The theory of state capitalism from the vantage point of today’s global capitalism – by Chris Ford

by Chris Ford

The theory of state-capitalism as developed amongst the Third Camp socialists, primarily in the Workers Party in the USA by Raya Dunayevskaya and CLR James; was in response to a situation very different from our “post-communist” era. Stalinism a new form of Russian Imperialism reigned supreme in the USSR, and was consolidating its grip over Eastern Europe. A mass “Communist” movement stood loyal to Moscow, and the identification of socialism with the USSR permeated wide layers of the labour movements. So changed is our world of global capitalism that some now argued that to address these questions is self-indulgent and they are of purely of historical value. This is not the case. Such is the living legacy of Stalinism that far from distance in time diminishing the importance of these questions they have immense implications for the struggle for workers’ liberty today and our efforts to conceptualise a socialist alternative to global capitalism.

 A New Division in Marxism

Leon Trotsky had stood as the symbol of socialist opposition to Stalinism; he had fought Stalin since Lenin’s death in 1924. The Left-Opposition was broken by repression and Trotsky himself expelled from the Communist Party and exiled in 1929. The contrast between Lenin’s response to the crisis of international socialism in 1914 when the Second International fell collapsed and Trotsky’s response to the rise of Stalinism is instructive. Lenin saw the need to reorganise his thought delving into Hegel using the dialectic method to grasp the new in the world capitalism of his day. The ‘transformation into opposite’ of competitive capitalism into the state-monopoly stage of imperialism, and of a section of the working class into an aristocracy of labour. Lenin called for a breach with the old and refoundation of Marxian socialism, and looked to new subjective forces of revolt. To Trotsky the world economy was essentially unchanged from the period of Lenin’s analysis of imperialism, to Trotsky the extension of the state and planning were not a new phase of capitalism but the signature of the “workers state”. In the Revolution Betrayed he wrote that:

“The first concentration of the means of production in the hands of the state in history was achieved by the proletariat with the method of social revolution, and not by capitalists with the method of trustification”.

Whilst the workers had lost control of production and their unions were incorporated into the state, in its economic foundations Trotsky asserted the USSR remained a workers state “though degenerate”. The problem was one of the wrong leadership, thus Trotsky fought the Stalinism not as the class enemy but politically, organised with his handful of supporters in the International Communist League, they considered themselves an excluded faction of the Communist International. Thus even after the catastrophic victory of Hitler in January 1933, he could write to the Politburo in March offering his return to the leadership appealing to a “sense of responsibility of those who presently lead the Soviet state”, he wrote:

“Only open and honest cooperation between the historically produced factions, fully transforming them into tendencies in the party and eventually dissolving into it, can in concrete conditions restore confidence in the leadership and resurrect the party.”

This at a time when millions were being starved to death in Ukraine and the slaughter of counter-revolution sweeping the USSR consolidating. Finally in 1938 he convinced his supporters to launch a new Fourth International, its theoretical foundations assured its stillbirth. The entire problems of the world were reduced by Trotsky to the question of the leadership and the “immaturity of the proletariat”, what was new in the period – state-capitalism – was missed. Raya Dunayevskaya who was working with him in Mexico in the late 1930’s wrote that “he became a prisoner of the Stalinist Plan” instead of strengthening the Fourth International it fatally weakened it. On the eve of the war Trotsky wrote that:

“To turns one’s back on the nationalisation of the means of production on the ground that, in and of itself, it does not create well-being of the masses, is tantamount to sentencing the granite foundations to destruction on the ground that it is impossible to live without walls and a roof”

The catalyst for Dunayevskaya’s break with Trotsky was the Hitler-Stalin Pact of 1939; this was nothing less than resurgent Russian Imperialism re-conquering West Ukraine, Poland and the Baltic State’s, opening the door to World War Two. Even this did not shake Trotsky from his fetishism of the state; it did split Trotskyism most notably in its strongest section – the USA.

Dunayevskaya wrote that she “felt the need to prove my conviction, that what had occurred was a total transformation into opposite, that Russia had turned from a workers state into a state capitalist society.” The main state-capitalist tendency developed within the Workers Party led by Max Shachtman. Though they were not the only adherents of the theory at the time, another state-capitalist tendency close to the Workers Party was the Ukrainian Revolutionary Democratic Party well known then but all but forgotten today. It was not only in opposition to the ideas of Orthodox Trotskyism that Dunayevskaya had to contend but of Shachtman’s definition of Stalinism as a new society of “bureaucratic collectivism”. The conception of an exploiting “new class” society was not unique; Rizzi in the 1930’s, Hornovy and Poltava in the 1940’s and Djilas in the 1950’s, Ticktin, and Kagarlitsky in the 1980’s put such theories forward. All these writers rejected the idea of Stalinism as a classless society of “actually existing socialism”, yet like the Trotskyist proponents of ‘post-capitalist’ societies they have been as much a failure in grasping the laws of motion of these states.

Dunayevskaya challenged both these schools of thought as early as 1941 asserting that The Union of Soviet Socialist Republics Is a Capitalist Society. In her initial formulations of state-capitalism Dunayevskaya took issue with Trotsky’s contention that “the existence of stratified property in Russia was sufficient to characterise a workers’ state”, a definition she asserted at “wide variance with the views held by Marx and Lenin”. In establishing itself as “the ruling class, the Russian proletariat had not only expropriated the capitalist and landlord” but guaranteed both “political power” and “social power” through democratic control and management of the Soviet Republic. It was this “merger” of political and social rule that “guaranteed power in the hands of the proletariat”. Her critics she pointed out did not even “contend that the workers had any power in the present Soviet state”, they relied solely on the existence of stratified property. It was not this that is the “social conquests of October 1917 but “the conscious and active political and practical participation of the masses in liberating themselves from the yoke Tsarism, capitalism and landlordism”. This could not be narrowed into such a misrepresentation of the “Marxian concept of a workers state”.

