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Socialist Studies Pamphlet: The Capitalist Class and the Ruling Class

British Capitalism in the 19th Century

There is a common belief that capitalist class and ruling class are synonymous terms and that consequently, wherever capitalism exists the government will of necessity be in the hands of the owners of capital.

It is a mistaken view. Numerous examples can be found of countries in which there was and is no such identity. One example is British capitalism in the nineteenth century.

Frederick Engels dealt with it in his 1892 Introduction to SOCIALISM, UTOPIAN AND SCIENTIFIC:

It seems a law of historical development that the bourgeoisie can in no European country get hold of political power -at least for any length of time -in the same exclusive way in which the feudal aristocracy kept hold of it in the Middle Ages. In England the bourgeoisie never held undivided sway. Even the victory of 1832 left the landed aristocracy in almost exclusive possession of all the leading Government Offices.

Engels pointed out that it was not until 1867 that the capitalists got their first representative in the cabinet, and that the aristocracy long continued to provide the officers for the army. The joke at the time was that the aristocratic landowner required four sons; the first to inherit the property, the second to advocate for it; the third to pray for it and the last to kill for it in the armed forces.

It was normal for the Prime Minister to be in the House of Lords. Of the eleven Prime Ministers from 1832 to 1902, nine were in the House of Lords and only two in the Commons.

It was not until 1911 that the power of the House of Lords to block House of Commons Bills was cut down to a maximum delay of two years and that the Lords were deprived of the power to interfere at all with Money Bills.

G. Kitson Clark, Reader in Constitutional History, University of London, also dealt with it in his AN EXPANDING SOCIETY: BRITAIN 1830-1900 (Cambridge University Press 1967 Page 28).

He described how "the nobility and country gentry", by making seemingly valuable concessions and cultivating public opinion "contrived to govern England for three-quarters of a century", and how John Bright, spokesman for the capitalists consequently called the 1832 Reform Bill "a sham".

The politically subordinate position of the capitalists was shown by the war with Russia, 1853-1856, the Crimean War.

They were solidly against the British government being involved in the war, but were unable to prevent it. The government was more influenced by the big meetings calling for war, organised by those described by Mrs. Olive Anderson, Lecturer in History, Westfield College, as "the urban lower middle and working classes" (PUBLIC ADMINISTRATION. Summer 1963).

Louis Boudin, in his SOCIALISM AND WAR (1916. Page 190) told how John Bright "used his great eloquence for the propaganda of peace and profit, but was defeated by Ernest Jones, the Chartist, who was campaigning for war".

Boudin quoted a letter to the New York TRIBUNE (July 25th 1853) written by Marx, describing how a resolution against the war, moved at a "Great Peace Meeting in Halifax" was, to Marx's gratification, voted down by an immense majority, in favour of an amendment "pledging the people to war, and declaring that before liberty was established peace was a crime".

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The Military Dictatorships

The people who constitute the government are those who have effective control of the machinery of government, including the armed forces; a necessary condition for which is that the civil authorities have been able to bring the armed forces under their control, as in Britain and other countries with a "Parliamentary system".

In many countries, past and present, army officers able to count on army loyalty to themselves have thrown out the civil authorities and taken over government.

While these conditions prevail - and many dictatorships have survived for years - the capitalist class is no more in the position of being a ruling class than were the British capitalists in the 19th century. Among the countries which have recently been under military rule are Nigeria, Ghana, Burma and Pakistan.

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The Changed Make-up of the Capitalist Class

Marx defined "class" in terms of individuals having the same source of income.

There are three great social groups whose members, the individuals forming them, live on wages, profit and ground rent respectively, on the realisation of their labour-power, their capital, and their landed property (CAPITAL VOLUME III, Kerr edition pages 1031 and 1032).

Within the capitalist class there have been and are wide variations. Many early capitalists were the working managers of the businesses they owned, themselves providing the technical knowledge. Similar businesses are to be found to-day among the group classified as "self-employed".

