Power, Money, Marxist Theory

Against the Current, No. 57, July/August 1995

Charlie Post

Power and Money:
A Marxist Theory of Bureaucracy
by Ernest Mandel
New York and London: Verso Books, 1992, 252 pages,
$18.95 paperback.

OVER THE PAST forty years, Ernest Mandel has been a central participant in almost every major discussion and debate among Marxist scholars and activists. Whether the issues involved the character and limits of the post-World War II “long-wave” of capitalist economic expansion,(1) the structure of the capitalist state, problems of revolutionary strategy in the advanced capitalist countries, the problem of revolutionary organization,(2) the origins and nature of the bureaucratized post-capitalist societies,(3) or the place of Marxism in the history of class society,(4) Ernest Mandel has made seminal contributions to these discussions from a non-dogmatic, but militantly classical Marxist perspective.

Recently, others on the left have embraced more trendy and academically acceptable theoretical positions — neo-Ricardian economics, Weberian sociology or post-structuralist/post-modernist “critical theory.” By contrast, Mandel has attempted to develop and extend the insights of historical materialism (the foundation of all social life in the social relations and material forces of production) to new problems and phenomena not anticipated by Marx, Engels, Lenin, Luxemburg or Trotsky.

His latest work Power and Money: A Marxist Theory of Bureaucracy, summarizes his earlier investigations of the problem of bureaucracy. Mandel reiterates his critique of Stalinist, social-democratic and bourgeois-liberal theories that deny the possibility of democratically organized workers’ power in the modern world.

He maintains that bureaucracy — the usurpation of power by a minority of officials and experts — is not an “inevitable” product of complex, modern, “rational” societies. Instead, bureaucracy is the product of specific, historically limited relations among human beings, and between human beings and the natural world — of specific social relations and material forces of production.

Although his broad sweep often results in a lack of conceptual cohesion, Mandel defends and extends the classical revolutionary Marxist analysis of the labor bureaucracy in capitalist societies and the bureaucratic ruling groups in post-capitalist societies.

The emergence of bureaucracies — in both the mass working-class parties (social-democratic and Stalinist) and unions under capitalism and in the post-capitalist societies — is rooted in the reproduction of the social division of labor between mental-supervisory and manual labor.

Division and Substitutionism

In the case of the labor bureaucracy and the professional reformist parliamentarians, the reproduction of the division of labor between “head” and “hand” work flows from the episodic character of working-class struggle. The demands of survival in capitalist society prevent the mass of workers from consistent activity in strikes, demonstrations and political life.

The task of administering the institutions created by the periodic upsurges of mass activity, whether unions or political parties, falls to a distinct layer of full-time labor officials and parliamentary politicians. Removed from the daily humiliations of the capitalist labor process and free to work “for the workers’ cause,” the labor bureaucracy consolidates these and new privileges (higher incomes in particular) by excluding rank-and-file activists in the unions and parties from any real decision making power.

In the case of bureaucratic ruling groups in the post-capitalist societies, the reproduction of the mental-manual division of labor is rooted in the material scarcity that has marked all of the societies where capitalism has been overthrown.

Isolated in relatively underdeveloped capitalist social formations, all of the anti-capitalist revolutions of the twentieth century faced the dilemma of building a new, collectivist social order in the face of extreme poverty — not the conditions of abundance which, the Marxian tradition believed, was a necessary precondition for the construction of socialism.

A layer of full-time state officials separate from the mass of workers emerged first to administer the distribution of scarce goods and services among the population. The bureaucracy consolidated its control over the state institutions and state-owned means of production as all opposition, particularly from the working class or peasantry, was dispersed and disorganized by their single-party monopoly of political power.

The bureaucracies in both the capitalist and post-capitalist societies, as they consolidate their power and privilege, develop a distinctive world view — substitutionism. Fearing that new waves of workers’ struggles in the capitalist countries, or active, democratic participation in social and economic life by the producers in the post-capitalist countries would undermine the institutions that provide them with important material advantages over the bulk of the working class, both the labor bureaucracy and post-capitalist state bureaucrats claim that their continued, unchallenged power is necessary to defend the hard-won gains achieved by workers in both East and West.

