It may be said from the outset that economics is truly a concentrate of politics and that consequently economics can be distinguished from politics only in terms of the time periods or cycles that the two spheres occupy. Economics is the inner sphere of social reality, spinning around a hypothetical centre with a different torque or angular momentum from that of the political sphere which has a faster cycle or torque. As we shift from this hypothetical centre of the social sphere to its outer layers, economics grows increasingly political until it turns into policy and finally, at the outer surface of the social sphere, it finally resolves itself into strategy and tactics.
Contrary to what Lenin is said to have quipped, then, politics is not a concentrate of economics. It is the other way round: economics is a concentrate of politics. In other words, it is not politics that "boils down" to economics; it is economics that can be reduced to a bundle of politics. The important thing is to focus on the meaning of the phrase "a concentrate of" and the phrase "boils down to". What is it that we mean when we say that "in the final analysis" politics is economics or the opposite, that economics really is politics? What kind of "reality" do we refer to when we speak of the ultimate foundations of economics or politics? As we all know, necessity is not just "the mother of invention" - meaning that there are some needs that are so fundamental that they stir up human imagination and inventiveness. Necessity can also be camouflaged and disguised or simply be rationalised away as "virtue": this is what we do when "we make virtue out of necessity". Differently put, we recognize that there are situations in social relations when we are coerced into doing things that either we would rather not do or else "concentrate the mind" to the point of inducing virtue - the acquiescence to necessity as virtue - or inventiveness, the desperate search for alternative solutions. But in all these cases, in all these instances, what we call ‘necessity’ is a function of social relations, not of physical or physiological necessity. If we accept that our environment offers sufficient resources for human societies to reproduce themselves, then it is evident that economics - which as "the dismal science" is often confused with "the sphere of necessity" - has little to do with physical or physiological necessity but must instead have everything to do with "coercion". The necessity of economics intended as a "science" is therefore in reality the necessity of political coercion. That is why it is correct to insist that "economics is a concentrate of politics", in the sense that what we describe or circumscribe as a separate field of human activity - "the Economic" - is a specific form of coercion imposed by some people on other people in the sphere of the production of and for human needs and their satisfaction.
To accept with Lenin that "politics is a concentrate of economics" would be tantamount to allowing that economic activity is dictated by a "necessity" that is independent of "coercion", that is physical or even physio-bio-logical in nature – and therefore independent of "the Political". This may make sense in terms of the economic determinism – indeed, an eschatology or even a “theodicy” of communism – that Lenin inherited from Marx’s labour theory of value and is implicit in the conception of human history expounded most explicitly in The Communist Manifesto and in the “Preface to A Contribution”. It was this economic determinism that Eduard Bernstein attacked with his Evolutionary Socialism wherein he sought to reformulate the strategy of the Social Democratic Party for the conquest of political power in post-Wilhelmine Germany. To be sure, Bernstein’s attack on the notion of the “general crisis of capitalism” or Zusammenbruchstheorie had little resemblance to Marx’s notion of the inevitability of its decline and replacement by “the dictatorship of the proletariat” – which was certainly consistent with the gradual transition to communism and even more consistent with a revolutionary overthrow of bourgeois regimes than with a sudden catastrophic end to capitalism. But what was more significant than the applicability of the “general crisis” to capitalism for Bernstein’s attack on Marxist eschatology was the undeniable determinism of Marx’s theory based on the notion of “socially necessary labour time” and, consequently, of the validity of the Law of Value. For if, indeed, the notion of socially necessary labour time were valid, then, given a fixed working population, there can be little doubt that rising productivity would push socially necessary labour time to the zero bound, that is, to a point where workers will receive little or nothing out of the social product whereas capitalists will be entitled to the near totality of it!
