Reformism or Revolution: 7. The economics of Socialism of the 21st Century

In Chapter 7 Alan Woods looks at Heinz Dieterich's attempts at economic analysis, pointing out that it in fact has nothing whatsoever to do with Marxism. It is superficial and unscientific and simply reflects a reformist outlook.

In an article called Hugo Chávez asks to speed up XXI Century Socialism that appeared in Rebelión in the summer of 2006, Dieterich is asked: What is a socialist economy? He answers as follows:

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"The first step to implement a socialist economy is to know what distinguishes this economy from the capitalist market economy which we now have to suffer. The main differences, that is to say, the main characteristics of the socialist economy, are six: four that belong to economic democracy and two that belong to political economy and value.

"A. The four elements of economic democracy:

"1. The real participation of the citizens in the macroeconomic decisions for example, the national budget. 2. The real participation of the workers in the microeconomic decisions (the enterprise), particularly on the rate of surplus labour, which decides the rate of exploitation of labour, and the rate of investment. 3. The real participation of the citizens in the economic decisions of the community, for example, through the participative municipal budget. 4. The planning of the economy on the basis of this participation of the majorities.

"B. The two elements of the economy of value:

"1. The accountability and operation of the economy is realized through value (time expended), not on the basis of market prices. 2. The interchange of products is realized through equal values. This is the principle of equivalence that brings about social justice at the point of production, not capitalist (empresarial) distribution or state redistribution. Social justice is realized, in this way, from the first level of all economic activity: production.

"These are the six basic institutions of the socialist economy. Only when an economic system works on this basis, can we speak of a socialist economy. When they do not exist or are not operative, we have not emerged from the market economy, because the economic base has not entered into a post capitalist civilization. Attempts to transcend the market economy that do not reach this socialist institutionality, will sooner or later revert to full capitalism, however much they declare themselves to be socialism or communism as the intention or reality on the part of the governments.

"The decisive step: the substitution of price by value

"The decisive step in the transformation of the market economy into a socialist economy consists in the substitution of price by value. To understand this decisive step it is necessary to understand the role played price in the market economy. This is a double role. Price fulfils two vital functions for the system: a) it is the cybernetic centre of the national, regional and global economy, which controls the flow of commodities (products), services, money and capitals; without prices, the market economy would not move, it would be a dead system; b) it is the principal mechanism for the appropriation of the surplus product or economic surplus (profit); that is, it is the principal instrument for the enrichment and the accumulation of capital by the bosses.

"And what is the relation between price and the ownership of the means of production? The form of ownership of the means of production - state, private, social or mixed - is the juridical base of the economy: it is the Magna Carta or Constitution of economic activity. But this general normativity does not serve to bring about the daily enrichment of the bosses. This enrichment requires a working instrument and this instrument is the market price.

"Price is the functional equivalent of the revolver in a bank robbery: whoever has the revolver (power) carries off the wealth. In this sense, the whole market economy is an unethical gangster economy, governed by the law of the strongest. Today, the strongest economic subjects are the transnational companies and the bourgeois States.

"Every socialist transformation therefore must take the revolver out of the hands of capital, that is to say, the power of price. In historical socialism this was done by taking over the means of production from the bosses and the State taking over the double function of price. In this way the accumulation of capital in the hands of private bosses, but it failed essentially in the cybernetic function, the optimization of the economic flows. In other words: the classical function of price was neutralized and its systemic function was distorted.

"A socialist transition in the present day world will only be successful if it manages to substitute the ‘bourgeois' institution of price in such a way that its two fundamental functions, the cybernetic and the accumulative, can be resolved satisfactorily, by means of a qualitatively different institution: efficient in optimizing the economy and without any capacity for exploiting other human beings. This institution is value." [1]

Why does the apparent equality of exchange (in contrast to Dieterich's view) prove to be an illusion? Why is the worker not really in an equal bargaining position against the capitalist? Because he has nothing to sell apart from his labour power. Because the capitalist class monopolises the ownership of the means of production. This is the most important point, and Dieterich does not want to admit it. He describes ownership of the means of production as the Magna Carta or constitution of capitalism. But the working instrument of exploitation, in his view, is market price. This is clearly not Marx's view.

One asks oneself whether Dieterich has ever seriously read the works Marx and Engels. Certainly his own theory of exploitation has nothing in common with that of Marx and is only a regurgitation of Dühring's "force theory". It was Dühring, not Marx, who claimed that private property was the result of theft and violence, and that exploitation takes place in exchange, not production. This extremely superficial and erroneous presentation of the nature of exploitation was answered long ago by Engels:

"1: Political economy, in the widest sense, is the science of the laws governing the production and exchange of the material means of subsistence in human society. Production and exchange are two different functions. Production may occur without exchange, but exchange - being necessarily an exchange of products - cannot occur without production.

"2: Private property by no means makes its appearance in history as the result of robbery or force. On the contrary. It already existed, though limited to certain objects, in the ancient primitive communities of all civilised peoples. It developed into the form of commodities within these communities...

"3: The question at issue is how we are to explain the origin of classes and relations based on domination, and if Herr Dühring's only answer is the one word ‘force', we are left exactly where we were at the start." [2]

How does the "working instrument" work? Dieterich describes market price like a revolver in a bank robbery. This is a double error. Firstly, as we have already explained, the exploitation of the worker does not take place in the market through price, but in the workplace through the extraction of surplus value. Secondly, the compulsion upon the worker to work for the capitalist (that makes a mockery of his apparent freedom in the market place) is the capitalist's ownership of the means of production.

That, and not price, is their "revolver". And that revolver is in turn secured by other revolvers, real ones this time, in the hands of the state power. In order to remove the revolver from the hands of the capitalists it is necessary to overthrow the bourgeois state and nationalize the means of production. Despite his revolutionary-sounding rhetoric about revolvers, that is not what Dieterich proposes. His rhetoric is quite empty - as usual - and is intended to conceal the fact that he proposes to achieve "socialism" while retaining private property and the bourgeois state.

‘Dual power'

Comrade Dieterich proposes what he himself describes as "dual power" within the factory as a stepping-stone towards the Socialism of the 21st Century. Again this sounds very revolutionary. It brings to mind the Russian Revolution, with workers storming the citadels of bourgeois power, arms in hand. But on closer inspection, the real aim of striving for "dual power" a la Dieterich turns out to be slightly more modest. What is the aim? The objective of this titanic struggle is - to put an extra label on the bottles of milk. But before turning to the important subject of labels on milk bottles, let us first ask what dual power is.

The phrase was first used by Lenin in an article published in April 1917 called The Dual Power. The first sentence in Lenin's article reads as follows: "The basic question of every revolution is that of state power. Unless this question is understood, there can be no intelligent participation in the revolution, not to speak of guidance of the revolution."

This is ABC for any Marxist. But comrade Dieterich does not deal with the question of state power here or anywhere else. At least, it is not dealt with in a Marxist sense - which is based on the idea of the working class overthrowing the old bourgeois state and taking power into its own hands. What did Lenin deal with in this article? In February 1917 the Russian workers and soldiers overthrew the tsarist regime. They accomplished this task although the tsarist state was one of the most powerful in the world, with a huge army, police and secret police.

The workers immediately set about establishing the soviets, which Lenin characterized as embryonic organs of workers' power. The workers and soldiers elected delegates to the soviets, which existed side by side with the old tsarist state, which, although severely shaken, was still in place. The counter-revolutionaries rallied around this state, under the cover of the reformists in the Provisional Government. They were waiting for a favourable moment to counterattack. Had they succeeded, the Revolution would have been liquidated, the soviets dispersed and a fascist regime would have come to power.

When he returned to Russia at the end of March, Lenin immediately began a campaign aimed at convincing the workers in the soviets of the need to take power under the slogan "all power to the soviets". This was opposed by the reformist leaders in the soviets and also by Stalin and Kamenev who led the opportunist wing of the Bolsheviks. In the aforementioned article, Lenin wrote:

"What is this dual power? Alongside the Provisional Government, the government of the bourgeoisie, another government has arisen, so far weak and incipient, but undoubtedly a government that actually exists and is growing - the Soviets of Workers' and Soldiers' Deputies.

"What is the class composition of this other government? It consists of the proletariat and the peasants (in soldiers' uniforms). What is the political nature of this government? It is a revolutionary dictatorship, i.e., a power directly based on revolutionary seizure, on the direct initiative of the people from below, and not on a law enacted by a centralized state power. It is an entirely different kind of power from the one that generally exists in the parliamentary bourgeois-democratic republics of the usual type still prevailing in the advanced countries of Europe and America. This circumstance often over looked, often not given enough thought, yet it is the crux of the matter. This power is of the same type as the Paris Commune of 1871.

"The fundamental characteristics of this type are: (1) the source of power is not a law previously discussed and enacted by parliament, but the direct initiative of the people from below, in their local areas - direct ‘seizure', to use a current expression; (2) the replacement of the police and the army, which are institutions divorced from the people and set against the people, by the direct arming of the whole people; order in the state under such a power is maintained by the armed workers and peasants themselves, by the armed people themselves; (3) officialdom, the bureaucracy, are either similarly replaced by the direct rule of the people themselves or at least placed under special control; they not only become elected officials, but are also subject to recall at the people's first demand; they are reduced to the position of simple agents; from a privileged group holding ‘jobs' remunerated on a high, bourgeois scale, they become workers of a special ‘arm of the service', whose remuneration does not exceed the ordinary pay of a competent worker." [3]

This is quite clear and is a classical restatement of the Marxist position on the state. In dealing with the question of dual power, Lenin did not use it as a mere phrase, as Dieterich does. He explains that the workers and soldiers could and should have taken power but failed to do so and this led to the abortion of dual power, which was only half a revolution. But a revolution cannot stop half way. Either the working class finishes the job by taking power into its hands, or else at a certain point the pendulum will swing the other way, creating the conditions for a counter-revolution. Whoever doubts this should study the experience of Chile and Nicaragua.

The situation today in Venezuela in many respects is similar to that faced by the Russian Revolution after February 1917. The Revolution has begun but has not been completed. The old state and the bureaucracy remain and the landlords and capitalists still own important sections of the economy. It is essential that the workers finish what was started. But reformists like Heinz Dieterich are doing everything possible to restrain them, arguing that it is not necessary to nationalize the property of the oligarchy. This is the opposite of the position that Lenin advocated.

It may be argued that comrade Dieterich is not talking about "dual power" in society but only in individual enterprises. In Venezuela in many factories the workers are moving to take control into their hands. In factories like Inveval, they have introduced workers' control. In other factories, although they have not yet established workers' control, the workers are constantly encroaching on the "sacred rights of management". In a certain sense, therefore, one could therefore speak of dual power in the factories. This is a by-product of the revolution itself, which has stirred up the masses and awakened their limitless potential for creative activity. No longer are the workers prepared to leave the most important aspects of their lives to the bosses and bureaucrats. This is the secret of the movement for workers' control. It does not come from reading books but from the experience of life itself.

The Venezuelan Marxists are fully in favour of workers' control and are in the front line of those who are fighting for it. On the contrary, the reformists like Heinz Dieterich do not advocate workers' control but only co-operatives. This is what he understands by "dual power". But experience shows that co-operatives within a market economy always tend to degenerate into ordinary capitalist enterprises. They are forced to operate on market principles of profit and loss. The leaders acquire privileges and begin to act like bosses, pressurizing the workers to get maximum profits, sacking "superfluous labour" and so on.

Even workers' control is not an end in itself, only a means to an end. It is not possible to build islands of socialism in a sea of capitalism. Workers' control is only a transitional stage towards nationalization. Either the enterprise is nationalized or else workers' control will turn out to be a passing episode. It is therefore incorrect to juxtapose it to nationalization as if it was an alternative. What is necessary is to mobilize the workers to take over the factories, eject the bosses and demand nationalization. The only real perspective is the nationalization of the land, the banks and industries under democratic workers' control and management. Only this can lead to socialism.

The question of power

There is a famous British cookery book written over 100 years ago by a Mrs. Beeton. One of her recipes for hare begins with the immortal words "first catch and kill your hare". We laugh at Mrs. Beeton because it is excessively obvious we can't serve up hare on the dinner table without first catching a hare (even better, have it caught and killed by someone else). We face a similar difficulty with what comrade Dieterich is proposing. How is it possible to arrive at socialism unless we start with the seizure of power by the working class? The difference is that, whereas Mrs. Beeton could find a hare ready prepared in the shops, the working class cannot rely on anyone else to do its work for it.