But most "capitalists" have moved away from what was typical and known to Marx in the middle of the nineteenth century. Nowadays a majority of the people with sufficient wealth to be able to live on the income they derive from the ownership of property, have ceased to have direct contact with industrial and commercial enterprises.

Engels noticed the beginning of the process in the 1860's. More and more wealthy capitalists were "fed up with the regular tension in businesses and therefore wanted merely to amuse themselves or to follow a mild pursuit as directors or governors of companies" (ENGELS' ON MARX'S CAPITAL page 119).

They preferred to invest their money in government securities, such as Consuls, giving a fixed but safe unearned income, far removed from industry

Through the development of the company share system, with the financial liability of shareholders limited to the amount they paid for the shares, and through companies becoming larger and larger, each with thousands of shareholders, most of the "owners" of the company have no contact with its operations beyond voting to elect members of the Board of Directors. As voting is by the number of shares each shareholder possesses, it means in practice that it is usually a small number of shareholders who elect or become members of the Board.

Then there are the huge sums of money lent to the banks and building societies in the form of deposits, which give the depositors who draw income from it, not even the appearance of direct contact with industry.

And the Unit Trusts, in which the Trust buys shares, receive the dividends and distributes to the people who have invested their money by buying "Units" in the Trust.

There are again the "Capitalists" who derive their unearned income from the government or Local authorities whose securities they have bought.

Summing up, most of the functions of the "working capitalists" of early capitalism are now performed by wage and salary earners, employed by companies for that purpose.

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Who Now Controls the Government and by What Means?

Under a parliamentary system as it operates in Britain, with universal suffrage without a property qualification, the government consists of those whose party has a majority of members in the House of Commons (not necessarily a majority of votes at the general election -no government since World War II has had such an elective majority).

Which means that no party can become the government without the votes of workers who constitute some 85% of the electorate. The capitalists and their dependents that have votes do not make up more than a small minority of the voters. If we assume that the Tories are largely financed from capitalist sources, as the Labour Party is largely financed by the Unions, the bigger financial resources of the Tory Party do not enable them to attract more votes. At eight of the sixteen elections since World War II the Labour Party has been successful and become a government.

In such circumstances to describe capitalists in Britain as being "a ruling class" is absurd. It is equally absurd to describe the party which happens too become the government (The Tory or the Labour Party) as being a "class".

Under Tory government or Labour governments, capitalism persists in Britain because the great majority of workers support it with their votes; either because they approve of it or because they believe that no alternative system of society is possible.

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The Situation in Russia before the Gorbachov Reforms

The economic set-up in Russia before the reforms were introduced by Gorbachav, showed interesting similarities and differences compared with the various parts of the economic set-up in Britain.

First, there had been the fact that both countries had been a mixture of "state capitalism" and "private capitalism", though the private capitalism in Russia had been largely illegal, most of it was in the "Black Economy". The "Black Economy" in Britain is large but the exact figures are unknown. It consists of the operations carried on by businesses which evade corporation tax, income tax, VAT and National Insurance contributions.

How much larger it was in Russia during the 1980's was disclosed in 1988 in an official report, which estimated the black economy's turnover to be some £84,000 million a year. It was published in the FINANCIAL TIMES (13th August 1988) using as the conversion rate the then Russian official rate of £1 = 1.07 Roubles.

The Moscow report threw light on the number of rich people in Russia at the time, with an estimate that, compared with the hundreds of officials, that is to say, legal millionaires (mostly writers and artists), the unofficial millionaires were estimated to run into thousands. The evidence of millionaires in Russia had long been known, information about them being officially disclosed during the war of 1939-45.

The Financial Times (18th April 1990) also drew attention to the great extent to which, in Russia, cash was the form of wealth available to the bulk of the population. The total, 1000,000 million Roubles, was, at the time, about six times as large as the amount of notes and coin in circulation in Britain, at £15,000 million.

