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VARGA ON POLITICO-ECONOMIC

PROBLEMS OF MONOPOLY CAPITALISM

ANDRÉ MOMMEN

May 2010

Revised edition
After his disgrace in 1947 Varga lost his position of leading academician. His Institute of
World Economics and World Politics was merged with the Institute of Economics of his rival
Konstantin V. Ostrovityanov. In order to correct his “reformist” leanings Varga started
working on a book on inter-imperialist rivalries. Varga was also addressing the problems of
“popular capitalism” and the phenomenon of the rising standard of living and the post-war
economic boom in the US. After Stalin’s dead in 1953, Varga did anymore hide his critical
views on Stalin and his Stalinist enemies in his academic environment. Still a prolific author,
Varga paid much attention to the phenomenon of state-monopoly capitalism, the business
cycle and Keynesian policies in the developed capitalist countries. His understanding of
recent changes in capitalism, such as the formation of a Common Market in Europe, was
however biased by his pre-war belief in capitalism’s inability to raise the living standard of
the working class and, hence, to increase consumption, which would fatally lead to an
economic slump. Finally, he rejected mathematical approaches in economics having become
popular in economic science as being contrary to Marxist principles.

Imperialist contradictions

After 1948 Varga was working on a new book on imperialism correcting his “bourgeois
mistakes”. Printing permission of this new book Basic Economic and Political Problems of
Imperialism1 was obtained on 8 August 1953. Finally, he had been obliged to rewrite his in
the light of Stalin’s Economic Problems of Socialism in the U.S.S.R. as well.2 In this book of
more than 700 pages describing in extenso all developments of post-war imperialism, had
become the ‘thickest and most stupid book’3 he had ever published. However, it ‘would earn
him a Stalin Prize and allow him and his collaborators to work and write further’.4
The general theme of this book was that the general crisis of capitalism developed along new
paths as a result of the decolonization process and the weakening of the capitalist system as a
whole.5 Varga’s analysis contained nothing new on the theoretical and analytical level, only
stressed the persistent realization problem of capitalism and the increased uneven
development of capitalism resulting in growing unemployment and sharpening class conflicts
having a ‘catastrophic character’.6 West-German economic recovery was seen as the result of
the American monopolies and their war diplomacy aiming at a full remilitarization of this
country. Varga’s concentrated his analysis on the reason why the 1949 overproduction crisis
in the US had not been followed by a general slump. After having examined industrial
production indexes, he concluded that the crisis had been postponed as a result of the Korea

1
E. Varga, Osnovnyew vorposy erkonomiki i politiiki imperializma posle vtoroy mirivoy voyny, Moscow, 1953;
translated as Grundfragen der Ökonomik und Politik des Imperialismus (nach dem zweiten Weltkrieg), Berlin:
Dietz Verlag, 1955. A Hungarian translation was published in 1954: Az imperializmus gazdaságának és
politikájának fő kérdései (a második világháború után), Budapest: Szikra. No other translations could be traced
in library catalogues.
2
Varga, Grundfragen, 1955, p. 7.
3
Jürgen Kuczynski,“Ein Linientreuer Dissident”. Memoiren 1945-1989, Berlin and Weimar: Aufbau-Verlag, p.
51.
4
After having met Varga in 1952 at the International Economic Conference in Moscow Jürgen Kuczynski
reported this conversation. Kuczynski, 1992, p. 51.
5
Varga, Grundfragen, 1955, pp. 42- 45.
6
Varga, Grundfragen, 1955, p. 47.
War which necessitated a remilitarization of the American economy. A controversial thesis
was the presumed the absolute impoverishment of the proletariat Varga tried to elude by
stressing the fact that in the US ‘real wages’ had not only decreased as a result of higher
income taxes, but also because of increased labor intensification, social insecurity and bad
housing conditions. Varga even pretended that the English working class’s consumption of
meat had fallen to one-fifth of the average pre-war consumption.
Varga identified the state as some kind of pump station siphoning taxes out of the pockets of
the workers and transmitting these moneys to the accounts of the monopolies. He now agreed
on the fact that the state in the actual capitalist countries was not an organization of the
‘whole bourgeoisie’, but a ‘mighty instrument for the enrichment of the financial oligarchy
on the costs of other classes’.7 Referring to Stalin’s Economic Problems of Socialism in the
U.S.S.R., Varga concluded that the monopolies were more than ever before dominating the
capitalist state.8 Analyzing the general crisis of capitalism, Varga concentrated on the
American situation where the organic composition and concentration of capital had increased
during and after the Second World War. ‘Big capitalists control the state. At the same
moment state bonds contribute to an ever increasing part to their enrichment’,9 Varga argued
that because of high taxation on wages the blue and white-collar workers purchasing power
was hollowed out. Hence they were unable to consume the additional produce that
aggravated the realization problem of the monopolies. As a consequence of the sharpening of
the general crisis of capitalism, the American monopolies were obliged to solve their
problems on the costs of other capitalist countries. Thus the function of the Marshall Plan
was preparing a new world war in order to solve the US overproduction problem.
Referring to the International Economic Conference held in Moscow on April 3-12, 1952, 10
where Varga had been present, he stressed that increased trade between the two world
economic systems was in the interests of everybody.11 Varga ended his long digression on
American imperialism with a long paragraph in which he analyzed the inherent ‘weakness”
of the position of the most powerful country. This weakness was, however, not of an
economic, but political and moral.
Because of liberation movements in the colonies, British colonial rule in India and the
Middle East had been swept away. Hence, the weakened British ruling class was preparing
for lowering wages and looking for an alliance with the European countries against the US
and the Soviet Union.12 Referring to Zhdanov, he argued that the US now had built up a
military bloc in which Britain and the other European countries were included13 and the
defeated imperialist states Japan and Western Germany were participating in against the
socialist world. Referring to Stalin,14 Varga detected growing contradictions between the
main imperialist powers and their monopolies in their struggle for raw materials. Imperialist
wars would be the outcome of these rivalries as inter-imperialist contradictions were stronger
than the contradictions between the capitalist and socialist world system.15 Varga defended
7
Varga, Grundfragen, 1955, p. 83.
8
Varga, Grundfragen, 1955, p. 89.
9
Varga, Grundfragen, 1955, p. 151.
10
The International Economic Conference took place in Moscow in April 1952. The Conference was originally
conceived in 1951 by the World Peace Council as the next installment in the communist peace movement. Alec
Cairncross, ‘The Moscow Economic Conference’, in Soviet Studies, 1952, Vol. 4, No. 2, p. 114; Louis Fleischer,
‘The International Economic Conference’, in Political Affairs, 1952, Vol. 31, No. 5, p. 2.
11
Varga, Grundfragen, 1955, p. 98.
12
Varga, Grundfragen, 1955, p. 240.
13
Varga, Grundfragen, 1955, p. 272.
14
‘The economic basis of the sharpening imperialist contradictions is the outcome of the economic basic law of
modern capitalism discovered by J. V. Stalin.’ Varga, Grundfragen, 1955, p. 324.
15
Varga, Grundfragen, 1955, pp. 335-336.
also Stalin’s view that in the era of the general crisis of capitalism the colonial big
bourgeoisie had become in general an enemy of the revolution.16
In the book’s last chapter Varga noticed that the formation of the socialist market World had
now reinforced the trend towards a narrowing of the capitalist world market. As the foreign
politics of the United States prohibited increased trade of capitalist countries with the
countries of the socialist camp17 the general crisis of capitalism was becoming world wide,
while production in the socialist world was increasing. No real prosperity phase would occur
in the cyclical process of capitalist accumulation. Hence, increased arms production had to
solve the realization problems of the monopolists but this also caused inflationary pressures,
while unemployment would grow to a mass level. ’The internal contradictions of capitalism,
their deepening and tightening in the new phase of the general crisis of capitalism will
inevitably lead to the outbreak of a severe over-production crisis in the whole capitalist
world.’ In addition, Varga predicted that ‘this crisis would throw back the production of the
capitalist world under its pre-war level’.18
Varga’s ideas about Anglo-Saxon rivalries had already been published in some articles
published in New Times and Pravda19 in which Varga stressed the parasitical character of
capitalism during the period of general crisis and its fatal decay.20 His analysis of
unemployment was determined by Marx’s ’inner motivated laws of the capitalist means of
production’ leading to the creation and expansion of a reserve army, that constituted ‘the
convincing proof that capitalism has completely outlived its time and that the capitalist
system is a major brake on progress.’21 Capitalism in the age of imperialism could therefore
only pursue ‘aggressive policies’ and repeatedly sought ‘to destroy socialism by force.’22
The sudden recession of 1953 was caused by the steadily deteriorating situation on the
American market which had compelled American monopolies to lower prices and
engendered a decline in industrial production began.23 Although capitalist overproduction
crises never had the same causes and each crisis was characterized by particular
contradictions determined by the changes in capitalism itself,24 the US crisis was leading to
attempts of the monopolies to intensify the reactionary drive. But Varga expected that “the
popular mass resistance is bound to increase, all the more so since Washington’s policies are
being increasingly discredited in the eyes of the workers, who can see that the Administration
looks out only for the interests of Big Business.”25
In 1950, Varga pointed to the fact that the US wanted to destroy the British Empire in order
to win equal rights for American capitalist groups in their struggle for world hegemony,
while the economic and political positions of Britain were steadily weakening and its
economy, finances and armed forces were falling into an ever-increasing dependency upon
16
Varga, Grundfragen, 1955, p. 485.
17
Varga, Grundfragen, 1955, p. 717.
18
Varga, Grundfragen, 1955, p. 728.
19
Varga in Pravda, 25 November, 1952, pp. 3. Translated in The Current Digest of the Soviet Press, 1952, Vol.
4, No. 47, pp. 23-24. He predicted the end of the economic boom because of an overproduction crisis in the US
in an article published in Pravda, 18 October 1953, pp. 3-4. He stressed the validity of Marx’ main theses on
reproduction and crisis. Translated in The Current Digest of the Soviet Press, 1953, Vol. 5, No. 43, pp. 13-15.
20
Varga, in Pravda, 19 March, 1950, pp. 2-3. Translated in The Current Digest of the Soviet Press, 1950, Vol. 2,
No. 12, p. 23.
21
Ibidem.
22
Varga, ‘Forty years of socialist progress and capitalist decline’, in New Times, 1957, p. 3.
23
Varga, in the Current Digest of the Soviet Press, Vol. 5, No. 43, pp. 13-14, translated article in Pravda,
October 18, 1953, pp. 3-4.
24
Varga, ‘Die Wirtschaftskrise in den Vereinigten Staaten’ in Der Aussenhandel, 1954, No. 25, pp. 564-565.
Also in ‘Economic crisis in the United States’, in New Times, 1954, No. 23, pp. 8-12.
25
New Times, 1954, No. 53, p. 11.
American capital.26 British and colonies had begun to ‘turn into markets for the cheaper
American industrial output, insofar as the limited reserves of the Empire countries
permitted.’27 Hence, the British bourgeoisie had gone ‘completely bankrupt in its effort to
preserve Britain as a world power.’28 Britain was ‘undoubtedly strong enough to pursue an
independent foreign policy corresponding to her interests. But the community of the
aggressive imperialist aims of the rulers of Britain and the U.S.A., their panicking fear of
communism, the camp of democracy and socialism, render Britain incapable of pursuing a
policy independent of the U.S.A. (…)’.29
In 1952 Varga reiterated in Pravda this view. This time American capital was not only
seizing the markets if the British colonies, but even intruding in British industry. Meanwhile,
the dollar shortage wrested from Britain many of her export markets and dislodged the pound
sterling as a world currency. Varga: ‘As Comrade Stalin states in his inspired (sic) work
Economic Problems of Socialism in the U.S.S.R., the Americans, under the guise of Marshall
Plan “aid,” are intruding in the economies of Britain and France and attempting to transform
them into appendages of the U.S. economy.’30
At the end, Varga adhered to Khrushchev’s foreign strategy of peaceful coexistence and
collaboration with progressive nationalist regimes in the developing world. The national
bourgeoisie in the colonies was no longer a reactionary force as was shown by the liberation
struggles. The newly liberated countries under bourgeois rule were even playing a
‘progressive role’ in international politics, as long as they were willing ally with the socialist
world. The theme of peaceful coexistence emerged already in 1954 in Varga’s texts. Two
different social systems were developing according to their own ‘intrinsic laws of
development’.31 Both should be able to live durably together in peace, as the Soviet Union
was not out to overthrow the capitalist regime in other countries by force of arms, but in
favor of peaceful economic competition and ideological contest.32