But comrade Dieterich is not deterred by such small difficulties. He is preparing for "dual power" in the factories. And what does this consist of? The workers in the dairy (it could be any other workplace, of course) will establish dual power by the following procedure: in addition to the usual monetary price they will put a labour time calculation of the value of milk that they produce. But in the first place Dieterich has not shown that the process of exploitation takes place by labour time being turned into the "swindle" of money. Secondly why should workers engage in struggle to put extra labels on milk bottles? How will this help them carry home more food for their families? They might as well just labels on saying, "Help, we're being exploited".

But here we immediately hit a problem. Won't the boss mind? It is reasonable to suppose that he would mind very much indeed. It is equally reasonable to suppose that he would try to put an end to this dual power as soon as possible. And would the workers rally behind the defence of their right to put extra labels on milk bottles? If they did, they would very probably be shown the door and invited to play at dual power somewhere else. And since the capitalist remains the undisputed owner of his factory, there is not a lot that one could do about it.

But, Dieterich says, the dual labels would set up "cognitive dissonance". What is this supposed to mean? I think this means buyers of milk would be puzzled. They probably would be. The main question for the milk buyer is likely to be, ‘how much do I actually pay for this?' Does this puzzlement generate socialist consciousness, as Dieterich goes on to suggest? Being puzzled doesn't necessarily lead to revolutionary conclusions. The Winter Palace wasn't stormed because the Petrograd working class all thought, "I wonder where my keys have got to?"

Dual power, as we have explained, is not a situation that is likely to last for very long. Dieterich suggests workers should participate in discussions in the workplace with the boss about the rate of surplus value and what to do with it. But isn't it obvious that this will involve conflicts of interest (or class struggle, as it used to be called)? The boss wants a yacht, the worker wants higher wages or more investment to create jobs. Who decides? This is the most important question. In fact, it is the only question. There are only two alternatives: either the boss is going to move to eliminate dual power, or the workers, if they want to hold on to their gains, will have to move to take state power. Even Lassalle (whose formulations in the Gotha Programme are criticised by Marx, and whose notion of ‘the full fruits of their labour' is so similar to Dieterich's concept of "equivalence") was contemplating arrangements after production had been socialised.

In the past, experiments were carried out by utopian socialists who established communist communities in the USA and elsewhere based on "equal exchange". In every case they broke down and ended in disaster. In Mexico, the Zapatistas, who comrade Dieterich in the past greatly admired, have apparently introduced similar schemes in the areas they control. Subcomandante Marcos believes that this kind of thing is an alternative to taking power by revolutionary means. Actually, such utopian experiments do not disturb the ruling class in the slightest.

The Mexican ruling class was terrified by the movement of the masses when López Obrador was cheated of electoral victory. But they do not lose any sleep over Marcos and the Zapatista leaders, who, when the question of power was posed by the movement of millions of workers and peasants, played a completely reactionary role and acted as de facto defenders of the existing bourgeois order. Nor do they lose any sleep over Professor Dieterich's utopian schemes, particularly when he also always acts "responsibly" in every key moment, like the constitutional referendum in Venezuela.

How is equal exchange to be achieved?

Let us ask how this equal exchange is achieved in practice. Presumably there will be some kind of labour bank that will issue certificates based on the hours worked, which can be exchanged for commodities containing the same amount of labour-time. The labour time needs to be authentically verified, which, despite the existence of computers, is not as easy as Dieterich imagines.

In effect, these certificates would be a kind of money. In reality they are only promissory notes, which at the end of the day must be exchanged for commodities in a definite ratio. But all history shows that in order to perform its function as a medium of exchange, money must be acceptable in society. People must accept that it actually is worth the amount that is printed on it - that it is "as good as gold". Otherwise the notes in circulation are merely printed bits of paper. How can this "labour money" circulate outside the bank? How does it become convertible?

In order to determine the value of a commodity it is necessary to determine the labour time in which commodities could be produced, with the average means of production available in a given industry, i.e. the time in which they would have to be produced. But that also would not be sufficient. One would have to determine the time in which a certain quantity of products had to be produced, and place the producers in conditions that made their labour equally productive, and also the amounts of labour time to be employed in the different branches of production.

It is not a question of an isolated individual calculating how many hours he or she has worked, since the value of a commodity is determined by the amount of socially necessary labour-time expended on its production. An economy based on exchange dissolves all individual relations of production and distribution and replaces them by universal dependence. In place of the local market we have the development first of the national market, then of the world market. The value of commodities in the modern era is determined by the sum total of production and distribution on a world scale.

Whether the labour time expended on production in a factory in Caracas is socially necessary or not is determined, not in that particular factory, but in hundreds of thousands of factories in China, India, etc. Each individual's production is dependent on the production and consumption of all others on a world scale. So what at first seemed like a very simple act of arithmetic now turns out to be an infinitely more complex calculation.

Adam Smith

Here we see the result of comrade Dieterich's error in lumping together different historical periods and establishing a false identity between qualitatively different socio-historical systems. Prices, money and exchange have a long history; determining the value of the articles exchanged by costs of production, but they only become dominant under the capitalist system. In earlier societies exchange has a more or less individual and accidental character.

Starting with Adam Smith the bourgeois economists imagine that every private individual pursues his private interest; and thereby unconsciously serves the general interest, through the "invisible hand of the market". This is an expression of the triumph of the market and exchange under capitalism. Like a good bourgeois Adam Smith assumed that the capitalist mode of exchange already existed in the prehistoric period. Dieterich does not go quite so far, limiting it to the past 5,000 years or so. In fact, only under capitalism does exchange develop to its full extent. In bourgeois society, the society of free competition production acquires absolute dominance over all relations of production.

This reciprocal dependence of producers and consumers is expressed in the constant necessity for exchange, and finds its all-sided mediation in exchange value. This universal interconnection has nothing to do with isolated individuals like Robinson Crusoe, as Marx explains:

"The reciprocal and all-sided dependence of individuals who are indifferent to one another forms their social connection. This social bond is expressed in exchange value, by means of which alone each individual's own activity or his product becomes an activity and a product for him; he must produce a general product - exchange value, or, the latter isolated for itself and individualized, money."

This is very different from previous societies, in which the individual or the individual member of a family or clan or community "directly and naturally reproduces himself, or in which his productive activity and his share in production are bound to a specific form of labour and of product, which determine his relation to others in just that specific way." [4] This kind of exchange was not possible in previous forms of society: the patriarchal relation, the community of antiquity, feudalism and the guild system. The latter had to be destroyed before capitalist economic relations could advance beyond the embryonic stage, as Marx explains:

"Patriarchal as well as ancient conditions (feudal, also) thus disintegrate with the development of commerce, of luxury, of money, of exchange value, while modern society arises and grows in the same measure." [5]

The central contradiction of capitalism is that between the social character of production and the private appropriation of wealth. In exchange value, the product of the worker's hand appears before him as something alien and objective, confronting the individual as an alien power over which he or she has no control. The way to abolish this contradiction is not to tinker with the market economy with utopian schemes for "equal exchange" but to expropriate the capitalists and thus create the conditions for a socialist planned economy, in which the workers can exercise conscious control over their productive and social activity.

"There can therefore be nothing more erroneous and absurd than to postulate the control by the united individuals of their total production, on the basis of exchange value, of money, as was done above in the case of the time-chit bank." [6]

Marx exposed the erroneous and absurd character of the idea of equal exchange as advocated by the utopian socialists and answered over a hundred years in advance the arguments of their lineal descendent Heinz Dieterich. It is an attempt to remove the contradictions of capitalism while retaining an economy based on exchange by individual producers. It is an attempt to create capitalism with a human face. That is to say, it is an attempt to square the circle.

The development of capitalism creates all kinds of contradictions: agglomeration, combination, cooperation, the antithesis of private interests, class interests, competition, concentration of capital, monopoly, stock companies and so on. From competition arises monopoly, and from the national market arises the world economy. The utopian socialists saw only the negative aspects of this: exploitation and injustice. But the development of capitalism also creates the conditions for its overthrow. The development of the means of production create the material base for a higher form of human society - socialism - and it also creates the class that is destined to act as its gravedigger - the working class.

Bourgeois society rests on exchange value, which is only an expression of existing socio-economic relations, including the relations of circulation and production. There are so many contradictions in this system that it is impossible to abolish them by isolating a single element (exchange). Utopian socialists like Gray (who is the real source of Dieterich's ideas on economics) believed that a reform of the money market could abolish the foundations of internal or external private trade. By means of peaceful reforms like the establishment of a labour bank and "equal exchange", the exploitative character of capitalism could be abolished, painlessly, without unpleasant conflicts.

Capitalism cannot be reformed

Marx explains that the "antithetical character [of capitalism] can never be abolished through quiet metamorphosis. On the other hand, if we did not find concealed in society as it is the material conditions of production and the corresponding relations of exchange prerequisite for a classless society, then all attempts to explode it would be quixotic." [7]

Here we see the abysm that separates the thinking of Dieterich from Marxism. For Marx, the capitalist system had to be overthrown by the revolutionary movement of the working class. For the utopian socialists and Dieterich, it can metamorphose into a "new and just society" by abolishing "unequal exchange", while retaining the economic system based on exchange and money - that is, capitalism. What do these words mean? For Marx, socialism was not just a good idea, or, to quote Dieterich's favourite phrase "an historical project". It was the inevitable result of the development of capitalism itself. In its greed for personal gain, the bourgeoisie developed the productive forces to an unheard-of degree and therefore created the objective conditions for socialism.

Marx pointed out that "a bank which directly creates the mirror image of the commodity in the form of labour-money is a utopia". In reality, socialism takes its starting point from the development of capitalism. The development of gigantic monopolies in the present epoch is the logical result of free competition, which it negates. But the existence of huge monopolies, real industrial armies of workers spread out all over the terrestrial globe, abolishes any necessary role the individual capitalist may once have played in production.

The day when the entrepreneur personally ran the factory has long gone. Instead, today the owners of industry pay professional managers to administer their plants while they confine their activities to parasitism and speculation. The bourgeois, who have enriched themselves to an unprecedented extent at the expense of the working class, are as superfluous as the drones in a beehive. Therefore, the next step must be to eliminate this role altogether by expropriating the expropriators.

Today in all the main capitalist countries the big monopolies are closely linked to the state. Although they constantly complain about the state, taxes and government interference, the capitalists are paid lavish subsidies by the state, which relieves them of the need to pay for the education and health of the workers, pays for the police who defend their property and the armies that fight their wars for access to foreign markets, raw materials and spheres of influence, all while reducing taxation on the rich and passing the bill to the working class and the middle class. The next logical step is therefore the nationalization of the big banks and monopolies, under the democratic control and administration of the working class.

What is the point?

The principle of indeterminacy states that it is not possible to determine accurately the position and velocity of an individual subatomic particle, but quantum physics is capable of making very precise predictions about the movements of very large numbers of electrons and other particles. Similarly it is not possible to determine the exact position of a gas molecule, but it is possible to do so in relation to very large numbers of gas molecules. In the same way, it is neither possible nor necessary to work out the "true value" of a single commodity in order to understand the evolution of prices in the aggregate. This is absolutely necessary for a socialist planned economy, but fiddling and fussing about the exact value of individual commodities is a ridiculous waste of time.

Let us assume for the sake of argument that, with the aid of one of Heinz Dieterich's computers, we are able to calculate the "true value" of commodities, what would the practical consequences be? The worker would then have the immense satisfaction of knowing that such-and-such an amount of his labour power has been used up on such-and-such a day in making such-and-such a product. What then? Will he able to demand that the boss raises his wages? No, because he has already agreed the amount of his wages with the employer before setting foot in the factory. As we have already seen, wages are not the price of labour but only of labour power, which, once he has purchased, the boss can use as he sees fit.

Moreover, if the worker wishes to receive his wages then the product of his labour must be sold. Otherwise its true value will be precisely zero. But here things begin to get complicated. At what price will the product be sold - at its "true value", or at the price dictated by the market? Why, at its market price, of course! One scratches one's head in bewilderment.