In Russia, as in Britain, there were large amounts of deposits in banks on which the depositors drew interest, though the total in Russia at 31st December 1987 was 267,000 million Roubles (about £250,000 million at the official rate of exchange) was much less than the total of deposits in all the banks in Britain. The interest paid in the Russian Savings Banks was very low, averaging 2.7% (FINANCIAL TIMES 18th April 1990).

The state capitalist (i.e. nationalised0 industries in Russia were directly owned and controlled by the government. Consequently they were not exactly like the industries nationalised by the Atlee Labour government. These latter were controlled by Boards, the members of which were appointed by the government, and operating under nationalisation Acts which were supposed to give the Boards freedom of action in day-to-day affairs.

Unlike the British nationalised industries which, since 1945 had collectively made huge losses, those in Russia were reported to have been profitable. In the Russia budget for 1989 revenue from "Profits tax paid by the State enterprises and organisations" (FINANCIAL TIMES) represented over 25% of total revenue and was three times as large as revenue from personal income tax.

These Russian nationalised industries were more like the British Post Office (including telegraphs and telephones) as it was for more than a century up to 1969. It was a government department, staffed by civil servants, and was operated as one of the three revenue departments providing income each year for the Budget (the other two revenue departments were the Inland Revenue and Customs and Excise).

In Russia, as in Britain, there were no private shareholders in the nationalised industries, the whole property belonging to the State.

The peasants in Russia, owning as they did the livestock and the implements on their small holdings, could in that respect be likened to tenant farmers in Britain.

The tens of millions of Russian wage and salary earners employed in the nationalised industries or by the government in the civil service etc could be compared with their opposite numbers in Britain.

The people in Russia who, in the various groups, possessed considerable amount of wealth in various forms could be regarded as the "capitalist class", like the similar groups in Britain.

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Position of the Communist Party in Russia until the failed 1991 Coup D'Etat.

The idea that the Communist Party leadership in Russia was both a ruling class and a capitalist class was put forward in the resolution passed by the 1969 Conference-supported largely by those who were to leave and join various anarchist groups or go on and write the "Where We Stand" manifesto which threatened the integrity of the Party's Object and Declaration of Principles. The Resolution stated:

This Conference recognises that the ruling class in State Capitalist Russia stands in the same relationship to the means of production as does the ruling class in any other capitalist country (viz it has a monopoly of those means of production and extracts surplus value from the working class) and is therefore a capitalist class.

The Communist Party in Russia was no more a "class" in Marx's definition then are the military who control Burma or Pakistan, or than the Labour and Tory parties when they form the government in Britain, or the employees of the 19th Century British Post Office.

The Russian Communist Party was able to seize power in a coup d'etat in the first place because they had the backing of the armed forces and in spite of being outvoted in the democratically elected Constitutional Assembly in January 1918. They continued in office for much of the Twentieth century because they could still count on the support of the armed forces. They lost their effective political monopoly when, in the failed coup against Gorbachav, Yeltsin was able to gain support of the military and crush the coup. In effect, the Bolsheviks were destroyed by the same political mechanism that had helped them to secure power in the first place.

For Socialist Studies, events in Russia proved our Marxian analysis to be correct. The Materialist Conception of History, which we applied to Russia in 1918, showed that it could not be a Socialist society and was, instead, going to develop along capitalist lines; a process it was already going through even during the days of the last two Tsars.

Second, in applying Marx's Labour theory of Value to State Capitalist Russia we demonstrated that because labour power in nationalised industries was a commodity, exploitation took place. Workers in Russia, just as they did elsewhere in the World, produced a surplus value in the form of profit over and above what they received in wages and salaries.

And third, we applied Marx's political principle of the class struggle to show that a small minority of dedicated revolutionaries cannot impose Socialism on a non-socialist majority. A socialist revolution in Russia, as in the rest of the world, still needs to take place. And only the conscious and political action of a Socialist majority can establish common ownership and democratic control of the means of production and distribution by all of society.

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