The debate on people’s capitalism

In the aftermath of the 20th Congress of the CPSU in February 1956 four leading scholars, E.
Korovin, A. Gruber, N. Lyubimov and A. Manfred had signed a letter to the editor of the
newly founded journal International Affairs in which they opinioned that ‘new and original
scholarly works of research into the most important current international problems’33 were
not being published. The editorial board of International Affairs on 18-19 April 1957 reacted
by organizing a discussion concerning ‘the whys and wherefores’ of “people’s capitalism”. 34
Some important changes in the attitude of Soviet economists could be noticed. I. I.
Kuzminov35 introducing the subject asserted that American propaganda was, of course, to

26
Varga, The Current Digest of the Soviet Press, 1950, Vol. 2, No. 32, pp. 3-10.
27
Ibidem, p. 6.
28
Ibidem, p. 9.
29
Ibidem, p. 9.
30
Varga, The Current Digest of the Soviet Press, 1952 Vol. 4, No. 47, p. 24, Varga in Pravda, November 25,
1952, p. 3.
31
Varga, ‘The problem of peaceful co-existence’, in New Times, 1954, No. 41, p. 4.
32
Varga, ‘The problem of peaceful co-existence’, in New Times, 1954, No. 41, p. 4.
33
‘A letter to the editor’, in International Affairs, 1956, Vol. 1, No. 12, p. 98.
34
International Affairs, 1957, Vol. 2, No. 5, pp. 61-107.
35
Speakers were I. G. Blyumin, M. N. Smit, I. N. Dvorkin, I. P. Mikuson (journalist), Y. Y. Kotkovsky, A. M.
Alexeyev, Y. A. Shvedkov, V. V. Rymalov, V. P. Glushkov and V. M. Kulakov. Varga’s name was not
mentioned. Ibidem, p. 61.
‘confuse the masses’36, but he nonetheless admitted that wages were higher in the United
States than in other capitalist countries. He remarked that the US rate of growth was lower
than in Japan and Western Europe and that its share in world output had been falling during
the post-war years.37 I. G. Blyumin argued that the theory of “people’s capitalism” was based
on several illusions about the distribution of ownership, management, income distribution
that in bourgeois economic theory the dominion of monopoly capital was minimized because
of the existence of “countervailing powers”. Y. A. Shvedkov argued that the American state
machine was directly dominated by monopoly capital.38 M. N. Smit tried to deconstruct the
“myth” of the welfare state by referring to the huge numbers of workers living in poverty and
official statistics – ‘though the latter are deliberately falsified’ -attesting that the workings of
the ‘law of mass unemployment’.39 V. P. Glushkov saw in the theory of “people’s capitalism”
and the “welfare state” an instrument of imperialist reaction, but after having debunked
“people’s capitalism” he focused on the role played by technical progress under capitalism.
However, Glushkov rejected apologies of capitalism which were making ‘a fetish of
technology and its role in the development of society’.40 According to Y. Y. Kotkovsky the
bourgeois state was unable to regulate and plan the economy. Reforms ‘do not touch the
foundations of capitalism’, he argued and under capitalism ‘“adjustment” is designed to
ensure increased profits for the big monopolies.’41 I. N. Dvorkin focused on Germany where
the steel and coal monopolists had to accept, ‘under pressure of the masses’42, trade union
representatives in the boards. Finally, nobody had taken the myth of “people’s capitalism”
seriously.
Varga, who had not been listed as a speaker at the conference of International Affairs, was
not an adversary of the theses defended by his colleagues. He believed that in the richest
capitalist country the workers were living in poverty and that the legend of “people’s
capitalism” had become the official theory of the American imperialism. In reality, income
differences between workers and capitalists were widening.43 Against The Voice of
America’s assertion Varga argued that it was ridiculous that the annual income of an
American industrial worker had a purchasing power equivalent to that of 80,000 rubles. In
America, rent absorbed from 15 to 25 percent of the worker’s income.44 After the Second
World War, when the ideas of socialism were blossoming, the American public was again
being submerged by panegyrics promoting “people’s capitalism.”45 Varga argued that that
only 3 percent of the skilled and semi-skilled workers own any shares at all,46 and of these 1
percent hold shares to a value of less than 500 dollars, and another 1 percent to a value
ranging between 500 and 1,000 dollars and 65 percent of all the dividends flow into the
pockets of 1 percent of the population.47 Furthermore, indebtedness of the population was
steadily increasing. Summing up, Varga thought that under the “people’s capitalism” of the
United States, the worker had remained what he was – a slave of capitalism.48
36
Ibidem, p. 63.
37
Ibidem, p. 64.
38
He quoted C. Wright Mills, The Power Elite, New York: Oxford University Press, 1956.
39
‘At the very bottom levels of poverty are the Negro people with their subnormal standards regarding wages,
jobs, civil rights, housing, etc.’ International Affairs, 1957, Vol. 2, No. 5, p. 75.
40
Ibidem, p. 80.
41
Ibidem, p. 84.
42
Ibidem, p. 86.
43
Varga, ‘Old song to a New Time’, in New Times, 1957, No. 20, pp. 3-6.
44
Varga, ‘The Voice of America and “People’s Capitalism”, in New Times, 1956, No. 26, p. 7.
45
Varga, ‘Old song to a new tune’, in New Times, 1957, No. 20, p. 4.
46
He confirmed this thesis in his article ‘La production capitaliste au XXe siècle’, in Cahiers d’histoire
mondiale. Journal of World History. Cuardenos de historia mundial, 1962, Vol. 7, No. 1, p. 209.
47
Varga, ‘Old song’, in New Times, 1957, No. 20, p. 5.
48
Varga, ‘The Voice of America and “People’s Capitalism”’, in New Times, 1956, No. 26, p. 9.
Later on, in an article published in Kommunist in 1959, Varga stressed that the theory of
“popular capitalism” had gained a considerable extension in the United States, but at the end
he remarked that some categories of workers having saved a “capital” of not more than
10,000 à 15,000 dollars were nonetheless obliged to sell their work force to the capitalists. 49
Completely in line with Kuzminov and his colleagues of the Academy, Varga rejected the
slogan of “people’s capitalism” as a pure swindle.

