Jenö Varga, Economist of The Comintern (1920-1928)

JENŐ VARGA: ECONOMIST OF THE COMINTERN`
(1920-1928)
ANDRÉ MOMMEN
Maarssen
May 2009
1
Already published in this series:
• The Varga Controversy and the Debate on the Coming Crisis of Western Capitalism
(1947-1949), April 2008;
• Jenő Varga versus Stalin: The Debate on the Economic Textbook Revisited, June
2008;
• Jenő Varga: The Years of Hungarian Socialist Reconstruction (1945-1956),
September 2008;
• Jenő Varga and the Economic Policy of the Hungarian Soviet Republic, May
2009;
• Jenő Varga, the Krestintern and the Agrarian Question, May 2009;
• Jenő Varga: Economist of the Comintern (1920-1928), May 2009.
ISBN 978-90-79885-05-3
2
Introduction
In March 1919, the Communist International (Comintern) held its first congress in
Moscow on the assumption that the date of ‘the final battle’1 was near. This claim
was justified by an economic analysis based on the immediate experience of the
World War and its aftermath. Three crucial aspects were important. First of all, the
living conditions of the masses had enormously deteriorated during and after the war.
Secondly, state and economy had been further merged under the aegis of finance
capital. Thirdly, capitalist rule had been reduced after the triumph of the October
Revolution and because of the national liberation movements in the colonial world.
In this period, Varga’s interpretation of the coming economic world crisis was based
on the narrowing of the world market and the impoverishment of continental Europe.
The world economic crisis of 1921 strengthened Varga’s belief in an imminent
collapse of the capitalist world system. As a consequence of inter-imperialist
rivalries, the two remaining imperialist world powers the United States and Great
Britain would then be forced into a new world war announcing the inevitable
socialist world revolution. At the Tenth Party Congress on 8-16 March 1921, Lenin
announced the end of “war communism”.2
Within a few years, Varga would also become the Comintern’s most prominent
economist and specialist in international economic affairs.3 Varga’s many talents
were not contested and his knowledge of the international labor movement broad and
thoroughgoing. At the Third (1921), Fourth (1922), Fifth (1924), Sixth (1928), and
Seventh Congress (1935) his reports now growing in length and importance on the
international state of economic affairs underpinned the prospects of the world
revolution.4 Having been appointed director of the Institute of World Economics and
World Politics5 in 1927, Varga acquired the status of a well-respected party
academician. As the impact of Stalinism increased, Varga’s reports would
nonetheless become subject of embittered debates in the preparatory commissions
1
Protokoll des III. Kongresses der Kommunistischen Internationale (Moskau, 22. Juni bis 12. Juli
1921), Hamburg: Verlag der Kommunistische Internationale/C. Hoym Verlag,1921, p. 171.
2
On “war communism”, see Jasny, 1972, pp. 9-15; Day, 1973, pp. 23-46..
3
The foundation of a new international to replace the Second had been included in Lenin’s April 1917
‘theses’ submitted to the CC of the Bolshevik Party, and the conference which followed resolved on 29
April 1917 that it was the task of the Party to take the initiative in a creating a third international.
4
Die Krise der kapitalistischen Weltwirtschaft, Hamburg: Verlag der Kommunistische Internationale,
Carl Hoym Nachf. Louis Cahnbley, 1921, 64 pages; Die Krise der kapitalistischen Weltwirtschaft.
Zweite, vermehrte und umgearbeitete Auflage, Hamburg: Verlag der Kommunistischen Internationale,
Carl Hoym Nachf. Louis Cahnbley, 1922, 147 pages; The Process of Capitalist Decline. Report to the
IV. Congress of the Communist International, Hamburg: Communist International, Carl Hoym Nachf.
L. Cahnbley, 1922, 47 pages; The Decline of Capitalism, Published for the Communist International by
the Communist Party of Great Britain, London, 1924, 69 pages; The Decline of Capitalism. The
Economics of the Decline of Capitalism after Stabilisation, Communist Party of Gr. Britain, London,
1928, 96 pages, plus tables in annexes; The Great Crisis and its Political Consequences. Economics
and Politics 1928-1934, London: Modern Books Limited, 175 pages. [French title: La crise: conomique
- sociale - politique].
5
Soviet Western research began in April 1925 with the foundation of the Institute of World Economics
and World Politics. The new institute was meant to enhance the Soviet leadership's knowledge about
the United States n1. Its first director was F. A. Rothstein. Born in 1871 in Kaunas, he spent 30 years in
exile in Great Britain before returning to the USSR. However, Rothstein's expertise did not save him
from replacement two years later as the price for allowing oppositional authors like Trotsky and Radek
to write in the institute's magazine.
3
and, finally, lead to his semi-disgrace in 1929. In January 1934, just before the
Seventeenth Party Congress met, Stalin called Varga back at to the Kremlin to give
his comments on the international economic situation. Varga’s rewrote and expanded
this report during the summer of 1934 when the Comintern was preparing the
Seventh Congress.6
Table 1 Dates of key Comintern meetings
First Congress 2–6 March 1919 (Moscow)
Second Congress 19 July – 7 August 1920 (Moscow and

Petrograd)
Third Congress 22 June – 12 July 1921 (Moscow)
First Enlarged Plenum of the 24 February – 4 March 1922

ECCI
Second Enlarged Plenum of 7 – 11 June 1922

the ECCI
Fourth Congress 5 November – 5 December 1922

(Moscow and Petrograd)
Third Enlarged Plenum of 12 – 23 June 1923

the ECCI
Fifth Congress 17 June – 8 July 1924 (Moscow)
Fourth Enlarged Plenum of 12 – 13 July 1924

the ECCI
Fifth Enlarged Plenum of 21 March – 6 April 1925

the ECCI
Sixth Enlarged Plenum of 17 February – 15 March 1926

the ECCI
Seventh Enlarged Plenum of 22 November – 16 December 1926

the ECCI
Eighth Plenum of the ECCI 18 – 30 May 1927
Ninth Plenum of the ECCI 9 – 25 February 1928
Sixth Congress 17 July – 1 September 1928 (Moscow)
Tenth Plenum of the ECCI 3 – 19 July 1929

6
Annie Kriegel and Stéphane Courtois, Eugen Fried. Le grand secret du PCF, Paris: Éditions du Seuil,
1997, pp. 232-252.
4
Eleventh Plenum of the 26 March – 11 April 1931
ECCI
Twelfth Plenum of the ECCI 27 August – 15 September 1932
Thirteenth Plenum of the 28 November – 12 December 1933

ECCI
Seventh Congress 25 July – 21 August 1935 (Moscow)
Working for the Comintern
When arriving in Moscow in the beginning of August 1920, Varga was immediately
received by Lenin. Both men discussed the economic-political problems of the
proletarian dictatorship in Hungary. Later on, Varga would recall that Lenin had
‘made sharp notes of criticism in the margins of some pages’ 7 in his book on the
economic problems of the dictatorship of the proletariat. Especially the sentence on
the hostility of the prosperous peasants towards the proletarian state, once a serious
step was taken to build up socialist economy, Lenin had underlined. 8 According to
Varga, Lenin had warned him also for Otto Bauer as the most talented social-
democratic defender of the bourgeoisie!9
Varga was appointed a candidate member of ECCI.10 Being in Moscow now, he was
asked to work for the nascent Comintern bureaucracy. In November 1920, he was
appointed director the newly founded office of economic statistics11 where he was
studying agrarian development, labor problems and the capitalist crisis cycle. Before
its first congress met in 1921, he provided the Profintern with a report on the
character of the economic crisis.12 Varga’s multiple activities suggest that he had
been absorbed by many back-office tasks the Bolsheviks were unable to fulfill in this
period.
Though he had become Lenin’s confident, he did not immediately join the Russian
Communist Party.13 It was nonetheless on demand of Lenin, Varga drafted a project
for setting up a West Europe-based institute for actively collecting information on the
international labor movement (Berlin, Vienna, Copenhagen, and Christiana-Oslo
were mentioned as possible seats of the planned institute). E. Varga’s project for the
7
E. Varga, ‘Democracy of a new type, II’, in Labour Monthly, 1947, Vol. 27, No. 9, p. 277.
8
Lenin had read Varga’s book Economic Problems of the Proletarian Dictatorship (Die
wirtschaftspolitischen Probleme der proletarischen Diktatur) after publication and before Varga
arrived in Moscow at the moment of the Second Congress of the Comintern.
9
‘In einem Privatgespräche äußere einmal Lenin, von allen sei Bauer der gefährlichste, weil der klügste
und gebildeste’. E. Pawlowsky, ‘Otto Bauer, der klügste Verteidiger der Bourgeoisie’, in
Internationale Presse-Korrespondenz, 1921, Vol. 1, No. 31 (3 December), p. 275.
10
According to Pravda of 10 August 1920. Vilém Kahan, ‘The Communist International, 1919-1943:
The personnel of its highest bodies’, in International Review of Social History, 1976, Vol. 21, No. 21,
p. 158.
11
He had to work with M. L. Pavlovich (Veltmann) and Avetis Sultan-Zade (Mikhaelian). Die
Kommunistische Internationale, 1921, Vol. 2, No. 16, pp. 487-492.
12
At that time, the Profintern was led by Alexander Lozovsky (Salomon A. Dridgubernim). Varga,
Mirovoi krizis, Moscow: Krasnyi International Profsyuza, 1921.
13
He and his wife only would become member in 1925 when staying in Berlin.
5
‘Organization of Information in the Comintern Executive’ 14 contained two
appendixes: ‘Appendix A- Instructions on Compiling Socio-Economic Reports’ and
‘Appendix B.—Instructions on Compiling Reports on the Political Situation Within
the Country’. The instructions under Appendix A covered:
1. The purpose of the reports, which was to give a dynamic picture of the
development of the revolutionary movement in the country and its analysis.
2. Four factors conditioning revolutionary development:
a) the Communist Party—the motive force of the revolutionary movement;
b) the proletariat—the revolutionary masses;
c) the ruling classes—the enemy;
d) The petty-bourgeois middle strata.
The report must show the alignment of forces.
3. The starting-point should be an account of the economic situation, the social
position of the proletariat and the middle strata.
4. The report should consist of a brief review (5-10 pages) with a detailed appendix
to it.
The instructions under Appendix B contained the following, sections: 1) Communist
Parties; II) non-communist proletarian parties; III) bourgeois parties; IV)
organization of the armed forces.
On 31 August and 1 September 1921, Lenin admonished Varga to avoid any contacts
whatever with official Soviet agencies in the West. Lenin: ‘The Institute must not
communicate at all with Russian embassies.’ Its link to the Comintern was to be kept
secret.15 On 6 September 1921, at Lenin’s behest, the Executive Committee
14
V. I. Lenin, ‘To Varga’, in Collected Works, Moscow: Progress Publishers, 1965, Vol. 42,
pages 337-339.
15
Lenin answered to Varga’s proposals. Lenin refers to § 3 and 4 of Section I (“Communist Parties”) of
Varga’s instructions (Appendix B) which deal with legal and illegal Party cells, the promulgation of
Party literature, appeals, pamphlets and books and the issue of illegal Party literature.
Dear Comrade Varga, I enclose my remarks. If you think it necessary, we can talk things over on the
telephone.
Best regards,
Lenin
31/8
Tentative Amendments or Theses

