UNDERSTANDING STATE CAPITALISM

One of the tasks that Internationalist Perspective has given itself is to develop theoretical contributions deepening marxist revolutionary thought. This text on state capitalism is the product of discussions in our Fraction. Far from being a mere academic concern, the question of state capitalism raises a whole series of issues vital to the understanding of the evolution of capitalism and its effects on the working class. The revolutionary milieu suffers from many errors and confusions on this subject and this has a negative effect on intervention in the working class. The following text does not represent a totally worked out position of our Fraction; it is presented as a contribution to the debate. We hope that it will provoke reactions and discussions in the milieu.

An understanding of state capitalism as a universal tendency in the decadent phase of the capitalist mode of production is an absolute precondition for revolutionary intervention in the class struggle. State capitalism and the decadence of capitalism are two sides of the same coin, and, therefore, it is no surprise that revolutionary organizations which reject the concept of the decadence of capitalism, such as the Bordigists, cannot begin to grasp the reality of state capitalism. However, the balance sheet of the whole revolutionary milieu today, as far as its understanding of state capitalism is concerned, is largely negative, as even a brief survey will show.

The Scandinavian Council Communist groups which arose during the 1970s as a direct result of the influence of Paul Mattick, have generally adopted the position articulated in Marx and Keynes [Mattick’s book published in 1969] which sees Russia as an exploitative but non-capitalist society, a society which Mattick designates as “state socialist”, in which the capitalist law of value no longer regulates the economy. As far as the advanced industrialized countries of the West are concerned, for Mattick, these societies are examples of monopoly capitalism, in which the law of value operates in basically the same way as it did before 1914; the modifications introduced by Keynesianism merely delay the outbreak of economic crises, but do not bring about a change in the operation of the laws of motion of capitalism (not even one comparable to that brought about by the formation of the average rate of profit in ascendant capitalism).

The Bordigists have dealt with the issues raised by the phenomenon of statification purely in terms of the class nature of the Stalinist regime. In contrast to the Trotskyists, Bordiga, in the late 1940s, concluded that Stalinist Russia was capitalist, but he denied the very existence of state capitalism. As a capitalist state, for Bordiga, the Stalinist regime could only be the instrument of the bourgeoisie. Thus Bordiga posed the question of the Stalinist regime solely in terms of who constituted the bourgeoisie on Russian soil. Bordiga first discovered this bourgeoisie in Stalinist Russia in what he thought were incipient tendencies towards the restoration of “private property” through the sale of interest bearing bonds to high-salaried functionaries, scientists, artists, etc., who constituted the embryo of a bourgeois class. A few years later, when it was clear that these strata had obviously not become a full-fledged bourgeoisie, Bordiga decided that the ruling class in Russia was in fact the American capitalist class (“Wall Street”), to whom Stalin had “sold” the USSR via huge state debts. In the 1950s, when it was obvious that Stalin and his heirs could not be construed as the tools of American imperialism, Bordiga put forward a new theory according to which each enterprise in Russia – despite nationalization, despite the role of the state and its plan – was an autonomous capitalist entity, the relations between which were determined by the operation of the law of value in exactly the same form as had existed throughout the history of capitalism (competition on the market between enterprises acting as independent capitalist entities). In this vision, the role of the state in the economy was only transitory, corresponding to a period of youthful capitalism, analogous to the role played by the state in the West during the formation of a national market (from the Renaissance to the latter part of the 19^th century, depending on the country), and destined to diminish as Russian capitalism reached its maturity.1

While the theories propounded by Mattick and Bordiga deny the very existence of state capitalism, the positions of Battaglia Comunista [Parti Comunista Internationalista, from Italy] and the CWO [Communist Workers Organisation, from Britain], which assert that Russia the countries of the Russian bloc, China, etc., are state capitalist countries are also inadequate. For both BC and the CWO, the issue of state capitalism is raised solely in terms of the “Russian question”. When BC in its platform insists that “state capitalism is just a form of capitalism and does not differ from any other type of capitalism in its nature, its contradictions and the external aspects of its organization (from the point of production to the internal and world market)”, this is not to demonstrate that state capitalism is a universal tendency in the decadent phase of capitalism, to show that the U.S. is no less state capitalist than Russia,2 but only to assert the unequivocably capitalist nature of the Stalinist regimes.