A constantly impoverishing proletariat

The question of the constantly impoverishing proletariat opposed Varga to a number of


Stalinist economists having belonged to the Zhdanovist group. Among them were such
prominent economists like I. I. Kuzminov and A. I. Katz. Relative impoverishment posed any
problem as real wages of workers always could increase. However, Marx proceeded from the
theoretical assumption that labor power was sold at value. A decrease in labor time per
consumer gods as a result of growing labor productivity also would lead to a decrease in
labor time per consumer goods unit. Hence, a decrease in labor time per consumer goods unit
would decrease the share of the national income going to the working class and would
increase the part being appropriated by the bourgeoisie. However, Marx’s analysis could not
be corroborated by statistical evidences. Prices of consumer goods were constantly rising -
instead of dropping - due to inflation and currency devaluations, high prices fixed by the
monopolies, taxes and duties. Katz and Kuzminov nonetheless calculated the decrease of the
factory and office workers’ share in the US national income. Katz could “prove” that the
share of the proletariat in the national income had constantly decreased between 1900 and
1956.50
Now that destalinization had made severe inroads into economic thinking, Varga felt free to
react against Katz’s and Kuzminov’s calculations. According to Varga, Katz had failed to
demonstrate a considerable impoverishment of the working class in the post-war years. Since
1940 the share of workers’ income had stabilized.51 Varga found the solution in the simple
statistical method for pricing the relative impoverishment of the proletariat by calculating the
growth in the rate of its exploitation. ‘Basically the two processes are identical: the
appropriation of the surplus value forms the basis for the distribution of the national income
among the classes.’52 Varga’s own calculations for the period 1899- to 1931 proved that the
rate of exploitation drops I crisis years and rises in the boom years. When the business
climate improves, the profits and the rate of exploitation rise to a peak, which is in keeping
with the true nature of capitalism. Hence, Varga concluded that the degree of exploitation
was increasing substantially after the Second World War and that the ‘relative
impoverishment of the working class’53 continued.
This exercise allowed Varga to compare his own approximations with Katz’s ‘extremely
complicated calculations’54 and to refute criticism he had received on the part of a number of
Soviet economists55 declaring that his calculations minimized the rate of exploitation. Katz’s
49
Varga, 1959, Kommunist, No. 17, pp. 36-52; translated as ‘La production capitaliste’, in Cahiers d’histoire
mondiale, 1962, p. 209.
50
A. I. Katz, Polozheniye proletariata SShA pri imperializme, Moscow: Academy, 1962; I. I. Kuzminov,
Obnishchaniye trudyashchikhsya pri kapitalizme, Moscow: Izd. VPSh AON pri TsK KPSS, 1960.
51
Varga, Politico-Economic Problems, 1968, pp. 105-106.
52
Varga, Politico-Economic Problems, 1968, p. 107.
53
Varga, Politico-Economic Problems, 1968, p. 109.
54
Varga, Politico-Economic Problems, 1968, p. 109.
55
Varga named V. Motylev, M. Smit-Falkner, A. Katz, people who had attacked him during the 1947 debate.
mistake was that he regarded not only the profits of trading capital but also the wages of
commercial workers as deductions from the wages of the workers in the manufacturing
industry and added the resulting sum to the surplus value. Varga found that entirely
unjustified: ‘They are not deductions from wages, but a payment made by the buyer out of
his income fro trade services rendered.’56
The problem of absolute impoverishment was much more complicated than that of relative
impoverishment. Among Marxists there existed a wide divergence of views on this problem.
Varga believed that the per capita income per head of the population was falling in the
developed countries. But he was also interested in the question of whether absolute
impoverishment was a constant, irreversible process similar to that of relative
impoverishment, or whether it was neither constant nor irreversible.57 Varga noticed that in
the program of the CPSU was said that crises and stagnation led to a ‘relative, and sometimes
an absolute, deterioration of the condition of the working class’.58 Basing himself on the new
program of the CPSU, Lenin and Marx, Varga castigated the “dogmatists” for having
defended the point of view that the position of the working class worsened all times and not
at times.59 Varga attacked the “dogmatists” who ignored the warnings of Marx against the
dogmatic, mechanical reiteration of the law on the polarization of capitalist society and the
growth of poverty as a result of the accumulation of capital. The Soviet dogmatists of the
Economics Institute had adopted the view ‘that the absolute impoverishment of the working
class was constant throughout the capitalist world.’60 According to Varga, Marx and Engels
had pointed out the root factors modifying the operation of the law of the impoverishment of
the proletariat and adopted a ‘very flexible approach to the problem’.61
When admitting the possibility of real wage increases above the level inspired Varga to
reconsider the influence of technological progress on worker’s family consumption.
American workers were purchasing cars, radios, television sets, etc. and they spent their
money on ready-to-cook foods. The average American ate more beef and chicken and less
potatoes. On the other hand, American and British workers were living in slums and were
undernourished. But this did not mean that the bulk of the workers were worse off than in the
19th century. Varga even admitted that working conditions in capitalist factories had
improved. Hence, he called for a ‘truly scientific analysis’ 62 of these phenomena. According
to Varga ‘our dogmatists’ had divorced ‘economics from politics’ by stressing ‘the constant
and inevitable absolute impoverishment of the working class’.63 They had forgotten Lenin’s
definition of politics as ‘a concentrated expression of the economy’ and ignored ‘the new
political conditions in the fight between labor and capital’.64 From a tactical point of view,
Communists could not mobilize the working class if they stated that the deterioration in their
living conditions was inevitable.65
56
Varga, Politico-Economic Problems, 1968, p. 110.
57
Varga, Politico-Economic Problems, 1968, p. 112.
58
The Road to Communism. Documents of the 22nd Congress of the Communist Party of the Soviet Union.
October 17-31, 1961, Moscow: Foreign Languages Publishing House, pp. 452-453.
59
Especially his attack on Kuzminov’s book on real wages in Britain and America was a real hit. Kuzminov had
declared that the impoverishment of the working class during crises was a fact, but also during booms.
Kuzminov, o. c., 1960.
60
Varga: ‘At that time I wrote that even a very small progressive impoverishment, i. e., of a progressive decrease
in real wages. At that time I wrote that even a very small progressive decrease in real wages would in a
comparatively short historical period reduce wages to zero (as can be seen from a very simple mathematical
calculation), but my objection went unnoticed’. Varga, Politico-Economic Problems, 1968, p. 114.
61
Varga, Politico-Economic Problems, 1968, p. 114.
62
Varga, Politico-Economic Problems, 1968, p. 119.
63
Varga, Politico-Economic Problems, 1968, p. 119.
64
Varga, Politico-Economic Problems, 1968, p. 120.
65
Varga, Politico-Economic Problems, 1968, p. 119.
Varga attacked the “dogmatists” for having discredited Soviet economic science abroad. He
remarked that many Marxist scholars there had made a ‘thorough study of the working
class’s position by combining statistical methods of research’ that contradicted ‘the views of
our dogmatists’.66 In addition, a growth in real wages was not the same as a growth in the
welfare of the workers. Studying profits the monopolists made at the expense of the
consumers, Varga remarked that it was unfounded that monopoly capital always paid for
labor power less than its value. In all highly developed capitalist countries workers were
striving ‘to obtain jobs in large enterprises’ and that wages in highly monopolized branches
were higher than ‘those of workers in the non-monopolized branches’.67 At any rate, in spite
of all management techniques, the American monopolies paid often twice as much as non-
monopolized enterprises. Varga’s conclusion was that the essence of monopoly superprofits
required the application of method ‘which are no less consistent than those Marx applied in
his analysis of profit.’ His final conclusion was that ‘in a pure capitalist society monopoly
superprofits can evolve only as a result of an irregular distribution of the aggregate surplus
value or aggregate profit, i.e., a distribution according to which profit does not correspond to
the amount of capital invested’.68 The redistribution of the aggregate profit in favor of the
monopolies was effected through the mechanism of prices. Modern capitalist society
comprises also millions of small independent producers playing a part in the formation of
monopoly profits. About 90 per cent of industrial production was concentrated in Western
Europe, North America and Japan. The unequal exchange was a means by which the rich
capitalist countries extracted superprofits from the less developed countries where nobody
was protecting the small commodity producers against the high monopoly prices charged by
the monopoly capitalists. ‘The tribute exacted by the monopolies from small commodity
producers through unequivalent exchange flows first and foremost from the less developed
countries to monopoly capitalist countries’.69 Though the price of labor power fluctuated
around its value. In countries in which the agrarian overpopulation was creating an enormous
surplus for the supply of labor power and where no trade unions to fight the capitalists, the
price of labor power was squeezed to a level below its value. Here the price of labor was thus
regulated by the market.
In his analysis Varga had returned to the debate he once had with Henryk Grossman in the
1920s about the fact that under monopoly capitalism and under non-monopoly capitalism, the
rates of different branches tended to equalize and form an average profit. However, the
monopolies were also making additional profits, Varga argued, which did not tend to
equalize, ‘and hence there is no such thing as an average rate of monopoly profit’.70 Varga
conceded that it was difficult ‘to draw a line between the monopoly and average rates of
profit’. Firms making superprofits could be the tomorrow losers. ‘In our analysis we have
intentionally avoided Stalin’s definition of maximum profit. Stalin’s assertion that “it is not
the average profit, that modern monopoly capitalism needs for more or less extended
reproduction” is entirely unfounded. Even the term “maximum profit” which Stalin
substitutes for Lenin’s term “monopoly superprofit” (…) is ambiguous and inaccurate.’71
According to Varga, the striving for maximum profits applied also to the Phoenician
merchants. Marx mentioned in his Capital that capital was ready to commit any crime for the
sake of maximum profit in its pre-monopoly stage. Hence, Varga could qualify Stalin’s

