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Marx's Economics for Anarchists - Chapter 7

category international | economy | opinion / analysis author Tuesday November 15, 2011 02:12author by Wayne Priceauthor email drwdprice at aol dot com Report this post to the editors

State Capitalism

This is the 7th chapter of my book, "Marx's Economics for Anarchists; An Anarchist's Introduction to Marx's Critique of Political Economiy." It discusses the trend toward state capitalism, as theoretically developed by Marx and, even more, by Engels. It covers the relationship between Engels and Marx. It looks at the actual development of state capitalism. Kropotkin's views on statification are contrasted to Engels'.
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State Capitalism


As previously quoted, Marx described a tendency of capitalism to develop larger and larger firms, in spite of counteracting tendencies toward breaking down into smaller, units. The trends toward centralization and concentration were due to accumulation (growing larger), competition (some firms beating other firms and absorbing them), the class struggle (getting larger in order to better dominate the workers), and the use of credit and fictitious capital, among other factors. Semi-monopolization caused increasing intervention by the state in the economy, to support the giant firms. The overall trend, Marx noted, was toward a single, merged, firm (he did not say whether he expected this trend to ever be completed). By implication, this did not end competition, since even a single national firm would be in the environment of the world market, in competition with other giant firms.

Engels and Marx

This concept, of a trend toward a unified, statified, capitalism, was further elaborated by Frederick Engels in a passage in his book, "Anti-Duhring" (more precisely, "Herr Eugen Duhring’s Revolution in Science"). Engels thought this passage so important, that he repeated it when he took parts out of Anti-Duhring to make his pamphlet, "Socialism: Utopian and Scientific".

But first, it is useful to say something about Engels’ relationship with Marx. There are those, particularly among libertarian Marxists, who criticize Engels as the first of the “post-Marx Marxists” who led the Marxist movement in the wrong direction. Rather than criticize Marx for things about the historical Marxist movement which they dislike, they blame Engels. They claim to understand Marx better than did his long-time political partner and dearest friend! If true, this should raise questions about Marx; how come he could not explain his ideas even to Engels? Engels, after all, was a very bright person, even if not a towering genius like Marx.

In particular, they blame Engels for interpreting Marx’s materialist dialectics in a mechanistic and wooden fashion. They reject the idea that dialectics should be applied to nature and physical science at all, rather than only to human society. They especially reject Engels’ "Anti-Duhring" (and his "Dialectics of Nature"). Unfortunately for their opinion, Marx is known to have read over "Anti-Duhring" and discussed all of it with Engels before its publication. Marx contributed a chapter to it--which he would hardly have done if he disagreed with major parts of it.

The anti-Engelsian Marxists also blame him for the reformist development of the German Social Democratic Party (and the other parties it influenced). By World War I that party supported the imperialist war and the monarchist government which waged it. After the war, it sabotaged the German workers’ revolution and directed the German army in its murder of Rosa Luxemburg and Karl Liebknecht, among many others (such as the anarchist Gustav Landauer).

Was this Engels’ fault, to some degree at least? Perhaps, but only if we include that he had been unhappy with the rightward trends in the party for a long time, and said so. But he did not make a fight, hoping that the class struggle would straighten things out.

On the other hand, it had been Marx who had advocated the policy of building working class parties to run in elections, independent of the bourgeois liberal and conservative parties. It had been Marx who had declared that it might be possible for such parties to come to power peacefully through electoral means, at least in Britain or the US. (He usually added, though, that such an event would probably be followed by pro-capitalist military rebellions.) In fact, this was the biggest practical difference between Marx and Bakunin in the First International. Both sides were for forming labor unions, but the Marxists wanted to work for electoral parties and the anarchists were against them, saying they led to corruption of the workers’ movement. (In my opinion, historical hindsight shows that the anarchists were right.)

I do not mean to argue here about dialectical materialism or electoralism. Nor do I deny that Engels and Marx were different people with different styles of thinking or writing. But Engels’ work was as much a part of the basics of Marxism as was Marx’s; they are both responsible for its strengths and its weaknesses.

