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Putin’ it to Putin: the Russian Oligarchy and the Primitive Accumulation of Capital May 1, 2014

Posted by rogerhollander in Capitalism, Economic Crisis, Labor, Marx and Marxism, Russia, Socialism.
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BjCHxNICMAAaVSj.jpg largeMeet the 11 Putin cronies and Ukrainian officials facing U.S. sanctions: http://t.co/0WOAuGtABa http://t.co/30T2yhxH4p


I don’t intend to go into the politics and economics of the situation in the Ukraine other than to point out the fact that the threats coming from the U.S. president against the Russian government seem to center on economic sanctions against the friends, associates, colleagues – well, let’s use the correct term: cronies – of the Russian president, Vladimir Putin. In other words, the Russian Mafia/Oligarchy. The New York Times reports that Obama’s spies are hard at work to discover Putin’s own fortune. What this circus amounts to then is the government of the nation with the world’s largest collection of parasitic crony capitalists attacking its rival nation’s crony capitalists. Russian Billionaires, take cover!

What his begs, however, is a question that no one seems to be asking: to wit, how did these billionaires come to be billionaires in the first place in Russia’s transition from Soviet “Communism” to Reaganite “Capitalism?” Or, more importantly, what this implies theoretically and philosophically about the very nature of capitalism itself. It indeed takes us to the heart of the origins of capitalism, what is referred to as “primitive accumulation” of capital, which is what this article is all about.

First we have to backtrack with a short discussion of economics. I assert that, despite popular opinion, economics is indeed a science in the sense that its elements can be measured and independently verified. The problem with Economic’s bad reputation is that the vast majority of economists are of the same ilk as biological “Creationists” and atmospheric climate change deniers. What they fail to take into account are the very dynamics that make capitalism what it is (usually in the form of ignoring obvious class divisions or making a fetish of the market place instead of focusing on what is fundamental in any economy, i.e. production).

Definitions are important. A simple but scientifically accurate definition of capital: vast accumulations of wealth (value) that today come in various forms, real estate, industrial and other corporate wealth, high finance, etc. Capital ISM then is the system of producing goods and services based upon the relationship between those who own and manage capital and the rest of us, who do the work that is responsible for the increase in value in the first place; that is, the relationship between capital and labor. It is a relationship that is hierarchic and despotic; that is, inherently undemocratic. A simple, yet accurate definition of socialism (the antithesis to capitalism), then, would be not state ownership of the means of production (as we saw in the former Soviet Union), but economic democracy, that is, direct ownership and control by those who produce the value. Note: it was not Karl Marx, but rather Adam Smith who demonstrated that new value added to land and natural resources can only come from living human labor.

Anyone who has ever had a job knows that the boss is the boss (be it the actual owner or his/her designates). You do not get to vote on what you do. You do what you are told, or you are shown the door (only union organization has mitigated this phenomenon to a degree). There are others waiting to take your place if you don’t like it. You do not get to decide what is produced (be it goods or services), how it is produced, or under what conditions (e.g. safety). But most importantly, you are paid for your creative effort as little as your owner/boss can get away with, and the rest of the value you create goes into his or her pocket (the pockets of heirs, stock holders, bankers, etc., i.e. capitalism’s parasites). This is what Karl Marx called surplus value (and what capitalists call profit), and it is the reason for the reality that we have always been aware of but are coming to see in greater relief more and more every day: the rich getting richer and the poor getting poorer. One example: the geometric increase in the proportion of CEO salary in relation to worker salary (according to the Washington Post, “The ratio of CEO pay to average worker pay is 273-1, down from a high of 383-1 in 2000, but up from 20-1 in 1965.” http://www.washingtonpost.com/blogs/wonkblog/wp/2013/06/26/congrats-ceos-youre-making-273-times-the-pay-of-the-average-worker/). In other words, the average worker has to put in about six weeks of eight hour days to earn what your typical CEO earns in one hour.

Forget all the crap that has been that has been shoved down your throat since you came off your mother’s breast (or the bottle) about the wonders of capitalism: the miracle of free enterprise, the invisible hand that makes everything just, the value of competition, capitalists taking all the risk, capitalists creating jobs – as if without capitalists we would all stop working to produce what we need to survive and thrive. Forget about free markets: there haven’t been free markets since Jesus threw the money changers out of the Temple. The deck (the economy) is stacked in favor of capital; capital essentially owns government and uses it to maintain its strangle hold on the rest of us – economically and militarily. And this was true long before the US Supreme Court made corporations into people.

So now let’s go back to “primitive accumulation.” How did there come to be such huge fortunes, such accumulated wealth in the first place; in other words, how did the feudal economy become a capitalist economy?

Here are the contrasting explanations from Adam Smith and Karl Marx:

“In the midst of all the exactions of government, capital has been silently and gradually accumulated by the private frugality and good conduct of individuals, by their universal, continual, and uninterrupted effort to better their own condition. It is this effort, protected by law and allowed by liberty to exert itself in the manner that is most advantageous, which has maintained the progress of England towards opulence and improvement in almost all former times. …

“It is the highest impertinence and presumption, therefore, in kings and ministers, to pretend to watch over the economy of private people, and to restrain their expense. … They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will.”