To Comrade B. Varga’s Project for the Organization of an Information Institute
1. Absolute and strict legality of the Institute for Berlin or Vienna conditions and for the whole of
Western Europe, Britain and America.
2. Headquarters of the Institute-Berlin or Vienna or Copenhagen or Christiania.
3. No more than 20% of the Institute’s working time and publications should be devoted to economic
and social questions (both together 20%). 80% to political questions.
4. As far as political questions are concerned, the task of the Institute is only to collect objective data
on questions that are legal and open to discussion.
5. The Institute must be completely independent of the respective Communist Parties.
6. The official name of the Institute should be, tentatively: Institute for the Study of Forms of Social
Movement.
6
Presidium formally did establish the institute, but the official minutes of the meeting
made no mention of the matter.
Belonging to the Hungarian immigration community Varga was known as a member
of the Kun faction, but he remained nonetheless outside inner-party struggles. In
addition, he helped solving problems concerning the Hungarian refugees and POWs16
residing in Russia. Occasionally, he assisted Pogány at the secretariat of the
Hungarian Section of the Russian Bolshevik Party.17 In the mean time, Varga had to
deal with Kun’s “offensive” strategy pushing Hungarian POW’s to go and organize
an armed uprising in Hungary.18
7. Instructions of a principle nature are to be given to the head (or to three heads, not more) of the
Institute.
8. On the basis of verbal instructions of a principle nature the head is to work out detailed and
absolutely legal instructions and submit them here in Moscow for endorsement by the Comintern
Executive.
9. Reports to be submitted weekly or twice a week. Socio-economic appendixes monthly or twice-
monthly.
10. The Institute must have no contacts whatever with the Russian embassies.
11. The Institute must begin in a small way. For the German-speaking countries, Scandinavia and the
Slav countries—only the German language.
Activities may be extended to Anglo-Saxon and Romance countries only on the basis of a special
agreement with a representative of each group of these countries. Agreement only here in Moscow.
12. The reports, or rather, publications, or correspondence of the Institute should be paid for by
subscribers (newspapers libraries, etc.).
The basic principle should be such an organisation of the Institute and such operation as would compel
all labour newspapers of all trends to subscribe to the Institute’s publications and pay for them. If this
does not happen, it will be proof that the Institute is worthless.
13. Comrade Varga’s project[1] should serve as initial draft instructions. In particular, two basic
amendments to this project are needed: 1) § 3-up; 2) the political part should be considerably
elaborated.
Some remarks to this Point 2:
(Appendix B.) § 3 and 4: Correspondence from factories?
+ money collected by the workers themselves?
+ questions of the trade union movement should be specially dealt with in detail from the political
angle. Winning the trade unions is one of the most important political issues.
+ workers’ co-operatives: ditto (to Section II, b)
+ all transitional political formations (like the workers’ and farmers’ party in the United States) are
especially important.
+ Leaflets? Distribution? Circulation?
+ attitude to the 1914-18 war? Extremely important.
Section II, § a “revolutionary” (??) workers’ parties like the Communist Workers’ Party of Germany.
Name is wrong. They are not revolutionary. They should be called: semi-anarchist, anarchist or near-
anarchist.
It is necessary to add: a split of anarchism all over the world in patriotic and internationalist questions;
for the Soviet system; against the Soviet system.
(b). Parties of the II and II 1/2 Internationals—much more detailed.
+ attitude to own colonies—and to imperialism in practical politics—much, much more detailed.
+ all pacifist and petty-bourgeois-democratic groups and trends—much more detailed.
And so on.
31/8.1921 Lenin
16
In September 1920 the Second All-Russian Conference of Hungarian POWs was convened with Kun,
Varga and Pogány reading reports on the causes of the fall of the Councils’ Republic, Varga on its
economic policy, and Pogány on White Terror.
17
György Borsányi, The Life of a Communist Revolutionary, Béla Kun, Boulder, Colorado and High
Lakes, New Jersey: Social Science Monographs and Atlantic Research and Publications, 1993, p. 245.
18
Kun’s interpretation of the Comintern’s “back to the masses” tactic meant for Kun ‘that the
Communist International had no reason to revise any of its ideas concerning the period of social
7
A party school was set up in Moscow where Kun, Pogány and Varga could teach 19.
Meanwhile Varga provided the Moscow press with articles on a wide range of
subjects. The monthly Narodnoe Khozyaystvo20 published Varga’s country surveys,
while the Moscow newspaper Ekonomicheskaya Zhizn21 published some of his witty
comments on actual economic problems. Incidentally, he contributed to Pravda as
well.22 Hungarian party papers like the Kassai Munkás in Košice or Előre in New
York published his articles on agrarian reforms in Hungary. More important was
Varga’s publishing in the Comintern’s theoretical journals on international economic
problems.23 In the mean time, Varga sought to ‘remove all meditation’ between his
individual consciousness and the ‘revolutionary goals of the state’24 by specializing in
virulent attacks on leading Marxist Austrian and German theoreticians like Kautsky,
Hilferding, Renner, Otto Bauer25 and Adler who all had betrayed the revolution.
In order to defend the Soviet Union against the Social Democrats, Varga called to
arms26. Apparently, the end of ‘war communism’ with peasants selling freely their
produce on the market, were no problem now that ‘everywhere, taxes in kind are
voluntarily and quickly delivered’.27 The return to the market was also welcomed by
all sorts of Mensheviks, academic Marxists and other evolutionary socialists who
were now praising this decision as being consistent with the Marxist ‘theory of
stages’.28 When commenting on NEP at the end of ‘war communism’, Varga
nonetheless described the Russian peasant as an independent economic subject ‘free
to produce any what they want’.29 With its half a million villages and about 30
revolution we are living in’ In contrary!’ Bela Khun, ‘An die Massen heran!’, in Internationale Presse-
Korrespondenz, 1921,Vol. 1, No. 1, p. 9.
19
In Moscow, there were many cadre schools for functionaries of the different Communist Parties. A
Communist University for Workers of the East started in April 1921 in Moscow in order to school
activists for the Middle-East, the Caucasus and other regions. This university counted at the end of
1921 more than 600 students from 44 nations. At the end of November 1921, the Communist
University for Minorities in the West was founded. There, many migrants from European Communist
Parties taught at their compatriots. There were eleven national schools. Model for this University stood
the Communist J. M. Sverdlov University founded in 1919. Leonid G. Babitschenko, ‘Die
Kaderschulung der Komintern’, in Jahrbuch für historische Kommunismusforschung 1993, Berlin:
Akademie-Verlag, 1993, pp. 42-43.
20
His first articles appeared in the November issue of 1920.
21
Varga’s first article was published on 13 September 1920. It contained an analysis of economic
planning and raw materials. Varga would continue his regular collaboration until 1928.
22
His first article on the ‘week of the peasants’ was published on 17 August 1920 in Pravda.
23
Varga gave articles to Internationale Presse-Korrespondenz in Berlin, Kommunismus in Vienna,
Russische Korrespondenz in Leipzig, Jahrbuch für Wirtschaft, Politik und Arbeiterbewegung and Die
Kommunistische Internationale in Hamburg.
24
Jochen Hellbeck, ‘Working, struggling, becoming: Stalin-era autobiographical texts’, in Igal Halfin
(ed.) Language and Revolution. Making modern political identities, London and Portland (OR.): Frank
Cass, 2002, p. 136.
25
In a rare reminiscence to a private conversation he had with Lenin, Varga writes writes: ‘In einem
Privatgespräche äußerte einmal Lenin, von allen sei Bauer der gefährlichste, weil der klügste und
gebildetste.’ E. Pawlowsky, ‘Otto Bauer, der klügste Verteidiger der Bourgeoisie’, in Internationale
Presse-Korrespondenz, 1921,Vol. 11, No. 31, p. 275.
26
‘No fall back into barbarity, but a ascent to liberty. But, first of all, the battle has to be fought…’ E.
Varga, ibidem, in Internationale Presse-Korrespondenz, 1921, Vol. 1, No. 16, p. 138.
27
E. Varga, ‘Die neue Wirtschaftspolitik Rußlands’, in Internationale Presse-Korrespondenz, 1921,
Vol. 1, No. 17, pp. 149.
28
The Bolsheviks could only see it as ‘a tragic, humiliating retreat from the communist ideal of Marx
and Engels.’ Andrzej Walicki, Marxism and the Leap to the Kingdom of Freedom. The Rise and Fall of
the Communist Utopia, Stanford: Stanford University Press, 1995, p. 503.
29
Varga, ‘Die Neue Wirtschaftspolitik Rußlands’, in Internationale Presse-Korrespondenz, 1921, p.
149.
8
million of farms it was nearly impossible to rule Russia ‘against the will’ of the
peasantry.30 In spring 1921, the peasantry had even protested against the grain
monopoly of the Soviet state. ‘Because the peasantry constituted the great majority of
the working population of Russia, the dictatorship of the proletariat could not be
imposed on them against the latter’s will by using violence.’ 31 After the October
Revolution the land, the banks and the greater part of Russian industry had been
nationalized.32 Just like Hilferding and completely in accord with Lenin and
Bukharin33, Varga attributed a decisive importance to the role of the banks in
capitalism.34 Hence, Varga believed that when finance capital was highly developed,
the amalgamation of all individual banks in one gigantic State Bank with branches in
all cities could be useful to building socialism.
An economic crisis with a special character?
Well before the Third Congress of the Comintern met in June-July 1921, Varga
defined the economic crisis as ‘a crisis of the capitalist world economy caused by a
profound deformation of the whole world economy as a consequence of the war.’35
According to Varga, the world had fallen apart in to different areas, with on the one
hand a pauperized European part, and on the other hand the United States and Japan
having developed their production facilities beyond the absorbing capacities of the
world market. The actual crisis was a crisis of overproduction in the rich part of the
world and a crisis of underconsumption in the pauperized areas. Hence, the only way
out of the crisis for the capitalist was cutting labor costs. However, working-class
resistance combined with the emergence of strong communists parties would
inevitably lead to the proletarian revolution.36
Varga’s interpretation that the slump of 1921 was by no means a “normal” crisis of
overproduction, should be interpreted as a hopeful signal that capitalism was entering
into a long phase of decay and that the periods of economic upswing ‘grow shorter
and shorter, the crisis deepens; more and more countries are dragged into a process of
general decay; the revolutionary movement of the working class pushes capitalism
into ever more crises, until after long struggles the social revolution finally
triumphs’.37 Despite its broad claim, Varga’s analysis remained, however, in this
30
Ibidem.
31
Ibidem.
32
According to Włodzimierz Brus, Marxists should not be satisfied with the socially anonymous
characterization of socialist ownership as public ownership. Ownership is a social relationship realized
through the relationship of people to things, in particular to the material factors in the process of
reproduction of the material conditions of life. Włodzimierz Brus, Socialist Ownership and Political
Systems, London and Boston: Routledge & Kegan Paul, 1975, p. 17.
33
In 1920, Bukharin thought that ‘the reorganization of the relations of finance capitalism was a move
towards a universal state-capitalist organization, with the abolition of the commodity market, the
transformation of money into an accounting unit, production organized on a national scale and the
subordination of the entire ‘national economic’ mechanism to the aim of world competition, i.e.
primarily of war.’ Nikolai I. Bukharin, The Politics and Economics of the Transition Period, Kenneth J.
Tarbuck (ed.), London, Boston and Henley: Routledge & Kegan Paul, 1979, p. 78.
34
Varga, Die Krise, o.c., 1921.
35
E. Varga, ‘Wirtschaftliche und soziale Revolution’, in Internationale Presse-Korrespondenz, 1921,
Vol. 1, No. 17, pp. 137-136.
36
Varga, ibidem, in Internationale Presse-Korrespondenz, 1921, p. 138.
37
E. Varga, Die Krise der kapitalistischen Weltwirtschaft, Hamburg: Verlag der Kommunistischen
Internationale – Carl Hoym Nachf. Louis Cahnbley, 1921, p. 60.
9
period articulated in purely geographical terms and restricted to some immediate
appearances of the political and economic situation. In the mean time, Varga was
working on a theoretical framework revealing the dynamics of the process by which
imperialism maintained its hegemony.38 This would be of crucial importance to
revolutionary politics, Varga thought.39
Varga argued that capital export was the key concept for analyzing imperialism.
Hence, imperialist wars were always the outcome of inter-imperialist rivalries.
However, a correct application Lenin’s imperialism theory required a thoroughgoing
analysis of all aspects and facets of capitalism in its ‘highest stage’. For the moment,
this analysis Varga was unable to provide because of Russia’s isolation from the
outside world. The claim that the end of capitalism was approaching was justified by
a rapidly changing political situation in Asia where communist parties saw the
daylight. A complicating factor was that the Russian Revolution of 1917 had split the
world economy into two competing economic systems, but the slump of 1921
confirmed nonetheless the imminent and inexorable collapse of the capitalist system.
Meanwhile, Varga tried to combine now Marx’s economic analysis in the three
volumes of Capital with Lenin’s imperialism theory without falling into the traps of
Rosa Luxemburg’s imperialism theory or Hilferding’s theory of financial
stabilization. Another problem was the periodicity of crisis in intervals of roughly ten
years. They stemmed, according to Marx, simply from capitalism’s ability to
overcome the overproduction of capital through changes in conditions of production
that increase the mass of surplus value relative to the existing capital.40
Third Congress of 1921:

