June 27, 2006

State Capitalism vs. Libertarian Socialism

by Wayne Price
Part 3 of The Nature of Stalinist Societies

The Soviet Union and similar states are analyzed as State Capitalist. These states had commodity production, the exploitation of the workers, and internal competition. It is not enough to collectivize property; it is necessary to abolish the capital-labor relationship. The program of state socialism invariably produces state capitalism in practice.

Kropotkin and Engels on State Capitalism
As early as 1910, Peter Kropotkin declared, “The anarchists consider... that to hand over to the state all the main sources of economic life--the land, the mines, the railways, 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, ... 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) The program of state socialism would in practice produce state capitalism.

Karl Marx’s comrade Friedrich Engels predicted the growth of giant corporations, trusts, and capitalist monopolies, which would plan ever larger sections of the economy. The tasks of the bourgeoisie will be increasingly carried out by hired bureaucrats. “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....” (1954, pp. 385-386; the whole of Anti-Duhring had been gone over by Marx; this section was included in Engels’ pamphlet Socialism: Utopian and Scientific.) These trends culminate in state capitalism, wrote Engels:

“The official representative of capitalist society--the state--will ultimately have to undertake the direction of production.... But the transformation...into state ownership does not do away with the capitalistic nature of the productive forces... The modern state... 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 capitalist relation is not done away with. It is rather brought to a head.” (Engels, 1954, pp. 384--386)

Both Kropotkin and Engels believed that nationalization of industry by the existing capitalist state (reformist state socialism) was not socialism but state capitalism. However, Engels believed that nationalization by a new, workers,’ state (revolutionary state socialism) would lead to classless, stateless, communism. “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.” (Engels, 1954, p. 388)

Kropotkin also wanted stateless communism but he did not believe in the possibility of a workers’ state. He thought that centralized, statified, property--even if created by a workers’ revolution--would lead only to state capitalism. Instead of the state, he proposed that the workers take power through “...the organization in every township or commune of the local groups of producers and consumers, as also the regional, and eventually the international, federations of these groups.” (1975, p. 110) This program has historically been called “libertarian socialism”--meaning antiauthoritarian or self-managed socialism, anarchist or close to anarchism.
The Theory of State Capitalism
From the beginning of the Soviet Union, anarchists accused the Bolsheviks of creating state capitalism. But it was Marxists who developed state capitalism as a theory to apply to the Soviet Union and similar states. This included the work of the anti-statist, anti-Leninist, Council Communists (Mattick, 1969). Most of the theorists of state capitalism were dissident Trotskyists. They rejected Trotsky’s belief that Stalinist Russia remained a “workers’ state” so long as it kept nationalized property. These included the “Johnson-Forest Tendency” of C.L.R. James (1998) and Raya Dunayevskaya (2000); Tony Cliff (1970), a theorist of the British Socialist Workers Party and the U.S. International Socialist Organization; and Cornelius Castoriadis (1988) of the Socialisme ou Barbarie group in France. In the U.S.A., the Revolutionary Socialist League, of which I was a member, evolved from dissident Trotskyism to anarchism, meanwhile developing a theory of state capitalism (Hobson & Tabor, 1988). So did a split-off from us which wished to remain Trotskyist (Walter Daum, 1990).

Other socialists disagreed, even those who accepted that the Communist Party-managed states were not workers’ or socialist states but had an exploitative ruling class. Max Shachtman, theorist of “bureaucratic collectivism,” wrote, “...The Stalinist social system is not capitalist and does not show any of the classic, traditional, distinctive characteristics of capitalism.... There are...many embarrassments in conceiving of a capitalist state where all capitalists are in cemeteries or in emigration....Nowhere can an authentic capitalist class, or any section of it, be found to support or welcome Stalinism, a coolness which makes good social sense from its point of view since it is obvious...that Stalinism comes to power by destroying the capitalist state and the capitalist class.” (1962, pp. 23--24).

