capitalism without capitalists

Previous philosophers have sought to change the world; the point, however, is to understand it.

-Adapted from Karl Marx's Theses on Feuerbach

ere is heresy. The thesis is simply that all previous theories about the fall of Soviet power are fundamentally, flawed; that the CIA-led "we fought the cold war - they lost and we won" interpretation of human events ignores the way the seeds of dissolution were sown from within the system itself, and that the same forces continue to create the strange hybrid which the authors categorise as "capitalism without capitalists".

They say: "It is agents other than capitalists who are making capitalism in central Europe, agents who share biographies as communist managers and technocrats, or as former dissidents."

This is because the power of both is based not upon economic capital, but upon cultural capital, built up over their years as apparatchiki of the socialist state.

It is a startling theory, and no less startling because it is framed in the arcane language of sociology, where technical terms (usually in the original German) like Bildungsbürgertum are introduced without explanation.

And it is interesting that it appears at first to endorse neo-Stalinist revisionism, the proposal from a small fragment of the old Stalinist left which maintains that everything started to unravel in the former USSR after the death (they would say murder) of Stalin in 1953, and that only a return to the pure way of pre-Khrushchev Marxism-Leninism will turn back the tide of history and reinstate the revolutionary world role of Mother Russia.

(It is also interesting that, as the post-Soviet electoral success of Communists like Zyuganov indicates, it is a view to which large sections of the post-Soviet population subscribes, however much their presidential candidate may try to distance himself from the previous order.)

A more profound analysis

But the analysis is more profound than that. Eyal, Szelényi and Townsley start by looking at the semi-feudal sociaties of pre-Communist eastern Europe, which they depict as based on "rank order", and that "at the same time as the communists destroyed feudal client ties based on status honour, the state-socialist system reinvoked the logic of rank in a qualitatively different way . . . [in which] a system of socialist patronage was institutionalised via politial capital in the form of Communist Party membership" (p.23).

And again: ". . . the early communist system has been called 'feudal socialism' because loyalty to patrons and faith in the proper world-view recall the logic of feudal rank order and clientelism. Notwithstanding the fact that socialism was a thoroughly modern ideology, and the nomenklatura system was imbued with the rationality of that ideology, this analogy is useful because it highlights how the top of the state-socialist social hierarchy was like a 'ruling estate' rather than a ruling 'class'." (p.28)

This status quo began to be challenged, they suggest, when the emergent communist technocrats began to feel themselves to be a "new class", in the sense intended by the Yugoslav dissident, Milovan Djilas. But while Djilas coined the expression to denounce the new bureaucrats, these authors see it as a natural stage in the progression from the "rank order" of feudal and communist society to a society which mirrored the class relations of western capitalism.

"The forces pointing towards the formation is this New Class and the transition from socialist rank order to a class-stratified socialist society were real, but eventually the project failed. A bureaucratic counter-offensive against the technocrats in the late 1960s and early 1970s blocked or destroyed the New Class project everywhere in Central Europe. . .

"These failed projects left their mark, however, since the bureacracy could not avoid relying on credentials" such as University degrees rather than CP membership "as criteria for recruitment to elite positions. Thus, in some respects, the bureaucratic victory proved Pyrrhic, as state-socialist elites became increasingly 'intellectualised'." (p. 31)

The 'trahison des intellectuals'

The authors point out that in pre-communist days, it was precisely the intellectuals who had tended to favour the "embourgeoisement", or transformation into a capitalist society upon classical western, class-stratified lines, of semi-feudal states, and that with the failure of the New Class project, "Central European intellectuals then reinvented their legitimate marriage with capitalism, and returned to the trajectory of capitalist transformation as a second Bildungsbürgertum " (educated middle-class, or "knowledge class").

The core of the technocrats' ideology, they say, is monetarism (which may be why Margaret Thatcher declared that she could "do business" with Gorbachev's USSR): "The reality of post-communist economic policy is budgetary restraint which, instead of distant guidance by an invisible hand, demands close, hands-on management of economic processes. . . They are accustomed to running the economy this way . . ." (p.12)

Just as monetarism led to the impoverisation of large sections of the British working class, and an unprecedented level of failures among the proprietors of small and medium-sized businesses, in Russia, too, "The poor have become poorer, but the most striking development of post-communism is that the not-so-poor have become poor, too."