What was the point in spending so much time and effort working out the value of commodities, when in the end they are sold according to the laws of supply and demand? What difference does all this make to the worker, the capitalist, the consumer or anyone else, when the end result is exactly the same: the worker is paid exactly the same wages, the capitalist gets exactly the same profit (derived from the unpaid wages of the worker) and the consumer has to pay exactly the same price, determined by market forces. What was it all for?

Here we come to the essence of the whole business. Heinz Dieterich has caused the workers to spend a colossal amount of time and energy to work out a purely symbolic "price" which can be written on a ticket and displayed on the product in the shop window alongside the ordinary market price. We know that, in the real market place, nobody will pay any attention to this symbolic price, any more than smokers pay any attention to the health warnings printed on the side of cigarette packets.

"Ah," says Heinz, "but then the people will be able to compare the price and the ‘true value"

So what? (We persist in our inquisition).

"After a while they will begin to notice that there is a difference between the two," Heinz replies.

So what? (We still persist).

"Then they will say: just a moment! This means that the capitalists are exploiting the workers! This is unjust! We demand the immediate introduction of Socialism of the 21st Century!"

Then everything will be all right.

Now it really requires a genius of the stature of Heinz Dieterich to think of something like this. He assumes a) that most people do not know that the bosses exploit the workers, b) that most people do not know that society is fundamentally unjust and c) they have had to wait until now for Heinz Dieterich to explain this to them. For our part, we have a somewhat higher opinion about the native intelligence of the masses than professor Dieterich.

Had he asked us (which, needless to say, he did not) we could have advised him that it is not necessary to have millions of workers armed with pocket calculators wasting their precious time computing "true value". The task is a lot simpler. All that is required is for Heinz to come out of his comfortable university study (not for long - a day should be enough) and just talk to ordinary men and women on the streets of Caracas or Mexico City. If he had taken the trouble to do this he would have a big surprise. He would soon discover that most workers are well aware that the bosses exploit them and that capitalist society is unjust.

The problem here is that professor Dieterich, like all the other reformists, treats the workers as if they were little children - and not very intelligent children, at that. He really imagines that without him and his wonderful theory of 21st Century Socialism the ignorant masses will never be capable of changing society. This is the exact opposite of the idea of Karl Marx, who said that the emancipation of the workers is the task of the workers themselves.

He thinks the masses are not capable of understanding socialism and that this is the real problem. If by this he means that they are not capable of understanding what he writes in his books, we can agree with him. But then, they are in very good company. The present writer can confirm that to plough through these writings is a painful task for which a great deal of time is needed, which the majority of suffering humanity does not possess. The masses have to suffer quite enough in the daily struggle for existence without having further tortures inflicted on them.

Heinz Dieterich complains that he is not understood, and he concludes that this reflects the low level of consciousness of the masses. If people do not understand what he writes he only has himself to blame. As a matter of fact, he is most fortunate that they do not understand what he writes, because if they did he would have even fewer supporters than he has now.

Why nationalization?

Having rejected nationalization and central planning, Dieterich's next step is to reform the market and move to the kingdom of equal exchange. How is this miracle to be accomplished? Why, through a network of computers, of course! This will, Heinz assures us, enable us to calculate labour time and thus ensure equal exchange. The project for 21st Century Socialism is thus based on a network of PCs.

This is approximately like making a brain that does not connect to any limbs. You cannot make the instruments of production do what you want them to do if you don't own them. Yet Heinz has rejected all suggestion of nationalizing the productive forces, so we must assume that in the 21st Century Socialist paradise, the land, the banks, the industries, and, yes, the computers will all remain safely in private hands.

Heinz is capable of stating the problem but not of providing a satisfactory solution. Once we have taken over the key points of the economy it will be possible to plan the productive forces in a rational way. It will be possible to mobilize the productive capacity of the nation to solve its most pressing problems. On this condition - and only on this condition - computers and other modern technology would be used to the full extent of their potential. Under such circumstances, Heinz Dieterich would be correct when he writes:

"There are millions of engineers, economists, mathematicians, activists and social fighters in India, Europe, the United States, Latin America and other latitudes who have computer capacity and unused time who, without doubt, would be disposed to collaborate in solidarity with the construction of the next phase of human evolution. It is simply a question of activating them with an ethical political project which will give them a sense of transcendence in life, which present capitalism lacks completely." [8]

It is certainly true that there are millions of engineers, economists, mathematicians, scientists and other qualified people all over the world whose talents and abilities are not being used for the benefit of humanity because capitalism is unable to use them. There are many graduates in all countries who are unemployed or working in supermarkets because an economic system entirely based on production for profit does not need their services.

Millions of people need trained doctors, teachers, nurses and so on. But capitalist production is not directed to the satisfaction of human needs but only the further accumulation of capital and the enrichment of the few at the expense of the many. The only way to put an end to this situation is to take the economic power out of the hands of the rich parasites and place it in the hands of the workers and peasants who make up the overwhelming majority of society.

Capitalists without profit?

Plato, as we know, banned poets from his ideal Republic. Arno Peters is far more broad-minded. In his ideal Socialist Republic of the 21st Century we will have not just poets but judges, factory managers, directors and ministers, but also capitalists, army generals, policemen and a hierarchical state bureaucracy:

"Also those activities that today still have as their objective personal enrichment must be included to the degree that the economy needs them. In this, trade is limited to the distribution of goods, their transportation and storage; these activities, as a necessary part of the division of labour, are converted into a part of value and must be remunerated like any other work: according to the time worked. Similar norms must be applied to the owners of enterprises that do not belong to trade but production. After their profits have disappeared, their entrepreneurial activity - which, like any other work forms a proportional part of the commodities - must be paid in an equivalent manner, as long as society has a hierarchical structure, and therefore continues to maintain a military organization that requires its activity. At the present time, this is the situation in almost all countries." [9]

The reader might be forgiven for thinking that this 21st Century Socialism is beginning to look increasingly like good old-fashioned capitalism. But no, there is a difference! Under 21st Century Socialism there will be capitalists, who will continue to own the banks and industries, but they will be completely different to the capitalists that exist in "almost" all countries at the present time, or at any other time in the past. Arno Peters' capitalists will continue to own and run their businesses as before, but they will do so in a completely altruistic manner, renouncing all personal gain and cheerfully accepting the "wages of equivalence" for their pains.

Mr. Peters has here achieved a miracle, compared to which the transformation of lead into gold is mere child's play. He has achieved something that even the old alchemists never dreamed of: he has turned the capitalists into saints. Activities that today are carried out for the sake of personal enrichment, says Arno, "must be included to the degree that the economy needs them". But if we accept that private capitalists are necessary, then we must leave them to carry on their business - just as they do at present. And the whole purpose of the private capitalist is no other than the pursuit of profit. It is rather embarrassing to have to point out things that are obvious to any normal person. But since such things are by no means obvious to Arno and Heinz, we have no alternative but to do so.

The only locomotive of capitalist production is private profit. To imagine an economic system in which private individuals continue to own and administer the means of production without the profit motive is to imagine Hamlet without the Prince of Denmark or the Catholic Church without the Immaculate Conception. If private capitalists are still necessary, then it follows as night follows day that profits are still necessary, and therefore that the extraction of surplus value is still necessary and exploitation is still necessary, and the market is still necessary.

Arno Peters' capitalists are, of course, individuals, and, like everyone else in the equivalence economy, pursue their individual activity. But in the market they encounter many other capitalists who are doing just the same thing. The competition between these individual capitals is what gives rise to the anarchy of capitalist production, rendering planning utterly impossible and producing periodic crises of overproduction, unemployment and factory closures and all the other things that were supposed to be banned from Arno Peters' Socialist Paradise, but which now reappear as an integral and necessary part of the economy of equivalence. We now see very clearly that, under the pretext of abolishing capitalist economic relations, this theory (if we can grace it by this name) merely reproduces them in a different (and utterly fantastic) form.

The first question we need to ask is: why are private capitalists necessary at all? In Marx's day the factory owners played a direct role in production, as managers in their own factories. But that has long since disappeared. The modern owners of industry play no role at all in production, other than providing capital for investment, and this they do exclusively to obtain profit from the unpaid labour of the working class. The factories owned by Ford could not function for a single minute without workers, but the same factory could function very well if Henry Ford and all the other capitalists vanished from the face of the earth.

But maybe Peters is not referring to capitalists at all but only to managers? No, he is quite explicit on this point; he specifically refers to the owners of industry. In a socialist economy there would be a role for managers and engineers, who could play an important role, participating together with the workers in drawing up the plan of production and carrying it out in the most efficient way possible. In the words of Marx, they would be entitled to the "wages of superintendence". But there would be no role whatsoever for private owners of industry. From the very beginning the main means of production - the land, the banks, financial institutions and the big monopolies - would be in the hands of the state, and the state would be in the hands of the workers.

Peters quietly smuggles in the idea that under socialism the means of production could remain in private hands. This makes a mockery of the very idea of socialism. Why does he insist on this absurd idea of "capitalist socialism"? Because he does not like unpleasantness and he realizes that the capitalists will not remain with arms folded while the workers relieve them of their power and privileges. He wishes to soothe the nerves of the ruling class and at the same time sings lullabies to the workers about the beauties of class collaboration and a wonderful society in which capitalists voluntary surrender their profits and work for the common good on the "wages of equivalence".

The whole thing is reduced to a cheap conjuring trick, whereby all the basic economic relations of capitalism are retained but are alleged to have been transformed into something altogether less unpleasant. Thus, trade is "limited to the distribution of goods, their transportation and storage; these activities, as a necessary part of the division of labour, are converted into a part of value and must be remunerated like any other work: according to the time worked." This would be correct in a socialist planned economy, where the state would take over all the tasks of distribution, transportation, etc.

One of the first tasks would be to nationalize the railways, and all other forms of transport by land, sea and air. This would permit the introduction of an integrated transport system, operated for the benefit of society, not private profit. It would allow us to solve the problem of congested roads and city centres - something no capitalist government in the world has been able to do, despite all the talk about "green" politics. The introduction of free public transport in cities would make it possible to ban private cars from circulating in cities at all. The lunacy of heavy articulated lorries owned by private companies clogging the roads would be prevented by transporting most goods by rail and improving the railway system to take more passengers and relieve pressure on congested roads and motorways. But the prior condition for this is the abolition of private property. This is precisely what Peters and Dieterich do not want.

How to make profits disappear

Arno Peters is very clear on this: not only transport, but also industry will remain in private hands: "Similar norms must be applied to the owners of enterprises that do not belong to trade but production. After their profits have disappeared, their entrepreneurial activity - which, like any other work forms a proportional part of the commodities - must be paid in an equivalent manner [...]." [10] This is quite typical of the method of Peters-Dieterich. They first assume what has to be proved, and then express themselves in categorical terms that allow no contradiction. Here we have a classical example:

Step one: we are informed that socialism can be achieved while retaining private property of the means of production.

Step two: we are informed that "profits have disappeared", although precisely when and how this happened is not explained.

Step three: we are informed that from now on, the capitalists will be prepared to work for the wages of equivalence, just like everyone else in 21st Century Socialism. Why? Because they must. Why must they? Because Arno Peters says so.

Now the word "must" implies a degree of compulsion. I must do something because I am under compulsion to do it. Compulsion can either be physical or moral; it can either come from external constraints (the threat of imprisonment, fines, etc.) or the acceptance of a certain moral code, like, say, the Ten Commandments ("Thou shalt not steal", etc.).

It seems to us quite possible that when the advocates of 21st Century Socialism solemnly inform Bill Gates that profits have disappeared and that henceforth he must only receive the wages of equivalence, he might entertain some small doubts on the matter. He might say, for instance: "I have invested billions of dollars in my factories, machinery and scientific research, and now you ask me to receive in compensation a pittance that would hardly be enough to pay a tip in a decent restaurant. Why should I accept such a kind offer?" To which Arno and Heinz reply: because you must.

Let us use a little imagination to recreate the whole of a conversation between Bill Gates and Heinz Dieterich:

Dieterich: Good morning, Mr. Gates; how kind of you to spare a moment of your valuable time to receive me.

BG: Not at all, Mr. Dieterich. What can I do for you?

Dieterich: I have come to inform you that your profits have disappeared.

BG: Really? I hadn't noticed. I'll ring my accountant and ask where they have gone to.