Thus the “dialectic of partial conquests” (establishment of ongoing workers’ organizations in the West, the overthrow of capitalism in the East) gives rise to a privileged layer of full time officials who embrace an “organizational fetishism” — the belief that the preservation of existing institutions takes priority over advancing the struggles of the workers and their allies.

From here it is one short step to replacing the tumultuous self-activity and self-organization of working and oppressed people with the more staid methods of the labor bureaucracy (electoralism, bureaucratized collective bargaining, etc.) or the more barbaric methods of the post-capitalist bureaucracies (single party rule, repression, restriction on the rights to strike and organize, terror, etc.).

In sum, bureaucratic hegemony, whether over working-class institutions in capitalist societies or over state institutions in post-capitalist societies, is explained and justified ideologically by putting the “farsighted wisdom” of union officials or party-state bosses in the place of the democratic self-organization and activity of working people.

Mandel spends considerable time pointing out the disastrous effects of bureaucratization on both the struggles of working people under capitalism and on the construction of a viable post-capitalist society.

The social-democratic substitution of electoral politics and routinized collective bargaining for working class and popular mass action has led to a profound disorganization and passivity in the ranks of organized labor in the West since the Second World War.

While such bureaucratic forms of “struggle” were able to “deliver the goods” in the form of higher wages, improved benefits, stabilized working conditions and increased capitalist state welfare spending during the “long wave” of expansion of the 1950s and 1960s, this strategy proved completely inadequate during the “long wave” of stagnation that began in the late 1960s.

As the crisis of capitalist profitability deepened, social-democracy’s substitutionism gave way to realpolitik — adapting to the new “reality” of declining living and working conditions:

“[T]he underlying assumption of present-day social-democratic gradualism is precisely this: let the capitalists produce the goods, so that governments can redistribute them in a just way. But what if capitalist production demands more unequal, more unjust distribution of the `fruits of growth’? What if there is no economic growth at all as a result of capitalist crisis? The gradualists can then only repeat mechanically: there is no alternative; there is no way out. (236)

Eschewing militancy and direct action by workers and other oppressed people, the labor bureaucracy and reformist politicians in the West have no choice but to make concessions to the employers’ offensive and to administer capitalist state austerity.

The spectacle of reformist bureaucrats shunning the struggle for reforms has been repeated across the capitalist world in the last two decades with tragic results: from the concession bargaining of U.S. AFL-CIO officials, to the French Socialist Mitterand regime’s budget cuts, privatization and deregulation, to the subjugation of an ANC government in post-apartheid South Africa to what some have called the “sado-monetarism”; of the IMF and World Bank.(5)

The bureaucratization of the centrally planned economies in the East has had equally disastrous results, according to Mandel. By substituting the party-state officialdom for the democratic decisions of workers and consumers, the Stalinized command economies were left without any mechanism for insuring the long-term and continuous development of labor productivity.

While post-capitalist bureaucracies were capable of organizing extensive growth — forcing millions of uprooted peasants to labor in plants that reproduced the labor processes of the capitalist West — they floundered when faced with organizing intensive growth, replacing labor with new technologies and producing new consumption goods.

Lacking either the “whip of competition” that ensures that each capitalist firm continuously reduces necessary labor through mechanization (with its deleterious effect on the rate of profit), or democratic control over economic decisions by “associated producers” with an interest in reducing their labor time and increasing the provision of the necessities of life, the bureaucratic economies are under no economic or political compulsion to develop new technique or economize on the use of resources.

The result is that “a general lack of responsibility, and indifference to the factory’s performance is therefore a characteristic feature of the system and threatens the USSR with stagnation and decline.”(42) The fate of the bureaucratic command economies in Eastern Europe and the ex-USSR tragically confirmed Mandel’s thesis.