However, the authors don't subscribe to the theory of "political capitalism", which maintains that the post-communist societies are being run, basically, by the very same people who ran them before the collapse of Communism.

". . . many members of the former communist elite have not retained their positions in the post-communist transformation. . . Indeed, most of the economic command positions in the post-communist sector are occupied by former communist technocrats who were younger and better educated than senior cadres." (p.13) "Indeed, 1989 might best be understood as the successful revolution of the technocratic fraction of the communist ruling estate against its bureaucratic fraction — it was a victory of 'experts' over 'reds'." (p.14)

An unholy allience between technocrats and dissidents

More startling is their conclusion that these technocrats struck an unholy alliance with dissidents to bring about their revolution (or more properly, surely, their counter-revolution). They show how the dissidents moved from "the possibility that reform could finally deliver on the promises of the socialist revolution, which were betrayed by Stalinism" but that following the suppression of the Prague Spring, they "reached the conclusion that socialism was not reformable, and began to view themselves as part of a new project".

For a while, the technocrats and the dissidents "proceeded along divergent trajectories".

"Dissidents increasingly considered the technocrats no better than collaborators, while the dissidents were shunned and dismissed by reform-minded technocrats as irresponsible 'troublemakers'. . .

"The historical irony is that precisely as they became isolated from one another, both fractions of the intelligentsia began to change, mostly in response to the shock of 1968, in ways which eventually made rapprochement possible and even necessary. . . as soon as they both reached the conclusion that socialism was dead, they also realised that what seemed so different were merely two sides of the same coin — that is, liberal capitalist society." (pp.84-85)

It is a fascinating thesis, and the authors are not alone in seeking for new explanations of something that at the time seemed inconceivable.

The part played by the Communist technocracy in creating this new-old society has been noted, among others, by The Economist back in 1994, which noted the part played by the young Turks of the Komsomol, the former Young Communist League: " . . . the Komsomol is the Harvard and Yale of the new business culture, churning out privileged entrepreneurs . . . Komsomol leaders have set up huge commercial banks . . . that are beginning to dominate the financial scene."

Another Economist survey claimed that those profiting from the new capitalism were too young to have held powerful economic positions under the Soviet system, the majority of them coming from the middle layers of enterprise management, local administration and the Party, including "significant numbers of engineers, technicians and academics" (The Economist 19/03/1994, p.72).

This runs counter to the theory of "nomenklatura capitalism" coined at the end of 1990 by Aleksandr Buzgalin, an old-style "Marxist Platform" Communist who declared that " . . . we have a situation where the old leaders are changing their political power into money and property . . ."

In an interesting article recently in The Observer , Timothy Garton Ash, calls upon Henri Bergson's theory of "the illusions of retrospective determinism" to demolish the triumphalism of many in the West who claim "we knew it all along".

"In 1989," he writes, "nothing went according to anyone's plan. Not [GDR leader Egon] Krentz's plan, not Gorbachev's; not Havel's, nor QWalensa's, nor that of US president George Bush."

Garton Ash contrasts the changes in Europe with the bloody massacre of Tiananmen Square, at the very same time that a Communist apparatchik, Alexander Kwasniewski, astounded the Solidarnosc delegates by proposing completely free elections to a new upper house. (He is now president of Poland.)

"The truth is that 1989 could have turned bloody at any point - as China did. . . What made the difference in Europe was two sets of political leaders: the opposition élites and the Gorbachev group in Moscow."

Of course, to Eyal, Szelényi and Townsley, the opposition élites and the Gorbachev group in Moscow were not so different from each other.

And yet . . . and yet.

What the thesis ignores

The thesis ignores so much that cannot be left out of the equation: the colossal burdens that the Soviet response to Reagan's Star Wars programme imposed upon its economy, for instance; the part played by KGB agents in exporting perestroika to countries like the GDR, who were already working on reforms (which dissident intellectuals complained robbed them of their revolution and handed over control of their country to the banking mandarins of Bonn); and the influence of the CIA. One does not have to become subject to Stalinist paranoia to be aware that the collapse of Communism is rooted not so much in the post-Stalin years, but in the purges in the time before Stalin's death, which can be traced back to an American agent, Jozef Swiatlo, deputy director of Department Ten of the Polish Bezpieka , who "leaked" evidence which brought to the gallows Party leaders like Laszlo Rajk in Hungary and Rudolph Slansky in Czechoslovakia.