Trotsky and Varga on the Crisis of the Capitalist World Economy
The Third Congress of the Comintern meeting in Moscow from 22 June 1921 to 12
July 1921 reunited more delegates than the previous two congresses: 605 delegates
representing 103 organizations and 52 different countries. The ultra-radicals formed
still an influential faction threatening to split the Comintern. Lenin and Trotsky
opposing them spoke about them as ‘empty-headed emotionalists’ and ‘unprincipled
opportunists’.41 During the debates, Varga sided with Lenin and Trotsky against the
ultra-left led by Kun. In the preface42 to his report to the Third Congress, Varga
mentions that the preparatory commission had decided to publish a preliminary
38
Varga’s most important contributions were published as Comintern congress reports and, more
important, as Quarterly Surveys in Internationale Presse-Korrespondenz. Apparently, Varga had
become Lenin’s ‘energetic, capable and committed scholar’.
39
James W. Roberts, ‘Lenin’s theory of imperialism in Soviet usage’, in Soviet Studies, 1977, Vol. 29,
No. 3, p. 357.
40
As Paul Mattick later would remark that the crisis cycle is an empirical fact which is not directly
related to Marx’s economic theory. Marx tried to connect the definite periodicity of the crises with the
turnover of capital. This does not mean that his theory depends on any periodicity of crises for it only
maintains that the crises are bound to arise as an expression of a temporary overproduction of capital
and as the medium for the resumption of the accumulation process. Paul Mattick, Marx and Keynes.
The Limits of the Mixed Economy, London: The Merlin Press, 1971, pp. 57-82.
41
Isaac Deutscher, The Prophet Unarmed. Trotsky: 1921-1929, London, New York, Toronto: Oxford
University Press, 1959, pp. 64-65.
42
Dated on the 10th of May, 1921, in Moscow. E. Varga, Die Krise der kapitalistischen Weltwirtschaft,
o.c., 1921.
10
report dealing with the economic situation in the world. Varga’s starting point was
the thesis that the ‘present’ crisis was not a ‘normal overproduction crisis’
characteristic for the capitalist system, but the consequence of structural
deformations caused by the war economy. Hence, not all countries were equally hit
by the crisis, but all were suffering from the fact that the world market was broken up
because of protectionism, currency crises and the rise of competing industries in the
colonies.43 According to Varga, the end of the capitalist system was near now that the
masses did not believe anymore in its inevitability.44 Theoretically, Varga’s analysis
fell back on the underconsumption thesis that the markets could absorb all produced
goods and that the overproduction crisis was spreading from the defeated Central
European countries to other nations.45 Hence, objectively spoken there was no way
out of the crisis.46 The task of the proletariat consisted in seizing power. Varga
warned for the outbreak of a new war and a complete annihilation of the world.47
Though Varga’s analysis was nearing Lenin’s imperialism theory, the difference was
that Varga reduced imperialist rivalries to the competing interests of the United
States, England and Japan, the three big powers having acquired advantages from the
outcome of the past world war. Varga concentrated on Europe, where the Russian
Revolution in combination with upheavals in Central Europe had created a business
cycle of a special kind. In Central Europe underproduction had created a state of
permanent crisis with only temporary and very short cyclical recoveries that would
end up in a new struggle for a new repartition of the world.48 In this context, Varga
identified the United States as the most aggressive imperialist power wanting to
acquire British oil reserves in Mesopotamia.
Crucially in Varga’s analysis was the rejection of any chance on economic recovery
now that chronic underproduction in Central Europe was meeting chronic
overproduction in other parts of the world. In the past, overproduction caused falling
prices on the world market and gave birth to technological innovations stimulating
higher productivity and lower production costs. In the age of monopoly capital, big
firms were regulating production, upholding prices and cutting wages in order to
finance technological innovations. However, everywhere in Europe the proletariat
had learnt to resist these wage cuts.
Though Varga’s analysis carries the imprint of many theoretical influences (Lenin,
Hilferding and Luxemburg), his main thesis was that the revolutionary tasks of the
proletariat had to be derived from a concrete analysis of the economic situation in the
different capitalist countries, where capitalism had stabilized with the help of the
social-democratic parties and their trade unions. Though Varga argued that the
situation of the European proletariat could be qualified as completely hopeless, he
nonetheless added that only a revolution could give a valuable response to the fatal
process of falling living standards, rising prices and increasing mass
unemployment49. Varga kept, however, silence on the concrete role and tasks of the
43
E. Varga, Die Krise, o. c., pp. 34-35.
44
E. Varga, Die Krise, o. c., p. 54.
45
Varga: ‘without Central Europe is the world market to small for the most developed countries.’ E.
Varga, Die Krise, o.c., p. 60.
46
Varga: ’Es gibt keinen Ausweg’. E. Varga, Die Krise, o. c., 1921, p. 55.
47
E. Varga, Die Krise, o. c., 1921, pp. 63-64.
48
E. Varga, Die Krise, o. c., 1921, p. 61.
49
All facts Varga took from capitalist sources and bourgeois newspapers. The Economist, The Times,
The Manchester Guardian, Weltwirtschaftliches Archiv and the Oesterreichischer Volkswirt are quoted
several times, which proves that Varga when staying in Moscow had access to some foreign press
11
communist parties. In this manifesto, Varga’s sources of inspiration are rather
heterodox, its composition is weak and uneven, and Lenin is not quoted. Varga
mentions Alfred Weber’s Standort theory,50 the analysis carries still the marks of
Kautsky’s and Hilferding’s economism, while his belief in a coming revolutionary
upswing is clearly inspired by Luxemburg’s Spartakism.
One may presume that Lenin had not been fully charmed by Varga’s piece of work.
But at the Third Congress of the Comintern, Lenin, who was doubting about the
prospects of an imminent world revolution, asked nonetheless for a thoroughgoing
inquiry into the nature of the capitalist world economy and this period of ‘relative
stabilization’.51
The Third Congress of the Comintern started with the debate on a report submitted
by Trotsky and Varga on the international economic situation.52 Varga was its co-
author. The Third Congress marked also the defeat of the extreme left tendency.53
In the Trotsky-Varga report,54 three desequilibria existing at the international level
received a broad attention: (1) The international economic equilibrium; the rural-
urban equilibrium in each country; (3) the equilibrium between Sector I (heavy
industry) and Sector II (light industry), or between investment and consumption. The
authors of the report noted that the equilibrium between agriculture and industry was
disturbed by grain and meat shortages because of a depletion of labor, herds,
fertilizers, high prices of manufactures and peasants’ resistance to wartime
requisitioning. The resulting desequilibrium was hindering Europe’s economic
recovery and stability. The report mentioned that the prevailing desequilibrium
between production and consumption was much more deteriorated and dangerous to
the capitalist world order than the rural-urban equilibrium, because, during the war,
“fictitious” capital (treasury bonds and currency issues) had replaced “real” capital
when financing war expenditures.55 Capitalism was no longer compatible with
artificially split up national markets flooded by unsalable manufactures and distorted
by large-scale destructions. Though various countries forming the core region of the
world economy were economically interdependent, the imperialist war had led to an
explosive contradiction by an upsurge of isolationism and a widening contradiction
between the United States and continental Europe. Europe’s purchasing power had
shrunk and had nothing to offer at the United States now suffering from an
overproduction crisis. International balance of payments crises were proliferating in
combination with increasing tariff barriers in a Balkanized Europe. As a
consequence, capitalisT decline was a reality.
Varga’s ideas were not yet entirely ‘developed’, nor ‘original’56 His concepts covered
the same phenomena as Bukharin’s: the discrepancy between real and financial
sources. He also quotes a recently published book of R. Kuczynski, Das Existenzminimum und
verwandte Fragen, Berlin: Verlag Hans Robert Engelmann, (Jahrbuch der “Finanzpolitischen
Korrespondenz”1920) 1921. W. Federn, Editor of the Oesterreischer Volkswirt, received a special
mention in a note.
50
Varga, Die Krise, o. c., pp. 4, 11, 17.
51
V. I. Lenin, ‘Theses for a report on the tactics of the R.C.P, Third Congress of the Communist
International June 22-July 12, 1921’, in Collected Works, Moscow: Progress Publishers, 1965, Vol. 32,
pp. 453-461
52
Léon Trotski and Eugène Varga, Thèses sur la situation mondiale et nos tâches, Moscow: Section de
la Presse de l’Internationale communiste, 1921.
53
Pierre Broué, Histoire de l’Internationale Communiste 1919-1943, Paris: Fayard, 1997, pp. 231-232.
54
Many parts of this text were visibly Varga’s.
55
Varga’s influence on this analysis is obvious; it goes back to his Hungarian book A Pénz (1918).
12
values, the obstacles to renewed capital accumulation, and the crippling effects of
shortages of commodities. Varga pointed to Great Britain and the United States as
belonging to an entirely different group of imperialist powers.57 He argued that
unstable world markets were causing economic and financial distortions and, as an
adept of Hilferding, he believed that finance capital was shifting the burden of
adjustment onto the back of the proletariat.58
However, in the report an immediate disintegration of the capitalist system was
predicted. Recalling the Parvus-Bernstein debate of the Second International, Trotsky
proclaimed in his speech ‘that capitalism lived by cycles of booms and crises’.59
Hence, cyclical fluctuations would continue and a limited recovery could be expected
as a result of endogenous factors within the cycle itself. For the Soviet Union, the
situation was not so dramatic at all. ‘Things are not yet terrible as to cause European
or American imperialism to throw itself at Soviet Russia in seeking salvation from
the plight into which capitalism has fallen.’60
The capitalist countries being not indifferent to economic reconstruction of Russia,
were waiting for investing in Russia’s industry and railroad system, as the country
was preparing for appearing on the world market. On the other hand, Russia was in
need of large-scale foreign investments where European surpluses of manufactures
could find a ‘natural’ outlet as a result of the NEP retreat. Pauperized Russia was not
able to pay for large imports. Therefore, Trotsky and Varga concluded that ‘the
reappearance of Russia on the world market cannot produce any appreciable changes
in it in the period immediately ahead.’61 Neither exports nor imports were therefore
likely to be of any consequence and Russia’s collaboration with the West would not
have a positive impact on capitalism’s recovery.
In his speech to the Third Congress of the Communist International on 23 June 1921,
Trotsky addressed the question of whether capitalism had achieved a new phase of
equilibrium in order to find out the most adequate response to the international
situation in the world.62 In his speech Trotsky wisely stated that, ‘of course,
capitalism is not dead, and because it is alive, it will have to breathe, i. e. that
fluctuations will occur.’63 The war had not only provoked ‘an acute crisis, but also
had caused a long crisis and even ruined the European economy’.64 Capitalism was
nonetheless developing notwithstanding ‘its complete social decay.’65 Meanwhile,
Social Democrats like Cunow and Hilferding in Germany were playing with the idea
of a possible ‘automatic equilibrium’66 as a new social base for their reformist policy
56
‘Less imaginative than Trotsky or Kondratiev, Varga avoided theoretical innovations and strove to fit
recent developments into the established Marxist categories’. Richard Day, The ‘Crisis’ and the
‘Crash’. Soviet Studies of the West (1917-1939), London: NLB, 1981, pp. 57-58.
57
Day, o.c., 1981, p. 58.
58
Day, o.c., 1981, p. 58.
59
Richard Day, Leon Trotsky and the Politics of Economic Isolation, Cambridge: Cambridge
Univeristy Press, 1973, p. 57; Protokoll des III. Kongresses, o.c., 1921, p. 71.
60
Quoted in Day, o.c., 1973, p. 57.
61
Quoted in Day, o.c., 1973, pp. 57-58.
62
See also Ernesto Galli dell Loggia, ‘La III Internationale e il destino del capitalismo: l’analisi di
Evghenij Varga’, in Storia del marxismo contemporano. Annali 1973, Milan: Feltrinelli Editore, 1974,
pp. 985-990; Protokoll des III. Kongresses, Thesen und Resolutionen des III. Kongresses der
Kommunistischen Internationale, Hamburg: C. Hoym Verlag,1922. pp. 47-91;
63
Protokoll des III. Kongresses, o.c., 1921, p. 73.
64
65
66
13
based on a new phase in the accumulation process of capital with an increased
exploitation of the working class and stabile exchange rates. Trotsky predicted that
this stabilization policy would engender a resurging class struggle, as the working
class would refuse wage reductions. The Communists’ task was the organization of
the economic struggle of the workers in order to widen their class conscience.
The changing international economic situation would prevent an automatic economic
recovery. The United States were unable to find an outlet for their produce on the
world market because of the impoverishment European economy and China’s and
Latin America’s resistance. ‘Thus we are in a period of depression; this cannot be
denied’, Trotsky exulted.67 However, Trotsky did not identify this economic
downturn with revolutionary upheavals. Trotsky: ‘Here there is no automatic
connection, there is only a dialectical interaction.’68 He warned nonetheless for a new
war for militarism was the most direct boost to a new economic boom. Trotsky
discovered a growing antagonism between French and British imperialism on the one
hand and between the United States and England on the other hand. ‘England has
been removed from its leading position on the world market. The English industry is
decaying. Two American workers are producing as much as five English workers.’69
Trotsky remained rather vague about the coming proletarian world revolution. In the
years 1918-1919, general disorganization had created a revolutionary rising tide, but
the bourgeoisie had not yet capitulated. Though the situation was complex and not
comparable with the pre-war period, Trotsky argued that ‘seen from a revolutionary
perspective’ the situation was favorable. ‘Maybe we can now say with certainty that
in essence the situation be completely revolutionary.’70
Was the situation as revolutionary as Trotsky had depicted in this speech? Much
depended on the objective and subjective factors of that moment. Much depended on
a hypothetical deepening of the European crisis and on the growing strength of the
communist movement. However, the Communists had not yet gained the support of
the majority of the proletariat. This remained the first and foremost task of all
communist parties in Europe. Neutralizing the impoverished petty bourgeoisie was
important in the struggle of the proletariat against the ‘trustified bourgeoisie’. 71
According to Trotsky and Varga, the revolutionary period was over and the
Communists had to prepare themselves for applying a defensive strategy to get
working-class support in the factories. This strategy was heavily criticized. The
spokesmen of the radical and sectarian currents in the Comintern, especially
Hungarian Pogány, pleaded for a more offensive attitude. Two German Communists
(Brand and Seemann) wanted to “make” the revolution. August Thalheimer thought
that Trotsky’s theses were not ‘sharp enough’.72 Finally, after a hectic discussion, the
theses were sent to a special committee for revising. But the radicals did not succeed
in having the majority at their side, while the Bolsheviks were yarning for a
revolutionary pause in order to stabilize their political power in a period of famine
and social and economic disintegration.
At the plenary session, Varga rejected any proposal in favor of a more radical
strategy by referring to the fact that the bourgeoisie had succeeded in gaining the
67
68
69
70
71
Protokoll des III. Kongresses, o.c,, 1921, p. 89.
72
Protokoll des III. Kongresses, o.c., 1921, pp. 113-114.
14
support of the majority of the peasantry against the proletariat. He ended with the
optimistic note that in their time Marx and Engels had already pointed to the fact that
the revolutionary activity of the proletariat increased, the longer the economic crisis
was lasting.73
Apparently, negative comments had obliged Varga to revise his preliminary report tot
the Third Congress.74 In a second, but considerably enlarged75 edition published in
February 1922,76 Varga wrote in his preface that he had worked out the concept
‘tendencies furthering the restoration of a new balance in the world economy’ he
slightly had mentioned in the previous edition.77 In this revised edition, Varga
worked out this concept enabling him to explain why postwar capitalism could
recover during the second half of 1921. He wisely noted that recovery had been
volatile and that the postwar crisis had not been fully overcome. The problem was
that the economic crisis was interwoven with foreign policy and with the
revolutionary struggle of the proletariat. Hence, the central question was: Can
capitalism recover from the severe postwar crisis or not? Varga added also a chapter
on the Russian economy in which he noticed that Russia was suffering from the
economic world crisis. This explained why the New Economic Policy (NEP) had
been introduced.78
Meanwhile, the ebb tide of the revolution in Europe and the necessity of save-
guarding the survival of the Bolshevik regime inspired some theses adopted at the
First Plenary Meeting of the ECCI in March 1922 concerning the dangers of war.
These theses were clearly reflecting Varga’s way of analyzing international politics.
Though the Genoa Conference of April 1922 marked the beginning of Russia’s
reintegration into Europe, Varga did not share the current enthusiasm about the
ability of foreign capitalists to restore the equilibrium of the world market by floating
the Russian economy by means of credits.79 But Rapallo also signified that the Soviet
Union could get a diplomatic foothold in Germany and establish trade relations with
German industry. Lenin immediately sent Varga to Berlin in order to fulfill the
function of trade expert at the Soviet legation.
Varga’s revised report to the Third Congress of the Comintern was mainly based on
dispersed sources and statistics from British origins, but a thoroughgoing
conceptualized analysis of postwar imperialism was missing. Lenin must have been
disappointed by this working method and therefore he wanted Varga to found a
73
Protokoll des III. Kongresses, o.c., 1921, pp. 708-716.
74
Varga later would refer to a ‘rather strong opposition’ coming form the German delegation and the
Italian and Hungarian “Left” which took exception to Trotsky’s and his prediction made in the theses
they had defended that there was a possibility that the boom period might enter upon a new phase.
Pogány had criticized them because the phase of prosperity had received too much emphasis and
Thalheimer had declared that the revolutionary character of the period of crises was not expressed
sharply enough. E. Varga, The Decline of Capitalism, London: Communist International, 1924, p. 5.
75
Parts of another pamphlet were included in this publication. E. Varga, Die Lage der Weltwirtschaft
und der Gang der Wirtschaftspolitik in den letzten drei Jahren, Hamburg: C. Hoym Verlag, Verlag der
Kommunistischen Internationale, 1922.
76
His foreword was dated on 28th February of 1922.
77
“…jene Tendenzen zur Wiederherstellung eines neuen Gleichgewichtes der Weltwirtschaft, welche in
der ersten Ausgabe nur ganz flüchtig angedeutet wurden…’ E. Varga, Die Krise der kapitalistischen
Weltwirtschaft. Zweite, vermehrte und umgearbeitete Auflage, Hamburg: Verlag der Kommunistischen
Internationale, Carl Hoym Verlag Nachf. Louis Cahnbley , 1922, p. 4
78
Varga, Die Krise, o. c., 1922, pp.122-131.
79
E. Varga in Narodno Khoyzaistvo, No. 3, March 1922, quoted in Richard B. Day, The ‘Crisis’ and
the ‘Crash’. Soviet Studies of the West (1917-1939), London: NLB, 1981, p. 64.
15
“statistical bureau” specializing in analyzing international economic problems and
collecting trustworthy statistical data on the major capitalist countries. When arriving
in Berlin in spring 1922 as a member of the Russian legation to the German
government, Varga would set up such a kind of economic information center and
publish high-quality reports and articles on current international economic problems.
As the editor-in-chief of the Jahrbuch für Wirtschaft, Politik und Arbeiterbewegung
(Yearbook for Economics, Politics and Labor Movement) tried to meet international
standards.80 In a unsigned preface to the first volume of his yearbook, Varga
announced that his aim was providing country studies based on statistics in order to
fight the ‘statistical falsifications’ of ‘bourgeois’ publications, but this time without
uttering the usual communist-inspired commentaries. This initiative still carried the
marks of ‘improvisation’, but his ultimate aim was to meet the standards of
prestigious ‘bourgeois’ publications, such as Statesman’s Yearbook, Labour
Yearbook and International Labour Yearbook. Varga’s project would collapse after
three years. Meanwhile, Varga had to solve unsurmountable editorial problems,
which made that after three issues the publication of his yearbook had to be stopped.
The publication of a Russian edition occupying an editing staff in Moscow had to be
halted as well.81
The Fourth Congress of 1922:

Varga and Capitalist Decline
At the Fourth Congress of the Comintern convening from 5 November to 5

December 1922, Varga made a distinction between “normal” pre-war liberal
capitalism and post-war declining monopoly capitalism. He stressed the importance
of the general decline of capitalism caused by the falling apart of the world capitalist
system. Economic cycles had been disturbed by the uneven development of
capitalism and the persisting agrarian crisis in Europe. In his report The Process of
Capitalist Decline,82 he agreed with Rosa Luxemburg on the point that the capitalist
mode of production was still expanding now that more new countries were entering
into the orbit of capitalist influence.
Taking his distances from Luxemburg’s capitalist accumulation theory he admitted
that the origins of the imperialist wars were not to be found in the impossibility of
peaceful inclusion of the non-capitalist world into capitalism, but in the profit-
seeking activities of the capitalist class. Varga raised the fundamental question: ‘Is
the present industrial crisis of the world a transitory and usual one within capitalism,
which, after having run its course, will be followed by a period of prosperity and
80
Among its collaborators were Trotsky, Kamenev, Krassin, Lenin Bronski, Pyatakov, Losovsky,
Rakovsky, Zonoviev, Deborin, Krylenko, Rukov, Dzerzhinsky, Kritzmann, Stalin, Tomsky, etc. Also
Leder, Rákosi, Barbusse, Brandler, Münzenberg, Pepper, Ernst Reinhard (Alexander Abusch), Dombal,
Fritz Glaubauf, Loaf, etc. were collaborating.
81
The German edition was published in Hamburg by Carl Hoym. The three issues covered the years
1922-23, 19323-24 and 1925-26.
82
Eugen Varga, Eugène Varga, Le déclin du capitalisme. Rapport pour le 4ième Congrès mondial de
la Troisième Internationale Communiste, Paris: Bureau d’Édition de l’Internationale communiste,
1922; Eugen Varga, Die Niedergangsperiode des Kapitalismus, Hamburg: Carl Hoym Verlag Nachf.,
1922; Eugen Varga, The Process of Capitalist Decline. Report to the IV. Congress of the Communist
International, Hamburg : Communist International in commission: Carl Hoym Nachf. L. Cahnbley,
1922.
16
social consolidation of class domination, in order to give way, some time later, to a
less severe and usual crisis. Or have we to do with a permanent crisis, which, while it
may be broken by spells of prosperity, can no more be topped?’ 83 He warned against
the mistake into which Social Democracy had fallen – ‘the mistake of scientific
fatalism, of merely theorizing, in Marxist terms, on the collapse of capitalism and
then passively waiting for its tumbling down.’ His answer sounds rather
voluntaristic: without a protracted and embittered struggle, ‘without the self-
sacrificing spirit of the proletariat’, capitalism will not fall to pieces. Capital, he
argued, will strive to surmount all difficulties at the expense of the proletariat; it will
pauperize the working class; it will drive down society to the pre-capitalist level
rather than relinquish one particle of its class domination.84
According to Varga, the difference between the former crisis and the present period
of crisis was that the former crises of capitalism were periodically recurring phases in
the ascending line of evolution of capitalism.85 Capitalism had, up to the outbreak of
the world war, exhibited an upward tendency, while the capitalist form of production
expanded geographically. New countries were increasingly opened up to capitalism.
Capitalism extended its sphere of operation in the capitalist countries themselves by
drawing the pre-capitalist strata of society into its vortex. The falling rate of profit in
the highly developed capitalist countries was compensated for by the export of
capital to less developed capitalist countries, with higher rates of surplus value and
profit. The centralization of capital into monopolist forms of production, covering the
whole economic field of a country, reduced the cost of capitalist management. The
proletariat of the imperialist countries received a small share of the extra profits
which it got out of colonial exploitation and the aristocracy of labor got separated
from the mass of the working classes. The landowners turned into capitalists. The
tendency of financial capital was to amalgamate all possessing sections of the nation
with one another. Mixing Luxemburg, Hilferding and Lenin, Varga defined the crises
as a transitory phase ‘within an upward development, - the effects of the anarchy of
the capitalist form of production,’ causing ‘but superficial disturbances in the
structure of capitalism.’ The system ‘as a whole’, however, would lose nothing of its
equilibrium.
83
Varga, The Process, o. c., 1922, p. 5.
84
85
In a footnote Varga refers to his companion Trotsky at the Third Congress of the Comintern. Varga,
The Process, o. c., 1922, p. 6.
17
Varga’s ten characteristics for the era of decaying capitalism86
The geographic expansion of the capitalist form of production is slackening; in