An Alternative Vision

Mandel concludes Power and Money with an elaborate discussion of the conditions for the development of a viable democratic socialism following a victorious workers’ anti-bureaucratic revolution in the East (as unlikely as that possibility may seem today).

While Mandel concedes that commodity production and exchange will not be completely and immediately abolished (particularly in agriculture), the changing boundaries of plan and market, like the character of the plan itself must be subject to the democratic decision of the “associated producers.”

Mandel’s vision of a “self-administered” economy involves the articulation of democratic bodies (whose officials are elected by the entire adult population, subject to immediate recall and are paid the average salary of a skilled worker) at the international, national, industrial and office, factory or neighborhood level, where:

“Decisions should be taken at the level at which they can most easily be implemented. And they should be taken at the level where the greatest percentage of people actually affected by them can be involved in the decision-making process.” (213)

Put simply, international and national bodies should be empowered to draw up the basic outlines of the economic plan (and the boundary between plan and market), while industrial, regional or plan-office bodies should decide how to implement their particular parts of the plan in consultation with those who will use their product.(6)

In order for democratic “self-administration” to be effective, the working class must be able to express their needs and desires in the planning process, and there must be mechanisms to correct social and economic miscalculations.

According to Mandel, “political pluralism” — the right of all political currents (including ideologically pro-capitalist tendencies) to organize political parties, have access (in proportion to their numbers) to the media and to organize demonstrations and other non-violent actions to advance their particular viewpoint — is required to allow the working class, in all its heterogeneity, to effectively control the planning process.

Mandel also recognizes that formally democratic institutions and the rigorous guarantee of political rights for all sectors of the population, while a necessary condition for democratic socialist rule, is not sufficient. There are also crucial social and economic conditions, most importantly the radical reduction of working time for the mass of the population so that all “have the time to administer the affairs of their workplace or neighborhood.” (202)

Such a reduction of the working day, so that most of humanity can spend three to four hours a day in the production of goods or provision of services and another three to four hours a day in the work of social self-administration (where everyone, and thus no one, becomes a “bureaucrat”), is premised on a fairly high level of material abundance and development of the productivity of labor.

This, Mandel asserts, will only be possible when not only bureaucratic rule has been replaced in the East, but capitalism has been overthrown in a number of advanced industrial societies and their vast productive potential freed.

While most of the ideas presented in Power and Money are developed in his other writings on the ex-USSR and the problem of bureaucracy, Mandel does present some new historical and theoretical insights.

Sensitive to the “Green” critique of both capitalist and bureaucratic economies, Mandel’s analysis of the relationship of different forms of social and economic organization to the physical environment is original and provocative.

Mandel addresses two objections to the Marxian vision of socialism raised by environmental activists in the last two decades. The first is the notion that the Marxian vision of a future society based upon the abolition of material scarcity would place an unbearable strain on the physical resources of the planet and lead to an ecological disaster.

Mandel points to the scale of socially wasted resources under both capitalism and the bureaucratic command economies. The immediate abolition of the arms industry alone would free up tremendous resources for socially useful production (based upon renewable energy sources, environmentally safe technologies, etc.) that could provide an adequate standard of living for the bulk of the world’s population without thrusting new demands upon the finite capacities of the earth.

As the basic, material needs for physical security and gratification (food, clothing, shelter, medical care, education) are met, priority can be given to meeting the non-material needs for “self-actualization” (cultural, intellectual and personal development), needs whose satisfaction do not require utilizing finite natural resources.

The second “Green” critique of Marxism, based upon the experience of ecological disaster in the former USSR and Eastern Europe, claims that centrally planned economies are no
more ecologically friendly than market-capitalist ecocomies. For Mandel, the destruction of the environment in the East flows from the same bureaucratic mismanagement that gave rise to systematic waste of labor power and other resources.

In other words, the absence of any democratic accountability on the parts of central planners and industrial managers allowed them to systematically befoul the physical environment in the East. By contrast, a democratically planned economy has the potential to avoid ecological disasters that characterize both capitalism and bureaucratic
command economies.