Indeed, in one of the rare articles where the Damenists [in the early 1950s the Italian communist left, organized in the Partito Comunista Internazionalista, split into two tendencies, a Bordigist one, with its review Programma Comunista, and another one, around the leadership of Onorato Damen, retaining Battaglia Comunista] took up the question of state capitalism in any detail (in the pages of Prometeo in the late 1950s), it was argued that state capitalism, defined purely in terms of nationalization of the means of production, was specific to Russia, China, and certain backward countries of the Third World, while the West continued to be characterized by the same monopoly capitalism that had appeared before 1914.

In the case of the CWO’s major text on “Theories of State Capitalism” in Revolutionary Perspectives #19, the issue is again posed in terms of “the class nature of the society produced by the failure of the Russian Revolution”. While the CWO, in contrast to the Damenists, did acknowledge that “the statification of property relations is a response of the entire world bourgeoisie to the decline of the capitalist mode of production in this [the 20^th] century”, this insight is never developed, and the whole of the text is devoted to “the Marxist Analysis of Russia”. However, even the demonstration of the capitalist nature of Russia must remain incomplete and formalistic if the Russian development is not shown to be an integral part of the trajectory of capitalism on a world scale, especially of its most advanced sectors, e.g. the U.S., in its phase of permanent crisis. To focus on the “Russian question” as do BC and the CWO, is to fail to grasp the phenomenon of state capitalism in its essential dimensions and, therefore, to misunderstand the reality of state capitalism even under the specific conditions of Russia and Stalinism.

In the case of G. Munis and the FOR [Fomento Obrero Revolucionario, from Spain], we finally have an analysis which does not reduce state capitalism to the Russian question, but rather one which clearly situates Stalinist Russia within the framework of the decadence of capitalism as a global system and its correlate, the universal tendency to state capitalism. Munis’ analysis, however, is vitiated by three major errors. First, his insistence that it is Russia which provides the model of state capitalism, a mirror, so to speak, in which the economically more powerful countries of the West can see the details of their own future development. In fact, it is the most advanced sectors of world capital, and not backward Russia under Stalin, which first broke the path for state capitalism (e.g. Germany and England during World War I), and which determine the course towards state totalitarianism on a global scale. Second, by his view that under state capitalism, the capitalist class disappears, giving way to a stratum of “riffraff”, “outcasts”, “scum”; a view which not only reveals a mistaken understanding of and overdependence on the low Roman Empire as a model for state capitalism, but also leads to the hypothesis of a capitalist system without a capitalist class. Third, by his conception that state capitalism eliminates the economic crises which plagued “private” capitalism; thereby putting into question the primordial fact that in state capitalism the economy continues to be regulated by the capitalist law of value and therefore cannot escape the catastrophic economic crises which are inseparable from its operation.

The ICC’s analysis of state capitalism, which is based on a recognition of the universal tendency to state capitalism in a phase characterized by a permanent economic crisis, though it is the point of departure for this text, is also deficient in several important respects. The ICC has never really gone beyond the brilliant insights contained in the text published by its predecessor, the GCF [Gauche Communiste de France], in 1952: “The Evolution of Capitalism and the New Perspective” (reprinted in IR #21). This text has served as the ICC’s only sustained treatment of the question of state capitalism, and in reprinting it in 1980, the ICC in its introduction saw fit to correct only the text’s insistence that a new proletarian revolution could only come out of a new world war, which at the time of the text’s writing was thought to be imminent. A whole series of other assertions invalidated by the actual development of state capitalism in the period 1952-1980 were allowed to stand: all too eloquent testimony to the ICC’s incapacity to provide a coherent theory of capitalism’s economic survival in its decadent phase. Thus, the text argues that the permanent crisis is characterized “by the continuing fall of production and trade in all capitalist countries (as in 1929-1934).” (p.26) Clearly the ICC continues to be bewitched by the model of 1929 and fails to provide a theoretical basis for understanding the phenomenon of reconstruction or the basis for the expansion of both production and trade – in however a distorted form – since the end of World War 2. While the introduction to the ICC’s text acknowledges that it “didn’t see or didn’t sufficiently emphasize the phase of ‘reconstruction’” (p.23), it fails to point out that the text is based on the denial of the very possibility of a period of reconstruction (even one on the scale of 1919-1929, let alone one of the length and breadth of the post World War 2 reconstruction). The ICC has continually used the term “reconstruction”, but it has never provided a real conceptual basis for, or explanation of, this phenomenon. In particular, the ICC has no clear understanding of fictitious capital and its role; yet fictitious capital is the veritable basis of state capitalism and the correlate to the real domination of capital to which the phase of state capitalism corresponds. Similarly, the text mistakenly insists that autarky is the dominant feature of state capitalism. Certainly autarkic tendencies exist under state capitalism, but the hallmark of the post-war era has been the refashioning of the world market and the complex network of world trade under the aegis of the American state (the dollar as the international currency, the Marshall Plan, the IMF, the World Bank, GATT, etc). The ICC’s text also argues that under state capitalism there is “a restriction in the law of value’s field of application”. (p.26) This view is based on the mistaken narrowing of the law of value to products and prices, when in fact it is expressed in the abstraction, quantification and reification which are the hallmarks of the exchange relation, and which under state capitalism penetrate all aspects of social existence. Thus, far from seeing a restriction in the application of the law of value, state capitalism marks its greatest expansion!