66
Varga, Politico-Economic Problems, 1968, p. 122.
67
Varga, Politico-Economic Problems, 1968, p. 155.
68
Varga, Politico-Economic Problems, 1968, p. 157.
69
Varga, Politico-Economic Problems, 1968, p. 158.
70
Varga, Politico-Economic Problems, 1968, p. 161.
71
Varga, Politico-Economic Problems, 1968, pp. 162-163.
“basic law” useless! ‘Stalin’s “basic economic law” is an efficacious political indictment of
monopoly capitalism but not a result of a Marxist analysis.’72

State-monopoly capitalism and Keynesianism

Varga’s views on capitalist development did not change that much in the period after the
Second World War. He repeatedly argued that the alliance of the monopolies and the state
was effected primarily in the form of a merger between the monopolies and the state
machinery. The alliance also takes the form of joint decisions on important economic issues.
In various ways the state helps the monopolies fix high monopoly prices on the home market.
State-monopoly capitalism is extremely reactionary, he asserted, because it defends a social
system doomed to collapse.73 He proudly mentioned that his former colleagues S. A. Dalin,74
Y. A. Pevzner,75 and E. L. Khmelnitskaya76 had recently contributed to the analysis of state-
monopoly capitalism in a number of writings.77
After Stalin’s death Varga returned to the old problem of the role of the state in capitalism. In
conformity with Marxist-Leninist theory he regarded ‘monopoly capital as single force and
the whole monopoly bourgeoisie as a class or as the layer of the capitalist class with common
class interest.’78 Thus, the coalescence of these two forces, the monopolies and the state, are
forming the basis of state-monopoly capitalism. Varga stressed nonetheless the fact that
monopoly capital and the state were forming ‘independent forces’.79 There could not be no
unilateral subordination of the state to monopoly capital, ‘as asserted by Stalin’ and some
Soviet economists dogmatically continue to assert to this day’.80
Varga argued that one could encounter in Soviet writings the erroneous tenet declaring that in
every monopoly capitalist country there exists a center representing the interests of the
monopoly bourgeoisie and giving directives to the state apparatus. But Lenin had emphasized
that competition remained under monopoly capitalism, which excluded a complete
community of interests among the bourgeoisie. Marx had pointed out that the bourgeoisie
was united in its attempts to squeeze out the working class surplus value as much as possible,
but that the bourgeoisie’s unanimity disappeared when it came to the distribution of the
surplus value. Varga even singled out that there were constant contradictions among the
different factions of the various monopolies in a single branch. However, the monopoly
bourgeoisie as a whole had several interests in common such as the safeguard of the capitalist
system or keeping wages at a low level. Or in obtaining government orders or tax breaks.
These conflicts, explained the fact, that under state-monopoly capitalism the state represents
the common interests of monopoly capital sometimes contradicting the particular interests of
the monopoly bourgeoisie. ’This shows that the definition that the definition of state-
monopoly capitalism based on Stalin’s conception (”state-monopoly capitalism implies the
subordination of the state apparatus to the capitalist monopolies”) is wrong.’ 81 According to
72
Varga, Politico-Economic Problems, 1968, p. 163.
73
Varga,Twentieth Century Capitalism, Moscow: Foreign Languages Publishing House, 1962, pp. 112-116.
74
S. A. Dalin, Voyenno-gosudartsvenny monopolistichesky kapitalizm, Moscow: Izd-vo Akademii nauk SSSR,
1961.
75
Y. A. Pevzner, Gosudartsvenno-monopolistichesky kapitalizm v Yaponii, Moscow: Akademiya Nauk, 1961.
76
E. L. Khmelnitskaya, Monopolistichesky kapitalizm v Zapadnoi Germanii, Moscow: IMO, 1959.
77
Varga, Politico-Economic Problems, 1968, p. 51.
78
Varga, Politico-Economic Problems, 1968, p. 51.
79
Varga, Politico-Economic Problems, 1968, p. 52.
80
Varga, Politico-Economic Problems, 1968, p. 52.
81
Varga, Politico-Economic Problems, 1968, p. 55.
Varga there was ‘no “one-sided subordination” but a joining of forces, which, in spite of this
merger, still maintain a certain autonomy.’82 He rejected any one-sided “subordination” in
name of Marxist philosophy: the dogmatists had forgotten ‘that all capitalist laws’ were no
more than ‘tendencies always opposed by counter-tendencies’83 Varga admitted that the
parliamentary system complicated the problem and that the contradictions between the
monopolies and their interests. Hence, the monopoly bourgeoisie created conditions for the
formation ‘of a broad anti-monopoly-capital front embracing the working people and those
layers of the bourgeoisie whose interests have been harmed by the monopoly bourgeoisie’.84
The fusion of state power and monopoly capital proceeded ‘dialectically’ and could not be
reduced according to Stalin’s formula of a “subordination” of the state to monopoly capital. 85
Varga combined this criticism of Stalin and his “dogmatists” with a strong believe in a
growing opposition in the capitalist countries to the monopolies and in the final collapse of
capitalism.
Varga’s analysis of monopoly capitalism was in full accord with the new program of the
CPSU of 1961 stating that in the interests of the financial oligarchy the bourgeois state had
instituted various types of regulation and accelerated the development of monopoly
capitalism into state-monopoly capitalism.86 Varga pleaded for nationalizations in order to
weaken the monopolies and to attract not only the support of the factory and office workers,
but also the broad layers of the peasantry and the petty urban bourgeoisie. 87 Though Varga’s
status of state-monopoly capitalism theoretician was mainly due to his pre-war writings on
monopoly profits,88 his later rejection of Stalin’s formula of the “subordination” of the state
to the monopolies would also make of him a “dissident”. In the GDR, this status was
enhanced thanks to his friend Jürgen Kuczynski89 who was rumoring that there existed a
“Varga School” of economic thought in Moscow.90 When the Humboldt University in Berlin
(GDR) celebrated on 12 November 1960 its 150th anniversary, Varga obtained a PhD honoris
causa for his ‘exceptional merits’ as a theoretician of state-monopoly capitalism.91
Apart from the problems of state-monopoly capitalism, Varga remained especially interested
in the capitalist cycle showing a tendency to become shorter because of the rapid technical
changes. Thus economic crises would also become more profound. The general crisis of
capitalism had not emerged in connection with a world war, he argued, but in conditions of
the competition between the two systems, with the balance of forces changing more and
more in favor of socialism. Historically, the fate of capitalism was already sealed with a
socialist system superior to capitalism. In a number of countries the transition to socialism
might be relatively peaceful, he concluded, but the 20th century would go down in history as
the century of the death of capitalism and the triumph of communism.92