Class nature of the state

Shachtman asked if the workers were no longer in charge of the Soviet Union, and there is no “property owning capitalist class”, what is the class nature of the state? Dunayevskaya argued that the proponents of a “new exploitative society thesis” confused the alleged distinction from capitalism of the Soviet Union from what is actually a “distinction from a certain stage of capitalism rather than from capitalism as a whole”. The determining factor is not whether the mean of production are privately owned or state owned but whether they are capital, “monopolized and alienated from the direct producers”, she wrote: “The Soviet Government occupies in relation to the whole economic system the position which a capitalist occupies in relation to a single enterprise”. Whilst Shachtman considered the property relations established by the October 1917 had been destroyed by the bureaucracy he did not consider the possibility that the “new” society is state-capitalist. Trotsky however had, and rejected the bureaucracy as a class of state-capitalists, as state ownership was brought about by a social revolution. Dunayevskaya contended:

“But does the manner in which a thing is accomplished determine the use to which it is put by its usurpers any more than each task to be accomplished determines the group to execute it…Finally the Stalinist counter-revolution identified itself with the state. The manner in which the mean of production were converted into state property did not deprive them of their becoming capital.”

The fact that a social revolution had began a process of placing production into the hands of the state, explains its historic origin but it does not “prove the economic law of motion or differs from that analysed by Karl Marx”. Duneyavskaya’s asserted that it was not a question of income inequality between factory workers and directors but “that the mode of production produces and reproduces the capitalist production relations. State-capitalism, it is true but capitalism nevertheless”. The existence of statified property did not make it imperative to defend the Soviet Union, Dunayevskaya asserted there should be “no defence of the Capitalist Society existing in Russia”.

The state-capitalist theory provides a more thoroughgoing basis for a third camp perspective which avoids the pitfalls of tailing one or other of the poles of world capitalism, previously Russia and the United States. But furthermore it strengthens our efforts to conceptualise a vision of workers self-liberation based on de-alienation of labour and human emancipation in a socialist society. As opposed to the statist orthodoxy’s of Social-Democracy and Stalinism.

Key features of the theory of state-capitalism

A new stage of world capitalism

Dunayevskaya wrote that: “Each generation of Marxists must restate Marxism for itself, and the proof of its Marxism lies not so much in its “originality” as in its “actuality”; that is, whether it meets the challenge of the new times” The theory of state-capitalism met the challenge of the day in its universality, it was not narrowed to a response to the transformation of the Russian Revolution into its opposite, but of a new stage of world capitalism. She argued that: “Because the law of value dominates not only on the home front of class exploitation, but also in the world market where big capital of the most technologically advanced land rules, the theory of state-capitalism was not confined to the Russian Question, as was the case when the nomenclature was used by others.”

Whilst later theoreticians such as Tony Cliff, turned to the writings of Bukharin on imperialism and state-capitalism, adopting his linear analysis of the continuous development from competitive capitalism to state capitalism, Dunayevskaya explicitly rejected such an approach:

“The State-capitalism at issue is not the one theoretically envisaged by Karl Marx in 1867-1883 as the logical conclusion to the development of English competitive capitalism. It is true that “the law of motion” of capitalist society was discerned and profoundly analysed by Marx. Of necessity, however, the actual results of the projected ultimate development of concentration and centralization of capital differed sweepingly from the abstract concept of the centralization of capital “in the hands of a single capitalist or in those of one single corporation”. Where Marx’s own study cannot substitute for an analysis of existing state-capitalism, the debates around the question by his adherents can hardly do so, even where these have been updated to the end of the 1920’s”

Dunayevskaya went so far as to argue that to turn to these disputes other than for “methodological purposes” was altogether futile; and it is with regard to the dialectical method that Dunayevskaya stands apart from other approaches to this question. The state-capitalism in question is not just a continuous development of capitalism but the development of capitalism through the transformation into opposite. In the Marxian concept of history as that of class struggles, there is no greater clash of opposites than “the presence of the working class and the capitalist class within the same modern society”. This society of free competition had developed into the monopoly capitalism and imperialism analysed by Lenin in 1915, simultaneously transforming a section of the working class itself and calling forth new forces of revolt, making the Russian Revolution a reality. The state-capitalism Dunayevskaya faced emerged as the counter-revolution, which grew from within that revolution, gained pace. With the onset of the Great Depression following the 1929 crash, argued Dunayevskaya the “whole world of private capitalism had collapsed”:

“The Depression had so undermined the foundations of “private enterprise”, thrown so many millions into the unemployed army, that workers, employed and unemployed, threatened the very existence of capitalism. Capitalism, as it had existed – anarchic, competitive, exploitative, and a failure – had to give way to state planning to save itself from proletarian revolution”.

This state ownership and state planning was not a “war measure”, but rapidly emerged across the industrially advanced and the underdeveloped countries. State intervention characterised both Hitler’s Germany, with its Three Year Plans, as a prelude to a war to centralize all European capital, and the USA where Roosevelt launched his ‘New Deal’. This tendency did not decline after the war but accelerated such as under the Labour Government in Britain. Dunayevskaya argued that the “true index of the present stage of capitalism is the role of the State in the economy. War or peace, the State does not diminish monopolies and trusts, nor does it diminish its own interference. Rather, it develops, hothouse fashion, that characteristic mode of behaviour of capitalism: centralization of capital, on the one hand, and socialization of labour on the other.”

This was a world-wide phenomenon and whilst it was true that Russian state-capitalism, “wasn’t like the American, and the American New Deal wasn’t like the British Labour Party type of capital, nor the British like the German Nazi autarchic structure”. It found expression not only in the countries subjugated by Russian imperialism in Eastern Europe and in Communist China but also in the newly independent states following the anti-colonial revolutions.