Engels’ Concept of State Capitalism

Engels was impressed by the rise of “trusts,” by which all the companies in an industry, on a national or international level, agreed to divide up a market and set prices. In fact though, since trusts were based on distinct companies which got stronger or weaker over time, they tended to eventually break up. They did not have the staying power of today’s multinational corporations.
….The official representative of capitalist society—the state—will ultimately have to undertake the direction of production….The transformation of the great establishments for production and distribution into joint-stock companies, trusts, and state property show how unnecessary the bourgeoisie are…. All the social functions of the capitalist are now performed by salaried employees. The capitalist has no further social function than that of pocketing dividends, tearing off coupons, and gambling on the Stock Exchange….

“But the transformation, either into joint-stock companies and trusts, or into state ownership, does not do away with the capitalistic nature of the productive forces….The modern state, no matter what its form, is essentially a capitalist machine, the state of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over the productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers—proletarians. The capitalist relation is not done away with. It is rather brought to a head. But brought to a head, it topples over
” (Engels, 1954; pp. 384-386).
Engels was saying that the culmination of corporations, trusts, and monopolies, is state capitalism (although he never actually uses the term). He did not say whether he expected this to happen or was just describing a tendency.

As he described state capitalism, the economy is managed by “salaried employees,” bureaucrats, officials, managers, etc. They are the state and as such the personification of capital. That is, they would exploit the workers in a capitalist fashion (as opposed to the methods of feudalism, or slavery, or of some new class society). He expected that the bourgeoisie will still be there, living as stock-owning parasites, but not actually managing anything.

By contrast, Bakunin predicted that a completely statified economy would develop a new ruling class out of better-off workers and socialist intellectuals. In Marx and Engels’ writings on the “Asiatic mode of production” and other aspects of pre-capitalist society, they had discussed earlier societies where the means of production, especially land, had been owned by the state, and had been collectively ruled by bureaucratic classes. They did not connect this to their writings on capitalist statification. They felt that these societies (e.g. some of the Central American “Indian” empires) were virtually stagnant, lacking capitalism’s drive to accumulate.

Under state capitalism, the proletarians will still be there (not slaves or serfs but proletarians). They will be selling their commodity labor power to the collective capitalist, the state, and will work to produce commodities, including more commodities than their labor power is worth, that is, surplus value. He did not comment on the continuation of competition internationally, between the national state capital and other capitals (either similar state capitalisms or other sorts of monopolistic businesses). It is implicit, in my opinion.

State Capitalism in Reality

The trend toward integration of the state and the capitalist economy has long been observable. Capitalist governments have owned railroads and other productive enterprises, even automobile factories or coal mines. Even now, when the right-wing anti-Keynesians have won hegemony over economic discourse, statism has not really ended. Despite all the talk about the “free-market” and “liberty,” the rightists have not called for diminution of the big state subsidy of arms production. Meanwhile they are champions of increased police and military power for the state.

But complete statification did not come through the merger of traditional capitalist monopolies. It came through the Marxist-Leninist-led revolutions in Russia, China, Cuba, and other countries, and the expansion of the Soviet Union’s military power into eastern Europe. In these countries weak bourgeoisies were overthrown, but the working class was also too weak to take power (or, in the Soviet Union, perhaps, to maintain power).

As a result, the systems which developed differed from Engels’ model of state capitalism in certain ways. The powerless bourgeoisie he postulated, had been wiped out. And the system covered itself in a pseudo-socialist, semi-Marxist, ideology, to justify itself and to confuse the population.

However, as Engels (and Bakunin) had described, the actual power resided in a layer of “salaried employees,” a collectivist bureaucracy. They “owned” the state property, in the sense that, collectively, they could do what they wanted with it (which is what ownership is). Collectively they held “private property,” in the sense that it was kept “private” (separate) from the mass of the population. Individual bureaucrats lived far better than did ordinary workers. They could not directly pass on their property to their children, but, by education and contacts, their children were guaranteed places in the bureaucracy.

The state remained a capitalist state, a bureaucratic-military-centralized instrument of capital accumulation. There is no such thing as a classless state, neutral as to its nature, but only depending on who controls it.

The workers remained proletarians, selling their commodity labor power, producing surplus value, producing commodities, and buying commodities on the consumer market.