Adam Smith, Wealth of Nations, Book II, Chapter II
(cited in Toronto Globe and Mail, April 5, 2008)

“The discovery of gold and silver in America, the extirpation, enslavement and entombment in mines of the aboriginal population, the beginning of the conquest and looting of the East Indies, the turning of Africa into a warren for the commercial hunting of black-skins, signalled the rosy dawn of the era of capitalist production. These idyllic proceedings are the chief moments of primitive accumulation. On their heels treads the commercial war of the European nations, with the globe for a theatre. It begins with the revolt of the Netherlands from Spain, assumes giant dimensions in England’s Anti-Jacobin War, and is still going on in the opium wars against China, &c. The different moments of primitive accumulation distribute themselves now, more or less in chronological order, particularly over Spain, Portugal, Holland, France, and England. In England at the end of the 17th century, they arrive in a systematic combination, embracing the colonies, the national debt, the modern mode of taxation, and the protectionist system. These methods depend in part on brute force, e.g., the colonial system. But they all employ the power of the State, the concentrated and organised force of society, to hasten, hot-house fashion, the process of transformation of the feudal mode of production into the capitalist mode, and to shorten the transition. Force is the midwife of every old society pregnant with the new one. It is itself an economic power.”

Karl Marx, Capital, Vol . I, Chapter 31

Karl Marx was a philosopher, whose primary concern was human freedom. In order to understand the un-freedom that was obvious to him in his age as well as it is to us in our own, he had to and did become a full-fledged historian and economist. He read, digested, analyzed and critiqued not only the famous economists like Adam Smith, Malthus and Ricardo, but the entire body of political economy of his day. Needless to say, with respect to the primitive accumulation of capital, he was aware and demonstrated how it was ongoing; and we see the unbelievably gigantic proportions it has taken in our own time.

The political economists like Adam Smith, showed us how only human labor can create value, then they proceeded to ignore human labor as they obsessed on the market placed and the distribution of goods and services. Karl Marx corrected the fundamental error by show us scientifically the inherent inequality and un-freedom of capitalist economy. It is ironic that Marxism is often criticized for ignoring the individual in favour of the community, whereas it was Marx who demonstrated how capitalist productive relationship created misery for individuals within their community. It was Marx, for example, who showed us that even if a nation’s economy may be thriving, suffering and injustice can abound for the majority of its citizens. It is the notion of the “economy” that is abstract and ignores the individual, not the notion of community. This is a fact that the vast majority of economists ignore completely.

And anyone who believes that “democratic” political institutions in the form of periodic elections can tame this insane and out of control Monster known as capitalism, is either naïve or uninformed (for which we can thank our bought and paid for mass media and institutions of higher learning).

Now we are ready to go back to Boris Yeltsin, Putin and the collapse of the Soviet Union. Under Stalin, the Soviet Union had become the opposite of its revolutionary class destroying origins. The Soviet State (brutally tyrannical under Stalin, then reformed and softened under Khrushchev) became the single owner of value, i.e. capital, in what is almost universally recognized theoretically as State Capitalism. With the collapse of the Soviet empire, which resulted from massive popular uprisings (aided and abetted by the democratic and progressive reforms of Gorbachev), things could have gone either one of two ways. All of Soviet capital, all that enormous wealth (value) could have been democratized, that is decentralized and put democratically into the hands of those who worked in the various industries (and who create the wealth in the first place). Any genuine Marxist left in Russia would have reminded the angry masses that the original soviets were democratic organizations made up respectively of industrial workers, peasant workers, and soldiers. With the theoretical and organizational backing of the Bolshevik Party, they were the impulse that overthrew the Tsar and established a union of soviets, which for a few years before the Stalin coup was striving for worker democracy at the same time as it was at war with the rest of the capitalist world, fighting for its very survival.

Alas, things didn’t go in that direction. They went instead in the direction of looting of the state’s enormous resources by those Adam Smith like industrious Communist apparatchiks cum Mafia. We see them everywhere today, as they have moved their newly gained capital around the world. We saw them at the Sochi Olympics and we see them as owners of American professional sports teams.

As with the Spanish Conquistadores and the slave traders of African skin, their wealth is stolen. That is what is meant by the slogan “property is theft.” Hegelian Marxism talks of continuing negations, ongoing revolution, if you will. The overthrow of the former Soviet Union was a first negation; the second one did not happen at the same time. We see the same phenomenon with the Ukraine’s “Orange Revolution,” Egypt’s “Arab Spring,” the Sandinistas in Nicaragua, etc.

But some day, if the capitalists do not destroy the earth first with nuclear or environmental catastrophe, it will happen. The capitalist way of creating and sharing wealth will come crumbling down simply because it is not sustainable. Capital will no longer exist, just working people producing and owning outright what they produce. When and how this will happen no one can say. But if it doesn’t, we are surely doomed.

One more theoretical point. It never ceases to amaze me how otherwise intelligent academics and pundits fail to understand the obvious contradiction between political democracy and capitalist economics. It is as if democratic institutions, however primitive, can somehow ensure freedom and justice, while at the same time working people are being systematically bilked by the capitalist Behemoth. Democracy, which is in fact the most highly advanced political notion, is just that, i.e. political. Capitalist economy is just that, i.e. economy. They are two entirely different animals, notwithstanding the fact that they are intimately entwined. Failing to understand this, leftists, progressives, liberals, etc., make a fetish out of the concept of democracy, ignore the economic implications of capital, and end up being entirely irrelevant. Note: capitalism cannot be reformed because it is inherently unjust and undemocratic.

For those who are interested in a truly scientific understanding of capitalist economic relations as outlined in Marx’s Capital, I recommend the first four chapters of Raya Dunayevskaya’s “Marxism and Freedom: from 1776 until Today,” Humanity Books, 2000. Of course, there is no substitute for reading Marx in the original, which I acknowledge is not an easy task. I recommend beginning with the so-called Early Writings or Economic Manuscripts.



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