Dieterich: No, no, Mr. Gates, you don't understand. They have not exactly vanished, only you will not be seeing them any more.

BG: Is that so? How come?

Dieterich: Because we are building 21st Century Socialism and therefore you must only get an equivalent wage.

BG: And how much would that be?

Dieterich: It is the exact amount of labour you have expended on the production of commodities, no more, no less.

BG: I don't think I have produced any commodities lately, not myself anyway.

Dieterich: Don't worry, Mr. Gates, we theoreticians of the equivalent economy have already thought of that, and as long as your services are necessary to society, we will consider your labour as equivalent to that of any other individual.

BG: That is extremely decent of you. But I still would like to know exactly how much I get for my necessary services.

Dieterich: We shall have to do some tricky calculations here. You don't happen to have a calculator on you?

BG: No, I have no time for complicated technology.

Dieterich: Ah well, we shall manage without then. Now, how much time to you spend at work?

BG: That is hard to say. You see, I have an awful lot of clever people who do the work for me.

Dieterich: Maybe you do a bit of management?

BG: Nope, I got plenty of managers.

Dieterich: How about the science and technology angle?

BG: Got plenty of clever scientists and technicians, too.

Dieterich: But you do have overall control?

BG: Are you kidding? A firm like Microsoft is far too big for one man to control, even one as clever as me.

Dieterich: But you must do some work?

BG: Oh yes, I occasionally come into the office to see how things are going.

Dieterich: At last! How many labour hours is that?

BG: Pardon?

Dieterich (Irritated): How often do you go to the office?

BG: That's a hard one. You see I'm away half the year on important business.

Dieterich: What business is that?

BG: You know, horse-riding on my ranch, shooting and fishing in Scotland, scuba diving in the Caribbean, playing the casinos in Las Vegas, attending first nights at the opera at La Scala, Milan, that kind of thing. It's really a very exhausting schedule.

Dieterich: But that is not work. That is what we call living life. We don't pay you for that!

BG: A pity! Anyway, you must admit I take big risks. Surely I deserve to be rewarded for that?

Dieterich: What kind of risks, when Microsoft has a virtual monopoly on the global computer business?

BG: Well, I am taking a huge risk that one day I may lose my monopoly!

Dieterich: That seems most unlikely. But surely you must do some kind of work?

BG: I guess I go to the office a few hours a week when I am in town. And I suppose you could say I inspire the workforce with my presence. So how much is that worth?

Dieterich: About a hundred dollars a month.

BG: (after a pause) It's not very much, is it?

Dieterich: It's the going rate for the equivalent wage. Everybody gets it.

BG: Well, if you don't mind, Mr. Dieterich, I will pass on this one.

Dieterich: But you can't do that.

BG Why not?

Dieterich: Because it goes against all the principles of 21st Century Socialism.

BG: That's too bad.

Dieterich: Well, then, because the majorities say you must.

BG: And I say: "Get lost!" I am still the owner of Microsoft, am I not?

Dieterich: You certainly are, Mr. Gates. Nobody can touch your property. It is strictly against the principles of 21st Century Socialism.

BG: Very good! In that case, you can get out of my office right now.

Dieterich: You cannot go against the wishes of the majorities. The tide of history is against you...

BG (throwing him out): The majorities can do what they like, and I will do what I like. I will close my factories and throw every worker on the street before I surrender my sacred right to make a profit from honest labour, and you can go to hell."

This is probably a fairly accurate reconstruction of the likely content of an imaginary conversation, except that Bill Gates would undoubtedly have expressed himself in rather more forceful language. The class struggle is essentially the struggle for the division of the surplus created by the working class. This continues uninterruptedly, now open, now disguised. The interests of wage labour and capital are incompatible. Yet for all his moral indignation, Dieterich believes that it is possible to reconcile them. He believes that the lamb can lie down with the lion and the tiger can be taught to eat salads, and the capitalists can renounce profits and accept with a smile the "wages of equivalence": in other words, he believes it is possible to square the circle.

In Shakespeare's Hamlet, old Polonius says: "Though this be madness, yet there's method in it". And it is also the case here. If we accept that this is all a moral question, that the workers are being swindled by the bosses, then what is needed is to persuade the bosses to behave themselves and stop their thieving, and then all will be well. Sooner or later they will see the light and rush to embrace the joys of 21st Century Socialism. After all, Dieterich assures them constantly that they will not be expropriated, that the capitalists can keep the factories, the landlords can keep the land and the bankers can keep the banks, and the workers and peasants can keep - well, whatever they can.

It may, of course, take a little time to persuade the rich of the moral superiority of 21st Century Socialism, but after all, we still have almost another 92 years to go. And if we have not succeeded by then, doubtless some new Heinz Dieterich will arise to announce some new theory of 22nd Century Socialism that will transform the world - if there is still a world to transform.

How not to make a revolution

That the planet is in danger is evident to all but the most narrow-minded reactionary. The environment is being systematically destroyed by so-called market forces. Giant transnational companies ravage and loot the Third World, encouraging the destruction of the Amazon rain forest, polluting rivers and seas, depleting fish stocks, poisoning the Arctic. The future survival of humanity is under threat. But the only way to prevent disaster for future generations is to tackle the problem at its roots: by abolishing capitalism and instituting a world planned socialist economy. How would the founders of 21st Century Socialism solve the problem?

"The soil and the natural resources would become common property, as they were for the greater part of the epoch of the local equivalent economy. But not like that period, when they were freely available to all, like air and water, but as a valuable asset controlled by the State, whose conservation and use must have priority for all humanity, above any particular interest." [11]

Very cautiously, Arno Peters hints (only hints) at nationalization, a word he avoids as the devil avoids holy water. Instead, the land and natural resources mysteriously "become common property". But how do they do this? Presumably the owners of the big landed estates will have something to say on the subject, as will the big mining companies that derive fat profits from exploiting the natural resources of the entire terrestrial globe. They will fight against this - as they are now doing in Venezuela. If we are to succeed, this resistance must be overcome. It cannot be done by preaching to the landowners and capitalists the virtues of equivalence. It can only be done by expropriating the oligarchy by revolutionary means. But this idea is firmly rejected by Peters, whose main obsession is precisely to prevent revolution. Peters is quite clear on this point, as we shall see shortly.

"It is more difficult to regulate materialized or accumulated labour. By socializing the means of production, this percentage of value that forms part of any new commodity, would favour the community represented by the State, which is also obliged to renew and modernize the means of production. If private property of the means of production is maintained, the percentage of value which comes from materialized labour and reappears in commodities, could continue to be part of the income of the entrepreneurs. Combined with the obligation to a complete reinvestment, here some structural elements of the non-equivalent economy could be retained in the transitional period to the equivalent economy." [12]

At this point, Arno is in full retreat. Having deducted from the "full value of labour" all the costs of schools, hospitals, judges and lawyers, and having further deducted the costs of the hierarchical state, army and police force, we now come full circle and deduct the capitalists' profits (which, as you recall, were supposed to have disappeared) - but only on strict condition that they are destined for "complete reinvestment". Thus, profit, which Arno Peters banished from the kingdom of 21st Century Socialism by the front door, rudely forces its way in via the tradesman's entrance.

In the transitional period that, we are assured, will eventually lead us to the Paradise of Equivalence, capitalists will be permitted to keep their profits (which, having mysteriously disappeared, have equally mysteriously reappeared) but only on condition that they are immediately reinvested. But just a moment! If the capitalists own the means of production, who can order them to reinvest? The decisions as to whether to invest or not, and how much and when to invest are entirely the competence of the owners of the business concerned. They will do so on the only grounds yet known for the functioning of the capitalist economy - and this is profit.

Capitalists like Bill Gates invest large sums, which may amount to billions of dollars. The state and the government have no real control over these activities, since you cannot control what you do not own. All attempts to regulate capitalism (for that is what Peters and Dieterich are really talking about) have led to failure. If the state accepts capitalist property relations and then acts in a way that the owners of industry do not like, the latter will stop investing, or move overseas. They will close their factories as if they were mere matchboxes, throwing thousands of workers onto the streets.

The whole of history shows this, including the recent history of Venezuela, where the capitalists have been organizing a strike of capital for years in order to destabilize the government of Hugo Chávez. To his credit, Chávez has stood up to the capitalist and responded by nationalizing parts of the Venezuelan economy. It is public knowledge that Heinz Dieterich is not enthusiastic about nationalizations and has done his best to dissuade President Chávez from "going too far" and "provoking the counter-revolution".

Maybe he is waiting for the Venezuelan bosses to read his books and convince themselves that it is a good idea to abstain from personal enrichment, accept the "wages of equivalence" and invest all their profits in the Bolivarian Revolution. The idea is so preposterous that it is enough to make even Pedro Carmona laugh. But the high priests of Socialism of the 21st Century take it very seriously indeed. They are the only people in the world who do.

A petty bourgeois utopia

We have already pointed out that the Marxist labour theory of value does not refer to the value of the labour of an individual worker but to the average socially necessary labour - to human labour in the abstract. It will never be possible to calculate the value of individual commodities produced by a particular worker, unless we refer to the medieval shoemaker or the individual small peasant proprietor on his cabbage patch. And this is really the kind of labour that Heinz and Arno are thinking about: not the kind of production we find in large-scale modern capitalist enterprises like Ford or IBM, but small scale businesses - the kind of productive units that were common in the early days of capitalism when it was still in the embryonic stages of development.

Here we see the essentially petty bourgeois mentality that underlies all this utopian thinking. The petty bourgeois idealises small business - the kind of business that is characteristic of the class of small proprietors. The petty bourgeois has a profound aversion to the big capitalist companies that are driving him out of business. He curses the big banks and monopolies, but at the same time he fears that he will lose his "privileged" position and be pushed down into the working class and desires at all costs to maintain what he regards as his superior status as an owner of property. This situation creates a contradictory psychology. The middle class constantly vacillates between the bourgeoisie and proletariat.

The confused, ambiguous and contradictory position of Dieterich and Peters is absolutely typical of this class. They hate and fear the monopoly capitalists and imperialists and rage against them. At the same time they are organically incapable of placing themselves in the camp of the proletariat, which they look down upon and which they distrust. They are constantly yearning for class peace and a "middle way". They preach humanity and democracy to the capitalists, appealing to them to be reasonable and give up their profits in exchange for the "wages of equivalence". At the same time they appeal to the workers not to go "too far", to be patient, to respect private property, and so on. In other words, despite their radical-sounding phrases, they act like vulgar reformists.

Although they consider themselves to be the greatest realists, they are in fact the worst kind of utopians. Their preaching to the bourgeoisie has absolutely no effect and insofar as they have any effect in the working class - or rather in sections of the leadership - it is to disorient and paralyse the movement. Though their subjective intentions may be of the very best, they play an entirely reactionary role.

Concentration of capital

The Communist Manifesto, written as long ago as 1848, is a remarkably modern document. It predicted long in advance the inevitable process of the concentration of capital, the inexorable concentration of obscene wealth on the one hand and extreme poverty on the other. The bourgeois economists have tried to argue that Marx was wrong when he predicted the concentration of capital and that the future is with small businesses. For decades bourgeois sociologists attempted to disprove these assertions and "prove" that society was becoming more equal and that, consequently, the class struggle was as antiquated as the handloom and the wooden plough. The working class had disappeared, they said, and we were all middle class.

Today only hopelessly naïve people can believe this nonsense. All the statistics confirm the fact that the concentration of capital has reached levels unimagined by Marx. In reality the march of capitalism has long ago cut the ground from under the feet of the petty bourgeoisie and its political representatives. It is ironic that, precisely in this epoch, when the entire world economy is dominated by huge multinationals, the apologists of capital try to show that the future lies with small enterprises. This wishful thinking is like the day-dreams of a decrepit old libertine who tries to forget his present ailments by recalling the vigour of youth. However, the youthful phase of capitalism is gone beyond recall.

Marx explains how free competition inevitably begets monopoly. In the struggle between big and small capital, the result is always the same: "It always ends in the ruin of many small capitalists, whose capitals partly pass into the hands of their conquerors, partly vanish." [13] Today, the vast power of the monopolies and multinationals exercises a total stranglehold on the world. With the access to staggering sums of money, their economies of scale, their ability to manipulate commodity prices and even their power to determine the policy of governments, they are the true masters of the planet.

