, is regristated as acquistion (buying) of means of production, it is in reality a simple act of transferring the product within the framework of the same form of ownership (in concrete terms: the same owner = the state) and not a real act of buying and selling at all. The proof is the arbitrary character of prices in the ‘nationalized sphere’; these prices are merely an instrument for bookkeeping, they do not correspond to the value relationship. But this is what happens when state-owned enterprises trade with each other in a country where the market exists. It doesn’t matter if the state owns the major part of the industry, as for example in Austria. A system does not become a statebureaucracy because of the dominance of a state owned sector, it is a statebureaucracy because of the lack of a market, which means that prices are determined by other criteria than the law of value, and therefore the system doesn’t work according to the same principles as a statecapitalist system as Austria. This, among other things, results in a different kind of tendency with regard to crises, thus a different kind of further development of the system, another inherent logic...".2

Even the transportations of consumption products from producer to consumer are just seemingly via a "market"; the prices rarely corresponding to the value relationships. The prices are fixed so that the total consumption reaches a level desirable for the state bureaucracy. There are no markets for agrarian products in the state bureaucracies where private farming is permitted. There are many sellers, but only one buyer - the state - which buys the agrarian products under conditions of monopoly, for centrally fixed prices. In addition, both compulsory purchase and obligatory delivery are used.

The existing local market plays a minor role in the supply of food products within the state. These markets could be called "elements of simple commodity distribution within the statebureaucratic social formation".

Since there exists no real market (and in no sense of the word of a market for means of production), there is no place where a surplus product can be sold, no place where surplus value can be realized. Acordingly there cannot exist any capital, since capital is defined as value which increases through surplus value.3

The enterprise in the statebureaucracy

We have now shown that in statebureaucratic countries, there are no commodities, no markets, no surplus value or capital and no capitalists. We will now move on to the question of what is the impelling force, the primus motor, of the economy, when it can’t be the profit (the surplus value in relation to the total capital). Let us look at an enterprise in the Soviet Union:

Higher authority decides:


main item of production,
main investments,
fund of wages


The enterprise decides:

minor conditions for delivery

distribution of wages,
minor investments

minor conditions for delivery

One wonders how many Swedish managers who would accept working under those conditions. What Eastern European managements may decide is apparently restricted to things such as: Whether a product should be painted blue or red; distribution of the total wage sum the enterprise has received among the employees (here it must be remembered that all wages are fixed in a higher level), and decisions about minor investments - if the company has saved means for this. In this case the means must come from the companys own surplus.

The fact that a company produces a surplus doesn’t make it in any sence a capitalist company. The unique quality of human labour is that it produces more than what is needed to maintain it (more than what is needed for the reproduction of the labour power). This fact is what makes material development through history possible, and which also makes the class society, with its exploitation of the proletariat possible. The ruling class lays claim on the surplus products produced by the proletariat. In a socialist society there would also be a surplus product, but this would be distributed according to the wishes of the working class, through collective decision-making.

In statebureaucratic societies there is also a surplus produced by the enterprises (of course there are exceptions and in these cases, the loss is compensated bysurplus, from other enterprises). This surplus is sometimes called "profit". Even if this "profit" shares its name with the profit of a capitalist company, it has in reality very little in common with its capitalist cousin.

The "profit" in a statebureaucratic enterprise is based on the surplus product produced by the workers. The amount of money the enterprise can register on transportation of a product to another company (or in some cases, directly to the consumer) is of course dependent on the produced quantity, but is also dependant on sales taxes. This "profit" may be called gross "profit". From this gross "profit", the state lays claim to the major part, (Poland 80%, Soviet Union 70%, Hungary 60%, for example5) and the rest, the net "profit", is distributed by the company on several different funds: e g "fund for production development", "social and cultural fund" (for the common needs of the employees such as lodgings), "fund for unexpected expenditures", "fund for material stimulus" etc. The surplus left over when the net "profit" has been distributed - according to certain regulations - on the different funds, is left over to the state. There is therefore no need for the enterprises to make great "profits" - the state will in any case appropriate them.

That which makes some people describe Eastern European enterprises as capitalistic is the fund for material stimulus. It is, in the USSR 6%, in Hungary 15% of the gross "profit ", in the GDR 20% of the net "profit".6 This fund for material stimulus is used to make wages "go further" (which indicates that wages are not generally high enough for a decent income). In the USSR this makes a wage increment of, on an average, 10%. For the managers however, the part of the salary that comes from this fund is important, in Hungary for example 80%.7 But this does not bear any similarity to capitalist conditions. The management can useneither this fund, nor the revenue of any other, for new investments. Moreover the manager cannot, to take an example raise the prices or decrease the production (as under capitalistic-monopoly conditions) to increase the "profit" and thereby his own income. This is, as we pointed out before, decided by the central administrative bureaucracy (we notice that Bo Gustavsson - a leading Swedish Maoist - is wrong when he states the opposite in the book "Social Capitalism", p 15).

The striving force of statebureaucracy

If not the striving for profit, what is the impelling force in the statebureaucratic mode of production? We can point out that it is not to satisfy the needs of the people, as it would be in a socialist society, if we do not think that nuclear bombs, space "science", luxury production for a privileged class etc., are basic needs for the working class. The proletariat in the so called socialist countries apparently does not regard wage reductions, rise in prices and lack of fundamental consumption products to be to their benefit, according to the revolts among workers in Eastern Germany 1953, Hungary 1956, Poland 1970-71 etc.

