State Capitalism

One Phrase, Two Uses

'State capitalism' is not the name of a single doctrine. The phrase is used to condemn somebody else's system, and it is also used to explain a tactical choice of one's own. The same words run in opposite directions, so the first thing to establish in any argument about it is which sense the speaker means.

The condemning lineage begins with Engels's Anti-Dühring (1878). When the state owns the factories and the railways, workers are still employed by somebody else for a wage, so the state has not abolished the capitalist; it has merged every capitalist into one 'ideal collective capitalist.' In 1896 Wilhelm Liebknecht pushed the point to its conclusion in a single sentence: Bismarck's state socialism is really state capitalism. Bakunin had warned that a plan to install workers' power would end by producing a new ruling class of officials.

The tactical lineage is Lenin's.

Lenin's Two State Capitalisms

Lenin used two overlapping names in entirely different contexts, and reading them as one makes his position look self-contradictory.

The first is the state-monopoly capitalism of The Impending Catastrophe and How to Combat It (1917). It names what happened when war drove the state to take direct hold of industry, and it means capitalism at its final stage. Lenin did not treat this as the opposite of socialism. Turn that machinery of administration, already built, towards serving the whole people rather than a few, and you have socialism.

The second is the transitional state capitalism of The Tax in Kind (1921), which runs the other way. The Russian economy after the revolution was mostly small-scale production: households farming their own plot and selling what was left over. Lenin argued that under those conditions state capitalism should not be faulted for falling short of socialism but measured against that scattered small production, next to which it was an advance. His example was Germany. Take a well-organised system of large-scale planned production, strike out the Junker-bourgeois imperialist state, put a workers' state in its place, and the conditions for socialism are all present. What decides the matter is not the form in which the economy is run but whose state runs it.

Mao's New Democratic state capitalism (1940) belongs to this second lineage, differing in that it presumes power held jointly by four classes rather than by the workers alone.

What to Call the USSR

Criticism began inside the USSR immediately after the revolution. Left communists such as Osinsky and Myasnikov attacked the installation of a single manager in each factory and the import of American work-management methods as a return to capitalism; Bordiga analysed the USSR simply as capitalism, and Otto Rühle and Pannekoek refined the theory through the 1920s and 1930s.

Tony Cliff turned it into a finished system in State Capitalism in Russia (circulated 1948, revised 1955). His argument is worth following because it runs backwards. Cliff himself grants that the usual marks of capitalism are missing in the USSR: market prices did not decide what got produced, labour power was not a commodity bought and sold, and there were no crises of goods piling up unsold. His ground for calling it capitalist anyway was military competition with the West. As firms compete in a market, the USSR competed as a state, and that pressure did the work capital accumulation does elsewhere. He dated the break to the First Five-Year Plan of 1928. If the bureaucracy is itself a collective capitalist class, the political conclusion follows that there is no reason to defend the USSR or states like it against imperialist attack. Max Shachtman had already, in 1940, called the same bureaucracy the ruler of a third system that was neither capitalist nor socialist, which he named bureaucratic collectivism.

Trotsky rejected the designation in The Revolution Betrayed (1936). Borrowing Lenin's phrase 'a bourgeois state without a bourgeoisie,' he held that the Soviet state had two faces: socialist insofar as it kept the factories in state hands, bourgeois insofar as it used force to preserve a larger share for a privileged layer. The bureaucracy held power but had no property to leave to its children and no shares to sell, and so was not yet a class. From this comes his well-known distinction: what was needed was not a social revolution overturning the property system, but a political revolution replacing only the political power sitting on top of it.

Why the Same Country Yields Opposite Verdicts

Opposite verdicts on the same USSR follow not from different evidence but from ranking these five tests differently.

Put ownership first and you arrive at Trotsky's degenerated workers' state, where the duty to defend the USSR survives; put workers' democracy first and demote ownership and you arrive at Cliff, where it does not; put class power first while still granting weight to ownership and you arrive at Lenin's transitional account.

The Term in South Korea

In South Korea the phrase works as a marker of political current before it works as an analytical term. Cliff's theory is the foundation of the British Socialist Workers Party and the International Socialist Tendency, and Workers' Solidarity (노동자연대) continues that line.

Against them, the International Bolshevik Tendency argues that to call a society capitalist after private ownership has been abolished is to discard Marx's own method of judging a society by its property system. They add that the first author of the diagnosis 'the USSR is capitalist' was Kautsky, the social democrat attacking the Bolsheviks, in Terrorism and Communism (1919). Within Trotskyism, Ted Grant's 1949 reply objected that no practical conclusion about whether to defend the USSR follows from Cliff's analysis at all.

The similarly named state monopoly capitalism reached Korea by a separate route. In 1985 Park Hyun-chae advanced neo-colonial state monopoly capitalism, analysing South Korean capitalism through a double determination: dependence on the United States, and the fusion of the chaebol with the state. Its target is South Korea rather than the USSR, which sets it apart from the debate above.