The authors draw a distinction between "capitalism without capitalists" and "capitalism without a bourgeoisie", which is hard to appreciate, since the difference between capitalists and bourgeoisie is nowhere defined. What is certain is that Russian post-Communism has created some very rich men indeed, notably the seven "oligarchs", headed by Boris Berezovsky, whose billion dollar fortune is based upon a deal he cut with the state automobile company nine years ago, and also boss of Russia's media (and partner of Rupert Murdoch in that enterprise).

Historically, the transformation of feudalism into capitalism unleashed a tremendous outburst in productive capacity, but the same has not happened with the growth of Russian capitalism. Early capitalism was based on the "primitive accumulation" of pre-capitalist entrepreneurs, while post-communism capitalism had a powerful economic base upon which to build. But while mega-billionaires like Berezovsky, Vladimir Gusinsky, Mikhail Khodorkovsky, Vitali Malkin, Mikhail Fridman, Alexander Smolensky, Vladimir Vinogradov, Anatoly Chubais, Pyotr Aven, and Vladimir Potanin have siphoned off billions to be salted away in Swiss and Israeli bank deposits according to Russia's Argumenty i Fakty magazine, to the tune of $1.2 trillion – the Russian Gross Domestic Product plunged by 83 per cent between 1991 and 1997, industrial output fell 81 per cent, agricultural output 63 per cent, while prices soared by 350 percent and unemployment rose to 13 million.

Boris Kagarlitsky, the former dissident and leader of the non-Communist socialist opposition to Yeltsin, has said: "It's ridiculous to think that Russia could build a US-style system in a few years, or ever. What we have got is a version of peripheral capitalism, in which all the driving forces are from outside. Instead of gradually accumulating capital and building up national industry as, say, the US did, Russia has been disaccumulating capital.

"It's incredible that Western leaders now affect shock over the corruption and dysfunctional economics that took root in Russia. After all, just a little while ago, the Russian elite who did this were hailed as heroes of reform and warriors of democracy in the West.

"Where did all the money go? Don't look for it in Russia."

The book also ignores the factors that have allowed the Russian communists, for instance, to bounce back to a situation where they constitute a serious electoral threat to the post-communist project, and former Commmunist Parties in Poland, Germany, Italy and France to reinvent themselves as "parties of the democratic left". Clearly social forces are at work which do not figure in their statistical appendices, not the least of which is the impoverishment of the poor and not-so-poor, already mentioned.

Another serious weakness in the thesis is that it applies itself only to the Soviet Union and its satellites: yet similar factors are at work today throughout the West, as state-controlled enterprises are privatised and new ventures which might well be characterised as post-capitalist are being set up by a combination of local community representatives and controllers of funding sources, which may or may not be capitalist in their functionality. (The fact that the first conception of such projects happened in CP-governed cities like red Bologna, rather than in centres of social democracy, and certainly nowhere the new right is in power, is also worthy of note.)

Such ventures may also be characterised as "capitalism without capitalists", and indeed the whole thrust of the authors' case could be seen as a more rational explanation of the nascence (and success) of New Labour.

And the collapse of the centralised command economies of the former USSR and eastern Europe shares many similar characteristics to the failure of state control in Britain. It may also be playing a factor in the decentalisation of control in the USA, which began with the break-up of the big telephone monopolies into the "Baby Bells" of today, and could also be the thrust of the Dept of Justice attack on Microsoft, and proposals to "reorganise" it.

Indeed, though their theory of "cultural capital" as a more significant factor in the growth of east European capitalism than economic capital may be questioned by orthodox economists, it is not so different from the concept of "intellectual capital", described as "the new wealth of organisations" in a recent book, characterised by The Observer as "the most important factor in economic life" rather than "natural resources, machinery, or even financial capital".

There is therefore something to be gleaned from this book, if one screens out the sociological jargon, for anyone concerned with what's happening in the new Millennium, whatever their views about what is happening, or has happened, in the former USSR.