Despite the varied extent of state control over sectors of these economies taken as whole all revealed we had entered a new epoch in history, differing from the period of Lenin’s analyses, as his was from that of Marx’s own lifetime. What Marx had posed in theory of the centralization of capital “into the hands of a single capitalist or a single capitalist corporation” had become the concrete of the new epoch.

Alienated labour is the hallmark of capitalism

What distinguished Marx from all other socialists of his time, and ours, was his analysis of labour. Amongst the key concepts in the theory of state-capitalism as developed by Dunayevskaya was alienated labour as opposed to private property in production as a distinguishing characteristic of capitalism. This was originally argued by Marx in his much neglected 1844 Economic and Philosophic Manuscripts, and during her original study of the Five Year Plans in 1941 Dunayevskaya studied Marx’s essay on Estranged Labour and subsequently published the first English translation of his Private Property and Communism and Critique of the Hegelian Dialectic. 

These writings of Marx provide us with a very different view of capitalism and stand in contradiction to the idea that the main characteristic of capitalism is private property, an outlook that has underpinned the thinking of generations of socialists who in turn consider state ownership, either of sectors of the economy or as a whole as the defining feature of the opposite of capitalism – socialism. Dunayevskaya drew the comparison between Marx’s critique of the “vulgar unthinking communism” of his day with the “totalitarian Communists” of our own arguing “he had put his finger on all that was essential when he criticized the utopian communists of his day for their total preoccupation with the question of private property.” Their view was merely the logical expression of private property for despite their opposition to it they were willing to allow labour to remain as was. Marx’s considered that:

“The relationship of the worker to labour creates the relation to it of the capitalist (or whatever one chooses to call the master of labour). Private property is thus the product, the result, the necessary consequence, of alienated labour, of the external consequence, of alienated labour, of the external relation of the worker to nature and to himself.”

Marx argued that as opposed to private property being the “reason, the cause of alienated labour, it is rather its consequence”. As early as 1942 in Labour and Society, she contrasted labour in class societies and socialist society. She pointed to the division between mental and manual labour as the hallmark of labour in class society:

” The separation of intellectual and physical labour stands in the way of mans full development. Hence labor in class societies – whether that be slave, feudal, or capitalist order – no longer means the free development of the physical and intellectual energy of man. The product of his labour is alienated from the laborer, and his very mode of labor becomes and alien activity.”

Labour under capitalist society is specifically one of human beings reduced to the drudgery of appendages of machines, producing capital. Marx argued that this alienation of the worker is not restricted to the relationship to the end product of his labour but in the very activity of production itself: “The worker therefore only feels himself outside his work, and in his work feels outside himself. He feels at home when he is not working, and when he is working he does not feel at home”. Dunayevskaya singled out Marx’s warning that: “We should especially avoid re-establishing society, as an abstraction, opposed to the individual. The individual is the social entity”. She argued that this was a consistency in all of Marx, whose emphasis on “the individual rather than society in his late works thus consistently follows and develops the theoretic scope of his early works where he sketched the pattern of the social order to follow capitalism”. Dunayevskaya asserted no other generation could understand Marx’s early writings like our own, “for only our generation bears on its back the fully capitalistic nature of this type of “anti-capitalism” known as Communism, or One Party State totalitarianism”.

If then private property arises from alienated labour does that affirm state-capitalism as the opposite of private property? For Marx alienated labour and private property were inseparable, he did not allow legal forms of appearance to prevent him getting at the actual relations in production. Dunayevskaya concluded that: “as long as there exists ‘power over individuals’, “private property must exist”. To Marx, private property is the power to dispose of the labor of others. That is why he so adamantly insisted that to make “society” the owner, but to leave the alienated labour alone, is to create an abstract capitalist”.

Thus in reconstituting Marx’s analysis of alienated labour we can conclude that state ownership as such still preserves private property i.e. the alienation of man/woman.

The operation of the law of value

Where other Marxian theoreticians considered state-capitalism as having superseded the rule of the law of value, Dunayevskaya’s theory was distinctive in its assertion that in the USSR as in western capitalist economies it continued to hold. She countered that:

“When we come to analysis of our age we say the phenomenon today is statification. Russia is the central question today in the sense of being the first in life of what was foreseen theoretically. We saw that statification had no effect on capitalist laws. It is not private property but how much surplus value extracted goes back into production. What is involved is how the law of value operates in the new decadent society”.

Capitalist society is distinguished from its predecessors in being a value-producing society, Marx outlined in Capital the specific type of labour in this society that created value – abstract labour. The commodity of the worker – labour power –ceases to be his property but that of the one who has paid a wage in exchange for it. The specific skills of the concrete labour of the individual are subordinated by the discipline of the working day, what is considered by the capitalist socially necessary labour time to work beyond the value of his labour power to produce ever greater proportions of surplus value for accumulation of capital, “value big with value”. It does so by paying workers the minimum whilst extracting a maximum unpaid labour. Dunayevskaya wrote that:

“The commodity of commodities in capitalist society is labour power. The whole society is governed by the necessity of producing labour power according to the labour time necessary for the production of this commodity”.

Production has become capitalist production according to Marx from the moment when the direct producer must “instead of a commodity, sell his own capacity to labour, as a commodity.” It has duly been argued it would be more correct to talk of Marx’s value theory of labour as opposed to a labour theory of value. For Marx what was essential, and perverse in capitalist society, was that labour power appears in the shape of a commodity.