This tendency of capitalism combined with the anarchy of production dictated by the reality of market competition necessarily entails the equal necessity of its supersession by political means to a new and higher form of social production that Marxists call communism. It was these two pivots of Marxian revolutionary economic theory – those of (i) the unsustainability of surplus-value extraction (Marx’s law of the tendential fall of the rate of profit) and (ii) the anarchy of capitalist market competition – and the obvious implication that they would lead to inevitable and irremediable crises for capitalist production and for bourgeois society – that Bernstein attacked, first, by challenging the “necessity” of the compression of workers’ wages as a proportion of total income (“the immiseration thesis”). And second, in further evidence of the erroneity of this Marxian hypothesis, Bernstein proceeded to show that indeed, far from the progressive immiseration of the working class and the growing intractability of capitalist crises, the recent emergence of welfare and interventionist states in Western Europe – the Sozialstaat instead of the liberal laissez-faire Rechtsstaat or Lassallean “night-watchman state” - together with their regulation of capitalist industry occasioned in part by the rapid ascent of social-democratic parties and trade unions – that these new political realities militated in favour of the ability of the capitalist system to avoid catastrophic political and economic crises and also – and this is the crux of Bernstein’s reformist thesis - in favour of the ability of socialist parties to achieve the gradual and peaceful, non-revolutionary evolution of capitalist society into a socialist one of freedom and equality. (On the transformation of the State in the nineteenth century, see the insightful studies by Franz Neumann collected in his The Democratic and the Authoritarian State and The Rule of Law, and those co-edited with Otto Kirchheimer in The Rule of Law under Siege. Bernstein's theses are reviewed in L. Colletti, From Rousseau to Lenin.)
Note that both these theses which form the essence of Bernstein’s socialist reformism can be derived directly from Marx’s own economic determinism. For, if indeed it is possible to calculate “socially necessary labour time” by reason of its “necessity”, and with it the magnitude of surplus value (the profit or value added by living labour after the cost of the means of production and real wages are subtracted from the total value realized from the sale of the products), it must follow that the Law of Value derived from the Labour Theory of Value is a calculable material quantity. But in that case the crucial question in the Marxian critique of capitalism boils down to the distribution of value in capitalist society and not to its production – because the mode of production is not called into question. The mode of production – what is produced when and how, by what means - remains exactly the same under capitalism as under socialism. All that changes is how the product – the Labour Value – is distributed between capitalists and workers.
It is true that Marx had intended “the Law of Value” – that economic value could be measured by labour content, specifically “labour-power” – to apply only to a capitalist economy and not to a socialist one. Indeed, Marx considered his greatest discovery to be undoubtedly the notion of “labour-power” – in other words, the notion that it is not “concrete labour” that measures the value involved in capitalist production but rather “abstract labour” or “labour-power”, the abstraction of human living activity coerced by capitalist employers into a measurable time entity (“man-power”). But here Marx was trying to have his cake and eat it, too. For if the measure of capitalist value is labour-power and labour-power cannot be measured scientifically because it is strictly a measure of political coercion, then it is inconsistent to call Marx’s theory “scientific”! Bernstein’s revision of Marxist economic and political theory starts from this deterministic Marxist premise that all human activity – taken as “labour” in the abstract – can be measured, and that this absolute measurement entitles workers to their rightful share of the social product. It follows that for Bernstein the essence of socialism was the fair distribution of the social product according to the “labour” required for its production. The whole social question then became one of distributive justice, not one over the political control of the entirety of social production including its what, when and how. Furthermore, Bernstein concurred with the prevalent critique of Marx’s “scientific” labour theory of value set forth by Eugen Bohm-Bawerk in Karl Marx andthe 'Close' of His System to the effect that Marx’s theory could not establish a direct verifiable empirical link between “socially necessary labour time” and the market-clearing prices of individual commodities. Following Bohm-Bawerk, Bernstein objected that Marx’s labour theory of value was no theory at all because it pretended “to transform” aggregate value into aggregate prices. But such an equivalence of “aggregates” clearly amounted to sheer metaphysics because any “aggregate” in the world may be said to be equivalent to any other “aggregate”. The difficulty of what became widely known as “the transformation problem” from values to prices that Marx attempted to solve in Volume Three of Capital is that the problem is not open to solution because, even if we accept that there is such a thing as “socially necessary labour time”, this “necessity” must ultimately be validated by “market prices” – which yields the vicious circle that labour values determine market prices and market prices determine labour values!
