[Marxism] State capitalism

Jurriaan Bendien andromeda246 at hetnet.nl
Fri Jun 18 02:27:09 MDT 2004

I think it is possible for a "state capitalism" to exist if state-owned
corporations operated on a profit-seeking basis are the dominant form of
economic organisation in an economy, and if part of those profits can be
privately appropriated as income. But to my knowledge this type of situation
has occurred in few countries, and only for relatively short intervals of
time. Usually this situation happens when private investors themselves lack
sufficient funds, cannot loan sufficient funds, or are not motivated to
invest, so that only state control and investment can make economic
development possible.

I have stated my view of the concept of capital several times, in debate
with Mark Jones and on OPE-L. Marx himself defined the essence of capital in
many different ways, including as "value in search of surplus-value" (value
in search of value-accretion, self-valorising value), or as a private claim
on the surplus product of labor, or as a social relation. Sometimes Marx
also refers to the "capital-relation" denoting command over a labor force by
virtue of property ownership, such that capital can buy labor.

Harry Braverman opined in his book "Labor and Monopoly Capital" that in fact
Marx's whole book constitutes his definition of capital. Because capital can
be understood only in motion, i.e. through an analysis of circuits of
transactions and the relationships between people this involves, and no
fixed, short definition is likely to be satisfactory. Marx gets around this
problem, by carefully defining successive "forms" that capital takes and
showing how one form can change into another form.

A careful logical analysis suggests that the best general definition of
capital is as a "an asset owned by virtue of socio-economic conditions,
which permit that asset to grow in value". This means that no object is
intrinsically capital, but becomes so by virtue of socio-economic relations
which permit the object to function as capital, and attract a profit return.
This definition emphasises that capital is a social form or social function
of objects, which presupposes definite property relations and economic
conditions in order to exist at all.

The "reification of capital" Marx emphasises is possible however, only if a
characteristic of relations between people can be expressed as the intrinsic
characteristic of a thing, such that the ownership of the thing can permit
claims and entitlements to products and can independently influence social
relations. But if we say that capital is "only a social relation, and not a
thing", as Marx sometimes does to emphasise the social aspect of capital,
this process of reification becomes incomprehensible, because it fails to
explain how things can acquire an objective power over people, and how a
social power can really be lodged in things.

Suppose Marxist A has a bag of money containing $30,000 of bank notes and
discusses with Marxist B the definition of capital. B argues, that this bag
of money is worth anything at all, and provides a power, only because there
exists a government which guarantees the currency, because a legally
sanctioned market exists which permits that money to be exchanged for goods
and services, and because those goods and services are produced by people
for the purpose of exchange. If those conditions did not exist, the money
would be worthless. "See", exclaims B, "I have proved that your capital is a
social relation, and not a thing".

So then A burns the bag of money, and says to B, "Okay, so capital is a
social relation between people. Where is my capital now ?". And B says, "it
is gone, you burnt it". But A says, "yet, you told me that capital is only a
social relation and not a thing, so now that I have burnt the money,
theoretically the social relation should still exist, because a social
relation is a relation between people." So B says, well, the goods you could
have bought with the money you burnt still exist, and your legally
sanctioned ability to buy it, depends on the existence of social relations."
But A says, "but the point is that now that I have burnt the money, I cannot
buy or invest anything anymore, so your definition is wrong, because I do
need to own a thing to own capital, and capital is a thing, which as you
admit I have now destroyed." And B says, "Well I did not mean that
literally, stupid."

This example brings out the fact that the concept of property has a double
meaning: it involves both a tangible thing and a socially agreed ownership
entitlement or claim to have it, use it, control it, dispose of it or
exchange it. In other words, there is an object, and there are social rules
which define what people may or may not do with the object.

It seems a trivial and bizarre definitional dispute, but in fact it is of
crucial importance to understand anything at all about the origins of the
capitalist mode of production, and the abolition of the capitalist mode of
production. As Marx himself admits in discussing more primitive or early
forms of capital (usury capital, merchant capital, bank capital), capital
existed long before the capitalist mode of production existed. Capital has
its historical origin in an exchange process which acts as intermediary
between producers and consumers.