Whilst Marx’s Capital does not usually assume a closed society, for the purposes of his critique he provided an outline of a closed capitalist society, dominated by the law of value. Through this analysis he showed that it would hold true for every capitalist society, which would remain by nature capitalist even if other conditions prevailed because they would in no way change the essence of that society. Even if the laws of centralization of capitals reached the extreme of a fusion into a single capital where: “In a given society this limit would be reached only when the entire social capital was united in the hands of either a single capitalist or a single capitalist company”. Marx considered – “the economic effect remains the same”.

How then does this relate to the former USSR where centralisation was brought about by a social revolution? In a workers republic the law of value operates in the sense of the existence of the world market, but it does not dominate to the extent that under working class self-government in production, its operation withers away in the forging of a new society, analogous to the extent the state itself withers away. As opposed to uprooting the domination of capital the theory of state-capitalism highlighted the opposite trend in the former USSR.

In her extensive studies of the first three Five Year Plans, Dunayevskaya had shown that the law of value dominated the economy, expressing itself through: “(1) The production of means of production outdistances the production of means of consumption. (2) The misery of the workers increases, along with the increases in capital accumulation”. This growth of the means of production over means of consumption was the proof of the specifically capitalist nature of the USSR, that it was not only exploitative but the direction of its development was the same as under classical capitalism. On the modus operandi of the profiteering in state enterprises Dunayevskaya wrote:

“By April 19, 1936, a decree established what was known as a directors fund, to be at the disposal of the management and to provide for paying premiums to the administrative staff and workers. It is a secret to no one that these funds are used mainly as premiums for directors and Stakhanovites and not for rank and file workers… Each individual undertaking has considerable discharge in the manner of executing the plan. For instance the management can make profits over and above those “planned” for it by the economizing on the cost of labour…………..There was introduced what was known as “ruble control”, that is to say the undertakings were to be conducted on principles of cost accounting as in any money economy.”

The share of these profits did not go to the worker, but was a means which the state siphons of that over and above which was paid at a minimum in wages, whilst the enterprise manager who was permitted to accumulate funds that from the planned profits. As in private-capitalism, under state capitalism, decision-making is organized in hierarchies of control, with power concentrated at the top. Similarly income tends to follow the hierarchy pattern, rising at the top. Among the people in the decision-making occupations there is an imperative to constantly increase profit and power.

Foreign observers had long noted that the Soviet Union employed almost all the devices associated with capitalism, Dunayevskaya pointed out that where “devices such as banks, secured credit, interest, bonds, bills, notes, insurance and so on”, were essential to the operation of Soviet industry. The Stalinist economists in Under The Banner of Marxism admitted that, “denial of the law of value created insurmountable difficulties in explaining the existence of such categories under socialism”. Thus as early as 1944 the façade of “socialism” gave way to the conclusion by the authors that: “the measure of labour and measure of consumption in a socialist society can be calculated only on the basis of the law of value”. Marx’s formula of “From each according to his ability to each according to his need” was appropriately revised by the Communists to “From each according to his ability to each according to his labour”.

Dunayevskaya did not consider this episode simply another example of the double-speak so common to this regime but a significant point of departure. Her analysis at the time A New Revision of Marxian Economics caused an international uproar making the front page of the New York Times. She wrote that the “ideas and methodology of the article are not accidental”:

“They are the ideas and methodology of an ‘intelligentsia’ concerned with the acquisition of ‘surplus’ products’. What is important is that this departure from ‘past teaching of political economy’ actually mirrors economic reality. The Soviet Union has entered the period of ‘applied economic’. Instead of theory, the present article presents an administrative formula for minimum costs and maximum production. It is the constitution of Russia’s post-war economy”

Indeed in later years following Khrushchev’s so called dismantling of Stalinism, she countered that whilst the regime may have taken a “milder form” neither the “United States ‘free enterprise’ or Russian ‘communism’ had changed the fundamental Marxian theory of value and surplus value, or capitalism as a exploitative relationship of capital to labour. After the Russian admission in 1943, that the law of value operates in Russia, there was no further point to continue the detailed analysis of their State Plans.”

The fetishism of the plan

Generations of post-Marx Marxists have erected as opposites planning versus the ‘anarchy of the market’ virtually as the equivalent of socialism versus capitalism. The age of state-capitalism has seen this theoretical morass reach new depths, firstly in the defence of the no longer “actually existing socialism” in Eastern Europe, where a planned economy was cited as enough to describe totalitarian regimes as a workers state, but secondly in the ongoing defence of state industries and the welfare state in the face of privatisation or restructuring programmes. 

Marxist-Humanism roots its critique of this aspect of state-capitalism in Marx’s writings in Capital on the Fetishism of the Commodity and its Secret and on Co-operation. The wealth of societies in which capitalist production prevails wrote Marx “appears as an ‘immense collection of commodities”, he maintained that commodities exhibit a fetish comparable to religious figures created in men’s brains taking on a life of their own.

“So it is in the world of commodities with the products of men’s hands. I call this the fetishism which attaches itself to the products of labour as soon as they are produced as commodities, and is therefore inseparable from the production of commodities”.

They appear to have an exchange-value, which belongs to them inherently, but is actually derived from human labour. In unravelling the “mysterious character of the commodity form”, Marx writes it consists in the “fact that the commodity reflects the social characteristics of men’s own labour as objective characteristics of the products of labour themselves, as the socio-natural properties of these things”. This fetishism has negative implications for human relations: “It is nothing but the definite social relation between men themselves which assumes here, for them, the fantastic from of a relation between things”.

