By Mike Haynes
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S is for state capitalism

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As global capitalism flounders, the world's governments are scrambling to use state action to try to stop the rot and bail out the system. After two decades of being told that the market works best, the state is back.
Issue 332

The reason for this is not some grand theory. It is pragmatic. The crisis is showing that states not only need to set the rules for capitalism to work but must also be major players. For socialists this creates a dilemma. If the choice is between bankruptcy and state support we obviously call for state support and nationalisation. No firm should go under, no job be lost because of the lunacy of the system. But we need more than this. And we should be under no illusion that the state is a socialist force.

The state has always been an active element in capitalism. In the late 19th century Frederick Engels warned socialists about the dangers of confusing this role with a socialist alternative. If state control and state production are defined as socialist then we would, he said, have to sign up Napoleon, Metternich and Bismarck to the socialist movement.

Today there would be many more strange names to add, including George Bush. In the autumn of 2008, as the US government rushed to support the banks, the US economist Nouriel Roubini called Bush, Henry Paulson and Ben Bernanke “a troika of Bolsheviks who turned the USA into the United Socialist State Republic of America [but] this biggest bailout and nationalisation in human history comes from the most fanatically and ideologically zealot free-market laissez-faire administration in US history”.

But despite Frederick Engels’ warnings one part of the socialist tradition did go on to identify capitalism with private ownership, and socialism with state ownership and control. The logic of this was to see socialism in a society like Stalin’s Russia where private property was all but banned even as Russia became a giant prison camp for ordinary Russian workers.

But this was only one part of the “socialist tradition”. Another part saw socialism in terms of workers’ power from below. In this tradition the enemy is both private capital and state capitalism. This was the name that these socialists gave to the ways in which states took control of the elements of the capitalist system to save it and try to make it work better.

So it is ironic that it was this tradition that gave rise to the Russian Revolution. In 1917 Russian workers rose against both private and state capital in Russia. Lenin wrote a famous pamphlet called State and Revolution in which he attacked the idea that socialism was simply about expanding the power of the state under socialist control. On the contrary, he argued, it was about bottom up democracy which would eventually lead to the withering away of the state. But as the Russian Revolution degenerated in the 1920s, and Russian workers lost power, more and more people came to identify socialism with “state capitalism”. A new elite would take over the state in the name of the workers and use their power to compete with other states.

This created a huge logical contradiction. If socialism is about state control and ownership then it could be found already in many parts of global capitalism.

For many it was Russia. Others saw it, and still see it, in China and Cuba. Some found it in Third World dictatorships. Over time the role of the state also grew within the core of capitalism. The military industrial complex is still a major example of semi and sometimes complete state control and state “planning”. In war too most capitalist states marginalised or controlled the private sector in fine detail.

Privatisation in the 1980s and 1990s was claimed to roll back the “state” and weaken “state capitalism”. But it did so in a peculiar way. Some theorists talked of the “enabling state”. The theory was that the state would now enable the private sector to work better. But what was really enabled was the ability of groups at the top to plunder the state in the name of “private enterprise”.

Now the chickens have come home to roost and states are bailing out the private sector and creating new forms of state capitalism. But even those who see the need to have state action to “save the system” ridicule the idea that this is a socialism that meets the needs of the mass of humanity.

Listen to Roubini again, “Socialism is indeed alive and well in America; but this is socialism for the rich, the well connected and Wall Street. A socialism where profits are privatised and losses are socialised with the US taxpayer being charged the bill of $300 billion.”

The Russian socialist Nikolai Bukharin had a nice way of describing how capitalism works. The capitalist class, he said, wears a coat with two pockets – one called private and the other called state. It shifts its means of control between them as it needs to. How far this shift will go today is still unclear. The argument about private versus state is not really about efficiency. Look at the banks which were supposed to be a model of efficiency. It is about policies and infighting at the top. For bosses the issue is how far they should go to save the system and what it will cost them. Should it just be the banks or should it be a high street chain like Woolworths or the car industry?

For socialists the debate has a different end. As Bukharin might have said, the issue is not so much what is in each pocket of the coat, but the need to strip capitalists of the coat itself.

Mike Haynes

Mike Haynes is the author of Russia: Class and Power, 1917-2000 and A Century of State Murder? Death and Policy in Twentieth Century Russia.

Further reading:

State Capitalism in Russia by Tony Cliff; State and Revolution by Vladimir Lenin.

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