That is, the existence of things as capital presupposes only money and
commodities, the ability to sell things for money, but not the capitalist
mode of production. Thus, capital can exist in a society in which the
production process is not capitalist. All that is required are the circuits
M-M' (one transaction) and M-C-M' (two transactions).

The whole point of Marx's story is, however, to investigate what happens if
these circuits of transactions envelop the whole production process, so that
money is made from the production process itself, not simply through
exchange, and the purpose of the production process, the motive for
producing, becomes making money from it.

In that case, a circuit M-C...P...C'-M' appears, i.e. the production process
is capitalised, and production is restructured to maximise the growth of
capital. What we have here is a production process subordinated to two
exchanges, M-C and C'-M' where the growth of capital depends crucially on
adding value in production (P) and capitalising that added value.

Abolishing the capitalist mode of production would therefore mean, that
production (P) is no longer subordinated and structured by the imperative to
make capital grow, but some other imperative. This would not necessarily
mean that the production process would then be "socialist", this doesn't
follow at all, it could be any kind of production, but it would not longer
be production for the overriding purpose of increasing capital.

The dispute about "state capitalism" is in reality about whether capital can
exist without private owners of capital, without capitalists. That is of
course conceivable, because the owner could be a legally sanctioned public
institution, an institutional entity, existing independently from particular
individuals, the purpose of which is to invest capital in production to
increase its value, as the main economic purpose.

The question however then is:

(1) whether the people who control this institution, are able to appropriate
the increased capital value. And in the USSR they could not, they could
obtain at most only an income entitlement made possible by that increased
capital value, but even so there was no necessary quantitative relationship
between that entitlement and the magnitudes of output growth, and in
addition their entitlement was based primarily on political criteria, not
economic criteria.

(2) whether the overriding purpose or motive of production in the USSR was
to use "money to make more money", a characteristic of the capital relation,
such that "capital bought labor" ? Clearly it was not, instead, the
imperative was to use public institutions to expand output as such,
according to social, political and technical criteria. The entire
international bourgeoisie was convinced that the USSR wasn't capitalism,
only the IS and the Maoists believed that. The USSR was called a "command
economy" because the command over labor was sustained primarily by
political, legal and military coercion, rather than economic coercion
expressed through market forces, deriving from property ownership or lack
thereof. In fact, just because you owned money in the USSR, didn't even mean
necessarily that you could buy anything with it in the stores, giving rise
to an extensive barter and "grey" circuit.

Why was this political, legal and military coercion necessary ? Because the
property relations were such that economic coercion through market forces
was to a large extent impossible; workers had a guaranteed income
entitlement and were guaranteed jobs, in fact they lacked the right to be
unemployed, except in cases of old age or sickness etc. No individual had
specifically a guaranteed right to surpluses from production, and no
individual owned them. That resulted from the abolition of private ownership
of means of production and legally sanctioned rights of citizens. But if you
abolish the power of things over people, then you reintroduce the
possibility of power of people over other people.

If the USSR was called "capitalist" or "state capitalist" then this has
nothing to do with real economic structure, but rather with a moral
evaluation of that economic structure, the fact that the nomenklatura could
obtain privileged income and product entitlements from it - not by virtue of
owning capital, because they didn't, but by virtue of managing public
institutions and a monopoly of political power.

That is just to say that the part of the surplus product, which was not
reinvested but consumed, was distributed mainly not according to economic or
commercial criteria, but according to political criteria, and indeed the
division between investment and consumption of output was primarily
politically decided. In that sense, however, the capital-relation no longer

The debate about "state capitalism" is not very interesting though if it is
just a moral debate. The real debate concerns what economic methods and
ownership forms best advance a society towards socialism, in a way which
both reduces economic insecurity, reduces unreasonable socio-economic
inequality between citizens, reduces economic irrationality, exploitation
and moral decay caused by uncontrolled competition between private
interests, and maximises the opportunities for people freely developing
their potential in a socially responsible way.

Unfortunately, Marx was unable to finish the whole project he set himself.
He said that economic life comprises production, distribution, circulation
and consumption. But he discussed mainly production and circulation, not
distribution and consumption. If Marx's thought is therefore understood as a
completed system, then this is only only historically inaccurate, but also
creates lopsided analyses. Relations of distribution and consumption are
just as important. That is one of the reasons why the Marxist debate about
the social nature of the USSR failed to provide a convincing analysis.


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