These forms of fetishism identified by Marx are not simply an illusion, he went out of his way to alter “considerably” this section in the French edition of Capital to emphasise that relations between people in their work do appear as “material relations between persons and social relations between things”. What is of importance to us today in considering this aspect of Marx’s in terms of the theory of state-capitalism is recognising that these alterations to Capital were made under the impact of an actual revolution – the Paris Commune. It was not only that he saw this working-class government as the “political form at last discovered under which to work out the economic emancipation of labour”, and celebrated that in its short life span it began stripping away the fetishism’s and uprooting the economic foundations class rule. In the Civil War in France he also warned against those critics of capitalism who advocated ‘co-operative production’, writing that if “co-operative production is not to remain a sham and a snare” if it is to “supersede the capitalist system” based on a “common plan”, then it must be under the workers own control. Marx could not see in his age the monstrous proportions in which this “sham and snare” would mature, for our generation it is very much a reality.

Outside of the control of the workers themselves, the Plan as opposed to superseding capitalism, of overcoming the fetishism of commodities, has perfected it and in its place substituted the fetishism of the Plan. Whilst in power the Russian communists for their part in order to square theory with the hideous reality ordered that Chapter 1 of Capital with its section on Fetishism be omitted from its study. Dunayevskaya who considered the Russian bureaucracy the most dangerous enemy of the working class because it “cloaks itself in Marxist terminology” wrote:

“But their Plan turns out to be no more than a disguise for the actual relations of production in the factory. They are no more able to overcome this fetishism than are the bourgeois economists. In other words far from the Plan bringing light into the relations of production in the factory the State Planners express in the Plan the total domination of the workers by the machine. In reality, therefore, the State Plan is nothing but the organization of the proletariat to produce under the domination of the machine”.

It was not the existence of the ‘free market’, which the fetishism was rooted in, but production relations, and under state-capitalism the Plan, whether of the ‘communist’ apparatchiks and the western Human Resource managers perpetuates the dehumanised relations in work and society as a whole. Marx did not see the emergence of planning as a socialist hallmark in itself – he drew a clear line, between the plan of capital and of labour. In this Marx’s humanism speaks to our age in challenging substitution of what he was for with what he was against – the despotic plan of capital.

This despotic planning of capital has developed through the centuries into ever more organised techniques of management, ‘human resource specialists’ and ‘production scientists’ all with one end in mind, increased control and co-operation of the workforce to produce more. The age of state-capitalism brought this domination the despotic plan of capital to new heights of exploitation – from Stakhanovism, to speed ups, production targets, business planners and, armies of technocrats.

Marx viewed this form of planning as fundamental to capitalism, arising from the antagonism between capital and labour. The resolution he raised against this fetishism of commodities and despotic plan of capital was a new society, whose elements existing in the co-operation of the workers in the present, set free through social revolution, he writes:

“The veil is not removed from the countenance of social life-process, i.e. the process of material production, until it becomes production by freely associated men, and stands under their conscious and planned control”.

The new in the theory of state capitalism insisted Dunayevskaya was that the State Plan did not differ fundamentally from the capitalism Marx had analysed in Capital, where he shows it was the despotic plan of capital which labour confronted not the anarchy in the market.

A highly unstable system – crisis and revolt

Whilst the extreme oppression of the regimes of the USSR and Eastern Europe gave an outwards appearance of stability, and cohesion, state-capitalism there had not created a sustainable new society. Instead, this form of capitalist development was wracked by the instabilities of social and class contradictions on a more extreme form than traditional capitalism. The theory of state-capitalism avoided the pitfalls of the new-class theorists and the apologists for Stalinism, outlining the laws of motion of the system towards the ‘collapse of communism’. Whilst observers could see the depths of crisis by the 1980’s, Dunayevskaya was arguing this in the early 1940’s. In contrast to the intellectuals who saw these regimes as having escaped the crisis of capitalism, she argued:

“Although the ordinary commercial crisis are avoided through statification of the economy…when the crisis occur, they are deeper than even in traditional capitalist lands…It is true that the Russian brand of crisis takes the form not merely of the liquidation of obsolete units of capital, but of “liquidation” of its inefficient managers. But the law of production remains the same: the payment of the worker the minimum and the extraction from him of the maximum unpaid labour”.

The theory of state-capitalism is not an explanation of the organisation of rulers keeping workers down, it was always held to be inseparable from its dialectical opposite in the new forms of workers revolt. Workers struggle are generated by the efforts to intensify exploitation by the ruling class, a drive stemming from the laws of motion of the state-capitalism, no different from those discovered by Marx. It was this importance of subjectivity, which Dunayevskaya considered differentiated her theory from such an eminent economist as Bukharin so influential on sections of 20th Marxism. Dunayevskaya wrote that:


“Our theory of state-capitalism differs from Bukharin’s not only because concrete circumstances differ in each epoch, but because the vision if you will, must differ from Bukharins abstract revolutionism and, instead be rooted in the actions and thoughts of working people who would themselves decide their own destiny, before, in, and after the revolution. That is why, from the start of the state-capitalist debate in 1941, my immediate point of departure was not the crimes of Stalin, but the role of labour in a workers’ state.”


It is the existence of such class conflict at the heart of totalitarian state-capitalism that is the key to understanding the need for a Stalinist police state. Dunayevskaya wrote:


“The millions in forced labour camps are the true measure of the never-ending resistance of the Russian workers in the state and in the factory. Had the revolt not been so persistent, the terror wouldn’t have been so violent. Nobody wants to put millions of people into concentration camps.”.


This is what distinguished the state-capitalist tendency from other theorists who stopped at the terror of Stalin and the development of centralization of capital; they did not see the revolt of the workers so essential to a revolutionary perspective. Even at the height of the post-war economic ‘boom’ as early as 1958, Dunayevskaya concluded in her work Marxism and Freedom that we were seeing the beginning of the end of Russian totalitarianism, based on the rebellion in the Vorkuta slave-labour camps and the revolutionary strikes in East Germany in 1953, shortly followed by the Hungarian Revolution of 1956. This revolution more any other initiated the start of the disintegration of the western Communist Parties. This did not mean that the ruling class would simply let go of its grip but would intensify its shackles; it did mean that the contradictions from the Russian centre, to the countries held in grip across Eastern Europe would move to a head.

