State monopoly capitalism

What does it mean for the state and monopoly capital to "fuse"?

In the textbook of liberal economics the state is a referee setting rules from outside the market. The theory of state monopoly capitalism holds that this picture does not fit twentieth-century capitalism. Once a few giant firms dominate each industry, the state creates a huge state market through arms orders and public works, co-finances the investment of big business through subsidies and taxation, and takes on through public enterprises and public finance the losses big firms could hardly bear. The core claim is that monopolies and the state become so intertwined that they form a single "overall mechanism".

Take numbers assumed for illustration. A state power company supplies electricity to a private steel monopoly. If the average rate of profit in the economy is 10 percent, a private power company would want to sell electricity costing 10 billion for 11 billion. If the state company sells it at cost, or at a loss for 9 billion, the difference of 1–2 billion passes into the steel monopoly's profits. The Frenchman Paul Boccara called this injection of public funds that do not demand normal valorisation, accepting a reduced, zero or even negative rate of profit to support the profitability of private monopoly capital, the "structural devalorisation of capital", and saw it as the key mechanism of state monopoly capitalism.

What did Lenin write in 1917?

Lenin coined the term. In a 1917 afterword to The Agrarian Programme of Social-Democracy he wrote that the First World War "transformed monopoly capitalism into state monopoly capitalism", and in September of that year, in The Impending Catastrophe and How to Combat It, he wrote:

"Imperialist war is the eve of socialist revolution. And this not only because the horrors of the war give rise to proletarian revolt (no revolt can bring about socialism unless the economic conditions for socialism are ripe) but because state monopoly capitalism is a complete material preparation for socialism, the threshold of socialism, a rung on the ladder of history between which and the rung called socialism there are no intermediate rungs." (Lenin, The Impending Catastrophe and How to Combat It; our translation from the Russian)

«Империалистская война есть канун социалистической революции. И это не только потому, что война своими ужасами порождает пролетарское восстание, — никакое восстание не создаст социализма, если он не созрел экономически, — а потому, что государственно-монополистический капитализм есть полнейшая материальная подготовка социализма, есть преддверие его, есть та ступенька исторической лестницы, между которой (ступенькой) и ступенькой, называемой социализмом, никаких промежуточных ступеней нет.»

In The State and Revolution, the same year, Lenin insisted that this was not a step beyond capitalism but a form of it, against liberal and social-democratic politicians who called the interventions of the German Empire "state socialism". What mattered was in whose hands the vast state management apparatus built by the war lay (for how this differs from Lenin's concept of state capitalism, see that entry). Bukharin, in Imperialism and World Economy, pictured it as the "state capitalist trust": state and private monopoly enterprises merge into one entity within the framework of the state capitalist trust, the interests of the state and of finance capital coincide more and more, and the central bank becomes the "golden head" of the whole trust.

How did it become official Soviet theory?

The term was hardly used under Stalin. When Evgeny Varga analysed the new techniques of state intervention in Changes in the Economy of Capitalism as a Result of the Second World War (1946), orthodox economists attacked him for contradicting the doctrine that state planning belongs to socialism alone and that "under capitalism anarchy of production reigns". In Economic Problems of Socialism in the USSR (1952) Stalin partly revised Lenin's concept.

After Stalin's death things changed. Varga published a second edition of Basic Questions of the Economy and Politics of Imperialism in 1957, and in 1960 the conference of 81 communist and workers' parties in Moscow adopted the theory of state monopoly capitalism. The Institute for Social Sciences in East Berlin published Imperialism Today (1965) and The Imperialism of the FRG (1971). The core propositions fixed in this period were these. The power of the monopolies and the power of the state fuse into one overall mechanism that rules the whole of society in the interest of the monopolies. The state shields big business from crises by creating a huge state market of government orders and purchases of surpluses, so that the militarisation of the economy becomes inseparable from state monopoly capitalism. The state mobilises capital and becomes the economy's biggest financier. Fascism and National Socialism were interpreted as extreme forms of state monopoly capitalism.

The political conclusion was the anti-monopoly alliance. Since the monopolies hold the state, the working class, led by the Communist Party, should ally with the progressive middle strata and small business against the state and big capital ("the monopolies" for short), and an "anti-monopoly democracy" reached first within the bourgeois state would be the waystation to socialism. This strategy shaped the debates of the West German Social Democrats' youth wing (the Jusos) in the 1970s and the Popular Unity government of Salvador Allende in Chile (1970–1973). In South Korea's social formation debate of the 1980s, too, the view of the South as "neo-colonial state monopoly capitalism" grounded the anti-imperialist, anti-monopoly line.

What did Boccara and the French Communist Party add?

In France Paul Boccara first set out the theory in 1966. In May 1966 the French Communist Party held an international conference on state monopoly capitalism at Choisy-le-Roi and published the collective work Le Capitalisme monopoliste d'État: traité marxiste d'économie politique (1971, two volumes). Boccara saw the stage after the Second World War as state monopoly capitalism marked by the weight of public finance, production and consumption, in which the "structural devalorisation" described above offsets the fall in the rate of profit, or more exactly overaccumulation. After a quarter-century of expansion, he argued, the system ran again into lasting overaccumulation and from the late 1960s entered a new systemic crisis visible in rising unemployment, financial accumulation, privatisation and globalised liberalism. In the era of Eurocommunism the theory was largely modified or abandoned, as it came to be believed that the state apparatus could be reformed by a mass movement.

What criticisms did it meet?

It drew much criticism within Marxism. Ernest Mandel and Leo Kofler argued that it pictured the state as able to override competition between capitals and the law of value at will. German-speaking critics said that large firms with market power modify the law of value but do not abolish it. Others objected that it treated the state merely as a tool wielded by the monopolies, without accounting for the class basis and relative autonomy of the state, assumed a monolithic structure of domination that did not exist, and could not explain the rise of neoliberalism, in which big business itself demanded a smaller state. Trotskyists rejected the anti-monopoly alliance as popular-front opportunism, and social-liberal West German historians such as Heinrich August Winkler put forward "organised capitalism", in which the state can remain a relatively independent factor, as an alternative. In France Louis Althusser reportedly called the concept "the zero point of Marxist theory".

State monopoly capitalism is a different concept from the transitional "state capitalism" Lenin spoke of in 1921 under the New Economic Policy, and from the theory that calls the Soviet system state capitalism, despite the similar names. It describes a capitalist state controlling the economy for monopoly capital.