The brilliance of Marx's method is shown precisely from the fact that he was able to predict the inevitable tendency towards monopolization when free competition was still the norm. Nowadays, despite the demagogic twaddle of journals like The Economist about "small is beautiful", there can be no question of this general historical tendency being reversed. Quite the contrary. The last few decades have witnessed an unprecedented tendency towards the concentration of capital. The broad historical tendency towards the concentration of capital is absolutely incontrovertible. The situation as regards Germany, Britain, France and all the other countries of capitalism is no different.

In the period of capitalist ascent, the bourgeois played a progressive role in developing the productive forces, investing in industry, science and technology. In the epoch of capitalist decline, we see a very different picture emerging. Speculative activity and investment in the parasitic service sector is displacing investment in productive activity as a source of profit. When huge fortunes can be made by a single telephone call by a currency speculator, why bother to risk capital in costly machinery which may never make a profit? Gambling on the stock exchange has reached epidemic proportions. Hundreds of billions of dollars a year goes to finance speculative takeovers in the United States alone, while factories are being continuously closed.

The entire world economy is now dominated by no more than 200 giant companies, the great majority of which are based in the USA. The process of monopolization has reached unprecedented proportions. In the first quarter of 2006 mergers and acquisitions in the USA amounted to $10 billion dollars a day. This feverish activity does not signify a real development of the productive forces, but the opposite. And the pace of monopolization does not diminish but increases. In November 2006 the value of mergers and acquisitions in the USA amounted to a record of $75 billion - in just 24 hours! Takeovers are a kind of corporate cannibalism that is inevitably followed by asset stripping, factory closures and sackings - that is, by the wholesale and wanton destruction of means of production and the sacrifice of thousands of jobs on the altar of Profit.

Alongside the most appalling misery and human suffering there is an orgy of obscene money-making and ostentatious wealth. Worldwide there are at present 945 billionaires with a total wealth of $3.5 trillion. Many are citizens of the USA. Bill Gates has a personal fortune estimated at around $56 billion. Warren Buffet is not far behind with $52 billion. Now they boast that this unseemly wealth is spreading to poorer nations. Among the super-rich there are 13 Chinese, 14 Indians - and 19 Russians. And let us not forget Latin America! The richest man in the world is a citizen of "our Great Fatherland" (Gran Patria). Carlos Slim, a Mexican, is now richer than Bill Gates. Yet millions of Mexicans live in conditions of dire poverty. The same story can be told of every other country in Latin America.

The oligarchies - the landowners, bankers and capitalists - have enriched themselves while the majority lives in poverty, and often on the border line of absolute misery. The polarization between rich and poor has never been as extreme as at the present. It is impossible to bridge the abysm that separates the classes. The only solution is to break the economic domination of the oligarchy, and this can only be achieved by the workers and peasants expropriating the landowners, bankers and capitalists by revolutionary means.

Anarchy of capitalism

In the third volume of Capital Marx explains the price of production of commodities. He points out that the capitalist only gets the cost of production of his commodity plus the average rate of profit. Some capitalists will be paid below the actual rate, others above, because of the different organic composition of different capitals, which is revealed through competition. Monopolies can extort a price above the value of the commodities, but only by other commodities being sold below their value. The total values produced by society would still amount to the same.

In the world market billions of commodities are exchanged every day. The prices of commodities rise and fall in a completely anarchic manner according to the blind play of market forces. The law of value ultimately regulates supply and demand, but not in an automatic manner. The market mechanism is a highly complex and contradictory phenomenon. Prices fluctuate constantly above or below the value of commodities, but sooner or later the labour theory of value will assert itself. The most striking manifestation of this is crises of overproduction.

This is the central contradiction of capitalism. Within a capitalist enterprise there is a plan. Ford and IBM do not leave their investment plans or the running of their factories to chance. They use the most up-to-date scientific methods to plan every aspect of their operations, down to the smallest details. Trained engineers and scientists measure every aspect of work in order to maximize the productivity of labour, precise inventories are kept and market trends carefully analysed. Armies of scientists, technicians and economists are mobilized.

The benefits of this plan of production are immediately evident in the constant improvements of technique and the raising of the productivity of labour. This is the basis of all human progress. Indeed, the main motor-force of the advance of civilization can ultimately be reduced to the struggle to increase labour productivity - to economize labour time. Never in the whole of history has such massive productive capacity been at our disposal. In a rational society this would be the used to bring about the well being of the whole of society, satisfying all human needs, reducing the hours of work and raising the cultural level of society.

However, under capitalism production is not intended to satisfy the needs of society but only to maximize profits through the extraction of surplus value. As long as the means of production remain in private hands, this situation will continue. Instead of being a means of improving the human condition, every advance in production and technique is a step towards the further enslavement of the workers and the greater enrichment of the capitalists.

Moreover, the element of rational planning is restricted to the enterprise. Once the commodities leave the factory they enter into another world: a world of total anarchy - the world of market economics. This is wasteful and destructive in the extreme. The fate of millions of men and women are determined by the blind play of market forces, which decide whether they will have work or not, whether they will have bread to feed their children or a roof over their heads.

The apologists of capitalism argue that the free market is the most efficient way of distributing resources, capital and labour. They refer to the invisible hand of the market, which in the long run will correct all imbalances and solve all our problems. To this the English economist Keynes answered that in the long run we are all dead. More recently George Soros, the Hungarian-American investor compared market forces to a smashing ball. It was an apt comparison.

The only way to change this and bring the benefits of planning to the whole of society is to nationalize the means of production. Without taking this step, all talk of socialism is just so much empty demagogy and a deception of the people. Why do socialists insist on the nationalization of the economy? Because this is the only way of ending the anarchy of the market and introducing a socialist planned economy. Unless we take this step, all the levers of economic power will remain in the hands of the capitalists. It does not matter much which party is in government or which leader sits in the Presidential palace because all the most important decisions affecting the lives of the masses will be taken elsewhere - by small unelected groups of wealthy people, by the boards of directors of the banks and big companies.

We have pointed out that planning already exists inside the capitalist enterprise. By turning the instruments of production into the common property of the whole of society, we will arrive at a situation where the whole economy will be operated as a single enterprise with different departments, rather than a series of independent producers competing against one another.

The need for a socialist plan

The capitalist system, then, is an anarchic system. It cannot be planned. The financier George Soros a few years ago wrote a book in which he described in great detail the anarchic nature of financial markets, but then he advocated (a bit like Attac) measures to regulate them, which was a complete joke. Needless to say, this had not the slightest effect on international finance markets, or anything else.

In order to solve problems like unemployment or the lack of houses and schools it is necessary for the government to introduce economic planning - to draw up an economic plan based on the needs of the majority, not the profit of the minority. But you cannot plan what you do not control and you cannot control what you do not own. This can be seen in the housing problem. In all the big cities of the world there are many empty and under occupied dwellings, while the problem of homelessness has become a modern scourge even in the most advanced capitalist countries. Together with unemployment, homelessness and bad housing are linked to the epidemic of crime, drug abuse and alcoholism that threatens to demoralize a whole generation of young people. How do Peters and Dieterich propose to solve this?

"In order to ensure the right to a home and a room for all men, the community which is organized in the State, must order the use of the soil and buildings according to the general needs. All public activities that do not produce values (like education, medical assistance, provision for retirement, jurisprudence, administration) could be paid for through taxation according to the time worked." [14]

First of all let us note that this State of Arno Peters is not something for the faint-hearted. It has teeth. It does not request. It orders. But who is it ordering and for what purpose? It has just been stated that the soil has become common property and is under the control of the State. Does the State have to issue orders to itself? The sentence makes no logical sense, unless the idea is to lease back the land to private owners. In relation to buildings, matters are far clearer: since no mention is made of buildings becoming common property, we must assume that along with private capitalists (and their profits), the private landlord (and his rent) will also be alive and well in the economy of equivalence, hence the peremptory order that buildings be used "according to the general needs".

In the same way that it is impossible for the state to control the investment decisions of private companies, all experience shows that it is very difficult to get private landlords to act in a socially responsible manner. They often charge exorbitant rents and treat tenants badly. If the state acts to reduce rents, they evict their tenants and leave their properties unoccupied.

The Bible says: "The fox has his lair and the birds of the air have their nest, but the Son of Man has no place to lay his head." The right to a decent home ought to be a basic human right, along with the right to a job, a living wage, good education and health care. But today in no capitalist country are any of these things guaranteed. In a country like Britain the high cost of housing means that it is no longer for anybody except the very rich to contemplate buying a house. But the rents in the private sector are so high that they normally take up half a person's income or more.

The scandalous speculation of recent years has increased the price of housing to unheard-of levels, so that most young people can no longer contemplate owning a house of their own, while cheap public housing has become a dream of the past. Even the middle class who can afford to buy a home find themselves burdened with the repayment of large sums of money to the banks and other financial institutions. This modern form of usury often takes up over half of the earnings of a couple even when they are in well-paid jobs.

In all countries there is a severe housing problem, which is particularly acute in Venezuela. Millions of families are living in slums, shanty towns or dwellings unfit for human habitation. Others are at the tender mercy of private landlords, who shamelessly exploit the scarcity of available housing to charge exorbitant rents, increasing the poverty of the poorest and most vulnerable sections of society.

Serious problems demand serious remedies. After the October Revolution in Russia the Bolsheviks expropriated all empty and under-occupied dwellings, as well as the palaces of the rich and the property of the Church and used them to house the homeless and provide socially useful buildings, such as youth clubs, centres for the aged, clinics, art galleries and museums. The real solution for the housing question, however, is the nationalization of the land, the banks and finance houses and the big building companies. This would allow us to mobilize the unemployed building workers in a crash house-building programme, which, in the space of one or two five year plans, would build sufficient houses to solve this problem once and for all.

Arno Peters does not propose any such measures. In his socialist paradise, there will not only be judges, generals and capitalists but also private landlords. But the almighty State will instruct the latter to behave properly, while funding all the necessary social operations through taxations. Since the unfortunate capitalists have no profits to tax (they only receive the wages of equivalence), the Tax Collector of the 21st Century, in order to pay for this generosity, will have no alternative but to tax the workers. What now is left of the "full value of labour"? Absolutely nothing!

To cover his self-evident embarrassment, Peters resorts to subterfuge. "Some structural elements of the non-equivalent economy could be retained in the transitional period to the equivalent economy," he admits sheepishly. This sudden attack of timidity contrasts sharply with the earlier Categorical Imperatives and Absolutes of the Equivalence Principle. What are these "some elements" that will remain for a transition that will probably last for the rest of the 21st century, and several centuries more? Only private ownership of the means of production, capitalists, landlords, rent and profit, taxes and the hierarchical state. To describe these as only "some elements" is just as much of an understatement as the reply of a certain young lady who, when her father demanded to know if she had had an illegitimate baby, answered: "Yes, but it is only a little one."

Keynesianism and socialism

In his interview, Weighty Alternatives for Latin America Discussion with Heinz Dieterich, 7/1/2006, with Junge Welt, which also appeared in Number 21 of the Marxistische Blätter Flugschriften, Dieterich explains his position on the banking system and monetary policy thus:

"Q: In 2005, Venezuela introduced a new national bank. What's the plan there?

"Dieterich: The key idea involves the modernization of the role of the central bank, to get rid of an outdated monetarism that has blocked the economic and social development of Venezuela.

"There are basically two notions of what a central bank should do. One is the orthodox monetarist view, which restricts itself to the manipulation of liquidity in an effort to control inflation. That's a role abandoned by larger nations years ago. The prototype of the newer interpretation of the role of the central bank is that of Alan Greenspan, who on the one hand acts as a guardian of the value of currency and on the other gives equal weight to unemployment, all the while keeping an eye on the business cycle.

"The central bank in Venezuela was occupied by people opposed to the Bolivarian project. They refused to accept that the democratically elected government had the right to restructure the institution according to the new requirements. They blocked attempts to use surpluses for capital investment, and they blocked every kind of productive assistance of the sort that Greenspan or the European Central Bank would provide..." [15]

Let us first note that there is not one word here about the nationalization of the banks, without which there can be no question of a socialist planned economy in Venezuela. Dieterich assumes that Venezuela will continue to operate on the basis of private ownership of the banks and financial system, and that this is perfectly consistent with his version of Socialism of the 21st Century, that is to say, an economic system that functions on the basis of market economics.