82
Varga, Politico-Economic Problems, 1968, p. 55.
83
Varga, Politico-Economic Problems, 1968, p. 55.
84
Varga, Politico-Economic Problems, 1968, p. 57.
85
Varga, Politico-Economic Problems, 1968, p. 59.
86
The Road to Communism, o. c., 1961, p. 471.
87
Varga, Politico-Economic Problems, 1968, p. 68.
88
Petra Gansauge, ‘Eugen Vargas Beitrag zur Gestaltung der marxistisch-leninistischen Monopoltheorie
innerhalb der Kommunistischen Internationale’, Dissertation zur Erlangung des akademischen Grades Dr. Oec.
Eingereicht dem Wissenschaftlichen Rat der Karl-Marx-Universität Leipzig, Fakultät für Wirtschafts- und
Rechtswissenschaft angefertigt bei Karl-Marx-Universität Leipzig, Sektion Wirtschaftswissenschaften, 1989.
89
Kuczynski’s letter to Varga, 31 October 1959. Collection of Mária Varga Private Archives, Moscow.
90
Georg Göncöl, ‘Lebensweg und Lebenswerk von Eugen Varga (1878-1964)’, in E. Varga.
Wirtschaft und Wirtsschaftspolitik. Vierteljahresberichte 1922-1939, Herausgegeben von
Jörg Goldberg, Vol. 1, Berlin: Das europäische Buch, 1977, p. 8.
91
Party Archives, Budapest, Varga files, 783.f.13.ő.e.
92
Varga, Twentieth Century, 1962, pp. 152-157.
Though Keynes’ works were studied at Varga’s institute, Keynes had become for him a
‘false prophet’.93 But at the end of his life, Varga recognized the ‘reformist leaders value
Keynes’ because the latter had not attempted ‘to refute Marx or argue with him’.94 Keynes
had simply ignored Marx. In addition, Varga never would link the Marshall Plan to
Keynesianism or any other form of macro-economic management. In Pravda of 5 August
1947 Varga adhered to Stalin’s vision that the Marshall Plan was a trap and that its aims were
the formation of a Western bloc under American control, the conversion of Western
Germany into a military base, the alienation of Eastern European States from the USSR. At
that time, this opinion he reiterated in two articles published in New Times.95 However, at the
end of his life Varga revised this initial appreciation of the Marshall Plan. He remarked that
the Marshall aid had had as a result to enable that the countries to rebuild their industries and
regain their prewar level. And once they surpassed the prewar level, they continued to boost
production without needing American aid anymore.’96
However, at the end of his life Varga also returned to the problem of Keynesian precepts
contained in Keynes’s The General Theory.97 Varga should have noticed that his colleague I.
A. Trakhtenberg had started studying and discussing the Keynes’ theory of full employment
and the role of credit in post-war capitalism.98 Varga noticed that in the US the Kennedy
Administration was paying tribute to Keynes’s theory by opting for deficit financing.99.
According to Varga view Keynes, who was a ‘typical eclectic’, dealt only ‘with the
superficial phenomena of capitalist economy’,100 his theory was superficial and a ‘confused
rag-tag’ for not having created an economic theory of his own or having refuted the teachings
of the ‘founders of bourgeois political economy.’101
Varga’s main charge against Keynes’s ‘muddled thinking’102 was that any class analysis or
historical approach was absent in his writings. In his ‘pseudo-psychology’ he had forgotten
that competition forced ‘the individual capitalist to make a profit or perish’. 103 Keynes’s
abstract economic man and his psychological laws had no validity in the ‘real capitalist
world’ in which there were at least ‘a thousand million people whose incomes are so low that
they are forced to live in perpetual hunger’ or people whose incomes ‘are so large that it
would be simply impossible to spend them on consumer goods’. 104 Hence, Keynes’s policy of
overcoming the narrowness of the market by increasing unproductive consumption among
the non-working classes was ‘not as absurd as it would seem at first glance’. 105 Deficit
spending was intended to justify the expenditure on arms as well.

93
Review article (E. Mantoux, ‘The Carthaginian Peace – or the Economic Consequences of Mr. Keynes,
London, 1946). Varga in Mirovoe khozyaistvo i mirovaya politika, 1947, No. 7, pp. 92-94.
94
Varga, Politico-Economic Problems, 1968, p. 319.
95
New Times, Vol. 5, 1947, No. 39, pp. 4-8; No. 42, pp. 3-7
96
Varga, ‘America’s weakening position in world power’, in New Times, 1964, No. 8, p. 6.
97
John Maynard Keynes, The General Theory of Employment, Interest, and Money, New York, Chicago and
Burlingame: Harcourt, Brace & World, Inc.1964 (1936).
98
I. A. Trakhtenberg, Kapitalisticheskoe vosproizvodchesvo i ekonomicheskie krizisy, Moscow:
Gospolitizdat, 1954; Kreditno-donesnaya kapitalizma posle vtoroy mirovoy voyny, Moscow: Izd.
A.N. S.S.S.R., 1954; ‘Keynesian theory of full employment’, in Keynesian economies. A Symposium,
Delhi, 1956, pp. 211-215.
99
Varga, Politico-Economic Problems, 1968, p. 304.
100
Varga, Politico-Economic Problems, 1968, p. 305.
101
Varga, Politico-Economic Problems, 1968, p. 306.
102
Varga, Politico-Economic Problems, 1968, p. 320.
103
Varga, Politico-Economic Problems, 1968, pp. 307-309.
104
Varga, Politico-Economic Problems, 1968, p. 307.
105
Varga, Politico-Economic Problems, 1968, p. 309.
Varga attacked Keynes’s unemployment theory as well. According to Keynes unemployment
emerged because the more workers an employer hires, the less profit he could expect as a
consequence of the working of the law of diminishing returns. Keynes’s second reason for
unemployment was that not all people wanted to spend their whole income on consumption
or on investment. However, the principal cause of unemployment is the capitalist system
itself, Varga argued.
Obviously, Varga’s criticism of Keynes’s General Theory was intimately related to the fact
that in 1960s neo-Keynesian thinking on economic growth had acquired some influence in
Soviet economic thought. Keynes’s popularity was mainly due to his recommendation that
state intervention in the economy could avoid crises of overproduction and mass
unemployment, which was in ‘complete harmony with the interests of the monopolies.’106
The union between reformism and Keynesian theories suited the requirements of the leaders
reformists not wanting to refute Marx or argue with him.107 Because neither the capitalists
nor the reformists knew how to fight growing unemployment, Keynes helped them by
producing a universal cure-all with government measures, such as public works financed at
the expense of a large deficit in the state budget, the maintenance of low-interest rates, etc.
Meanwhile, the function of the labor aristocracy was expected disseminate bourgeois
ideology among the workers with the help of the growing workers. Data Varga had collected
showed nonetheless that the position of the labor aristocracy had been weakened because of
an ongoing deskilling process and diminishing pay differences.