Not only was these countries’ total state capital in competition on the world market, but it was internally divided into competing entities and commodity marketplaces. As mentioned, the workers sold their labor power for money on a labor market (there was far more labor turnover than was supposed to be). They bought consumer commodities on a market, as did the capitalist bureaucrats. Farmers worked at collective farms (officially cooperatives, not state farms) which sold goods on the markets. Plus they had small private plots which also sold food in markets. The large enterprises also sold means of production to each other (using contracts and bank accounts); therefore means of production were also commodities. And the whole thing was held together by gray and black markets, deal making and trading. There was an official economic “plan,” but it was never fulfilled—not once.

The economies of the Soviet Union and Maoist China were highly distorted and deformed forms of capitalism. The laws of capitalism operated in an indirect and mediated way. But a distorted market is still a market and a distorted capitalism is still capitalism (think of capitalism under Nazi totalitarianism or the historical “company towns”). This was a capitalist economy; it might be most appropriate to describe it as a “statified capitalism” (Daum, 1990).

Engels did not expect such a society to last long. “Brought to a head, it topples over.” Marx had emphasized how capitals which were overcentralized for their level of technical productivity would fly apart, dissolving into smaller units, as a result of internal competitive pressures. Engels emphasized, rather, political effects. Writing about the monopolistic power of the trusts, he wrote,

…The exploitation is so palpable that it must break down. No nation will put up with production conducted by trusts, with so barefaced an exploitation of the community by a small band of dividend mongers” (p. 384). In the Soviet Union, this effect was countered for a time by the absence of a traditional, propertied, bourgeoisie and by a quasi-Marxist, pseudo-socialist, ideology. People did not see through this at first.

For whichever reason, Marx and Engels saw state capitalism as ultimately fragile. It is unable to solve the basic problems of capitalism, including its tendencies toward stagnation, increasing conflict between the capitalists and the proletarians, and an explosive, crisis-ridden, economy. In fact, the statified and collectivized form of capitalism in the Soviet Union and China did break down. Given the weaknesses of the world working classes at the time, unfortunately it returned to traditional capitalism (with a great deal of state involvement). But there is no guarantee that state capitalisms cannot be re-created, under certain conditions—conditions such as the defeat of a working class revolution.

State Capitalism and the Socialist Program

From the thirties to the eighties, there were sharp debates among Marxists about the nature of the Soviet Union (and later of its offspring). I find it astonishing how few sought to compare it to Engels’ model of state capitalism. Many theorists insisted that the theory of state capitalism contradicted Marxism--in spite of Marx and Engels’ clear statements. The condition which Marx and Engels saw as the culmination of capitalist decay, a great many Marxists saw as the basic model of socialism.

For Engels, nationalization of all industry by a capitalist state was not socialism but what we today would call state (or statified) capitalism. So far anarchists agree with Engels and Marx. But Marx and Engels believed that if the workers were to take over the statified economy, through their own state, then it would be, not state capitalism, but the beginning of socialism. The collectivized economy would lead to the end of classes and the state, as the state machinery turned into a benign, noncoercive, institution. Engels wrote,

The proletariat seizes political power and turns the means of production in the first instance into state property. But in doing this, it abolishes itself as proletariat, abolishes all class distinctions and class antagonisms, abolishes also the state as state…. The government of persons is replaced by the administration of things, and by the conduct of processes of production. The state is not ‘abolished.’ It dies out” (Engels, 1954; pp. 388, 389).

By contrast, Kropotkin wrote in an article on “Anarchism” for the 1910 Encyclopedia Britannica, “The anarchists consider…that to hand over to the state all the main sources of economic life—the land, the mines, the railroads, banking, insurance, and so on—as also the management of all the main branches of industry, in addition to all the functions already accumulated in its hands (education, state-supported religions, defense of the territory, etc.) would mean to create a new instrument of tyranny. State capitalism would only increase the powers of bureaucracy and capitalism” (1975; pp. 109-110). Whether this involved a bourgeois state or a so-called workers’ state would not make a difference.

With the benefit of over a century of hindsight, we may judge who was right.


Chapter 8, "Socialism or Barbarism," will consider whether socialism is inevitable or a moral choice by the working class.
Previous parts:

Chapter 6 - The Post-War Boom and Fictitious Capital
Chapter 5 - The Epoch of Capitalist Decline
Chapter 4 - Primitive Accumulation at the Origins of Capitalism
Chapter 3 - Cycles, Recessions, and the Falling Rate of Profit
Chapter 2 - The Labor Theory of Value
Chapter 1 - An Anarchist's Introduction to Marx's Critique of Political Economy

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