He then goes on to point out, quite correctly, that "the central bank in Venezuela was occupied by people opposed to the Bolivarian project" and that these people used their position to sabotage the government and block its economic policies. What conclusions are we invited to draw from this? Logically, if the banks are owned and controlled by the enemies of the revolution, the revolution has the right to defend itself by expropriating the banks. But professor Dieterich does not like such radical measures. Instead, he speaks only of "modernization of the role of the central bank".

What does this modernization of the banking system consist of? It consists of abandoning "an outdated monetarism that has blocked the economic and social development of Venezuela." That is to say, he advocates, not the abolition of capitalism, but only the replacement of one capitalist economic model in favour of another capitalist model. He says that there are "basically two notions of what a central bank should do". What are these notions?

"One is the orthodox monetarist view, which restricts itself to the manipulation of liquidity in an effort to control inflation. That's a role abandoned by larger nations years ago." [16]

We do not know what economic textbooks they read in Mexican universities these days, but we have to say that it is professor Dieterich and nobody else who is outdated on economic questions. He informs us perfunctorily that "the orthodox monetarist view" has been abandoned by "larger nations" years ago. Which larger nations is he referring to? Certainly not the United States, the largest capitalist economy in the world: they have been operating on the basis of these policies for decades, and show no signs of abandoning them. Nor is it true of Britain, Japan, Germany, France or any other member of the Euro-zone.

The fact is that all the major capitalist nations are following similar economic policies, which can broadly be described as monetarist. The so-called neo-liberal economic model has been imposed everywhere, ever since the ignominious collapse of the Keynesian model, based on deficit financing, towards the end of the 1970s. Everywhere we see the ugly face of capitalism, with wage cuts, liquidation of reforms, abolition of the welfare state and attacks on living standards.

Our friend Heinz does not approve of this. On the other hand, he does not want to propose anything as radical as the abolition of the market economy, which is responsible for this sad state of affairs. He has a much more "realistic" proposal: why not return to the good old days of Keynesianism, deficit financing and managed capitalism? Heinz Dieterich wants to keep capitalism, but he does not want the present ugly model of capitalism. He wants the kind of capitalism in which humanistic sentiment and solidarity takes precedence over the sordid profit motive. He wants capitalism with a human face: that is, he demands pears from an elm-tree.

He complains that monetarism is outmoded. But the capitalists and bankers do not share his opinions. They tried his Keynesian model for a couple of decades after 1945 and for a while it seemed to work. The reformists were delighted. The state intervened to "manage" capitalism, using state funds to "straighten out" the business cycle and avoid recessions. This was a finished recipe for inflation. It is the explanation for the galloping inflation that existed at the end of the 1970s and caused enormous social and political instability both in Europe and Latin America.

Is Keynesianism the answer?

The capitalists have no answer to the problem of unemployment, which is the inevitable result of the fact that the capitalist system has now gone beyond its own limits. The growth of the productive forces has outstripped the narrow limits of private production and the nation state. That is the real reason for the phenomenon of organic (structural) unemployment. Does Dieterich have a solution for this problem, over which the best bourgeois economists have cracked their brains in vain? Of course!

The answer, as we are entitled to expect from the New Historical Project, is new, modern and original. If there is unemployment, the state must simply increase the budget deficit to subsidize the enterprises to provide employment. The problem is that this is neither new nor original. It is called deficit financing and was long ago invented by the English economist John Maynard Keynes.

Keynes was an intelligent bourgeois who understood the danger of a socialist revolution after the end of the First World War. He advocated what was then certainly a new, modern and original idea. This has been expressed in a popular manner thus: if there are unemployed workers, the state should pay one group of workers to dig a hole, and then pay another group to fill it in. The workers then pay taxes, the government gets its money back, demand is created, which creates more employment, and so on in an upward spiral.

This theory, apparently so logical and attractive, is based on an erroneous supposition, because the state itself has no money to pay anybody to do anything. It can only obtain finances from taxation. Here it has two options: tax the rich or tax the workers and the middle class. If it increases taxation for the capitalists it reduces the profit margins and creates a disincentive to invest, thus increasing unemployment. If it taxes the workers and the middle classes, it cuts into demand and thus increases unemployment. There is no way out of this vicious circle.

Is there a solution? Yes, there is. The state has a monopoly on the printing of promissory notes that we call money. In the past, this paper money was backed up by real values: gold and silver reserves. Every banknote contained a promise to pay the bearer a certain sum, based on the value of a precious metal, usually a certain amount of silver. Unlike paper money, which contains no intrinsic value, the value of gold and silver is determined by the amount of socially necessary labour expended on their production. In the good old days before the First World War, one could go to the bank and demand a silver coin in exchange for one's banknote. Money was "as good as gold". But all that has changed.

If a private individual prints banknotes in the cellar of his home, he runs the risk of being arrested for forgery. The law says, quite correctly, that these notes are worthless because there are no objective values to back them up. But if the state decides to increase the money supply, that is to say, to increase the amount of paper money in circulation, even when it is not backed up by either gold or other commodities, nobody can say anything about it. But by so doing, all that the state does is to change the relation between the amount of paper money in circulation and the commodities it can buy. The inevitable result is inflation.

The history of political economy knows many periods when the debasement of the currency led to a general rise in prices. A long time ago in England, Henry VIII needed money to pay for his fleet. One of his advisers came up with a brilliant plan (this was the NHP of the 16th century). He advised the king to call in all the gold coins in circulation, mix them with copper and distribute them to the population. They would have exactly the same appearance as before and nobody would notice the difference.

Henry was naturally delighted with the advice of this ancestor of J.M. Keynes and Heinz Dieterich. The plan was put into practice and gave excellent results. The king had twice as much money as before. But unfortunately after a few months, all the prices in the market had doubled. This 16th century Keynesian received the reward he deserved: he lost his head.

Keynesianism in action

The bourgeoisie adopted the so-called Keynesian model in the period after the Second World War, when it was again threatened by revolution and "Communism". For a period it appeared to give good results. The period after 1945 saw an astonishing fireworks display of the productive forces. In the industrialized capitalist countries there was full employment. This was ascribed by bourgeois economists, and particularly the reformists and Social Democrats to the miraculous results of Keynesian economics and "managed capitalism" (capitalism with a human face).

In reality the post-1945 economic upswing was not the result of Keynesianism, which played a subordinate role. The reasons for the post-war economic upswing have been explained by Marxists since the 1950s (see Ted Grant: Will There Be a Slump?). There were many different factors, such as post-war reconstruction, the discovery of new industries during the war, and to some extent the increased involvement of the state ("state capitalism") through arms expenditure, deficit financing, nationalization, and above all the expansion of world trade, which, for a temporary period partially mitigated the central contradiction of private ownership of the means of production.

The main factor which acted as a motor-force driving the world economy was the unprecedented expansion of world trade. In the period between 1950 and 1991, the volume of total world exports grew twelve times, while world output grew six times. More startlingly still, the volume of world exports of manufactures rose twenty three times, partly because this is where trade liberalisation was concentrated, while output grew eight times.

These figures clearly show how the rapid expansion of world trade in the post-war period acted as a powerful motor-force which drove the growth in output. This is the secret of the capitalist upswing from 1948-74. It means that, for a whole historical period, capitalism was able partially to overcome its other fundamental problem - the contradiction between the narrowness of the national market and the tendency of the means of production to develop on a global scale.

During the period of capitalist upswing from 1948-74, we saw a staggering increase in the productive forces, fuelled and stimulated by an unprecedented expansion of world trade. The capitalists, above all in Japan, the USA and Western Europe, were prepared to invest colossal sums in expanding the productive forces in pursuit of profit. The productivity of labour increased enormously as a result of a constant revolutionizing of the means of production. New branches of industry were established - plastics, atomic energy, computers, transistors, lasers, robots, etc.

From a Marxist point of view, this was a historically progressive development, which helped to create the material basis for a socialist society. The strengthening of the working class and the squeezing out of the peasantry in Western Europe, Japan and the United States also changed the class balance of forces within society to the advantage of the proletariat.

The theoreticians of reformism were really convinced that capitalism had solved its problems, and that unemployment, booms and slumps were a thing of the past. They spoke in ironic terms of "old fashioned Marxism", which belonged to the 19th century. However, all these dreams of the bourgeois and the Social Democracy were shattered by events. The long period of capitalist expansion came to an end with the recession of 1973-74. Already in that period we saw the re-emergence of mass unemployment, not seen since the 1930s.

Why the bourgeoisie abandoned Keynesianism

What was the reason for the abandonment of Keynesianism and the triumph of monetarism in the last period? Why is it that the bourgeoisie in every country has passed from reform to counter-reform? Was it the result of a caprice on the part of the bourgeois or the madness of Margaret Thatcher? Not at all, it had objective reasons, rooted in the whole of the previous period. The period of the 1970s was a period of high inflation everywhere. In Latin America it reached fantastic levels that created economic chaos. The same situation was beginning to threaten economic stability in Europe and the USA. The bourgeoisie paid a high price for the distortions caused by deficit financing.

In the period 1945-74 capitalism had gone beyond its natural limits. The application of deficit financing produced huge budget deficits and unmanageable rates of inflation everywhere. Trotsky once said that inflation is the syphilis of a planned economy, but this is also applicable to a capitalist market economy. The bourgeois were compelled to squeeze the poison of inflation out of its system. That was the real meaning of monetarism and the economic theories of people like Milton Freedman. There was really nothing new about the theories of Freedman. All they represented was an attempt to return to the old ideas and methods of the past, of capitalism in its raw state, "pure" market economics as they were in the good old days of the 19th century, before governments began to meddle in the workings of the market.

This was a purely reactionary theory, based on the notion of "trickle-down" economics. This has been wittily (but accurately) described by the American economist John Kenneth Galbraith as the theory that all our problems are caused by the fact that the poor have too much money and the rich not enough. It has led to a heavy increase in indirect taxation falling on the shoulders of the poor and a considerable reduction on taxation on the rich. It has also led to sharp cuts in the welfare state everywhere, as the bourgeois attempt to reduce the deficits they have accumulated over the past half century or more.

This is the reason for the "neo-liberal model" about which comrade Dieterich complains so bitterly. In common with all the other petty bourgeois reformists, Dieterich does not want to abolish capitalism, but only to change the model. That is why they all use capitalism and neo-liberalism as if they were one and the same thing. They are not. Neo-liberalism and Keynesianism are only the right boot and the left boot of capitalism. It is the choice between inflation and deflation. But for the worker, this is only the choice between death by hanging and death by slow roasting over a fire: that is to say, no choice at all.

From Keynesianism to ‘neo-liberalism'

The abandonment of Keynesianism was followed by a return to the old model of "free market" capitalism ("neo-Liberalism"). The underdeveloped countries have been forced through the dictates of the IMF and the World Bank to open up their markets and privatise the nationalized industries. This is really a looting of the state. It will have far-reaching consequences in the next period.

Far from being an advance as they try to claim, it is an expression of the crisis of capitalism. They have created a whole new language ("downsizing", "liberalization", "opening up of the markets", "freeing the economy", etc.) to cover up for what is really a massive destruction of productive forces and jobs. This reminds one of the "Newspeak" of George Orwell's novel 1984, where the Ministry of Plenty presides over shortages, the Ministry of Peace is the Ministry of War, and the Ministry of Love is the secret police.

The advocates of the free market conveniently forget that capitalism developed precisely on the basis of high tariff barriers and protectionism. In the early phase of capitalism British capitalism sheltered behind high trade barriers in order to defend its own nascent national industries. Only when its industry became strong did the British bourgeoisie become a fervent advocate of the principle of free trade. The same was true of France, Germany, America, Japan and all the others who now preach the virtues of free trade to the nations of Africa, Asia and Latin America. But this process creates new contradictions. Sections of the state apparatus and the national bourgeoisie see how this cuts their own share of the cake and also fear an explosion on the part of the masses.

In pursuit of short-term gains, the imperialists are provoking the masses in the ex-colonial world to the limits of their endurance. At a certain point, the whole process we have seen in the last twenty years will be thrown into reverse. Therefore we can conclude that in the next period, given the impasse of capitalism in the colonial countries, the backlash against privatisation and the pressing needs of the masses in these countries, we will witness new movements in the direction of revolution. This is shown by the Bolivarian Revolution in Venezuela, which itself was the result of the Caracazo, which was in turn the result of the application of free market economics by Carlos Andrés Pérez, following the dictates of the IMF.