Varga on cyclical crises

In 1954, Varga was waiting for of a new economic slump in the United States.108 Output of
consumer goods had begun to decline, while stocks were growing. Varga’s analysis of the
coming crisis was that a vast surplus of loanable money was causing inflation. In addition,
there were big surpluses of basic production facilities in the war industries. High monopoly
profits had kept the purchasing power of the population low. The claim that there was no
crisis, but only a slight recession stemmed from the fact that the monopolies had not as yet
felt the impact of the crisis as long as they can maintain high prices. But the lesser
monopolies had been forced to cut down investments. As a result of mass unemployment the
purchasing power of the working class had declined and farmers and office workers had seen
their income declining. Varga identified the 1958 cyclical slump in the United States not as a
short-term transient crisis similar to those of 1949 and 1954, but only as a cyclical crisis of
overproduction. Because there were no signs of improvement, he thought, judging by all the
available evidence, the crisis to be long.109 The U.S. monopolies, he argued, know only two
methods of combating the crisis: more spending and less taxes. This policy only could
prolong the crisis, render it more severe and impair the interests of the country and business
community. He identified General Motors as the leader of an anti-labor offensive wanted by
monopoly capitalists in order to undermine, or, at least, weaken the American labor
movement.110 But already in 1959, Varga had to admit that the monopolies had only lost
some of their profits, but there had been practically no decline in prices and only a temporary
drop in share prices, followed by a pickup. Manufactures were selling at 10 percent above

106
Varga, Politico-Economic Problems, 1968, p. 316.
107
Varga, Politico-Economic Problems, 1968, p. 319.
108
Varga, ‘Economic crisis in the United States’, in New Times, 1954, No. 23, pp. 8-12.
109
Varga, ‘Cyclical crisis’, in New Times, 1958, No. 24, p. 6.
110
Ibidem, p. 6.
1955 price levels. Varga concluded that intensive re-equipment had caused higher
productivity, so that the labor costs had dropped. Steel prices were 15 percent higher than
before the crisis. Even automobiles, notwithstanding cutthroat competition, were higher
priced than before the crisis. The population of the economically backward areas had been
hard hit along with the proletariat of the industrial countries. There, in the former colonies
and semi-colonies, the crisis began earlier than in the developed industrial nations, because
the latter reduced raw material imports.111 The drop in primary goods prices meant extra
revenues for the capitalist economies. However, less export revenues means smaller
purchases of industrial goods, which accentuated the economic crisis in Western Europe. The
biggest sufferers were the old industries (coal, steel, cotton textiles and leather), while the
new industries had suffered only slight damage.112
How to explain that any economic crisis of some importance had been postponed? Varga’s
explanation of this new phenomenon - that contradicted Marx’s accumulation schemes - was
not at all convincing because mainly built up out of several ad hoc factors. For instance, he
noticed that the export of all capital to the former colonial and semi-colonial countries which
had embarked on the socialist road had stopped. Thus capital export was now limited to a
few numbers of politically and economically stabile countries. However, this tendency was
not hastening the process of imperialist breakdown as long as large-scale export of capital
could continue in the form of economico-military aid.113 Obviously, this new tendency had
only brought ‘a temporary expansion of the market and, all other conditions being equal, a
lenthening of the trade cycle’.114 No predictable breakdown of imperialism could be expected
because of shortages in some raw materials created by the extension of the socialist world.
Modern technology had helped the capitalist countries to open up many new deposits or
develop sources of raw materials.115
Varga explained the long post-war boom in the US as a result of ‘postponed consumer
demand for durables’ and ‘a tremendous unsatisfied demand for means of production for the
“peaceful” branches and for consumer goods’.116 He admitted that the well-to-do and even
some categories of industrial workers had to wait until de post-war period for spending their
savings because of the shortage of consumer goods and that by the end of the war the
postponed demand had become ‘fully effective’.117 Varga mentioned three factors being
responsible for the lengthening of the post-war cycle. First of all, there was the expansion of
fixed capital until 1957. Second, commodity stocks had been accumulated because of the
Cold War, which had contributed to the lengthening of the post-war cycle. Third, there was
the artificial expansion of the consumer market by the considerably extending comsumer
credits.118 Varga noticed that in the case of this increased additional demand the ‘future
purchasing power’ had been used ‘to save the present situation’.119 But he could not explain
the 1957-58 overproduction crisis in the US had not spread to the other capitalist countries. 120
111
Varga, ‘The capitalist economy in 1958. Some characteristic features’, in New Times, 1959, 5, pp. 10-11.
112
Ibidem, p. 12.
113
Varga recognized that in the 1960s US aid had changed. It was no longer, as in the 1940s directed to countries
with preconditions for capitalist development. US aid flew to developing countries which for long years were
under imperialist domination. Varga. ‘America’s weakening position as a world power’, in New Times, 1964,
No. 8, p. 6.
114
Varga, Politico-Economic Problems, 1968, p. 220.
115
Varga, Politico-Economic Problems, 1968, p. 220.
116
Varga, Politico-Economic Problems, 1968, p. 222.
117
One should notice this Keynesian slip of the pen. Varga, Politico-Economic Problems, 1968, p. 224.
118
Varga, Politico-Economic Problems, 1968, pp. 225-226.
119
Varga, Politico-Economic Problems, 1968, p. 226.
120
Varga argued that the 1957-58 overproduction crisis in the US was not accompanied, like in 1931, by a credit
crunch in Austria and Germany.
Varga remarked that a crisis of overproduction could spread to new countries only if the
conditions for a crisis have ‘matured in their domestic economy’!121
In his research notes, Varga was focussing on the distinguishing features of the post-1945
cycle. He noticed that with the years the economic supremacy of the US over all other
capitalist countries had decreased considerably. The US were suffering from a constant drain
of their gold reserves. In spite of high labour productivity based on up-to-date equipment, the
US were unable to play the role of the sole defender of capitalism on a world scale. American
goods did not dominate the world market. Even complaints about dumping were heard.
Meanwhile, structural unemployment was growing in a period that economic growth rates
were slacking down in the US and Britain, but not in the countries of continental Europe.
Varga thought it would be illogical that two different cycles would exist in the future.
‘Sooner or later a cycle of a single type will be established throughout the capitalist world. In
our opinion this cycle will resemble the post-war development of the USA’.122 During the
post-war boom this renewal and expansion of capital was, according to Varga, characterized
by new factors such as the speedy methods of factory construction, the rapid technological
progress making equipment sooner than beofre obsolte, the rapid replacement of equipment,
capital investment in the modernization of operating factories, etc. All these factors would
accelerate the break-out of an overproduction crisis and shorten the cycle in all developed
capitalist countries.
Varga foresaw a period of economic stagnation in the near future in the US with available
equipment constantly underemployed and also a general intensification of the class struggle.
A general aggravation of the contradictions of capitalism would follow as the laws of
competition operating under monopoly capitalism were forcing capitalists to renew and
expand their fixed capital. The ‘reproduction cycle is’, Varga argued, ‘determined by the
fixed capital, or (…) every crisis is the starting point for a mass renewal and expansion of
fixed capital undertaken for the purpose of lowering production costs’.123 Obviously, some
extra-economic factors could be invoked in order to explain the long post-war cycle with
growing prosperity. Varga noticed that the capitalists ‘now have a far deeper knowledge of
the overproduction following a boom and also of world market conditions than they had in
Marx’s time or even 30 years ago’.124 He noticed that efficient ‘projected statistics’125 existed
in combination with market-research reports enabling capitalists ‘to pre-gauge consumer
demand and thus avoid an overproduction of commodities’.126 In addition, Varga noticed that
the state could increase ‘effective social demand’. But on the other hand Varga refused to
believe in demand management under capitalism. ‘Under capitalism there can be no state
planning, no crisis-free capitalist reproduction’,127 he asserted. Hence, he predicted that in the
future the long and powerful growth in output would come to a standstill. ‘The deepening of
the general crisis of the capitalist system is expressed by the growth in the number of
industries which are in a state of perpetual crisis, such as coal, textile and ship-building
industries, and those being gradually drawn into this state – the iron and steel and motor
industries’.128