Similarly, Michael Albert, a founding theorist of “participatory economics” (“Parecon”), rejects “state capitalism” as a description of these societies, in favor of “coordinatorism.” It would be a mistake, he claims, “to say that the old Soviet economy was capitalist despite there being no private ownership of the means of production....The absence of owners and the elevation of central planners, local managers, and other empowered workers to ruling status is what characterized these economies as different. “ (2006, p. 158)

However, whatever their differences among themselves, theorists of the Soviet Union as capitalist did not deny that the Communist Party-ruled economies were nationalized and collectivized. They were aware that the ruling class was a collective bureaucracy and not a stockholding bourgeoisie. This is why Cliff made a point of calling the Soviet Union “bureaucratic state capitalism,” not just “state capitalism,” and why Castoriadis called his theory “bureaucratic capitalism.” They insisted that what most mattered was that the capital-labor relationship existed in the Stalinist states. The relation between the workers and the bosses remained the same in essentials. The workers were exploited by the ste, not private corporations, but the state was, in Engels’ terms, “the ideal personification of the total national capital...the national capitalist.”

The old Soviet Union may be examined from one of two class perspectives. From a ruling class perspective, the differences between the shareholding bourgeoisie and the collectivist bureaucracy are all-important. The bourgeoisie does not care, after all, whether its wealth and power are taken away by the workers or by totalitarian bureaucrats. Either way, it loses its wealth. So it hates both alternatives and regards them as essentially the same: “socialism.” This is also the viewpoint of those who regard the Soviet Union as non-capitalist: either “socialist” or a “workers’ state” or a new class society. It is a fundamentally bourgeois viewpoint.

From a working class viewpoint, however, what matters is the relation of the workers to the boss class--the method of their exploitation. If this method is the same--if, as Engels said, “the capitalist relation is not done away with”--then the system is the same. How the rulers divide up the surplus value among themselves, after pumping it out of the workers, is a secondary question. It is only a state capitalist theory which starts from this proletarian perspective.

The classical Marxists who wrote about state capitalism, beginning with Marx and Engels, did not expect traditional capitalism to actually evolve into a stable form of state capitalism. There were too many conflicts and contradictions within capitalism to overcome. But what happened in the Soviet Union was that a working class revolution overthrew a weak bourgeoisie. The workers were unable to go ahead to socialism--due to the poverty of the country, the failure of the revolution to spread, and the authoritarianism of the Bolsheviks. Yet the bourgeoisie was too weak to restore its traditional rule. Instead the Bolshevik state became the nucleus of a new, statified, capitalism. This became a model for a few other countries, such as China, where the national bourgeoisie was too weak to hold on but the working class was not strong enough to establish workers’ and peasants’ self-management. After decades, the internal conflicts of state capitalism became too great. It fell apart and restored the old capitalism.
In What Ways Was the Soviet Union Capitalist?
Contrary to Shachtman, the Soviet Union, Eastern European states, China, other Asian states, and Cuba, did show the essential “characteristics of capitalism.” To begin with, they were commodity-producing economies. All noncapitalist societies produced useful goods for consumption (of the tribesmembers, or the serfs and lords, or the slaves and masters, or--someday--of the freely associated producers under socialism). Only capitalism produces commodities for sale. This includes the most important commodity, the ability of the workers to work, by hand and brain: the commodity labor-power. In the Soviet Union, the workers were not simply given food and clothes, as were slaves, or soldiers, or prisoners. Management paid them for their labor time--paid them in money. Then they went to the shops to buy consumer commodities--commodities which workers had produced. These consumer goods were commodities being sold on a market. The laboring ability which the workers sold to the bosses was also a commodity. Labor power was sold at its value, its worth in maintaining and reproducing the workers and their families. But the workers worked for longer hours than was necessary merely to reproduce the value of their wages. The worth of the commodities produced in the extra hours they worked was the surplus value, the basis of profit. The workers produced a greater value than they themselves were, which is to say they were exploited in the capitalist manner.

The operation of such markets, whether in consumer goods or in labor, are quite distorted compared to some model of a perfectly unhindered free-market of classical capitalism. But markets are also distorted under the monopoly capitalist conditions of today’s Western capitalism (what the bourgeois economists call “imperfect competition”). Markets were also distorted under the conditions of totalitarian Nazi Germany, where labor was intensely regulated and the government was integrated with big business--and yet there remained a stockholding, profit-making, bourgeoisie. Markets would be even more distorted under the model of state capitalism as developed by Engels. Buying and selling continues--distorted markets are still markets.