If the ICC’s text fails to explain the economic basis for capitalism’s survival in its phase of permanent crisis, does it at least explain the origin of state capitalism? Unfortunately, here again the answer is no. The ICC sees the origin of state capitalism exclusively in terms of a political response to the danger of proletarian revolution and the necessity for state concentration to prepare for, and to wage, imperialist war. While this is certainly one of the origins of state capitalism, it is not the only one. The origin of state capitalism must also be sought in the fundamental economic transformation internal to the capitalist mode of production brought about by the change from the formal to the real domination of capital. This epochal change from a process based on the extraction of absolute surplus value to one based on the extraction of relative surplus value necessitates an internal reorganization of capitalism in which the state must become the literal axis of the capitalist production process – and this as a condition for its very survival. It is not a question of separating political and economic processes which are of course inextricably linked in the actual social development itself, but of analytically distinguishing them precisely so as to grasp the real process in all its complexity. In failing to do this the ICC has proven itself incapable of providing a coherent Marxist account of state capitalism – its origins and its mode of functioning.

An advance in Marxist theory does not begin with the resolution of the problems posed by changes in reality, but with the posing of a problem, and with the development of the conceptual tools necessary to grasp it. Only in this way can theory-praxis ultimately resolve the contradictions which are the very essence of an ever moving reality. In this regard, the whole of the revolutionary milieu has woefully failed to provide the indispensable theoretical basis for the comprehension of state capitalism.

In attempting to lay the groundwork for a real Marxist theory of state capitalism, we shall discuss in turn:

1) the Marxist theory of the state,

2) the meaning of the relative autonomy of the state in Marxist theory,

3) the changes in the operation of the law of value in the phase of state capitalism,

4) the question of the nature of the capitalist class under state capitalism, and the fate of the bourgeoisie in the epoch of state capitalism.

THE MARXIST THEORY OF THE STATE

The theory of the state was never definitively worked out by Marx and Engels. It remains a task that revolutionary Marxists must now accomplish. In the original plan of Capital, Marx envisaged a separate volume on the state. This project, though it could not be carried out, was never abandoned. Had Marx been able to write it, the integral role that the state plays in the enlarged reproduction of capital, as well as the dialectical interaction between the state and the economy in all modes of production, would have been clearly delineated. In fact, the absence of a fully worked out theory of the state (one that didn’t have to be pieced together from Marx and Engels’ voluminous and scattered historical, propagandistic and journalistic writings) facilitated the banalization and outright corruption of Marx and Engels’ seminal insights into the nature of the state as Marxism was uprooted by mechanistic materialism within the ranks of the Second International. Under the reign of Stalin, the vulgar Marxist theory of the state was enshrined as orthodoxy within the Communist International. The pre-eminent features of this theoretical aberration are two: first, that the state is an epiphenomenon, a passive superstructural reflection of the economic base (a theory rooted in the undialectical concept of base-superstructure dear to vulgar Marxism); second, that the state is the simple instrument or tool of the economically dominant class in society (a sort of executive committee of the ruling class, to use the unfortunate terminology of the Communist Manifesto, which, whatever the propagandistic value of its imagery, is very far from the theory that Marx and Engels articulated in text after text).

The supposed alternative to this vulgar Marxist theory of the state consisted in effecting a separation between the state and the mode of production, in insisting on the autonomy – albeit relative – of the state from the mode of production. Such a view, no less undialectical than its orthodox counterpart, underlay Trotsky’s theory of the Stalinist state. In blatant contradiction to both the facts and Marxism, Trotsky argued that the Stalinist state and the Russian economy were proceeding on opposite courses: the Stalinist state and the bureaucratic caste which directed it was virtually the same as the fascist state, while the Russian economy was ‘socialist’, based as it was on the expropriation of the bourgeoisie, the nationalization of the means of production, and central planning;3 in short, the state was counter-revolutionary, while the economy was progressive. That this autonomy of the state from the mode of production was only relative was made clear by Trotsky’s insistence that the bureaucratic caste, in the final analysis, had to defend the ‘socialist’ nature of the economy, despite the horrible brutality of its policies towards the working class.