Ronald Meek, in his impressive Studies in the Labour Theory of Value, reviews Bernstein’s objections to Marxian theory and rightly points out that Marx intended the Law of Value to apply only to capitalism. But he remains ambivalent over whether Marx’s theory is to be considered “scientific”, in which case it is clearly a vicious circle, which Meek does not concede, or political, in which case it makes perfect sense from a practico-historical viewpoint, but Meek considers to be insufficient to qualify as "theory". Whilst he opts for the political theory that the Law of Value applies only to capitalism, Meek then gets entangled in the insistence that such a “theory” would be scientifically indeterminate or unprovable:
But surely there are two salient points which a theory of distribution appropriate to our own times should concentrate on explaining: First, how is it that unearned incomes continue to be received in a society in which the prices of the great majority of commodities are determined on an impersonal market by the forces of supply and demand, and in which the relation between the direct producer and his employer is based on contract rather than on status? And second, how are the respective shares of the main social classes in the national income determined in such a society? Unless one is content to rely on some sort of explanation in terms of “force” or “struggle” (in which case again one could only with difficulty speak of a theory of distribution), it is impossible to give adequate answers to these questions without basing one's account on a theory of value.2 (Meek, Studies, p.250.)
Evidently, like Marx before him, Meek is trying to circle the square, that is, attempt the impossible, because he is looking for a precise scientific theory of distribution, how a capitalist economy can co-ordinate itself as a market economy, without resorting to “force” or “struggle”, when in fact such co-ordination can only be politically regulated, and certainly not be the product of “impersonal market forces”! Meek’s retort is that such a “theory” is not distinguishable from a general theory of exploitation:
A “theory of distribution” which said only that unearned income was the fruit of the surplus labour of those employed in production would hardly qualify as a theory at all; and the mere fact that it expressed input and output in terms of embodied labour would not make it any more likely to qualify as one. At the best, such a “theory” could be little more than a generalised description of the appropriation by the owners of the means of production, in all types of class society, of the product of the surplus labour of the exploited classes. (ibid.)
Repeatedly, Meek reverts to the notion that for Marx “socially necessary labour time” referred to an absolute standard or measure by means of which the capitalist “transformation” of labour-time values into market prices, and therefore the calculation of profit as surplus value, was to be determined. (See above all his discussion of Benedetto Croce's critique of Marx's labour theory in Studies.) But this is simply false, because in Marx the concept of “socially necessary labour time” refers to “labour-power” not in a theoretical society analysed scientifically or objectively but specifically to the abstraction of human concrete labour achieved by means of capitalist political violence and coercion! Throughout his Studies, Meek overlooks the fact that for Marx, as for us, capitalism is a specific mode of production operating according to historically specific modes of exploitation or “social relations of production”, into which we will inquire presently.The essential point to Marx's critique was not to determine the distribution of value in a capitalistic society on scientific grounds but rather to show that capitalist production was conceivable only through the violence of the reduction of concrete labour to abstract labour or labour-power. It is true that Marx often deviates from this position in a misguided attempt to give his critique of capitalism the (Darwinian!) status of a natural science (a science of history in the Engelsian distortion of historical materialism re-baptized as dialectical materialism!). Yet, this cannot detract from the essential validity of Marxian theory when interpreted in its politico-practical, historico-materialist dimension. No greater claim need be made for the originality and greatness of Marx’s critique and theory of capitalism than that it discovered the precise historico-political mode of exploitation specific to capitalist enterprise! The residual problem then remains of how it is possible for capitalist enterprise to regulate and calculate values and prices to ensure at least partially the co-ordination of social production. As we shall discuss later, this exakte Kalkulation at the heart of capitalist enterprise will become the political measure or rule of Weber’s entire theorization of Western capitalist “rationalization”.
To return to Bernstein’s revisionism, in a nutshell, it can be summarized thus: once it is established that all Value is created by Labour – through the absolute “scientific” version of socially necessary labour time -, it becomes clear that the redistribution of value from capitalists to workers can be achieved by peaceful reformist social-democratic means through the process of parliamentary representation which was already spreading throughout Western Europe with the introduction of ever more “universal” suffrage. The process of production of Value and pricing of the product becomes thus a “technico-neutral” question – a mere matter of engineering - that is now removed from the more “ethical” question of the workers’ claim to the fruit of their own Labour. Thus, Bernstein’s revisionism and reformism represent a seismic shift in socialist politics not just in tactics but indeed in strategy – because the fundamental presuppositions (Voraussetzungen) of Marxist theory have changed. The very title of Bernstein’s series of essays that kicked off the controversy around the Bernstein-Debatte and the secession of the Third from the Second International referred to The Premises (Voraussetzungen) of Socialism. And these premises had changed in part, as we have seen, because of the crucial ambiguity in Marx’s own theorization of the evolution of capitalist enterprise. By seeking to give a scientific foundation to his critique of political economy, Marx had ended up reducing the political basis of capitalist industry – the violence of the “exchange” between living and dead labour, its coercion, in the production and reproduction of human society – to the economic quantification of the distribution of a scientifically calculated Value between workers and capitalist “managers”.