Advocates of noncapitalist analyses of the Communist Party-run countries claim that these countries are devoid of competition. They are supposedly run by “central planning” and therefore cannot be capitalist, it is argued. But even if this were true, the Soviet Union or Cuba would be just one firm in a capitalist world market. Under Stalin, it is true, the Soviet Union made an effort to be as self-sufficient as possible. But even then there was always some international trade; it could not be totally cut off. At other times, these regimes bought and sold much on the world market and borrowed international loans. When urging Mexican businesspeople to invest in Cuba, in 1988, Fidel Castro told them, “We are capitalists, but state capitalists. We are not private capitalists.” (quoted in Daum, 1990, p. 232)

Besides trade, the Soviet Union always had to build up military forces to defend the wealth of its rulers from other nations’ rulers. While intercontinental nuclear missiles were not traded among the major powers, they were “compared,” both in firepower and in cheapness. In short, there were international competitive pressures on the “firm” of the Soviet Union to produce as much as possible, to exploit its workers as much as possible, and to accumulate as rapidly as possible--all capitalist processes. (These points were emphasized by Cliff, 1970. The weakness of his theory is that he only looked at such international pressures and therefore denied internal sources of competition which drove the internal market and the law of value. This makes his theory essentially a third system/new class analysis, with its concomitant weaknesses, as discussed in Part 2. )

Despite its monolithic appearance, the Soviet Union had a great deal of internal competition for scarce resources. Factories competed with factories, enterprises with enterprises, regions with regions, and ministries with ministries. The central plan, such as it was, was developed under the competing pressures of different agencies, each seeking as many resources as possible and as low production goals as possible. Once developed, the plan was more a wish list than the controlling guide to the national economy. The plan of the Soviet Union was never, ever, fulfilled--not once! Torn by internal conflicts, and needing to hold down the workers, the ruling bureaucracy could not integrate the economy in a harmonious fashion. Lacking workers’ democracy, it was incapable of truly planning the economy.

The competitive aspects of the economy were officially built in. Firms made legally binding contracts with each other for raw materials and productive machines, which were paid for by credits (money) in the central banks. Therefore, not only were consumer goods and labor power commodities, but means of production were also commodities, bought and sold among firms. Also, collective farms were not state farms but were legally cooperatives. They produced food for the market (this is aside from the permitted private plots which produced a disproportionate share of food). That was the legal market. Additionally the whole system was tied together by a vast system of black and gray markets, of illegal and semi-legal trading. Individuals did extra work, factories made deals with each other through special expediters, there was organized crime, and the wheels were greased throughout the society by off-the-books trading. The bureaucratic management would have collapsed without this very real wheeling and dealing, that is, market (capitalist) relations. (This can be studied in detail in any book on the Soviet Union’s economy. For Marxist analyses, see Hobson & Tabor, 1988, and Daum, 1990. Daum feels that “state capitalism” gives a false impression that there was a centralized single capital; he prefers “statified capitalism.” )

At this point I could give a more detailed critique of various theories of state capitalism, but I lack the space. What is significant is that most of the “state capitalist” theorists have some version of libertarian socialism--either socialist-anarchism or autonomist Marxism. But Cliff (1970), of the International Socialist Tendency, still advocated a “workers’ state,” a nationalized and centralized economy, a “vanguard party,” and other elements of the Leninist and Trotskyist tradition--and the same is true of Daum (1990) of the League for the Revolutionary Party. Regardless of intentions, these concepts reflect the capital-labor relationship: the relationship between order-givers and order-obeyers, between exploiters and exploited, between mental and manual labor.

The third-system/new-class theorists reject “state capitalism” because the Soviet Union-type of system is ruled by a collectivist bureaucracy (or “coordinator class,” as per the Pareconists). They correctly note its roots in the class of salaried professional managers under traditional capitalism. As I have demonstrated in this and the previous part, Marx and Engels had foreseen this as part of the development of capitalism. As Engels said, “All the social functions of the capitalist are now performed by salaried employees.” But these remain the social functions of capitalism! Under traditional capitalism, this bureaucratic middle layer is a part of the system. It is created under corporate/monopoly capitalism in order to serve capitalism, to help pump surplus labor out of the workers. The bourgeoisie would not hire it otherwise. The managers are the higher servants of the bourgeoisie and yearn to join it. The upper layers usually do, being rewarded with stock options, insider knowledge, and such.