By the time of Andropov’s ascendancy in 1982 three decades of revolt, comprising East Germany, Hungary, Czechoslovakia and Poland had preceded the final stage of state capitalisms degeneracy. Dunayevskaya singled out this historic moment against all the so-called Soviet specialists at the time who considered it the ‘beginning of an new age’, similar to the subsequent exhortations over Gorbachev. Of significance, until that point it had been the Party which played the ‘vanguard’ institution which gave orders to the Military and the Secret Police, even Beria never achieved power. Now the 15-year head of the KGB was established leader, similarly in Poland it was the Military under Jaruzelski, not the Party that took the helm of the regime. Dunayevskaya wrote that:

“What needs to be seen at the pivot is not the degeneracy at the top, but the truth that the revolts against Communist totalitarianism for fully three decades have been so deep that the rulers have had to resort to the military over the heretofore sacrosanct Party machine.”

Both Andropov and Jaruzelski were facing the same overriding problems of ‘low productivity’, how to force labour to produce, “for productions” sake as Marx wrote, how to enforce greater ‘labour discipline’. Yet despite years of terror and “barracks discipline”, and militarization of labour, they still faced the continuous revolt of labour. The newness in the stage of degeneracy of state-capitalism was not in its foreign relations, whether of the new Cold War and demands on military investment it demanded, or in further even more “peaceful coexistence’, the newness was in the intensity of the internal conflict and the massive opposition it unleashed.

The world witnessed events during 1989-91 of a revolutionary wave unseen in Europe since the downfall of three Empires in 1917/18. It was working class resistance, decisively the Polish workers movement that undermined the ruling class’s ability to rule in the same old way, shattering the communist monolith. A point of renewed importance in light of the constant efforts to denigrate the place the freedom struggles for the modern mystification that the Pope or Ronald Reagan delivered greater freedom to the East European masses. 

Intellectuals and the pull of retrogression

 The dual rhythm of revolution involves not only the destruction of the old but also the creation of the new. The second half of the 20th century has been littered with unfinished and aborted revolutions, which failed, which proved that theory couldn’t be picked up en route, history does not afford us that luxury. This has been confirmed not only by the failure of the 1960’s and disasters such France in 1968 – but the culmination of the East European revolts in the events of 1989-91.

The sight of the red flag over labour camps was never going to make it easy for genuine Marxism to gain the upper hand in the revolts against totalitarian communism, nevertheless at least until the military sought to break Solidarnosc in Poland in December 1981 the concepts of a radical working class alternative had permeated the opposition movements. From our 21st century vantage point we can obviously see that this changed dramatically – the legacy of which we live with today. 

How does the theory of state-capitalism explain the rush to embrace neo-liberal ideas of ‘free market’ capitalism in the USSR and Eastern Europe. In part what we have experienced is a form of appearance of a phenomenon not opposed to but integral to the age of state-capitalism – the administrative mentality of the intellectuals. Dunayevskaya wrote “in origin, the administrative mentality dates back to the 1929 world crash that signalled the end of rationality of capitalist production relations, it is only with the nuclear age that the administrative mentality became the all pervasive phenomenon it is now.” This was expressed in those who were sucked in by one or other of the poles of capital, becoming apologists for the progressive nature of Russia or America, for forty years the middle class intellectuals embraced the state ownership and state planning, in the west they found an ally in the labour bureaucracy shackling working class self-development. In the Afro-Asian Revolutions Dunayevskaya noted that:

“The greatest obstacle to the further development of these national liberation movements comes from the intellectual bureaucracy which has emerged to ‘lead’ them. In the same manner the greatest obstacle in the way of the working class overcoming capitalism comes from the Labour bureaucracy that leads it”.

The tragedy that unfolded in the newly independent countries which had broke from Russian imperialism was due not only to the dead hand of world capitalism. It was as much the role to the new leaders turned rulers who abandoned the creativity of the revolutionary masses. This retrogression began to take on a different energy with the end of the post-war boom and onset of the new cold war of Reagan and Thatcher, who led the offensive against their rival Russia, but also against revolutionary movements at home and abroad. This period saw the ascendancy of neo-liberal ideas in the 1980’s, at the centre of it was the freedom for capitalist from interference – primarily from the working class and supposedly the state. The free movement of capital wherever it wants would lead to the enrichment of humanity and privatisation would increase production with a more flexible labour. The economic stagnation in the communist states, the widespread poverty in Latin America and Africa were the evidence of the state control – branded as “socialism”.

Throughout the 1980’s neo-liberal ideas, underpinned by post-modernist philosophers declaring the “end of history”, took hold amongst leaders of social democracy and permeated the section of communist bloc’s, official “intelligentsia” of economists, planners, advisors and academics. From their vulgar defence of the state-capitalist tyranny as “actually existing socialism”, they called for “market socialism”, to outright neo-liberalism. These ideas not only permeated sections of the ruling class, they were cascaded throughout the very dissident intellectuals and opposition movements in the regimes had persecuted.

The argument presented to justify the break from a socialist perspective by most of the oppositionists was that Stalinism was evidence of the absolute failure of socialism, or that the ‘geo-political realities’ code for Russian intervention prevented revolution. The Administrative mentality found its grandest testimony in the concept of the “self-limiting revolution” of the former Marxist Polish intellectuals Kuron and Modzelewski. It was a means to use the masses to blackmail the communist rulers into reforms – whilst retarding their revolutionary aspirations for a greater freedom than of the ‘free market’. An example of this mentality at work was during the revolutionary upsurge of 1980-81 Poland, both the intellectual oppositionists who advised Solidarnosc and those who sat on the regimes shoulders found they had a great deal in common. A participant Jadwiga Staniszkis recalled, “we could very easily have changed places”.