This technical scientization of the production and distribution of Value according to the calculable amount of Labour represented by them threw open the question over the integration of working-class parties in the bourgeois institutions of parliamentary government and representation that was at the centre of the dramatic split in the workers’ movement between the Second and Third International, between social-democratic and communist parties around the Organizationsfrage – the question of the organization of the workers’ party either into a reformist majoritarian “umbrella” mass party leading to a broad-based parliamentary democracy or into a minority revolutionary “vanguard” that would lead the proletarian “masses” to the dictatorship of the proletariat. It is important to appreciate that both the social-democratic and the communist variants of the socialist movement agreed on the “scientific” determination of labour-values in society, whether capitalist or socialist. They also agreed that in a capitalist society founded on private property the preponderance of anarchical decisions in capitalism over the scientifically planned decisions under socialism would result in unnecessary and oppressive social and economic crises of underemployment and immiseration and social waste. The difference between the Sozialismus and the Kommunismus lay precisely on the degree of scientificity, and therefore of steered planned economic decision-making, that could be achieved. The lesser degree implied by Bernstein’s critique of Marx meant that greater democratic consensus was required to avoid the upheavals (and evils) of capitalism; whereas the greater degree of scientificity claimed by the Kommunismus meant that only the “democratic centralism” of the dictatorship of the proletariat could steer society to socialism by wresting the ownership of the means of production from the oppressive anarchy of the capitalist bourgeoisie.
The change in strategy that Bernstein proposed and that was adopted enthusiastically by the German bourgeoisie in its backing of the integration of the Sozialdemokratische Partei (SPD) with the establishment of the Weimar Republic in 1919 had already been presaged in Friedrich Engels’s 1895 Introduction to the re-edition of Marx’s The Class Struggles in France. Written shortly before his death, this Introduction can be regarded as a last testament on the part of Marx’s lifelong companion, and for that reason alone it received enormous attention in the workers’ movement leading up to the First World War. It is an important document for our purposes because it addresses several analytical themes that are essential to the schematization and periodization of our own study of the origin, formation and seizure of power of revolutionary movements in the totalitarian era between the World Wars. To be sure, Engels had intended his theses to be a mere change of the tactics to be adopted for the transition to communism; but they were never meant as a change of strategy because unlike his assistant, Eduard Bernstein whom he appointed as trustee of his intellectual estate, Engels unflinchingly held fast to the theoretical premises of the Marxist critique of capitalism.
In this astoundingly visionary short exposition, Engels owns up to “errors” that he, together with Marx, had committed in the assessment of the political preconditions required and the revolutionary tactics to be adopted for the successful transition to a communist society. Tersely summarized, these errors referred principally to the ability of a minority vanguard or leadership of the working population to lead the majority of the proletariat to a successful revolutionary insurrection, given the spread of capitalist enterprise and the rise of the bourgeoisie as the hegemonic political force in control of powerful nation-states with their pervasive bureaucratic apparatus including sizeable standing armies capable of putting down any uprising with overwhelming force. In support of his critical revision, Engels could do no more than to point to the fate of the Paris Commune of 1871 – itself the subject of another Marxian piece on The Civil War in France where the errors of the earlier tract written in 1848 were repeated. As a remedy for these “errors”, Engels proposed a change of tactics toward a more “majoritarian” conquest of power by socialist workers’ parties given that the spread of parliamentary representation and of universal suffrage could not but lead to the gradual political supremacy of the proletariat and its eventual transformation of human society to socialism by either peaceful or, if compelled, revolutionary means.
The reason for us recalling this quite remarkable Introduction by Engels is once again that it presciently referred, with unmatchable perspicacity, to the essential ingredients of the origin and formation of proto-totalitarian regimes in accordance with our thesis on “the primacy of economics” in the first phase – comprising the first two stages – of the historical evolution of these regimes. To repeat, these ingredients are: - (a) the spread of capitalist enterprise; (b) the rise of the bourgeoisie as the hegemonic political force within integrated economic regions; (c) the formation of powerful nation-states with their pervasive bureaucratic apparatus to govern and administer these economic regions, including (d) sizeable standing armies capable of putting down any uprising with overwhelming force.