Workers and consumers actively involved in formulating and implementing an economic plan have a direct interest in developing labor processes that will not destroy the health of those directly involved in production, nor befoul the air and water that all must breathe and drink.

Revolutionaries’ Subjective Errors

Mandel also provides new insights into the historical process of bureaucratization in revolutionary Russia. While never losing sight of the objective causes of bureaucratization (the failure of revolutions in Western and Central Europe, for which the labor bureaucracies and social-democratic politicians bear a major responsibility; imperialist invasion and civil war; industrial collapse; and Russia’s economic underdevelopment), Mandel forthrightly confronts the subjective errors made by Lenin, Trotsky and other Bolsheviks that may have weakened the ability of the diminished Soviet working class to respond to the rise of Stalinism.

Embracing Marcel Liebman’s characterization of pre-revolutionary Bolshevism as an anti-substitutionist “libertarian Leninism,”(7) Mandel argues that the civil war years of 1920-1921 were “the dark years of Lenin and Trotsky.”

Specifically, Lenin and Trotsky’s writings in these years turn what should have been temporary violations of workers’ democracy necessitated by the civil war (banning opposition socialist political parties and factions within the ruling Communist party, limiting peasant and bourgeois suffrage, empowering the Cheka to arrest, try and execute accused counter-revolutionaries without any political oversight) into political virtues.

Elements of a substitutionist conception of the relationship of the party and working class appear in numerous writings of Lenin, Trotsky and other Bolsheviks (in particular Trotsky’s Terrorism and Communism). The working class was portrayed as either “wavering” (Trotsky) or hopelessly divided with major sections corrupted by capital (Lenin).

The party became the only force — even if against the wishes and desires of the workers — capable of building socialism. These theorizations, which “falsely generalize from a conjunctural situation” (120), and the policies they legitimated prepared what Mandel and Trotsky have elsewhere described as the “legal-juridical” preconditions for Stalinism.(8)

Finally Mandel, perhaps inadvertently, raises a serious question about the traditional “orthodox trotskyist” description of the Soviet Union and the other post-capitalist regimes as bureaucratized “workers’ states.”(9)

In his discussion of the consolidation of the Soviet bureaucracy’s usurpation of power and atomization of the working class, Mandel makes an important observation about the differences between bourgeois and proletarian rule. While capital, because of its social power in production, can rule (dominate society) without governing (directly dominating the state apparatus), “there is no way in which the working class can rule without governing” (74).

While, as I will argue, there are many good reasons to reject the theory that the bureaucracy is a new class ruling over a new mode of production, Mandel’s formulation raises serious questions about the validity of the label “workers’ state” when applied to societies like the ex-USSR and its Eastern European satellites. As Mandel argues throughout Power and Money (and all of his other works), these are social formations where the working class clearly did not govern.

Theorizing the Russian Experience

A major weakness of Power and Money is related to this issue. While Mandel’s criticisms of various social-democratic, liberal and conservative theories of bureaucracy are quite compelling, his critique of alternative Marxist theories of these societies are often quite weak.

Mandel has long been one of the most sophisticated defenders of Trotsky’s theory that the ex-Soviet Union (and by extension, other bureaucratic post-capitalist regimes) is a transitional society between capitalism and socialism, whose progress toward socialism is blocked by the social and political power of the bureaucracy.

In Trotsky’s and Mandel’s theory the bureaucracy is a caste, a social layer that, unlike a social class, plays no necessary role in the nationalized economy. The “parasitic” relationship between the bureaucracy and the planned economy deprives these post-capitalist societies of the social and coherence of an established mode of production.

Since the late 1930s, various Marxist critics of Stalinism have challenged this theory, claiming that the bureaucracy was a new ruling class that organized a new mode of production in the ex-USSR and Eastern bloc countries.(10)

The theory of “bureaucratic collectivism” has been held by a wide variety of socialists, including many prominent anti-bureaucratic activists in the former Eastern bloc. Its intellectual attraction is not surprising. On the one hand, it avoids the problems of the theory of “state capitalism”(11) — it does not do violence either to the Marxist theory of capitalist accumulation or to the empirical reality of the bureaucratic economies. On the other, it avoids the complexities and ambiguities of the “transitional society” theory — the bureaucracy and command economy are situated in the familiar Marxian categories of class and mode of production.