addition to capitalist countries there are countries in growing numbers where the
proletariat is preparing for dictatorship.
Within various capitalist countries there is a growing tendency towards a reversion to
pre-capitalist forms of industry.
The international division of labor is getting narrowed; foreign trade is shrinking, the
economic life of the world, which used to range itself organically round the highly
developed industrial nucleus of Western Europe, loses its center of gravity and
disintegrates into elements with very diverse economic structures.
The gold standard of the various countries, which, while it differed in the number of
its gold units, was on the whole a uniform and stable currency, is being replaced by an
unstable, violently fluctuating paper currency; and there is even a tendency to revert to
barter.
The former accumulation of capital is being replaced by a progressive
impoverishment, - disaccumulation.
The volume of production is decreasing.
The whole credit system is crumbling.
The standard of life of the proletariat is getting lower, either through the normal wage
not keeping pace with the rise of prices or through wage cuts, or though
unemployment.
Among the various strata of the possessing class a severe struggle is blazing up for the
division of the diminishing social product. This manifests itself, politically, in the
disruption of the governing Coalition Parties, in the failure to form new political
bodies, or to formulate new programs, etc., etc.
The faith in the unity and solidity of the capitalist order of society is being shaken.
The governing class, losing its moral authority, has recourse to force and arms itself
for the protection of its dominance
Varga called this post-war period the ‘decaying stage of capitalism or the period of
permanent crisis, or the crisis-period, for short’87 or a ‘period of permanent crisis, or
crisis-period, owing to its world dimensions must be of long duration.’ 88 He clearly
distinguished three types of crisis: (1) Acute crises in the period of ascending
capitalism; (2) The crisis-period, or the period of the decline of capitalism; (3) Acute
crises within the crisis-period itself. Finally, Varga concluded, however, that one was
no more in a phase of crisis, ‘as we were at the time of the Third Congress’ and that
86
But with paying a fair tribute to Bukharin. Nikolaï I. Bukharin, The Economics of the Transformation
Period, New York: Bergman, 1971.
87
88
18
‘we are in a phase of improving trade, but still within the crisis-period of capitalism.’
He warned his readers that his conception would meet with opposition from the
Social Democrats and generally from all those who were interested in the continued
existence of the capitalist order, but also from certain adherents of the “Left” of the
communist movement ‘who deny that we have entered any phase of improving
trade’. Against his opponents of both sides he tried to demonstrate that one had
actually entered ‘a period of permanent crisis; that the war which gave rise to this
crisis-period was no “accident”, but the necessary consequence of the imperialism
which is the present evolutionary stage of capitalism; that an improvement of the
economic situation is drawing near.’89
In the different chapters he thoroughly studies the essential features of his theory of
declining capitalism. Especially the disturbed accumulation cycle and the
disappearance of the equilibrium had retained his attention. In the time of Marx the
capitalist mode of production only touched a small part of the civilized world.
However, Marx comprised in his model of analysis the capitalist world as a whole.
Therefore, Varga approached the equilibrium of the economic life of the capitalist
world from the point of view of the balance of exchange values. Until the outbreak of
the war the center of the capitalist economic life, Western and Central Europe,
received annually, without equivalent, from the whole world large masses of values
and profits from investments abroad and from the political exploitation of the
colonies. The center exported other and new accumulated masses of values as new
investments to the less developed capitalist countries. That a kind of equilibrium
established it self, was proved by the fact that the rates of the foreign bills fluctuated
little.
The war, however, destroyed – at least temporarily – the bases of the former
equilibrium of the capitalist world. During the war the European belligerent powers
consumed not only the profits of their foreign investments, but the capital sums
themselves; the accumulation of capital stopped, and, partly, even a disaccumulation
took place. This destruction of the exchange-value-equilibrium of the economic life
of the capitalist world manifested itself by the chaos of the currencies. The regions
that used to supply foodstuffs and raw materials, were establishing their own
manufactures. The goods of manufacturing center could find therefore no markets.
Hence the glut of manufactured commodities in the highly developed industrial
countries, and a glut of foodstuffs and raw materials in the agricultural countries.
And this led to a deliberate limitation of production. Instead of reproduction on an
extending scale there took place a reproduction on a shrinking scale. This was, in
Varga’s view, the theoretical outline of the present grave disturbances of the
equilibrium of the capitalist system. And this was the essence and meaning of the
present crisis-period. The result of it was that the whole economic life of the
capitalist world doid no more move on the ascending, but on the descending line.90
Some remarks can be made on Varga’s pamphlet. First, Varga’s analytical
framework had already reached a high degree of maturity. Later in his life, he would
use this framework for most of his academic studies of ‘twentieth century
capitalism.’91 Second, Varga remained far from embracing Rosa Luxemburg’s
89
90
Varga, The Process, o. c., 1922, pp. 10-11.
91
‘The functioning of the economic laws of capitalism under the new historical conditions, shows that
the system has outlived itself and must make way for a new and more progressive system of society’.
E. Varga, Twentieth Century Capitalism, Moscow: Foreign Languages Publishing House [1962], p. 5.
19
imperialism theory, but he accepted the idea that imperialism leads necessarily to
war.92 Third, Varga classified the various countries into categories in order to create
some order into the international chaos of his period and grouped them according to
their position in the economic life of the world, and brought into prominence certain
types. In comparison to his pamphlet of 1921, this meant a real progress in his
analysis of world politics.
The first group embraces countries on very diverse stages of economic and public
development. At the lowest level he situates the oppressed colonial regions in Africa
inhabited by an uncivilized native population. A second subgroup is formed by
colonial countries having reached a higher level of civilization. A third subcategory
is constituted by nominally independent countries. Finally, there is the subgroup of
British settlement colonies. These countries will probably have recourse to protective
duties moving along the direction of establishing a self-sufficient economic life.93
The second group comprises fully developed and essentially intact capitalist
countries. Japan, the USA, Great Britain and the neutral European countries belong
to this select club of highly developed capitalist countries. Here too he makes a
difference between their stage of development or their position in the post-war world.
In some of these countries capitalist decay is not evident. Great Britain’s capitalism is
fully developed, but the proletariat, however, is still on the way to a revolutionary
conception of the situation, and is all but completely in the hands of trade-union
leaders who are co-operating with the capitalists.94 More hopeful for the
revolutionary movement is that in a group of countries decay of capitalism is evident.
These countries of continental Europe took part in the war and their common feature
is ‘a large decrease of production as compared with the pre-war period.’ 95 Varga
mentions here aspects such as instability and nascent fascism.
Another subgroup is formed out of the victorious countries, France Italy, and
Belgium. The case of France is interesting because Varga identifies this country with
its large agrarian sector as quasi independent from the world market. France’s
influence in Central Europe and its reparation demands are dangerous for Germany’s
economic stability. The manufacturing countries of Central Europe in which the
decline is most advanced, are Germany, Austria, Poland and Czechoslovakia. Except
for the latter, production has considerably diminished and accumulation of capital has
come to a standstill.96 Their currencies are being rapidly depreciated, the credit
system has broken down, the rates of interest are reaching fantastic heights and the
whole region is sinking, economically and politically, to the level of a colony of the
Allied Powers. Finally, the smaller countries and border states in Eastern Europe,
among them Bulgaria and Hungary, are in a relatively better economic condition, but
they are, nonetheless, nearer to a proletarian revolution than those of Central Europe,
because the dominant classes are not united in their resistance.97
92
‘We are thus in agreement with Rosa Luxemburg as to the fact, that highly developed capitalism in
its political form as imperialism leads necessarily to universal conflicts. But we differ as to its
motivation. We do not believe that an accumulation or the continued existence of capital is impossible
without an extension of capitalist mode of production in hitherto non-capitalist strata.’ Varga, The
Process, o. c., 1922, p. 23.
93
Varga, The Process, o.c., 1922, p. 26.
94
95
96
Varga, The Process, o.c., 1922, pp. 31-32.
97
Varga, The Process, o.c., 1922. p. 34.
20
Finally, there is the ‘group’ of Soviet countries constituting a vanguard force against
‘the capitalist class’, which is ‘still stronger than the proletariat’, and this fact
compells isolated proletarian Russia to make ‘serious concessions to capitalism’ in
order to accelerate the ‘economic reconstruction of Russia.’98 Nonetheless, while the
‘decline of capitalism’ is proceeding apace, ‘the new governmental type, the Soviet
power, so full of promise for the future, is growing in strength.’99
Of course, this analysis of the international situation reproduces the headlines of the
Kremlin’s foreign policy mixed up with some of revolutionary optimism meeting
Stalin liked to use in his speeches.100 When making prospects for the near future,
Varga prefers making overviews of possible development. Leaving room to different
interpretations, he concludes that capitalism had acquired ‘a certain firmness’ and
this through ‘its inherent tendencies towards a restoration of the equilibrium.’ As
there was no possibility for the goods of the ‘overproduction region’ to be sold at
profitable prices on the world market, many capitalists prefer to shut their factories,
which hampers economic recovery and results in a diminution of production. As in
consequence of the depreciation of the money prices of the foreign goods in the
‘underproduction regions were increasing sharply, their consumption diminished, and
stimulated import-substitution production. Increased production at home meant at last
diminishing international exchanges. Total result: tendency towards ‘a restoration of
the distributed equilibrian (sic) between the rich and the impoverished countries.’101
In the last chapter of his book, Varga argued that the capitalist great powers were
willing to overcome the crisis of capitalism by passing the bill the proletariat.
Although remnants of Kautsky’s theory of super-imperialism were still present in his
analysis, his revolutionary optimism did not leave him in this period of capitalist
restoration. Varga thought that the great powers were wanting ‘to transform the
whole world into a colonial region and to create in this manner a new world-
economic equilibrium on capitalist lines,’ even if in this process many millions of
proletarians should perish from starvation and ‘the whole civilization of Europe be
wrecked.’102 Nevertheless, Varga held on his thesis of capitalist decline, which
provided him with an additional argument in favor of his sacrosanct revolutionary
optimism. ‘To be sure, the crisis of capitalism has not been overcome. We are, no
doubt, in the midst of the decline of capitalism, and this offers the objective
possibility of a victorious proletarian revolution.’ In the mean time, he also warned
his readers that the objective possibility is still far from being a reality! Varga: ‘The
proletarian control must be fought for. The material development does not
automatically result in the collapse of capitalism.’103
Bukharin’s mocking undertone in his reaction on Varga’s report must have highly
displeased its author. Bukharin called Varga ‘a courageous guy, who is believing that
we all are cowards who do not agree with his position on a workers’ government.
(…) His courage is an opportunistic courage and his cowardice is the cowardice of
not being an opportunist. That is our cowardice. We are afraid to be transformed into
98
99
Varga also points to the successful stabilization of the ruble. Varga, The Process, o.c., 1922.
100
In 1922, Varga still holds on the Gold Standard as a guaranty for currency stability, which was in
line with Russia’s monetary policy. Varga: ‘Apart from U.S.A. and Switzerland there is no country
with a real gold standard.’
101
102
103
21
opportunists and Varga is not such a coward to fear it. That is the difference between
him and us.’104 Varga did not officially react to this inopportune offence.
However, in his quarterly analyses made for International Press Correspondence,105
Varga kept on hoping for an imminent collapse of the capitalist world system. As a
result of the built up production capacity during the world war, the overproduction
issue was on the agenda of all European countries. Because of overcapacity, the
world market was unable to absorb the whole industrial output.106 In the European
steel alone, about 100 blast furnaces were in excess. Even the exchange rates of the
neutral European countries were now depreciating against the dollar. The unsolved
reparation question and the hopeless situation of Germany’s finances contributed
meanwhile seriously to the deepening of the actual crisis. The point was that the
American boom of 1923 had been incapable of raising the European economy to a
higher level and had caused ‘a trade revival for the whole capitalist world.’107 The
collapse of the capitalist world market was still proceeding, and this even in a more
acute form, making that there was ‘no uniform capitalist world economy, with a
uniform conjuncture and with the alternation of boom and depression which is so
characteristic of the capitalist system’.108 During the year 1923 European economic
life had remained, with minor fluctuations in the individual countries, ‘constantly in a
state of crisis and depression’.109 He noticed that the boom in the US was entirely
based upon increased domestic demands and, moreover, that the US continued to
draw not only goods, but also gold in large amounts in return for its surplus exports.
Varga: ‘The fact of the piling up of the half of the gold supply of the world in the
United States is symbolical of the transfer of the center of gravity of the world
capitalist system to the United States, which has already come about.’110
In contrast to American prosperity, the economic situation in Europe had become
worse because of the occupation of the Ruhr by the Franco-Belgian army. Varga
concluded that the occupation of the Ruhr had ended in ‘a temporary political
victory, but not with an economic strengthening of France.’111 The victorious powers,
of course, had committed the error of assuming that the vanquished states would be