121
Varga, Politico-Economic Problems, 1968, p. 227.
122
Varga, Politico-Economic Problems, 1968, p. 232.
123
Varga, Politico-Economic Problems, 1968, p. 234.
124
Varga, Politico-Economic Problems, 1968, p. 238.
125
Varga, Politico-Economic Problems, 1968, p. 238.
126
Varga, Politico-Economic Problems, 1968, p. 238.
127
Varga, Politico-Economic Problems, 1968, p. 238.
128
Varga, Politico-Economic Problems, 1968, p. 239.
At the beginning of the 1960s, Varga admitted that the reproduction cycle after the Second
World War differed substantially from that of the interwar period129 because of the (1)
contraction of the capitalist world as a result of the appearance of new socialist states; (2)
sharpening of the contradictions in some of the capitalist countries; strengthening of the
Communist parties and weakening of the Social-Democratic parties of these countries; (3)
disintegration of the colonial system of imperialism. As a result, striking differences existed
between the business cycle in Britain and the continental European countries, where no crises
of overproduction had occurred. Fortunately, the laws of the reproduction cycle, ‘like all
laws’, were no more than ‘scientific abstractions’, and they were determined by ‘the different
tendencies and counter-tendencies at work in capitalist economy’.130 However, the capitalist
system was unable to develop the productive forces. It was the same imperialist, moribund
capitalism of the pre-World War I years, the only difference being that its domination
extended to a considerably smaller area.131
In 1962, he noticed that cyclical economic upsurges had not led to a full-fledged boom and
that US production was stagnating. The dialectic of the general crisis of capitalism was such
that its effect was ‘greater in the richest capitalist country.132 The American economy was
caught in a ‘vicious circle’ of undercapacity operation resulting from low purchasing power,
low invest and competition compelling the entrepreneurs ot modernize and autromate their
factories.133 The framework of Varga’s analysis was still the same: underconsumption could
not be solved under capitalism because of the low purchasing power of workers and office
workers.134 Hence, US capitalism could not make use of its complete productive capacity.
Because productivity in American enterprises was rising, mass unemployment, also among
white-collar workers after the introduction of computing machinery had increased.
The year 1947 should be regarded as the beginning of a post-war cycles lasting from 10 to 11
years. The cyclical movement of world capitalist production was feeble. Its main function
was the creation of ‘the conditions for a crisis of overproduction’. 135 The disintegration of the
colonial system also had a telling influence on the course of the cycle. ‘The war weakened all
the imperialist powers with the exception of the United States. They could no longer hold all
the colonial nations in subjection by armed force.’136 The crisis of 1958 had not been the
beginning of a depressing either as in 1959 the 1959 output level was considerable above the
preceding peak. Post-war production growth was almost entirely due to economic growth in
the developed capitalist world. How should one explain the fast recovery of the Japanese,
German, Italian and French economies and slow economic growth in the US and Great
Britain? Varga explained Japan’s and West Germany’s economic recovery because of their
comparatively low war expenditures and to an expansion of their fixed capital. Mainly due to
the Cold War, the US could take up large-scale arms production soon after the end of the
Second World War. Thus, even in peacetime the US monopolies could get new and highly
profitable orders. At the same time there were no idle production reserves and the final result
was ‘an overstrained and unbalanced economy similar to that in times of war.’137 Hence,
Varga concluded that ‘war production’ was able to ‘lengthen the upward and overstrain
phases, and hence the whole cycle, but cannot avert a crisis of overproduction, as has been

129
Varga, Politico-Economic Problems, 1968, p. 207.
130
Varga, Politico-Economic Problems, 1968, p. 207.
131
Varga, ‘Forty years’, o. c., 1957, pp. 5-6
132
Varga, ‘Trying to solve the insoluble. Notes on the U.S. economy’, in New Times, 1962, No. 32, p. 5.
133
Ibidem, p. 5.
134
‘No capitalist is going to raise wages in order to enable the worker to buy more goods.’ Ibidem, p. 5.
135
Varga, Politico-Economic Problems, 1968, p. 212.
136
Varga, ‘Forty years’, o. c., 1957, p. 6.
137
Varga, Politico-Economic Problems, 1968, p. 218.
conclusively proved by the 1957-58 crisis’.138 Meanwhile, the Soviet Union could grant
credits on favorable terms to the developing countries and supply arms them with arms. Thus
the imperialist monopoly had become a thing of the past. Hence, the decline of capitalism
was now obvious. However, Varga also referred to inter-imperialist American, French and
British rivalries caused by conflicting interests ‘despite their military alliance’.139
Summing up, Varga’s views were the following: 1) the period of the Second World War
should be excluded from the cycle; 2) 1947 should be considered the beginning of the post-
war cycle; 3) the first post-war cycle continued to the 1957-58 crisis of overproduction; 4)
the second post-war cycle began after that crisis. In addition, Varga believed that sooner or
later a single cycle would establish itself for capitalism as a whole and that it would be
similar to the post-war cycle in the US and Britain, i.e., would be sharter than it was before
the Second World War. Not everybody could agree with Varga’s analysis of the the capitalist
cycle. Writing an introductory comment on Varga’s analysis of the cyclical course of
reproduction in Politico-Economic Problems of Capitalism Cheprakov admitted that there
were ‘many views among Marxists’140 on the post-war cycle. He also accepted Varga’s
warning against ‘an overestimation of the “anti-crisis” measures taken by the capitalist
state.’141 But then he added that ‘it is undeniable that state activities can influence the factors
determining the intensity and duration of the upward phase and the depth and duration of the
crisis phase in future cycles.’142 Cheprakov articulated the already predominating Soviet view
that the role of the capitalist state had to be reconsidered in the light of recent developments.
With respect to the capitalist reproduction cycle Varga’s analysis was one-sided or not
sophisticated enough to grasp the role of demand management in modern capitalism.

The European Common Market

The Treaty of Rome establishing in 1957 the European Common Market had attracted the
attention of Soviet academicians. On 15 April 1957, the Department of Political Economy of
the Academy of Social Sciences of the Central Committee of the CPSU organized a debate
on this issue. The meeting, which was attended by economists, representatives of publishing
houses, journalists, post-graduates and lecturers on international problems, discussed the
present situation in the capitalist world. Though Varga’s name was not on the speakers list,
he may have been invited to attend the lectures of which an abstract was published in the
newly founded academic journal International Affairs.143 However, though Varga’s
absence always could be explained by frequent health problems, he had not been invited at
the moment of the foundation of this journal specializing in articles for an international
public and edited by a team of young journalists and academicians.144 Marking the “thaw” of
the first part of the Khrushchev era, International Affairs organized a readers’ corner in
138
Varga, Politico-Economic Problems, 1968, p. 219.
139
Varga, ‘The Atlantic Bloc’, in New Times, 1956, No. 6, p. 7.
140
Cheprakov, in Varga, Politico-Economic Problems, 1968, p. 8.
141
Cheprakov, o. c., 1968, p. 9.
142
Cheprakov, o. c., 1968, p. 9.
143
I. I. Kuzminov, S. L. Vygodsky, B. M. Pichugin, A. M. Sharkov, M. N. Smit, V. V. Rymalov, A. I.
Shneerson, Y. Y. Kotkovsky and A. M. Alekseyev had given a lecture. International Affairs, 1958, No. 5,
pp. 76-102.
144
This journal, carrying the subtitle Monthly Journal of Political Analysis, was a clear product of
Khrushchev’s new course. The initial editorial board consisted of E. M. Zhukov, V. Y. Vasilyeva, A. A.
Kononenko, V. P. Glushkov, E. A. Korovin, V. V. Mayevsky, Y, Z. Viktorov, P. V. Milogradov, E. M.
Primakov, V. B. Lutsky, A. F. Sultanov and L. N. Vatolina. Varga would never have access to the pages of
International Affairs.
which the recently established Institute of World Economics and International
Relations was debated.145
Important for Soviet analysts were the inter-imperialist contradictions that had taken another
form than Stalin had predicted. Especially supra-national cooperation and the rise of the
European Common Market was received in the Moscow Kremlin as a sign that monopoly
capitalism attempted to overcome the dividedness of the world market. However, inter-
imperialist contradictions could not be solved by monopoly capital, but only postponed. The
program of the CPSU said that imperialism was incapable of solving the market problem.146
The studies Varga made on international capitalist development, especially the European
Common Market, were not received with much respect and even disqualified as inadequate
or abstract. Varga’s first article on the Common Market Plan was published in New Times in
March 1957 in which he expressed his doubts about the project of creating an integrated
European market. ‘If the ruling element in these six countries wanted to establish a real
common market, and were in the position to do so, it would be enough to set out in a few
pages the basic provisions for abolition of customs tariffs and other trade impediments,
unification of taxes, repeal of export subsidies, etc.’.147 He noted increasing military,
financial and economic dependence on the part of France and Britain vis-à-vis America. The
increase in dollar reserves was bought at the price of military submission to the United
States. Because of the presence of American troops, dollar expenditures amounted to nearly
US$2,000 million a year in the period 1953-55. Therefore, a common market would not free
Western Europe of economic dependence on the United States. A Common Market might
help to increase trade between the six founding states, but it would change nothing in their
economic relations with the rest of the world. That state of affairs would remain until the
West-European nations abandon their American-instigated Cold War policy.
According to Varga, a radical change in foreign and economic policy was the only solution,
which will require a genuine peaceful coexistence, an expansion of foreign trade with the
socialist countries and an all-European collective security system embracing both capitalist
and socialist countries.148 Varga refrained from analyzing Germany’s particular position in
the integration process or the role of US diplomacy149 and he did not pay any attention to the
important differences between a common market and a free trade area. The European
Common Market Plan envisaged gradual abolition of customs frontiers, repeal of tariffs and
quantitative quotas within the establishment of a common tariff against outsiders, while
British diplomacy promoted, on the contrary, a free trade area. Varga saw the Common
Market as a ‘return to the conditions existing before the First World War’, thus as ‘an attempt
to overcome the dividedness of the world market by uniting the markets of six countries’.150
Equal conditions for competition, however, served ‘primarily the interests of the big
monopolies’ and the Common Market was also ‘an attempt on the part of the West European
imperialist powers to consolidate their position following the political liberation of the