Mandel does not provide a convincing critique of the theory of bureaucratic collectivism in Power and Money. The bureaucratic economies cannot be a mode of production, according to Mandel, because they combine remnants of commodity production and planning.

The survival of the wage form, the impact of the world market and the bureaucracy’s privileged access to consumer goods all run counter to the logic of planning, making these economies:

“[H]ybrid combination of an allocative and a commodity-producing economy, in which the law of value operates but does not hold sway. And this influence of the law of value ultimately sets immovable limits to bureaucratic despotism. This is what theorists of `bureaucratic collectivism’…fail to see… (28) For a `new,’ ‘bureaucratic’ non-capitalist mode of production to emerge, the Soviet bureaucracy would have to have liberated itself once and for all from the influence of the law of value.” (29-30)

This line of argument is very problematic. First, some of Mandel’s evidence for the survival of commodity production, particularly the bureaucracy’s privileges in the sphere of consumption, is not convincing.

Much of the bureaucracy’s ability to enjoy a substantially higher standard of living compared to the bulk of the working class is not based on their superior incomes and access to commodities on the market, but on their use of political influence to gain preferential non-market, non-commodity access to consumer goods through special stores and “jumping the queue” for relatively scarce consumer goods like cars, housing, etc.

Second, and more importantly, there have been numerous societies where non-capitalist modes of production coexisted with quite extensive commodity circulation and where “The privileges of the dominant classes…are mainly confined to the realm of private consumption, [and] they have no long-term interest in a sustained increase in productivity.” (32)

European feudalism, slavery in both classical antiquity and the so-called “new world,” and the various societies labelled “Oriental Despotism” or forms of the “Asiatic mode of production” all allowed for, and in some cases promoted extensive commodity production (although not the generalized commodity production possible only under capitalism).

These same modes of production were dominated by ruling classes whose privileges were confined to private consumption, and who were unable to organize the labor process of their direct producers in a manner that allowed for sustained increases in productivity. In fact, only under capitalism does the ruling class’ privileges extend to real possession of the means of production — the ability to organize the labor process — and is this class both able and actually compelled to continually raise the productivity of labor through mechanization.(12)

Bureaucracy Vs. Planning

While Mandel’s critique of bureaucratic collectivism in Power and Money is inadequate, in his (and Trotsky’s) other writings on the post-capitalist societies there are the elements of a much more powerful criticism of the theory of the “new ruling class.”(13) Put simply, the bureaucracy’s power runs counter to the logic of effective economic planning.

First, the bureaucracy is theoretically unnecessary to a planned economy — the working class could quite as easily organize a planned economy without a privileged layer of officials (although, at least initially, not without specialists and technicians). By comparison, one cannot conceive of an economy of generalized commodity production without a capitalist class and a working class.

Second, the bureaucracy’s attempt to enrich itself undermines the planning process. At every level of the command economy, bureaucrats systematically hide resources, whether labor power, raw material or machinery, in order to meet production targets and obtain bonuses in the forms of cash or access to better housing, vacations and the like.

Bureaucratic secrecy makes effective economic planning impossible — without realistic information about resources and productive capacity it is impossible to set realistic production targets. By contrast, the bourgeoisie’s efforts to enrich itself deepens capitalist competition as each capitalist attempts to undercut the others and increase their market share by lowering costs.

Finally, the contradictions between the privileges of the bureaucracy and the logic of planning deprives the bureaucratic economies of any internally generated dynamic of crisis and recovery. While the bureaucracy’s privilege undermines the effectiveness of planning, leading to declining rates of growth in the 1970s and 1980s, there is no mechanism internal to the bureaucratic economy that can resolve the crisis.

Thus it is not surprising that the attempts to terminate the crisis in the ex-Soviet Union and Eastern Europe took the forms of first trying to introduce market mechanisms into the command economy, and later of abandoning state property altogether.