economically capable of delivering gratuitously to the victors, without intermission,
such large portions of their production that, as a result, the very generously estimated
war damages of the belligerent countries could be covered.112 They had not reckoned
with the fact that receiving gratuitously such large masses of values would destroy
their own economies. In addition, Varga thought that the crisis of European
capitalism was accentuated by currency crises and necessitated an international
104
Protokoll des Vierten Kongresses der Kommunistische Internationale. Petrograd – Moskau vom 5.
November bis 5. Dezember 1922, Hamburg: Verlag der Kommunistischen Internationale, 1923, pp.
422-423
105
On the history of Internationale Presse-Korrespondenz, see Irén Komját, Die Geschichte der
Inprekorr. Zeitung der Kommunistischen Internationale (1921-1939), Frankfurt am Main: Verlag
Marxistische Blätter, 1982; Sabine Kebir, ‘Aladár Komját (1891-1936) – ein unbekantes Mitglied des
BPRS’, in UTOPIE kreativ, 1999, No. 102, pp. 72-75.
106
International Press Correspondence, 1924, Vol. 4, No. 8, p. 48.
107
Varga predicted the origins of the Marshall Plan the US drafted in 1947. Varga: ‘… could only have
succeeded in stimulating Western Europe if the adverse balance of trade for the United States were a
permanent thing, that is if the United States, for a long period, had bought more from the world market
than sold.’ International Press Correspondence, 1924, Vol. 4, No. 8, p. 48.
108
109
110
111
112
22
action by the world bourgeoisie for regulating German reparations, which would
mean the hegemony of the Anglo-Saxon powers over the capitalist world. Therefore,
Varga believed that the reparation negotiations would be without result, and that the
chaotic dissolution of European capitalism would continue.113 Varga: ‘The possible
international regulation failed (…) owing to the fact that the antagonisms between the
bourgeoisie of the imperialist countries are too acute to render any international
regulation possible.’114 Furthermore, Germany was unable to pay in gold and,
therefore, she had to pay in goods while the world market was not capable of
absorbing such quantities of goods. As a result of the depreciation of the Mark,
Germany could get rid of her interior debts, and as a result of the depreciation of the
currency German industry could be freed from debts. As a consequence, German
production costs could be lowered.
France had reached a complete political victory with the occupation of the Ruhr in so
far as the supply of coal and coke from the Ruhr area to the French steel industry
could be guaranteed. But protectionist French heavy industry was not interested in
bringing the Ruhr district within the French customs area. Therefore, the German and
Franco-Belgian bourgeoisie was seeking for the solution of the reparations problem
by transferring the burden on to the German working class.115 Inter-imperialist
rivalries, nonetheless, had remained. Varga even pointed to the danger of a possible
economic cooperation of the French, Belgian and German coal and steel producers in
a community of interests which would endanger the position of England’s heavy
industry.116 His overall conclusion was that ‘the chaos in Europe will become still
greater and will drift with all speed towards a solution through war. The prospects of
the restoration of “normal” capitalism in Europe in the year 1924 are the remotest.’117
Finally, Varga came to the conclusion that Germany had become the Entente’s
‘international colony’.118
.
The Fifth Congress of 1924: Varga and the Decline of Capitalism
By far the most important event between the Comintern’s Fourth and Fifth Congress
was the failure of the attempted German revolution of October 1923. The diagnosis
of the German failure as the product of a ‘Brandlerite’ deviation to the Right had
been spontaneously adopted and was followed by the eviction of the existing
leadership in favor of leaders of the German Left. The other major event was the
advent to power of the British Labour Party which was considered as a symptom of
the growing revolt of the British workers against the existing order. At the Fifth
Plenum in March 1925, the Comintern agreed that the capitalist system had gained a
more extended lease on life, which was called a partial and temporary stabilization.
This term recognized the recovery of Western capitalism, but qualified it as a mere
postponement of the inevitable final breakdown. Even Germany, with the help of the
Dawes Plan, had made strides toward recovery, but the Fifth Congress refused to
recognize the signs.
113
International Press Correspondence, 1924, Vol. 4, No. 21, pp. 188-189.
114
115
116
117
118
23
At the Comintern’s Sixth Plenum in the spring of 1925, Varga repeated the formula
that American capitalism was on the upgrade. But John Pepper (Pogány), then at the
height of his influence in the Comintern, scoffed at the idea that the American
working class was then undergoing a process of radicalization or that its real wages
were moving downward. The Plenum’s thesis referred to the upswing of American
capitalism, but softened the blow by conceding that it was not proceeding smoothly
and that a general economic crisis should not be ruled out.119
Before the Fifth Congress of the Comintern met on June 17, 1924, Zinoviev thought
that for the first time in the history of the British labor movement favorable
conditions were now being created for the establishment of a mass communist party.
He described the Comintern as standing at the moment between two waves of the
proletarian revolution.120 Kamenev confirmed that capitalism was ‘incurably sick’.121
Trotsky qualified the situation as revolutionary: ‘there is not a single healthy spot in
Europe’.122 Stalin spoke about the inability of the imperialist powers to bring about a
durable peace and the growing attraction of the masses in capitalist countries towards
the Soviet Union.
However, at the Fifth Congress everybody agreed that the cause of the world
revolution had suffered a major setback from its early hopes. In his opening speech,
Zinoviev repeated in almost the same words what Trotsky had already said to the
Third Congress: ‘We misjudged the tempo: we counted in months when we had to
count in years’.123 Zinoviev set forth its basic assumption that a stabilization of the
world economic situation was out of question. In turn, Varga predicted a severe
American crisis and European economic deterioration, while Zinoviev insisted that
the German situation was still revolutionary. He put the problem of power on the
agenda of most European countries. On the basis of this analysis, he attacked the
Right as the main enemy and took the sting out of Trotsky’s demands for an even
more aggressive revolutionary policy. If the Bolsheviks had believed, the world
revolution was necessary to build socialism in Russia, did the postponement of the
world revolution mean the postponement of socialism in Russia? In Varga’s eyes, the
date of the collapse of capitalism was coming nearer and nearer.
Meanwhile, the Dawes Plan was a halter round the neck of the German working
class. The longer the British Labour Party remained in power, the fewer illusions it
would inspire to the workers. With the French ‘Left Boc’ in power the social-
democratic masses were in a process of succumbing to the illusions of democratic
pacifism. Therefore, Zinoviev attacked in his speech to the Fifth Congress social
democracy as a third party of the world bourgeoisie and he described the German
SPD as a wing of Fascism. This seemed an indication of a shift to the left and
constituted an embarrassing commentary on the united front policy which had been a
bone of contention between Zinoviev and Radek ever since it had been first
proclaimed by ECCI in December 1921. Zinoviev now buried the united front in the
guise of the “united front from below”, meaning a policy of splitting other left parties
against their leaders. Past defeats were attributed to a false interpretation by the
119
Theodore Draper, American Communism and Soviet Russia. The Formative Period, New York:
Vintage Books, 1986, pp. 269-271.
120
E. H. Carr, Socialism in One Country, 1924-1926. Volume 3, A History of Soviet Russia,
Harmondsworth: Penguin, 1972, p. 73.
121
E. H. Carr, o .c., Vol. 3, 1972, p. 74.
122
E. H. Carr, o .c., Vol. 3, 1972, p. 75.
123
Protokoll: Fünfter Kongress der Kommunistischen Internationale, Hamburg: Verlag Carl Hoym
Nachf., 1924, p. 5.
24
“Right” of the slogans of the united front and the workers’ government. In addition,
the German fiasco of October 1923 was subtly associated with the Trotskyist
opposition in the Russian party who had rejected the idea of a united front.124
Zinoviev’s political report was immediately followed by Varga’s economic report. Tt
indicated the importance of this subject.
The Third Congress in 1921 had already diagnosed an offensive against the working
masses both on the economic and on the political level, while the Fourth Congress in
November 1922 had admitted that the bourgeoisie had strengthened its political and
economic domination, and begun a new offensive against the proletariat. In May
1924 Varga published a pamphlet under the ominous title The Decline of
Capitalism125 in which he concluded that the ‘acute social crisis of capitalism’ after
the war had been ‘by and large overcome’. Hence, he appeared to admit the
likelihood of ‘a long delay in its ultimate downfall’. A close reading of this pamphlet
reveals, however, that Varga was not at all very clear in his statements. At any rate,
in his preface he combines vagueness with revolutionary optimism, one reads that
several ‘factors that are important for gauging developments cannot be determined at
this time’126. According to Varga, the American boom had come to an end, but it was
impossible at that time to say whether the sharp decline of the boom during the
month of April 1924 was only a passing phenomenon or the beginning of a crisis.
Varga paid much attention to the agrarian crisis as a key factor in world economics,
because the outcome of the harvest was of great importance ‘for shaping the course
of the market during the ensuing business year.’127 A decidedly poor harvest would
put an end to ‘the sparse beginnings of a recovery of business in Middle Europe’.128
Therefore, it was not really clear what the relation of Russia toward the capitalist
states would be in the immediate future.129
Then, Varga sketches what the period of decline capitalism really is. He admitted that
three years after the Third Congress the proletariat had suffered defeats in several
countries and that the bourgeoisie had succeeded throughout the world in establishing
its hegemony anew. Varga wanted to know whether after the postwar boom a normal
crisis had followed or not and whether one could speak about the beginning of a
period of crises for capitalism? Placing an ‘estimate upon the whole period, and not
upon the phases of which it is made up’130, was the principal challenge.
In a footnote Varga admitted that during the Third Congress there was a rather strong
opposition, supported by the German delegation, which at that time was very “Left”,
and by the Italian and Hungarian delegations, ‘which took exception to Comrade
Trotsky’s and my prediction, made in the theses, to the effect that there was a
possibility that the boom-period might enter upon a new phase.’131 But, according to
124
Protokoll: FünfterKongress, o. c., 1924, pp. 42-107.
125
Varga, Aufstieg oder Niedergang des Kapitalismus, Hamburg: Verlag Carl Hoym Nachf. Louis
Cahnbley, 1924. Varga’s preface was dated on 5 May 1924 in Berlin; English translation: The Decline
of Capitalism, Published for the Communist International by the Communist Party of Great Britain, 16
King Street, Covent Garden, London, W.C. 2. [s.d.]
126
Varga, The Decline, o. c., [s.d.] p. 3.
127
128
Varga, The Decline, o. c., [s.d.]p.3.
129
‘The only stable thing in this period of crises is the uncertainty, the chaos!’. Varga, The Decline,
o.c., [s.d.] p. 3.
130
Varga, The Decline, o. c., [s.d.] p. 5
131
Thalheimer declared: ‘The revolutionary character of the period of crises’ in the midst of which we
find ourselves… is not expressed sharply enough… in the theses”. Pogány’s criticism went even
25
Varga, actual economic developments had, however, proven the correctness of the
theses at the Third Congress.
In this pamphlet, Varga used some paragraphs of his report to the Fourth Congress of
1922. This suggests continuity in his analysis and confirms the fact that he had grown
out to an authority not afraid of pronouncing controversial statements. This time, he
could agree with Rosa Luxemburg’s thesis that capital employs different means for
combating the falling tendency in the rate of profit. ‘The principal means, however, is
the exportation of capital to countries where the time involved in labor is shorter and
the rate of profit and for overtime is a higher one.’ 132 Capital in every highly
developed, capitalistic country is compelled, in order to retard the decrease in the rate
of profit, to subjugate larger colonial areas. ‘We therefore find ourselves in
agreement with Rosa Luxemburg with reference to the fact that highly developed
capitalism in the form of imperialism leads to warlike conflicts of world dimension.
The reason for this, however, is not the impossibility of accumulation without the
existence of non-capitalistic elements, but the simple desire for higher rates of
profit.’133
The direct economic consequences of the war were the separation of the world into
spheres of relative over-production and absolute under-production.134 Varga stuck to
the opinion that the period of decline of capitalism continued. This did not mean that
single sections of the earth, which were only recently encompassed within capitalism,
would not pass through a strong economic ascendancy on a capitalistic basis. Nor did
it mean that there could be no more business booms for Europe. It did mean,
however, that capitalism, as a whole, was proceeding along a downward curve.
Considered over a longer period of time, the total of production was decreasing,
crises were lasting long and intensive, while periods of boom were of a short duration
and not big. Unity of capitalistic world economy was not achieved: industrial cycles
crossed each other’s paths, the interlocking of world-economic interests became less
and less.135
In addition, Varga criticized Hilferding’s optimism vis-à-vis capitalism’s future.
According to Varga, the Social Democrats looked too optimistically upon the future
of capitalism, which explains their treaty with the bourgeoisie and their enmity
toward a proletarian revolution. For the time being, they could temporarily keep the
workers away from the revolutionary movement only if they promise them a
betterment of their condition for the future within the capitalist system.136
At the Fifth Congress Varga was less pessimistic about the economic situation and
the chances of the world revolution. Varga hastened to change his mind about
American capitalism. Varga: ‘American capitalism is still healthy. As opposed to
farther: ‘Within the great economic crisis… the theses… give too much emphasis to the phase of
prosperity and too little to the period of crises within the crisis which obtains to-day… We cannot and
must not make prosperity and the future second world war out Leitmotiv, but, quite the reverse, we
must talk about the crisis and the new civil wars.’ Pogány was anxious to have the reference to a
coming boom-phase eliminated entirely. Protokoll des III. Kongresses der
Kommunistischen Internationale, o.c., 1921, p. 113, and p. 116.
132
133
Varga, The Decline, o. c., p. 8.
134
Varga, The Decline, o. c., p. 8.
135
Varga, The Decline, o. c., [s.d.] pp. 51-52.
136
Varga, The Decline, o.c., [s.d.] pp. 52-53. The whole trend of Hilferding’s thought is: ascending
capitalism, agreement with the bourgeoisie, democracy, world peace. Varga, The Decline, o .c., [s.d.] p.