However, there is a radical section of the professional bureaucracy which dreams of replacing the bourgeoisie altogether. This is what they did in the Soviet Union and similar countries. Anarchists and certain Marxists had discussed the bureaucrats’ role in the Soviet Union. Rather than using stock ownership, they divided up the surplus wealth by official position, but they remained a capitalist class for all that. They served as the agents of capital accumulation through the exploitation of the workers. In Engels’ terms, they managed “the modern state, a capitalist machine, the state of the capitalists, the ideal personification of the total national capital.” As a class they are themselves what Marx called the bourgeoisie, “the personification of capital.”

Whether the Soviet Union, etc. were capitalist or noncapitalist is a question which has been settled by history. After 1989, the Soviet Union and its satellites changed over to traditional capitalism. Had this been the transfer of power from one class to an alien class (from the workers or the third-system new class to the bourgeoisie), then we should have expected a terrible upheaval, a revolution or counterrevolution. Instead, the old bureaucracy morphed into the new bourgeoisie, going from one capitalist form to another. There were popular upheavals, but topdown maneuverings managed to avoid a workers’ revolution. The internal competitive tensions within the bureaucracy permitted it to transform itself peacefully into another variety of capitalist rule. (For the workers there were both gains--expanded freedoms--and losses--shredding of the social services.) This was even clearer in China, where there still exists the old bureaucracy, the Communist Party’s dictatorship, the Marxist-Leninist ideology, the “People’s Army,” and a great deal of nationalized industry. Yet the state has plainly adopted traditional capitalism and eagerly participates in the world capitalist economy.
Political Implications of State Capitalism: Libertarian Socialism
Collectivized property is necessary--is essential--but is not sufficient, if socialism is to mean the emancipation of the working class and all oppressed. Instead, the revolutionary workers must COMPLETELY ABOLISH THE CAPITAL-LABOR RELATIONSHIP. There must be an end to order-givers and order-takers, to those who live well while others do the work, to those who manage and those who do the physical labor. This means doing away with the state, an institution over and above the rest of society. The same goes for the utopia (in the bad sense) of a centralized planned economy which won’t need a state (or so we are told by Engels and Marx) because it will be the “management of things and not of people,” as if these could be distinguished in practice. The program of state socialism--even if phrased in a revolutionary manner (as did Engels and Marx)--would invariably produce state capitalism in reality. Instead, all the tasks of a classless society must be carried out through the self-management of all the working people, in which everyone participates, democratically deciding and planning social and economic life, at all levels and in all ways.


Albert, Michael (2006). Realizing Hope; Life Beyond Capitalism. London/NY: Zed Books.

Castoriadis, Cornelius (1988). Political and Social Writings; Vol. I, 1946--1955. (David Ames Curtis, trans. and ed.). Minneapolis: University of Minnesota Press.

Cliff, Tony (1970). Russia; A Marxist Analysis. London: International Socialism.

Daum, Walter (1990). The Life and Death of Stalinism; A Resurrection of Marxist Theory. NY: Socialist Voice Publishing.

Dunayevskaya, Raya (2000). Marxism and Freedom; From 1776 until Today. NY: Humanity Books.

Engels, Frederick (1954). Anti-Duhring; Herr Eugen Duhring’s Revolution in Science. Moscow: Foreign Languages Publishing House.

Hobson, Christopher Z., & Tabor, Ronald D. (1988). Trotskyism and the Dilemma of Socialism. NY/Westport CN: Greenwood Press.

James, C.L.R. (1998). “The USSR is a Fascist State Capitalism.” The Fate of the Russian Revolution; Lost Texts of Critical Marxism, Vol. I. (Sean Matgamna, ed.) Pp. 319--324. London: Phoenix Press.

Kropotkin, Peter (1975). The Essential Kropotkin (Emile Capouya & Keitha Tompkins, eds.). NY: Liveright.

Mattick, Paul (1969). Marx and Keynes; The Limits of the Mixed Economy. Boston: Extending Horizons Books/Porter Sargent Publisher.

Shachtman, Max (1962). The Bureaucratic Revolution; The Rise of the Stalinist State. NY: The Donald Press.


Blogger gray said...

You might be interested in checking out the website of the Socialist Party of Great Britain at

The Socialist Party was one of the first parties in the world to have made an analysis of Russia as being state capitalist.

Also, see fellow blogger Inveresk Street Ingrate's post:


and the website "Marx Myths and Legends"

Tuesday, June 27, 2006  
Blogger Alice said...

Thank you!

Wednesday, June 28, 2006  

Post a Comment

<< Home