Similarly amongst the intellectual dissidents who pioneered Rukh in Ukraine there was an abandonment of the best traditions of the Ukrainian movement, which had never separated social from national liberation and defended the overthrow of capitalism in 1917-20. As soon as the intellectuals emblazoned capitalism on the banner of the movement against totalitarian communism then the actual ruling class began to sleep more easily. Far from the introduction of an alien social system as the pro-market opposition believed the laws of motion of capitalism brought no surprises to that 20% of the population who made up the class of exploiters.

The theory of state-capitalism helps us to understand more clearly the transition in the 1990’s, from one form of acquisition of surplus value to another, by a circuitous route the very same social class of exploiters was able to utilise its position to its full advantage during the change in forms of property. Indeed the other state-capitalist theorists from the 1940’s, the émigré Ukrainian Marxist Vsevelod Holubnychy had an more insightful prognosis predicting what has come to haunt post-‘communist’ states. In response to the debates in American ruling circles on returning the USSR to capitalism, Holubnychy pointed out the flaw in their program:

The domestic forces that would deliberately support such a program are, however, misjudged by the Americans. Or rather, they are looking for them where they are not to be found. The emigrants and the rest of the demolished ruling classes are really too pitifully weak to be of service to them. But there is a force that could be enlisted to support this American program. This force is in the Stalinist bureaucracy itself.

The bureaucracy he argued were the main source of internal support for this program, in the throes of a crisis and a possible internal struggle the upper echelons of the state could well see a shake up and in response:

“When it sees the current system about to collapse, the ruling bureaucracy would be quite willing to maintain its social and political privileges in that way. The restoration of private property would as a matter of fact be greeted with great joy by the bureaucracy, provided that this form of private property assures its continued rule…”

After 1991 the exploitative class remained intact and continued to appropriate for itself the surplus value of the labour of society during the change in the forms of appearance of capitalism, there was no sweeping clean of Augean stables of the old order.

State-Capitalism and globalisation

Over a decade since the collapse of ‘Communism’, with a new generation of activists challenging global capitalism the question posed today is how does the theory of state-capitalism, assist us in our struggle to find a way of uprooting capital? To answer this question we have to establish if state-capitalism still exists in this age of globalisation, for the presence of the state as a central factor is being vigorously challenged by a number of socialist and bourgeois scholars. There is no hiding the fact that in the last decade there has been a massive change in the world capitalist economy of which the term globalisation has emerged as the principle descriptor. Just as the fetishism of commodities hides from us the reality of capitalism, so too has this hall of mirrors affected many of the writings on globalisation with regard to real world, none more so than the question of the state.

The principle thesis of the ultra-globalisation school is that the state is an “out-dated intermediate authority, dismissed by history” and its decline is arising from the impact of “fragmentation and globalisation.” Such theorists argue that only two forces matter, global market forces and stateless transnational companies which have rendered surplus the power of the state. Former Communist Party of Great Britain theorist Eric Hobsbawm has written that: “the most convenient world for multinational corporations is one populated by dwarf states or by no states at all”, and from a very different angle the Italian autonomist Marxist Toni Negri has argued that in the new “world order” as opposed to the fragmentation of the state, it has been superseded by new forms “composed of a series of national and supra national organisms united under a single logic of rule”, a transnational body the call “Empire”.

In addressing this thesis of the “decline of the state” there are two questions to answer firstly what happened to state-capitalism after widespread privatisation of the 1980’s-90’s, and secondly the extent and reality of globalisation. A more accurate description of the process, which has led to our current situation, is not so much a “moving away from state capitalism” but the new forms of appearance of state-capitalism. The Marxist-Humanist Andrew Kliman, countered many of the arguments which are so fashionable today when he wrote:

“Clearly the state’s role as direct producer and owner in many countries has ended for now, and deregulation in the West represents a lessening of one particular form of state intervention. Yet such changes are part and parcel of a heightened role of the state in “restructuring” the various national economies and, as the rebellious masses of Los Angeles can testify Reaganism’s smashing of the welfare state goes hand-in-hand with greater military repression. Throughout the world, ostensibly” free market” aims coexist with state interventionist methods”.

An understanding for the co-existence of privatisation and the state can be found in Marx’s analysis that to ensure the domination of the capitalist over the worker, “extra-economic force is still used, but only in exceptional cases”, and that force is “the power of the state”. The current crisis of global capitalism very much fits the kind of “exceptional case” Marx describes requires the state. In the west and the east where privatisation and restructuring programmes have occurred, indispensable to their success as organiser and enforcer has been the state, the privatisation of state owned companies has actually increased state regulation as opposed to a withdrawal as an economic agent. Simultaneously the austerity programme of increased unemployment, driving down wages and cutting back on the welfare state requires wholesale attacks on the working class by employers – backed up by the laws and power of the state.

The massive technological advances of our current stage of globalisation has in no way changed this situation, the use of new technologies to increase productivity is still subject to the tendency for the rate of profit to decline, leading again to a quest for more surplus value at the expense of variable capital (living labour, wages). Thus argues Kliman: “Austerity is consequently not a temporary way-station on the road to “free market” prosperity, but the future of the continuing global economic crisis”. Far from the role of the state declining it is as much a necessity for capitalism in crisis as it was during the emergence state-capitalism in a previous crisis. State capitalism in our age of globalisation far from having “now exhausted itself” has not lost it centrality in the capitalist economy, it continues to play a key role in regulation, planning and increasingly as a cushion against economic collapse such as preventing some of the largest corporations going to the wall.