145
Letter from V. P. Glushkov (Foreign Economics Chair of the Economics Department of the Moscow State
University). He even wanted a Union-wide conference on the planning of the study of international relations and
the making of a “good” textbook on the history of international relations. V. Shurshalov en G. Zhukov
(International Law Department of the Institute of Law of the Soviet Academy of Sciences) proposed the funding
of a publishing house specializing in publications on international relations. International Affairs, 1957, Vol.
1, No. 5, pp. 135-136.
146
‘Monopoly capital has, in the final analysis, doomed bourgeois society to low rates of production growth.’
The Road to Communism, o. c., 1961, p. 473.
147
Varga, ‘The Common Market Plan’, in New Times, 1957, No. 10 (March), p. 11.
148
Ibidem, p. 12.
149
In Moscow, specialists of international affairs thought that the US was guiding the integration process.
150
Varga, Politico-Economic Problems, 1968, p. 71.
colonial countries, to enable them to conduct a vigorous policy of neocolonialism and to
compete with the United States’.151 Thus the Common Market was a politically ‘desperate
attempt to resolve imperialism’s inevitable internal contradictions and to oppose the socialist
world system by a single imperialist front’.152 Meanwhile, US monopoly capital was rapidly
setting up subsidiaries in Western Europe in order to penetrate local markets.
The Institute of World Economy and International Affairs in Moscow became nonetheless
more and more interested in this phenomenon of regional economic integration which went
well beyond the project of a free-trade association. An international conference of Soviet and
foreign communist economists was held between August 27 and September 3, 1962, in
Moscow on initiative of the Institute of World Economy and International Affairs and the
Prague-based journal World Marxist Review. It was presided over by director A. A.
Arsumanyan153 and academician A. M. Rumyantsev.
Varga’s contribution to the debates consisted in a long intervention on some ‘theoretical
problems’ of the Common Market economy154 was nonetheless published in extenso in his
institute’s journal.155 Again, Varga argued that the Common Market was nothing else than a
plan of capitalist integration, an attempt to perpetuate the economic exploitation of the
former African colonies and to unite the forces of West European monopoly capital against
the economic supremacy of the US. He remarked that labor productivity was much lower in
Europe than in the US and that only an increase in demand could expand production, but that
the laws of capitalism and imperialism nonetheless would operate. Thus, Varga foresaw an
increased centralization of capital in combination with a decrease of real wages and a
shrinking market of consumer products.156 Summing up, Varga argued that ‘capitalist
integration would be incapable of liberating capitalism from its internal and external
contradictions and that it would be impossible to save capitalism’.157
Some were not charmed by Varga’s rather abstract analysis. E. Sereni representing the Italian
Communist Party (PCI) at the conference argued that Varga’s abstract schemes were wrong,
but also that ‘they had an exaggerated static and no dynamic character’. 158 Varga had omitted
that integration of markets also would mean a change in the international division of labor.
Centralization of production units in the automobile industry would engender a lowering of
all costs in combination with increasing volume of cars yearly produced in the countries of
the Common Market. Finally, the accumulation process of capital would create an expanded
market because of growing production in other sectors of the economy.159
Varga did not explicitly respond to this criticism. He only examined the question whether the
Common Market would be able to expand the West European capitalist market at all. Varga
argued that a Marxist should formulate the question as follows: ‘can such an association lead
151
Varga, Politico-Economic Problems, 1968, pp. 71-72.
152
Varga, Politico-Economic Problems, 1968, p. 72.
153
Arsumayan distributed a polycopied report Problèmes du capitalisme contemporain to the participants.
154
His contribution was published in the official congress book in 1963 (Russian edition) and in its German
translation Probleme des modernen Kapitalismus und die Arbeiterklasse, A. A. Arsumanian and A. M.
Rumjanzew (eds), Berlin: Dietz Verlag, 1964, pp. 324-332.
155
Varga, 'Teoreticheskie problemy ekonomiki "Obshchego rynka"’, in Mirvaya Ekonomika i Mezhdunadnye
Otnoshenya, 1962, No. 10, pp. 49-59; article was also published in Varga’s collection of articles Politico-
Economic Problems, 1968, pp. 286-303.
156
See Varga, in A.A. Arsumanjan and A. M. Rumjanzew (eds), Probleme des modernen Kapitalismus und die
Arbeiterklasse. Materialien eines Meinungsaustausches, der von der Zeitschrift “Probleme des Friedens und des
Sozialismus” und vom Institut für Weltwirtschaft und internationale Beziehungen der Akademie der
Wissenschaften der UdSSR durchgeführt wurde, Berlin: Dietz Verlag, 1964, pp. 325-327.
157
Ibidem, p. 332.
158
Sereni in ibidem, p. 335.
159
Ibidem, p. 336.
to a constant, or enduring non-cycle expansion of the population’s consumption capacity?’ 160
His answer was negative, because ‘an expansion of the market for Department I goods
cannot ensure an enduring upswing of production as a whole. If the demand for goods
produced by Department II is not high enough, the production of Department I goods is
bound to decrease. Only adherents of Tugan-Baranovsky’s theory can believe that a constant
expansion of fixed capital can ensure a steady crisis-free upswing of capitalist production.’161
Varga thought that economic consequences of a Common Market would be insignificant
because there would be no changes in the operation of the ‘objective laws of capitalism’.162
No constant or even ‘protracted expansion of the market for consumer goods’163 could be
expected for a more or less enduring period! Like in the 1920s, he predicted a contradictory
development with the largest monopolies attempting to corner the newly acquired markets.
Social labor productivity would grow and the socially necessary labor time embodied in a
commodity unit would decrease, while, all other conditions being equal, less workers would
be needed causing a decrease of total wages. Even if the size of real wages of every
individual worker would remain unchanged, the market for commodities produced by
Department II would shrink. Hence, Varga concluded that the final result of the Common
Market would be diametrically opposed to that predicted by its advocates.164
The most pressing question was who could reap the fruits of technological progress and
growing labor productivity. Increase in the demand for consumer goods would be essential.
Market expansion ultimately depended on a redistribution of the national income in favor of
the working class. However, the outcome of the intensified competitive struggle was the
ousting of weaker competitors, the rapid centralization of capital, the concentration of
industrial production, etc. This would all tend to a decrease of real wages, with ‘a resulting
drop in the demand for consumer goods, and hence an aggravation of the market problem.’165
Hence, the European Economic Community (EEC) hinged on whether the capitalist market
would expand or shrink. Varga pointed to the fact that the EEC was harping on prospects for
greater exports, which he qualified as a renascence of ‘mercantilist ideology’.166 Incomes
from exports were regarded as the main factor favoring an active balance of payments, which
incited governments of almost all capitalist countries to consider an increase in export as the
key to a stable economy. Hence, export credits and subsidies had become a source of
‘additional monopoly profits’.167 However, Varga was not able to give a ‘concrete appraisal
of the EEC’s export prospects’; they depended on ‘a multitude of factors, as yet unknown’.168
Varga remained pessimistic about the real chances of the EEC’s export-led strategy. An
increase in exports by 50 per cent would expand the general market capacity by even less
than 7.5 per cent, he argued. Why? ‘First of all, a country exporting commodities receives
reimbursements for their value from abroad. These reimbursements predominantly take the
form of other commodities, since no country is able to pay for all its imports in gold. The
imports often consist of commodities also produced in the country in question. This naturally
results in a narrowing of the market for domestic goods. Finally, Varga warned his readers
that his analysis was ‘abstract and theoretical’, 169 because did not touch on the concrete
160
Varga, Politico-Economic Problems, 1968, p. 290.
161
Varga, Politico-Economic Problems, 1968, p. 290.
162
Varga, Politico-Economic Problems, 1968, p. 291.
163
Varga, Politico-Economic Problems, 1968, p. 291.
164
Varga, Politico-Economic Problems, 1968, p. 293.
165
Varga, Politico-Economic Problems, 1968, pp. 194-195.
166
Varga, Politico-Economic Problems, 1968, p. 299.
167
Varga, Politico-Economic Problems, 1968, p. 300.
168
Varga, Politico-Economic Problems, 1968, p. 301.
169
Varga, Politico-Economic Problems, 1968, p. 302.
historical conditions, but referred to the theoretical assumption that if full economic
integration could be realized, the problems capitalism was facing would not be solved.
According to Varga, a complete economic union would mean ‘a single currency, a single
budget, a single state, i.e., complete political integration, the rejection of all individual
sovereignty by the countries in question’.170 Varga prophesized that the chances of this
happening were so slight as to be neglible.

170
Varga, Politico-Economic Problems, 1968, p. 302.