The USA in the 1990s managed to achieve a relatively high rate of growth - partly at the expense of the working class and partly at the expense of its rivals. But this was on the basis of a consumer boom, which has now reached its limits. Bourgeois economists are now warning of the risk of recession and the next slump, when it comes, is likely to be severe. The long period of relative peace and prosperity in the advanced capitalist countries is drawing to a close. In the first decade of the 21st century the world is faced with a new period of wars, civil wars, revolution and counter-revolution. In the course of this period, the destiny of humanity will be settled, one way or another.

Over many decades, all the contradictions have been piling up. What way out can there be for capitalism? As Lenin used to say, the truth is always concrete. The bourgeois have tried Keynesianism and Monetarism. Both ultimately failed - the second far more quickly than the first. They can try a mix of both these witches' brews. That will bring them the worst of all worlds - a mixture of inflation and deflation, which will rapidly provoke new social and political convulsions. This means that the contradictions of capitalism must express themselves in an ever sharper conflict between the classes.

Dieterich's capitalist perspective

The recent boom was kept going by a massive expansion of credit and debt in the USA. As Marx explains, credit can temporarily take capitalism beyond its limits, before bouncing back like an elastic band stretched almost to breaking-point. There was a colossal increase in the public, private and corporate indebtedness in the USA, creating an artificial consumer boom which benefited the rest of the world for a while, but which has now collapsed.

The bourgeois economists manifest their total confusion and inability to understand the nature of the present crisis. They were forced to abandon the discredited ideas of Keynesianism and deficit financing, having burnt their fingers badly. But now the policies of neo-Liberalism have also led them into a blind alley. However, comrade Dieterich is undaunted by all this. Like the Bourbons in France he has learnt nothing and forgotten nothing. Now the Junge Welt interviewer comes to the point:

"Q: You state that, in middle range and in the long run, it is the economic elite who set the political course for a country. You are advocating a new kind of Keynesian development. But your Keynesianism proposes to stabilize capitalism rather than dispose of it. One could deduce from that that you want to strengthen the private economy rather than prepare the way for socialism, which seems paradoxical."

That is quite correct. The entire perspective of Heinz Dieterich is based on the continuation of capitalism for the foreseeable future, and his aim is precisely to stabilize capitalism rather than dispose of it. If the aim is really to move towards socialism, this would be indeed paradoxical. But since Heinz Dieterich long ago abandoned any idea of the socialist revolution, there is absolutely no paradox here, but only a systematic and consistent defence of capitalism.

However, aware that the masses in Venezuela and other countries are bitterly opposed to capitalism, our Heinz feels the need to cover his backside with the occasional reference to socialism. Answering the somewhat embarrassing question by the Junge Welt interviewer, he resorts to subterfuge and evasion:

"We'll have to see which sectors of the economy are strengthened. If the subsidies flow to large industry, transnational corporations, or wealthy landowners, that would of course strengthen international capital and the oligarchy. Some of these concerns of course have hung on to some subsidies; that is simply a question of their power."

Yes, my friend, it is precisely a question of power. And who can deny that, ten years after the start of the Bolivarian revolution, the oligarchy still has quite a lot of power, and that this power is based on their ownership and control of the land, the banks and key sections of industry? The President, following the wishes of the masses, is making inroads on private property, although still not sufficiently. You are doing your best to hold back the process, prevent further nationalizations and defend the power of the counter-revolutionary oligarchy. And no amount of subterfuge and evasion can conceal this fact.

Then Heinz continues: "For example, Chávez is not in a position to break from the large oil concerns. The great oil companies of the US and Russia are in place, and oil concessions are one method of applying the brakes to pressures from the US. But the bulk of the economic development must be organized around the small producers."

So there we are! Chávez is not in a position to break from the large oil concerns. And therefore, the professor concludes, he must meekly accept the dominance of the big US companies over the Venezuelan economy. Isn't this an absolute scandal? Doesn't this go against everything the Bolivarian revolution has ever stood for? And this man still has the nerve to pretend to stand for "Socialism of the 21st Century"! Come, come Heinz, let us at least be serious! You do not stand for socialism, either in the 21st or the 22nd century, but for the continuation of the rule of the big banks and monopolies for ever and ever, amen.

The bulk of the economic development must be organized around the small producers, professor Dieterich informs us - and he somehow manages to keep a straight face. This economics comes not from Marx but straight from the Chicago School, which for the past two decades has been assuring us that the future belongs to small businesses and that "small is beautiful". The purpose of this bourgeois propaganda is to draw our attention away from the fact that today, more than at any time in history, the economy is completely dominated by giant monopolies. Insofar as small producers play a role in the modern economy, it is an entirely subordinate one. The small peasants, shopkeepers, etc., are completely under the thumb of the banks and big monopolies.

Socialism on ‘the horizon'

In an interview signed by Yásser Gómez in the magazine Revista Mariátegui dated 12/08/06 - that is, after President Chávez had said that socialism was the only answer - Dieterich is asked: "To accept that the only alternative to Neo-liberalism is Keynesianism, for many people may sound like scepticism or defeatism as opposed to more radical changes. What do you think of that?" To which he replies:

"The strategic alternative to Neo-liberalism is, of course, socialism, that is, a post-capitalist civilization, but in these moments you do not have conditions to make socialism (sic), because in the first place you do not have the historic project for the new socialism, massively divulged either by the leaders of the social movements, or the politicians, or by governments. This theory has scarcely reached its degree of maturity that permits it to be realized through the work of four scientific schools [?]. Furthermore, you do not have mass movements or vanguards integrated on a Latin American scale to carry it out, it would be a chimera to speak of socialism as an alternative to neo-liberal capitalism. The immediate alternative is Keynesianism, developmental State capitalism. Of course, this [will have] the strategic horizon of socialism, and will have to combine both elements, because the peasants, the unemployed want an immediate solution and socialism cannot be the immediate answer. We have to link the two historical projects: Keynesianism and Socialism of the 21st Century." [17]

The ancient Israelites had to wait a long time at the foot of Mount Sinai for Moses to come down with the tablets of stone containing the Ten Commandments. Now we will have to wait even longer for Heinz Dieterich and his friends to work out the details of the New Historical Project. Presumably the reason in this inordinate delay is the well-known unreliability of Internet connections, an irritating difficulty which Moses, with simple stone tablets and a direct line to the Almighty, did not have to struggle with.

The fact that nobody has the slightest idea what this theory consists of may go some way to explain its singular lack of support outside the mysterious "four scientific schools", about which nobody knows anything. It seems therefore a little unfair of Heinz to complain bitterly that, so far, his New Historical Project has met with no support, either with leaders of the social movements, or politicians, or governments, or mass movements or vanguards.

Because of this notable lack of success in "massively divulging" his theories, Heinz logically concludes that humanity is not yet ready for socialism and must therefore settle for something less. This "something" is called capitalism. But since our Heinz - like so many other university professors - has a profound allergy to calling things by their real name, he prefers to use the expression Keynesianism. This he now baptises as yet another historical project, which is destined to co-exist happily with elements of socialism for the foreseeable future, until the whole of humanity finally grasps the NHP and immediately proceeds to "make socialism".

Since Dieterich is so fond of lists, let us lay out his arguments in a way he and everybody else can understand:

1) The neo-liberal model of capitalism has failed.
2) The "strategic solution" is socialism
3) In order to "make" socialism everybody needs to understand the New Historic Project of Heinz Dieterich.
4) Nobody understands the New Historic Project of Heinz Dieterich.
5) Therefore socialism is impossible.
6) Therefore we must accept capitalism.
7) But capitalism is unacceptable.
8) Therefore we must invent a New Historical Project for capitalism to make it acceptable.
9) We will call this Keynesianism, or "capitalism with a human face."
10) We will, of course, still have socialism on the horizon, but it will be so far off it will not worry anybody particularly.
11) The State will rule
12) The capitalists will be happy
13) The workers will be happy
14) Heinz Dieterich will he happy
15) Everyone will be happy
16) Forever and ever. Amen.

For decades the Social Democrats have tried to reform capitalism in order to give it a "human face". In order to do this, they proposed to use the state, which they envisaged as an instrument of social and economic policy above the interests of classes. The idea of a "democratic state" under capitalism is as old as the idea of the People's State (Volkstaat), which Marx and Engels subjected to a merciless criticism. This is entirely false from a theoretical point of view and entirely disastrous from a practical standpoint. Marx, Engels and Lenin explained that the state - any state - is the instrument of oppression of one class over another. As long as the working class does not take power, the state will remain a bourgeois state and will be used by the exploiters to oppress the working class.

It is true that after the Second World War, for entirely exceptional historical reasons, in a number of countries (mainly, but not entirely, the privileged nations of Western Europe), the capitalists used Keynesian methods to assist the economic upswing and were able to give certain concessions to the working class. However, this was an historic exception and by the 1970s had reached its limits. The Keynesian model showed its complete bankruptcy and the bourgeoisie threw it into the rubbish bin, from where it has been pulled out by Heinz Dieterich who presents it as the very latest thing in economic theory and the cornerstone of 21st Century Socialism.

The questioner from Revista Mariátegui was quite right to say that this advocacy of Keynesianism (that is, capitalism) is precisely an expression of complete scepticism and defeatism in relation to the possibility of carrying out the socialist transformation of society. In order to cover his backside, Dieterich is obliged to make all kinds of qualifications: "of course" socialism is the answer in the long run; of course, when we introduce state capitalism, socialism will still be "on the horizon", etc. But these are, as usual, only a smoke-screen calculated to deceive the workers, while in practice defending an anti-socialist, capitalist policy.

There is absolutely no ambiguity about Dieterich's position: the only possible solution is capitalism for the foreseeable future. But since this is a very bitter pill for the workers and peasants to swallow, Dr. Dieterich immediately gives it a generous coating of sugar: this is not the nasty, brutal old capitalism, he says, but Keynesianism - capitalism with a human face. And in the meantime we shall still, of course, have socialism as a "horizon". This reminds me of an old joke I heard many years ago while studying in the Soviet Union in the Brezhnev period. The economy was already practically stagnant, but the Stalinist bureaucracy was still talking about "building communism".

A Party Secretary comes to explain the results of the last Five Year Plan to the workers on a collective farm. He is asked in turn why there were no eggs, butter, shoes, and so on. In answer to each question the Party Secretary answers with a broad smile: "Yes, we do not have any of these things, but don't worry comrades. Remember: socialism is on the horizon". After the meeting one of the peasants who did not understand all these long words, looked up the word "horizon" in the dictionary and found the following definition: an imaginary line which, as you approach it, gets further away.

The answer is - deficits

In the same interview, the Founder of 21st Century Socialism is asked whether Bolivia can carry out the socialist transformation of society. On this point he is vehement: "No, there is no way to socialism in Bolivia, because you cannot fly if you do not have an aeroplane, the objective and theoretical conditions in our peoples for socialism are not given, you have to create them." [18]

This is exactly the same song that the Russian Mensheviks used to sing when they opposed the "utopian" ideas of Lenin and Trotsky: "How can we talk of socialism in Russia when ‘our people' lack ‘the objective and theoretical conditions' for it? We must not attempt to introduce socialism but must fight for a democratic bourgeois republic, which is the best we can get. First we will build a strong democratic national capitalism. Then, maybe in fifty or a hundred years time, we can begin to talk about socialism in Russia."

The position of the Russian Mensheviks, which Lenin attacked mercilessly, was a mechanical caricature of Marxism. Like Dieterich, the Mensheviks presented Marxism in a castrated form, Marxism without the class struggle, without revolution, without dialectics: a lifeless caricature that had nothing in common with the real revolutionary ideas of Marx and Engels. Nevertheless, the ideas of the Mensheviks were infinitely more correct and logical than those of Heinz Dieterich. They did not chatter on about some ridiculous New Historical Project that they had invented to save suffering humanity. They produced very solid arguments, based on the material and cultural backwardness of Russia to show that the material basis for the construction of socialism was absent in their country.