53. He quotes Hilferding in Die Gesellschaft, in No.1, p. 9 and No. 2, p. 118.
26
European capitalism, it is certainly on the upgrade.’ But he still held out hope that the
American upswing would come to a quick end. Varga reiterated this view in his
speech. He simply argued that the capitalist world remained in crisis, and that a
further deterioration could be expected.137 Stagnation and production decline in
combination with declining living standards would create the objective possibility of
successful struggle for power.138
The Comintern’s 1925 resolution declared that American finance capital was now
more powerful than ever, but would get ever more deeply entangled in the
contradictions and crises of European capitalism. Nothing could alter the final
downfall of capitalism which had already entered its last stage.139 But within the
general crisis of capitalism, many variations could occur, in the form both of partial
recovery and of incongruities between different countries: capitalism was no longer a
uniform world system. According to Varga, the present phase, though it offered no
objective proof140 of the collapse of capitalism, did, however, offer ‘objective
possibilities for successful struggles of the proletariat.’141
During the debates different positions emerged. Albert Treint, the French delegate,
supported Zinoviev with the argument that the principal danger came from the right
wing.142 But the Polish German delegate Gustaw Reicher (ps. Gutek Rwal)143
declared that in October 1923 the German party had been in a position to seize
power.144 Murphy, the British delegate, pointed out that the united front was the
essential basis of the tactics of the British party.145 Roy, the Indian delegate,
castigated the British proletariat as a class penetrated through and through by the
unconscious and conscious spirit of imperialism.146 Only Radek attacked Zinoviev
and challenged him to say whether he really rejected all coalitions with the Social
Democrats. Turning on Varga, he read extracts from Varga’s pamphlet of the
previous month, contrasting them with the more bellicose passages of his report. But
on the Congress Radek was answered by Ruth Fischer who rejected the united front
slogan as “obsolete”. She declared that Radek and his followers did not believe in the
German, in the European revolution. She predicted the imminence of an acute
revolutionary crisis.
Varga’s theses on the economic situation, which had been referred to an economic
drafting commission, were adopted unanimously, though it was reported that,
presumably as the result of pressure from the “Left”, they had been further modified
in the commission in order to make them more favorable to the prospects of
revolutionary action.147 In their final form the theses dwelt on the exceptional
137
Nicholas N. Kozlov and Eric D. Weitz, ‘Reflections on the origin of the ‘Third Period’: Bukharin,
the Comintern, and the political economy of Weimar Germany’, in Journal of Contemporary History,
Vol. 24, 1989, p. 392.
138
Protokoll: Fünfter Kongress, o. c., 1924, Vol. 1, pp. 109-121.
139
E. H. Carr, Socialism in One Country, 1972, Vol. 3, o.c., p. 76.
140
This inspired E. H. Carr to the remark that Varga’s ‘cryptic utterance sounded like a compromise
between Varga’s professional and the need for a revolutionary platform which would satisfy the Left.’
E. H. Carr, Socialism in One Country, Vol. 3, o.c., 1972, p. 77.
141
Protokoll: Fünfter Kongress, o.c., 1924, Vol 1, pp. 108-131.
142
Protokoll: Fünfter Kongress, o.c., 1924, Vol. 1, pp. 134-139.
143
Gustaw Reicher (1900-1938).
144
145
146
147
Protokoll: Fünfter Kongress, o.c., 1924, Vol. 2, pp. 415-26. Already at the Second Congress of
the Comintern in the summer of 1920, a debate arose over the ‘Theses on the National and Colonial
27
character of capitalist prosperity in America, which contrasted with the misery and
chaos of capitalism in Europe, and on the worldwide agrarian chaos.148
Well before the Fifth Congress of the Comintern met in 1924, Varga had become the
Comintern’s leading expert in matters of international economic relations and affairs.
In this role, he would become involved in the Comintern’s internal disputes
engendered by the factional struggles between the Trotskyite Left and the ruling
coalition led by Bukharin and Stalin in the Russian Communist Party. At the Fifth
Congress of the Comintern, Varga sketched all recent economic improvements in a
few nations, such as France or the United States, as ‘isolated’ and not representative
for the general trend of a ‘decaying capitalist world economy’. At this Congress
Zinoviev and Varga had presented a profoundly sceptical interpretation of the
prospects for capitalist recovery. But in 1925 Varga had his views somehow revised.
He now argued that European economies had expanded their productive potential as
a result of technological change and reorganization. There existed a gaping
contradiction between the production and realization possibilities of European
industries, because there was no demand for the increased output capacity. In 1921,
low wages were still the result of economic chaos, but by 1925 they had become the
cause of an idle productive apparatus.149
Even during the most prosperous years of the 1920s, Varga never abandoned this
underconsumptionist view on capitalist realization problems.
At the Enlarged Plenum of the ECCI meeting from 17 February until 15 March 1926
in Moscow, Varga acted as a referee on the world’s economic situation.150 He
diagnosed a temporary and fragile economic stabilization of capitalism at the expense
of the European proletariat. Because of a sinking living standard of the working class
a revolutionary tendency would develop at the end of the stabilization period. In
America, the economic boom would end up in a slow down initiating a worldwide
economic crisis putting an end to the period of economic recovery in Europe.
Meanwhile, Europe had lost its predominant position in the capitalist world
economy, colonial super-profits had disappeared, while revolutions were shaking the
Asian continent. Varga was talking this time about a ‘structural change in world
capitalism’.151 At the end of his speech, Varga attacked Werner Scholem152 for having
criticized him as rightist deviations having taken over Hilferding’s stabilization
Questions’. Indian communist M. N. Roy interpreted Lenin’s imperialism theory in his own way. Roy
said that world’s capitalism dependent on the spoils of imperialism and that it drew its chief resources
from the colonies and corrupted by this way its workers. Dissatisfied with Lenin’s Theses, Roy
submitted his own thesis that European capitalism drew its strength chiefly from the colonial
possessions. Lenin remarked that Roy’s thesis went too far in asserting that the fate of the western
capitalism was depending solely on the degree of development and strength of the revolutionary
movement in the colonies. Finally, Roy’s thesis was watered down. Obviously, Lenin’s main concern
was about the strategy the Comintern should follow towards the national bourgeoisie as a potential ally
in the colonies.
148
Bela Kun (ed.), Kommunisticheskii internatsional v dokumentakh: resheniia, tezisy i vozzvaniia
kongressov Kominterna i Plenumov IKKI 1919-1932, Moscow: Partiinoe izd-vo, 1933, pp. 415-426.
149
Kozlov and Weitz, o. c., 1989, p. 392; Eugen Varga, ‘Ways and obstacles to the world revolution’,
in Communist International, 1925, Vol. 2, No. 18-19, p. 86.
150
Laszlo Tikos, E. Vargas Tätigkeit als Wirtschaftsanalytiker und Publizist in der ungarischen
Sozialdemokratie, in der Komintern, in der Akademie der Wissenschaften der UdSSR, Tübingen and
Cologne: Böhlau-Verlag, 1965, p. 50.
151
Protokoll Erweiterte Exekutive der Kommunistischen Internationale, Moskau, 17. Febr. Bis 15.
März 1926, Hamburg and Berlin: Verlag Carl Hoym Nachf., 1926, p. 109.
152
Werner Scholem (1895-1940) was a member of the KPD Politburo and close to Zinoviev. He
belonged to the Fischer-Maslov Group or the Ultra-Left in the KPD.
28
theory. Varga forcefully repeated that there was no perspective on a period of further
peaceful development of European capitalism. Conquering political power would
require a long process of revolutionary upheavals of which the result would be
uncertain.153 In order to reassure his audience, Varga said that the vanguard of the
proletariat had nonetheless prepared this bid for power. Though Varga was ‘believing
in and hoping for a fast final victory of the proletariat’154, he did not believe in an
automatic collapse of capitalism. ‘Without risking a revolutionary struggle against
the bourgeoisie no revolution could succeed.’155
Varga’s views were in line with the theses Stalin had defended at the Fourteenth
Congress of the VKP (CPSUb) in December 1925156 and the latter’s claim at the
Seventh Enlarged Plenum of the ECCI (November 22 - December 16, 1926)157 that
‘the starting point for the position of our Party is the recognition of the fact that
present-day capitalism, imperialist capitalism, is moribund capitalism.’158 Of course,
Stalin admitted that capitalism had yet gone completely bankrupt, but the good news
was nonetheless that it was ‘on its road to extinction’. Stalin added that the ‘law of
uneven development in the period of imperialism means the spasmodic development
of some countries relative to others, the rapid ousting from the world market of some
countries by others, periodic re-divisions of the already divided world through
military conflicts and catastrophic wars, the increasing profundity and acuteness of
the conflicts in the imperialist camp, the weakening of the capitalist world front, the
possibility of this front being breached by the proletariat of individual countries, and
the possibility of the victory of socialism in individual countries.’159
In his polemic with Trotsky, Stalin had used Lenin’s words that the uneven economic
and political development was an absolute law of capitalism, and that the victory of
socialism was possible in ‘several or even in one capitalist country taken
separately’.160 Furthermore, he also gave a brief outline of the basic elements of the
law of uneven development under imperialism. Its is noteworthy to quote them:
‘Firstly, the fact that the world is already divided up among imperialist groups, that
there are no more “vacant”, unoccupied territories in the world, and that in order to
occupy new markets and sources of raw materials, in order to expand, it is necessary
to seize territory from others by force. Secondly, the fact that the unprecedented
development of technology and the increasing leveling of development of the
capitalist countries have made possible and facilitated the spasmodic outstripping of
some countries by others, the ousting of more powerful countries by less powerful
but rapidly developing countries. Thirdly, the fact that the old distribution of spheres
of influence among the various imperialist groups is forever coming into conflict
with the new correlation of forces in the world market, and that, in order to establish
153
Protokoll Erweiterte, o.c., 1926, pp. 112-113.
154
Protokoll. Erweiterte Exekutive der Kommunistische Internationale Moskau, 17. Febr. Bis 15. März
1926, Hamburg and Berlin, Verlag Carl Hoym Nachf, p. 112.
155
Ibidem, p. 113.
156
J. V. Stalin, Speech Delivered at the French Commission of the Sixth Enlarged Plenum of the
E.C.C.I. March 6, 1926, Works, Vol. 8, January-November, 1926, Moscow: Foreign Languages
Publishing House, 1954, pp. 106-113.
157
J. V. Stalin ‘The Seventh Enlarged Plenum of the E.C.C.I.’, November 22-December 16, 1926,
Pravda, Nos. 285, 286. 294, 295 and 296, December 9. 10, 19, 21 and 22, 1926; J. V. Stalin, Works,
Moscow: Foreign Languages Publishing House, 1954, Vol. 9, pp. 1-155; J. V. Stalin, On the
Opposition, Peking: Foreign Languages Press, 1974, pp. 517-656.
158
J. V. Stalin, On the Opposition, Peking: Foreign Languages Press, 1975, p. 612.
159
J. V. Stalin, o. c., 1975, p. 615.
160
J. V. Stalin, o. c., 1975, p. 617.
29
equilibrium” between” the old distribution of spheres of influence and the new
correlation of forces, periodic redivisions of the world by means of imperialist wars
are necessary.’161According to Stalin, the implications of these ‘facts’ were
unequivocally clear: they show a growing intensity and acuteness of the uneven
development, an impossibility of resolving the conflicts in the imperialist camp by
peaceful means, an untenability of Kautsky’s theory of ultra-imperialism preaching a
peaceful settlement of these conflicts.162 However, Stalin’s analysis was not followed
by precise guidelines for action.
From the very beginning on, Stalin had stressed that the revolution would have a
violent character, a position he had explained in his pamphlet Concerning Questions
of Leninism of January 1926 that was ‘dedicated to the Leningrad Organization of the
VKP(b)’163: ‘To think that such a revolution can be carried out peacefully, within the
framework of bourgeois democracy, which is adapted to the rule of the bourgeoisie,
means that one has either gone out of one’s mind and lost normal human
understanding, or has grossly and openly repudiated the proletarian revolution.’ 164
That did not, however, mean that the proletariat could not share power with another
class, especially the ‘laboring masses of the peasants’ for the achievement of its
aims.165
Nobody, however, could think that it would be quite impossible that without a world
revolution the Bolsheviks could hold power in Russia. Lenin’s call for the revolution
was primary a call for support a maintenance of his regime. Lenin’s coming out for
the right of self-determination of all oppressed peoples, sprang likewise from the
urgent need to hold on to power. Finally, even the Comintern meant a respite for the
Bolsheviks. Hence, to an increasing group of Bolsheviks conducted by Stalin the
restriction of the revolution to Russia would make of the Soviet Union a fortress
against the reactionary forces in the world. Therefore, the demand for the world
revolution was converted into the slogan of building socialism in one country. Of
course, there were Communists in Russia who had grown tired of waiting for the
European revolution and who wished to make the best of their national isolation.
Conclusions
When in the spring of 1927, Varga left Berlin for Moscow, he had become the
Comintern’s leading but nut necessarily uncontested economist. Varga’s analysis of
the current capitalist crisis was based on an underconsumptionist understanding of
the breakdown of capitalism. Varga admitted the role played by technological change
in the west, but, aside from some developments in chemical and electrical branches,
no fundamental changes had occurred. The great changes had taken place in the
organization of the production process with the introduction of Taylorism, not by the
introduction of new machinery. He went so far as to argue that the intensification of
labor had led to an aggravation of the contradiction between possibilities of
production and sale stemming from the reduced number of productive workers.
Varga explained the specific features of capitalism’s decline through the fundamental
161
J. V. Stalin, o. c., 1975, p. 615.
162
J. V. Stalin, o. c., 1975, p. 616.
163
J. V. Stalin, o. c., 1975, pp. 268-346.
164
J. V. Stalin, o..c., 1975, p. 279.
165
J. V. Stalin, o. c., 1975, pp. 281-282
30
contradiction between production and realization. This soon became known as the
“Law of Varga”, i. e. the notion that under conditions of advanced capitalist
accumulation an absolute decline in the number of productive workers would occur,
thereby exacerbating the realization problem of capitalism. Along with Zinoviev and
Trotsky, Varga admitted capitalism’s limited possibilities for economic revival. No
capitalist advancement would be possible. Varga held to a catastrophic view on the
future of capitalism that identified the prospects for a proletarian revolution with the
general decline in production and in the proletariat’s living standard.
31