Capitalism’s inherent drive to replace human labor generates declining profit rates and periodic prolonged periods of economic crisis. Capitalism, however, generates its own solution to its crises — the massive destruction of inefficient capitals and “redundant” labor during an economic collapse restores the conditions of profitable accumulation.(14)

Ultimately, the major flaw in this otherwise stimulating restatement of Mandel’s voluminous writings on the problem of bureaucracy is its lack of analytic cohesion. By attempting to analyze every and all social phenomena that have been labelled “bureaucracy,” Mandel’s theoretical focus is diluted.

In particular, his effort to include an analysis of the “bourgeois bureaucracies” — the capitalist state personnel, the personnel of the burgeoning welfare state and the vast layers of managers and supervisors in large capitalist corporations — leads him away from his central focus on the problem of bureaucracy in the labor movement and post-revolutionary societies. “[B]ourgeois bureaucracies” are best understood in terms of the dynamics of capitalist accumulation, which is very different from the “dialectic of partial conquests” and the reproduction of the mental-manual division of labor that gives rise to the labor and state bureaucracies.

Despite these problems, Power and Money remains worthwhile for both those new to Marxian discussions of bureaucracy and those searching for more in-depth discussions of these issues.


  1. Among his best known economic works are: Marxist Economy Theory, 2 Volumes (New York: Monthly Review, 1970); Late Capitalism (London: New Left Books, 1975); Long Waves of Capitalist Development: The Marxist Interpretation (New York: Cambridge University Press, 1980).
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  2. Among his political writings are: Stalinism to Eurocommunism (London: New Left Books, 1978); Revolutionary Marxism Today (London: New Left Books, 1979); Revolutionary Marxism & Social Reality in the Twentieth Century: Collected Essays (Atlantic Highlands, NJ: Humanities Press International, 1994).
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  3. Along with relevant sections of his economic writings, see: On Bureaucracy: A Marxist Analysis (London: IMC Pamphlets, n.d.); Beyond Perestroika: The Future of Gorbachev’s USSR (London: Verso Books, 1992).
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  4. “The Place of Marxism in History,” Notebooks for Study and Research 1 (October 1986).
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  5. A similar analysis of the dynamics of reformism is Robert Brenner, “The Paradox of Reformism” Against the Current 43 (March/April 1993) 42-45.
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  6. For a more detailed presentation see Mandel’s “In Defense of Socialist Planning,” New Left Review 159 (September-October 1986), 5-38.
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  7. Marcel Liebman, Leninism Under Lenin (London: Merlin Press, 1975). See also Paul LeBlanc, Lenin and the Revolutionary Party (Atlantic Highlands, NJ: Humanities Press, 1993).
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  8. Mandel, On Bureaucracy, 28-30. Leon Trotsky, Stalinism v. Bolshevism (New York: Pathfinder Press, 1974).
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  9. Trotsky, The Revolutionary Betrayed (New York: Pathfinder Press, 7972); In Defense of Marxism (New York: Pathfinder Press, 1970).
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  10. Max Shachtman, The Bureaucratic Revolution: the Rise of the Stalinist State (New York: The Donald Press, 1962); Jack Trautman, ed. Bureaucratic Collectivism: The Stalinist Social System (Detroit, MI: International Socialists, 1974).
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  11. Tony Cliff, State Capitalism in Russia (London: Pluto Press, 1975; original) published 1955). P. Binns, T. Cliff and C. Harman, Russia: From Workers’ State to State Capitalism (London: Bookmarks, 1987).
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  12. Robert Brenner, “The Origins of Capitalist Development: A Critique of Neo- Smithian Marxism” New Left Review 104 (July-August 1977), 2.5-92.
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  13. See, in particular, Mandel, Beyond Perestroika, 30-33.
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  14. A. Shaikh, The Current Economic Crisis: Causes and Implications (Detroit, MI: Against the Current Pamphlet, 1989).
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ATC 57, July-August 1995