That argument was correct as far as it went. Nobody, least of all Lenin, argued that socialism could be built in backward Russia. But Lenin and Trotsky also understood that it was impossible to carry out the programme of the bourgeois-democratic revolution in Russia without overthrowing and expropriating the landlords and capitalists. They were not afraid to take power in an economically underdeveloped country. But they did not regard the socialist revolution in Russia as a self-sufficient act but only the first act in the European and world revolution.

In his advice to the people of Bolivia Dieterich opposes the position of Lenin and the Bolsheviks and repeats almost word for word the arguments of the Mensheviks. The Bolivian workers and peasants must not take power because "our people" lack "the objective and theoretical conditions" for it. What the people of Bolivia and Venezuela need, according to Dieterich, is not socialism but a good dose of Keynesianism:

"What is happening is that Keynesian governments improve your conditions for working with the people and creating consciousness. That is what - correctly - Hugo Chávez is doing. Ninety five percent of the resources of labour [?] is being invested in defending the revolution against the oligarchy and the gringos and the construction of the Keynesian economy, and in generating conditions for socialism. In Bolivia there are strong movements with a socialist political consciousness from the past like the Central Obrera Boliviana (COB) and some elements of the conservative socialism of the past. So what you need in Bolivia is systematic work with the people, so that they can pass over to the vision of Socialism of the 21st. Because the historical socialism today is no longer viable. In the 21st century, you can only have the capitalism of the 21st Century or the Socialism of the 21st Century." [19]

We have already learned that socialism is not feudalism and that caterpillars crawl and butterflies fly. Now we learn that "one cannot fly if one does not have an aeroplane". Moreover, we are informed that in the 21st century, you can only have 21st century capitalism or 21st Century Socialism. One cannot, alas, aspire to capitalism or socialism of, say, the 15th century or the 23rd century, but must settle for whatever our own times permit us. This childishness is paraded as profound and original thought! What is really meant, however, is that the only real choice is not (as we foolishly thought) between capitalism and socialism but between capitalism and - Heinz Dieterich's New Historical Project. Since, as we have seen, that is the same as capitalism under another name (leaving socialism on the far distant horizon) we conclude that there is not much choice before us at all.

This is what Dieterich has to say about Venezuela: "In the case of Venezuela, it finds itself in the declaratory phase of Socialism of 21st Century [but] the systemic conditions for a socialist system have not been made. The first condition, for example, is to change the accountability of the firms over to value, based on the time employed, leaving behind price, which is the key element in the market economy, [and] this has not been done." [20]

Isn't this simply amazing? The two countries in Latin America where the masses have moved to take power on several occasions, showing enormous revolutionary energy and a high level of class consciousness are precisely Bolivia and Venezuela. That these countries are ripe for socialist revolution is beyond question. Yet this intellectual pedant assures us that socialism is out of the question in both cases. Why? Because the masses in these countries have not yet reached a sufficient level of maturity to read Heinz Dieterich's books and discover for themselves the deep secrets of 21st Socialism à la Dieterich!

We have already said enough on the subject of the Peters-Dieterich "theory" of equivalence to show that it is complete nonsense with no theoretical basis and absolutely no practical application. Yet Dieterich wants the workers of Venezuela (and everywhere else) to put aside all other tasks and occupy their time trying to work out the exact amount of labour-time expended on each and every commodity. And according to this man, until they accomplish this task (which is impossible) socialism is out of the question. It is like the tasks that were imposed upon Hercules, deliberately, in order that he should fail. Hercules was very determined and carried out all these impossible tasks. But the Venezuelan workers have better things to do than to waste their time on pettifogging nonsense that has absolutely nothing to do with socialism in this century or any other.

How Dieterich ‘accelerates'

In an interview in Rebelión, Hugo Chávez pide acelerar el socialismo del Siglo XXI, 22/6/2006, Dieterich asks: "What is the first political step towards a socialist economy in Latin America?" And he replies: "The first step towards a socialist economy in Latin America is therefore not the generalized statization of private property - because it does not resolve the cybernetic problem - but the substitution of the system of market prices for calculation in values and the interchange of equal values (equivalence). The first step is neither spectacular nor glorious: it is the prosaic task of establishing socialist accounting, based on value, alongside capitalist accounting, based on price." (My emphasis.)

We agree with Heinz that what he proposes is "neither spectacular nor glorious": it is the usual petty fiddling and fussing of reformism combined with a large dose of utopianism. How is it possible to establish socialist accounting without a socialist planned economy? What Dieterich wants is to combine socialism with capitalism (that is what is meant by "establishing socialist accounting, based on value, alongside capitalist accounting, based on price"). In other words what he wants is a mixed economy, in which the landlords will own the land, the bankers will own the banks and financial institutions and the capitalists will own the factories, but there will be some nationalized enterprises and small-scale co-operatives. That means that the situation we had in Venezuela before Chávez must continue and nationalization must cease.

Heinz continues: "This first step consists in registering all the internal and external transactions of the enterprise in terms of time inputs, that is, values. This is easy to do, because every productive process is based on the factor (vector) time. In fact, the bosses calculate on the basis of the times of production, but they express these times in monetary units, that is, as cost/price, which permits them to appropriate the wealth of others.

"This relation value-price is owing to the fact that in modern digitalized enterprises values can be ‘extracted' with extreme rapidity. In one of these Latin American firms where we are conducting a pilot study of a socialist economy, the systems engineers confirm what was by deductive inference an a priori truth: that in three weeks they could provide all the values (time expended) necessary for socialist accounting.

"The second step for the installation of a socialist economy consists in the formation of a group of specialists in software that will write programmes that permit us to work out all the flows of the business prices (money), values (time) and volumes (tons, litres, etc.). Through the three commensurable scales of measurement and expression of value of the product, the firm can continue trading in its economic environment of market economy, without violating the existing economic relations, that is, without loss of productivity, production or markets. Speaking with Lenin [sic], a dual power is established within the firm: the logic of socialism alongside the logic of capitalism." [21]

This is yet another superb example of Heinz's unconscious humour. It seems that comrade Dieterich, in addition to all his other remarkable gifts is also a spiritualist who is able to converse with the dead. He is "speaking with Lenin", so who are we to argue? Despite this spiritual dialogue with the leader of the October Revolution, we are not entirely convinced. We will not repeat what we have already said about his economy of equivalence, except that it is a completely unscientific amalgam of reformism and utopianism. But how do we arrive from this petty accountancy to Lenin and dual power?

Dual power is a concept first articulated in an article by Lenin, The Dual Power, which described a situation in the wake of the February Revolution in which two powers, the workers' councils (or Soviets) and the official state apparatus of the Provisional Government co-existed with each other and competed for power. Lenin argued that this essentially unstable situation constituted an opportunity for the Soviets to take power by overthrowing the Provisional Government and establishing themselves as the basis of a new form of state power. Lenin pointed out that if the leaders of the Soviets were prepared to act with decision to take power it could be done peacefully, without civil war. But the reformist leaders were not prepared to do this. Like comrade Dieterich they insisted that there were no conditions for taking power, the level of the masses was too low, etc.

What has Lenin's revolutionary idea got to do with the reformist tinkering of Dieterich? Instead of advocating the establishment of workers' control and action committees (soviets), which would really bring about a situation of dual power in Venezuela, Dieterich opposes workers' control and instead calls on the workers of Venezuela to waste their precious time calculating "true value" and sticking two labels on every commodity where previously there was only one. This does not threaten capitalism in the slightest, nor does it advance us one single step towards socialism. It is therefore "dual power" only inside comrade Dieterich's brain.

Undeterred, our Heinz continues with his glorious vision of the future: "Once we have made these two great advances the moment has arrived, to make the third step in the implantation of a socialist economy in a market economy." [22]

There is a poem by E.V. Rieu entitled Night Thought of a Tortoise suffering from insomnia on a Lawn, which goes like this:

"The world is very flat.
There is no doubt of that."

The tortoise concerned was a very profound philosopher and as he advanced slowly across the lawn he drew the most portentous conclusions. For some reason or other, this philosophical tortoise came into my mind when reading the above lines. Our Heinz can see two great advances, where we ordinary mortals can see none at all. But then the tortoise also imagined he was moving very fast... Let us confine ourselves to the observation that comrade Dieterich, like the philosophical tortoise, does not like sudden movements or violence of any sort. He crawls towards socialism with his heavy shell on his back, into which he can withdraw his head the moment there is any sign of danger.

One thing is clear: in this world of tortoise socialism there is no room for revolution. No! Gradually and imperceptibly we will have the "implantation of a socialist economy in a market economy". And what will the owners of the means of production be doing while this "implantation" is taking place? Presumably they will be quietly tucked up in their beds, just like the owners of the tortoise's lawn. But let the tortoise socialist continue on his way:

"Once we know the value and price, the products of a socialist enterprise are put on sale with the two units of measurement. The packaging of a litre of milk, for example, would carry the following denomination: Price: 2,000 bolívares; Value: 10 minutes. Upon buying different products, the purchaser will realise that the relation between value and price varies. For example, that in one product 10 minutes of work is expressed in 2,000 bolívares and that in another product they are worth 10,000 bolívares. The cognitive dissonance aroused by both expressions generates inevitably a process of reflection and social discussion, which generates socialist consciousness.

"That is, by expressing the value of the product with an objective and transparent medium, the socialist (time) and, at the same time, a dictatorial and exploitative medium, the capitalist (price), the duality of the socialist and capitalist economic logic is extended from the enterprise to the everyday life of the citizens: from the sphere of production of commodities to the sphere of circulation, the market, the heart of the capitalist system. There can be no more pedagogical and striking way of bringing home to the citizen the problem of socialist economy than this.

"Last week a group of young Venezuelans asked me to assess the possibility of constructing a nucleus of endogenous development, based on the economy of equivalence. I gave it to them in the sense of this essay. Together with the big company employing thousands of workers somewhere in the Patria Grande, these young people represent the first models of the implementation of a socialist economy that represents a civilizing model qualitatively different to the market economy.

"Advancing on the basis of the experience of these two models or prototypes of socialist enterprise, we can gradually extend the number of national enterprises that operate on the principle of the economy of equivalence, until finally they will be the dominant economic element of the national-regional system. It is through the multiplication of these experiences of political economy that we will lay solid bases for Socialism of the 21st Century in the Patria Grande."

And Heinz finishes with the following admonition: "If the President is looking for the accelerator for his socialist project, here it is!" [23]

In all our reading of Heinz's works we have found many things, but we have never found anything remotely resembling a sense of humour. Therefore we can only assume that this sentence is meant quite seriously. Heinz Dieterich is furiously slamming his foot on the brakes and at the same time shouting loudly: "this is how to accelerate!" We have already noted that in 21st Century Socialism anything is possible, so it is likely that under this system drivers will be required by law to accelerate - by braking. But since we have not yet arrived at the 21st Century Socialist Paradise, we strongly advise to those who wish to travel faster not to pay the slightest attention to our Heinz.


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[1] Dieterich, Hugo Chávez pide acelerar el Socialismo del Siglo XXI, 22/6/06.
[2] Engels, Anti-Dühring, pp. 203, 233 and 246, my emphasis, AW.
[3] Lenin, Collected Works, Volume 24, Progress Publishers, Moscow, 1964, p. 39.
[4] Marx, Grundrisse, pp. 156-7.
[5] Ibid., p. 158.
[6] Ibid., p. 158-9.
[7] Ibid., p. 159, my emphasis, AW.
[8] Dieterich, La revolución mundial pasa por Hugo Chávez, in Rebelión. 6/3/2005.
[9] Dieterich, Hugo Chávez y el Socialismo del Siglo XXI, pp. 108-9.
[10] Dieterich, Socialismo del Siglo XXI, p. 101, my emphasis, AW.
[11] Dieterich, Hugo Chávez y el Socialismo del Siglo XXI, p. 110.
[12] Ibid., p. 101.
[13] K. Marx, Capital, Vol. 1, p. 626.
[14] Dieterich, Socialismo del Siglo XXI, p. 102.
[16] Ibid.
[17] Revista Mariátegui, my emphasis, AW.
[18] Ibid. my emphasis, AW.
[19] Ibid.
[20] Ibid.
[21] Ibid.
[22] Ibid. My emphasis, AW.
[23] Heinz Dieterich, Hugo Chávez pide acelerar el socialismo del Siglo XXI.