State capitalism – the theory that fuels the practice

When I joined the Socialist Review Group, the precursor of the Socialist Workers Party, back in 1961, our opponents on the left called us the “state caps” – short for “state capitalists”. This was not because we were in favour of state capitalism (although rumour had it that one of our members had joined for that reason). It was because we rejected the notion that the USSR, China and the Eastern European states were in some way socialist or workers’ states.

If the workers could not even discuss government policies without fear of incarceration, we argued, how could anyone possibly believe they controlled the state and were freely building socialism?

This was very much a minority position on the far left at the time, both in Britain and internationally. Even people who were critical of some aspects of Russia or China would feel that these must be more progressive than Western capitalism.

But there was more to our theory than just that. For our use of the term “state capitalism” made us a minority within the minority. Most of those who agreed with us that the USSR was not socialist came to the conclusion that it was a radically different sort of society from Western capitalism – that it was a class society, but with a ruling class and an economic mechanism completely different to capitalism. This was the view given theoretical form by a supporter of Trotsky from the 1930s, the American socialist Max Shachtman. It was also the view encapsulated in George Orwell’s Nineteen Eighty-Four.

That view could have very dangerous practical conclusions. It could lead you to believe that the USSR was not only just as bad as Western capitalism, but qualitatively worse. If that was so, there was a logic in supporting Western capitalism against the USSR – and against those on the left who identified with it. This logic led Orwell to pass on the names of Communist sympathisers to the authorities, and Shachtman to support the attempted US invasion of Cuba in 1961.

The “state capitalist” theory led to a very different conclusion. It was based on recognition that the parameters within which the rulers of the Eastern bloc states operated were determined by competition. This was not internal competition, but external competition with the west European states. An increasing amount of this competition was for markets, but most was military. This might seem different from what happened with competition between firms in a Western economy, but it had the same effect in terms of the economic dynamic of the system.

The various Eastern rulers could only survive this competition if they exploited workers to the maximum, using the surplus they obtained to build up industry. This was exactly the same picture as that presented by Karl Marx in Capital, where he showed that the competition between capitalists to sell commodities led to each undertaking “accumulation for the sake of accumulation”.

Competitive accumulation had a double consequence. On the one hand it would lead to a new period of massive economic crises. On the other hand it was building up a working class that had the potential to overthrow the ruling class. No state mechanism, however repressive or totalitarian, could indefinitely subdue that working class.

The originator of the theory, Tony Cliff, had set this out in general terms in a book he had written in 1947. We spelt it out more concretely in our perspectives for the next decade in 1970. The USSR would eventually crack apart as a result of an economic crisis with roots similar to those of the crises of Western capitalism.

To most on the left it still seemed the deepest sort of pessimism to write off the states that ruled a third of the world. But with the fall of the Berlin Wall in 1989, when the truth could no longer be avoided, they often concluded that socialism as such had failed.

For us, by contrast, 1989 showed that capitalism in any form is vulnerable to mass resistance from those it exploits.

One additional point followed from the theory. If the crisis in the Eastern states was a result of competitive accumulation within a world system, then simply moving to the Western model of capitalism would not bring it to an end. How right we were was shown by the way economic crises that had begun under Brezhnev and Gorbachev deepened in the early 1990s – and have now returned with a vengeance during the present world crisis.

Some people will ask, is any of this relevant today? It is, in two ways. First, state capitalism as a theory never simply applied to the Eastern states. It also had relevance in the West, since at least a third of every Western economy is in the state sector. While otherwise excellent Marxists like David Harvey continue to see this sector as somehow standing outside capitalism, we see it as an integral part of the system.

And that leads to a very practical conclusion. When I joined the Socialist Review Group, our statement of aims started, “War is the inevitable result of the division of society into classes.” War is still with us, precisely because the state is part of the capitalist system and one of the forms that the competitive struggle between states takes is the accumulation of armed strength.

There can be no revolutionary practice, Lenin once wrote, without revolutionary theory. He was exaggerating a little. But there is no doubt that the left as a whole would have been stronger if more people had accepted our arguments about state capitalism.