I would argue that far from globalisation undermining state capitalism it has underpinned these new forms of appearance. The real power behind the IMF is one particular capitalist state , the USA. The IMF’s “conditionality” always involves the state enforcing austerity, promoting exports etc. It has been through the agency of the national states that the programmes of global capitalist institutions such as the World Trade Organisation (WTO) made up of 140 states, and primarily the imperialist states, that determine the policies of these bodies.

This is not to deny the reality of globalisation, but to demystify what may almost be called the fetish of globalisation. The fact is the international character of capitalism is not new, what is new is scale and intensity of the inter-nationalisation and drive of capital to become absolute. From 1985 to 1998 world exports rose from $1.6 trillion to $5.4 trillion, in 1998 63,000 transnational corporations, dominated world trade and investment with 690,000 affiliates, the top 100 being concentrated in the economically advanced countries. Money markets have seen massive movement across the globe, $1.5 trillion in foreign exchange changed hands every day in 1998, the stock of international bank lending rose from 4% of GDP of advanced countries to 40% in a decade. Neo-liberal policies of de-regulation have allowed greater manoeuvrability for corporations to prize open countries and dominate global markets. This staggering concentration is exemplified in that 225 individuals control more wealth than half the world’s population of 2.5 billion.

Whilst these corporations spread their web they have not extracted themselves from their original countries but are imbedded in them and enmeshed with the state. There is an intimate relationship between the global interests of corporate power and the state as guarantor. The World Bank argues the need for the state to ensure its “development agenda” of privatisation and structural adjustments are not impeded, the same report notes that in the advanced countries state expenditure has increased dramatically over the last quarter century, that is the period of globalisations ascendancy. Similarly heightened competition characteristic of state-capitalism continues to give the lie to the ‘freedom’ of the market, as trade expands internationally it reflects the antagonisms of national states.

Even where the concentration and centralization of capital has taken the shape of the European Union, France refused to concede state ownership of its electricity industry. Whilst the EU itself has signed 27 trade agreements and 15 more in the pipeline which from the perspective of the USA who is excluded – it is increasingly surrounded by preferential trade agreements by other states. But most missing from the wide range of writings on globalisation arguing the decline of the state is amnesia with regard to ‘Communist’ China – a member of the WTO and an integral part of the globalisation.

Every stage of capitalist development has been met by new working class resistance, this itself has been a major determinant on the shaping of the new forms of appearance and re-organisation of state-capitalism. Just as state-capitalism saw a new stage of workers revolt such as the battle against automation in the USA and East German workers revolt our age is no different.

Statism in today’s anti-capitalism

In the decade since the fall of the Berlin Wall decadent capitalism has plunged the world further and further into an abyss of obscene inequality, imperialist wars, reactionary nationalism and religious fundamentalism. Is then a theory developed in response to the false-socialism of Stalinism and new phase of capitalist development relevant to our generation? The body that will take us to either a ‘new society’ or shield us from globalisation is viewed still by some as the state, not new subjective forces challenging existing capitalist reality. Susan George a leading light amongst in the ‘anti-globalisation’ activists writes that:

“Unless we can make sure that the state retains its prerogatives, I can’t see who will stand between the person on the ground and organisational tyranny. Without the state- though not necessarily the one we have now – it will soon be McSchools, McHealth and McTransport”.

In practice it is to reforming the existing state that is the focus of George, and she may well be criticising the manner in which capitalism is being preserved in the 21st Century but her statist mind-set is a sure guarantee of doing exactly that. Yet the most astounding example of this fetishism must be the leading Russian socialist Boris Kagarlitsky.

Kagarlitsky’s argues that: “Marxists have always argued not just for more state involvement in the economy but connected it with the need to transform the state itself…What makes us leftists is that we combine the idea of state interventionism with the goal of changing the state so it will be a different sort of state, intervening in the economy in a very different way”. This is what Kagarlitsky has reduced to the “strongest point of Marxism”. Instead of the free association of producers we are told, “we must undermine the domination of private property, thus nationalise it…The state has to take responsibility for production for the development of the economy”.

Kagalitsky strikes a tragic figure in his argument that because transnational corporations make use of the state in their own interests so too must the left, and the “starting point of this new co-operation can only be the national state”. That there is a needed rethinking to address the problems of today is without question, to take this as our point of departure is to place Marx’s philosophy of liberation back into to the statist gulag which from which it has fought to break free. As Dunayevskaya’s warned: “Unfinished revolutions have ever been the source for the new breath the old class society draws to keep on existing. Sometimes it even appears as ‘new’.”


Those who underestimate importance of the power of ideas have failed to grasp the tragedy of the 1989-91 struggles that overturned Russian Imperialism – that is that there was no shortage of imagination and creativity on the part of the working class, the youth and the oppressed who mobilised in their millions against totalitarian rulers. What was absent on a grand scale was a philosophy of liberation capable of preventing the immense retrogression in thought at the culmination of those struggles. Even after defeats Marx took as his point of departure the highpoint of the revolution. As such we can build on the momentous revolts under state-capitalism and not allow them to be buried in the distorted history of those years written by those who usurped or broke decisively with their aspirations.

In tracing the origins and development of the theory of state-capitalism we can see its importance as an absolute critique of capitalism in all its forms of appearance even when it claims to be on our side – ‘Communism’, of its agents both as rulers and within the labour movement, but furthermore in the projection of its absolute opposite – Marx’s vision of human liberation in a free communist society. For over half a century state-capitalism paraded as its opposite and has shown clearly the aspiration for power, so desired by many a radical, and the creation of a free classless society are not a priori the same thing. In re-examining state-capitalism from our vantage point of this age of globalisation we can see not only that this global phenomena remains part of our present decadent capitalism, but our critique must be again absolute and reach beyond mere anti-capitalism, and those who wish to bring back the old statism, disguised as something new.

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