Jenö Varga, Economist of The Comintern (1920-1928)

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Jenö Varga, Economist of The Comintern (1920-1928)

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JENŐ VARGA: ECONOMIST OF THE COMINTERN`

Table 1 Dates of key Comintern meetings

First Congress 2–6 March 1919 (Moscow)

Second Congress 19 July – 7 August 1920 (Moscow and

Third Congress 22 June – 12 July 1921 (Moscow)

First Enlarged Plenum of the 24 February – 4 March 1922

Second Enlarged Plenum of 7 – 11 June 1922

Fourth Congress 5 November – 5 December 1922

Third Enlarged Plenum of 12 – 23 June 1923

Fifth Congress 17 June – 8 July 1924 (Moscow)

Fourth Enlarged Plenum of 12 – 13 July 1924

Fifth Enlarged Plenum of 21 March – 6 April 1925

Sixth Enlarged Plenum of 17 February – 15 March 1926

Seventh Enlarged Plenum of 22 November – 16 December 1926

Eighth Plenum of the ECCI 18 – 30 May 1927

Ninth Plenum of the ECCI 9 – 25 February 1928

Sixth Congress 17 July – 1 September 1928 (Moscow)

Tenth Plenum of the ECCI 3 – 19 July 1929

Twelfth Plenum of the ECCI 27 August – 15 September 1932

Thirteenth Plenum of the 28 November – 12 December 1933

Seventh Congress 25 July – 21 August 1935 (Moscow)

Working for the Comintern

Tentative Amendments or Theses

An economic crisis with a special character?

Third Congress of 1921:

The Fourth Congress of 1922:

At the Fourth Congress of the Comintern convening from 5 November to 5

The geographic expansion of the capitalist form of production is slackening; in

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