We regard the general goal for production in statebureaucratic societies as the same as in all class societies: "Every ruling class decides the goal for social production. Of course it does this in its own class interest which is, aiming at a strengthening and extention of its control over the production and the whole society".8

Under capitalism this means a striving by the capitalist for maximal profit. Under statebureaucracy the ruling statebureaucratic class secures its power through maximizing the economic surplus for the whole national economy.

The material basis for the state bureaucracy’s self establishment as a ruling class, is the necessity of an industrialisation in a backward, agrarian society.

The task for the statebureaucracy ("instead of" the capitalist class, which has been wiped out by the revolution or military conquest) will be to develop the productive forces of the country through central directives, In order to do this as fast as possible (fast because of threat orcompetition from the surrounding, highly developed capitalism), the state bureaucracy is forced to allocate the existing resources in the production industry, (the industry that produces new means of production, i e machine-shops and raw materials industries) generally known as heavy industry. This necessitates giving a low priority to the consumption industry and of course to consumption itself. This is possible as long as there is labour force available eg. from the countryside, and as long as the statebureaucracy can, with the help of political stimulus, get the working class to make sacrifices for the construction of the "new society". During the time it took to develop the production industry (in Eastern Europe up to -53, -56, in China up to "the Great Leap" 1958) it was a common interest for the state bureaucracy and the working class to develop the industry potential (this does not mean there was a common interest in the methods which were used). However when almost everybody had work, and there was a common feeling that industry, and indeed the whole country, had been "reconstructed", the ideological ties between the working class and the statebureaucracy began to loosen. The workers now begin to demand more consumption products to buy with the wages they have earned in the industry. They can hardly consume steel, coal or electricity to any greater extent. The peasant demands to get back the surplus from agrarian production in the form of other consumption products. But from the statebureaucracy’s point of view, it is too great a task to administrate both the society and the consumption, and therefore, investments in the consumption industry is not an advantage but rather a necessary evil. This is because, if every Rubel, Zloty or Yuan invested in the consumption industry, had instead been invested into the production industry, it would have meant still more surplus to invest, still more power to the state bureaucracy. This is why the specific class interest ofthe state bureaucracy is "production for production", here in the most material sense of the word: tons, m2, etc. This differs from capitalism, where the goal for production is profit in terms of money. For this very reason, the state bureaucracy is not able to liquidate the production industry since it doesn’t "pay", it can’t as the bourgeoisie in a capitalist country can, speculate in currencies when the coal isn’t worth digging out any more.

What impedes a state bureaucracy from maintaining accumulation and investing more in the production industry? Nothing else than consumption. Further investment in the production industry beyond a certain limit would mean that consumption decreases to below the socially necessary level. The laborpower would not be able to reproduce itself.

The crisis

The state bureaucracy is forced to spare a certain part of the surplus for the consumption industry, which limits accumulation. The basic contradiction within the statebureaucratic society is therefore between "the already developed industrial potential and the low consumption level".9 The striving of the bureaucracy to develop the industrial potential and, at the same time, keep consumption at the lowest possible level, is the root of the crisis in the statebureaucratic society. These crisis expresses themselves in the following way:


Since there is a tendency towards investment in the production industry, the number of people employed there tends to increase, as well as the total wage sum paid out to the employees. Since the consumption industry is not given priority, the state bureaucracy is forced to raise the prices on consumption products, in order to get back the money paid out in the form of wages. The result will be a tendency towards inflation, which can lead to social crisis as for example in Poland 1970-71.


As a result of the exaggerated concentration of the production industry, more raw materials are needed than if the consumption industry had a role of higher priority within the economy (since the consumption industry needs less raw materials). As the resources of raw materials are often limited, the bureaucracy is forced to import them. Since there is a lack of consumption products, which under other circumstances could have been used as a payment for the imported raw materials, the result is a lack of balance in the foreign trade. This must be solved by reserving a part of the economic surplus for the payment of loans, to take one example. This in turn results in a further limitation of the import of consumption goods into the country.


The bad cooperation between production and consumption, that is to say a bad adaptation of production to the existing needs, leads to a production of things there is no need for, and to a production of "commodities" of bad quality - which among other effects, results in difficulties for the export.

"Bourgeois" observers tend to state that the crisis in these societies are caused by bad planning, or even that it is impossible to plan an economy under any circumstances. They state that enterprises can’t adapt their production to consumption. But the fact is that both managers and workers show a great inventiveness in adapting production after the needs - their own needs. From the managerial side, production resources are kept secret, stocks are over- or underestimated. The workers act in the same way as in capitalist companies - they do as little as possible and try to make it look like as much as possible. Once again it’s the basic contradiction in the society that is expressed - between consumption and production.

"Reforms" extending the influence of the "market" on the production cannot solve any crisis. If a state bureaucracy advances further towards a market economy (e.g. Yugoslavia), it will be the victim of the capitalist system’s overproduction and liquidation crisis. The Soviet Union is a good example. In the beginning of the 70’s the USSR has retreated from the "decentralizing" reforms of 1965-67. "The political structure,based on the bureaucracy’s possession of the means of production, has seriously hindered the development of the production forces; as long as this lasts, the crisis will worsen from day to day. The only and inevitable solution of the crisis will be the removal of these modes of production and consequently the overthrowing of the class power of the bureaucracy".10


1. Jacek Kuron & Karol Modzelewski: Letter to the Polish Workers’ Party.
page 43 (Swedish version)

2. Ibid, p 43

3. See for example Ernest Mandel

4. Bergström, Ådahl: Företaget i samhället p 63 (The Enterprise in the Society)

5. J. Wilczynski: The Economics of Socialism p 53

6. Ibid., p 53

7. Ibid., p 54

8. Kuron & Modzelewski, a.a. p 42

9. Ibid., p 61

10. Ibid p 73