Against these two theoretical aberrations purporting to be Marxist theories of the state, it is necessary to restore the genuine foundations of the Marxist theory of the state. For Marx and Engels, the state is a product of the division of labour in society, a power complex that has a specific function within this overall division of labour. The state is personified by a bureaucracy, which continually seeks to expand the range of state functions (independent of other factors leading in that direction) so as to justify its own existence and power. With respect to the real motor of historical development (the growth of the productive forces, the class struggle), the state plays an essentially conservative role, representing a force of social inertia in historical terms, even if within a given socio-economic formation it can play an innovative role. A Marxist theory of the state is incompatible with one which sees the state as the result of some sort of class plot, or as a pure and simple instrument or extrusion of the economically dominant class in a given mode of production. But neither can the state be conceived as being in any way independent of the mode of production, to which it is organically, though not mechanistically or passively, linked. What precisely is the nature of this link? What exactly is the objective role of the state according to Marxist theory? The state is a complex of institutions basing itself on the instruments of violent coercion (army, police, courts, prisons), and on ideology in order to maintain the prevailing social relations of production, to preserve the existing property relations from basic change, and to keep the non-possessing and exploited classes in subjection. To accomplish these basic tasks, which are indispensable to any class society, the state will utilize force and violence whenever necessary, and ideology whenever possible. In this sense it is well to remember Engels’ dictum that “the state presents itself as the first ideological power over man”; from which follows the combination of royal and priestly functions in Pharaonic Egypt to the existence of the mass media as an integral part of the totalitarian apparatus of state capitalism.

Inasmuch as the very raison d’etre of the state according to Marxist theory is the maintenance of the existing social relations of production, there can be no question of the autonomy of the state from the mode of production. While in the ascendant phase of a mode of production the role of the state is generally confined to assuring the external conditions necessary to the functioning of the economy (internal peace, order, security for the ruling class), in the decadent phase of a mode of production the state apparatus will be directly implicated in the operation of the economy itself. Indeed, the ‘active’ role that the state must play in such periods will involve it in effecting substantial modifications in the functioning of the economy so as to preserve its fundamental structure and its essential features (‘though this phenomenon will highpoint in state capitalism).

The decadent phase of a mode of production will also see a veritable hypertrophy of the state apparatus as a response to the turmoil and instability provoked by the combination of devastating economic crises, violent social upheavals and chronic wars which are the hallmarks of such periods. One need only think of the bloated state apparatus of the low Roman empire (Diocletian, Constantine) in the decadence of the ancient slave mode of production, or the huge bureaucracies of the absolute monarchies of the 17^th and 18^th centuries in the decadence of the feudal mode of production to find revealing parallels with the rise of state totalitarianism in the decadent phase of capitalism.

THE MEANING OF THE RELATIVE AUTONOMY OF THE STATE IN MARXIST THEORY

In every socio-economic formation there is a tension between the state and the economically dominant class. Put another way, Marxism denies the identity of interests between the state and the ruling class that its vulgarizers make the basis of their concept of the state. In all modes of production, and in both the ascendant and decadent phases of a given mode of production, the state (and the functionaries or bureaucracy which comprise it) is characterized by a relative autonomy from the economically dominant class (the ruling class). This is the real meaning of the autonomy of the state in Marxist theory. This relative autonomy of the state from the ruling class constitutes the objective, social basis for the modifications in the functioning of the economy which the state has brought about in each of the successive modes of production which class society has known.

Just as phases of decadence see a hypertrophy of the state apparatus, so too it is in such periods that the state achieves its greatest degree of autonomy from the ruling class. Thus in the low Roman Empire, the imperial bureaucracy, in a vain effort to prop up the social bases of a declining slave society virtually divested the economically dominant class (the owners of the great slave-worked latifundia) of all its political power. In carrying out its function of maintaining the relations of production of slave society and suppressing the exploited classes, the bureaucracy came into direct conflict with the slave-owners, to the point where the latter – in the process of creating new property relations on its estates based on proto-serfdom (the colonate) – supported the Germanic invaders who toppled the Empire.

A similar process of autonomization of the state vis a vis the ruling class occurred under the absolute monarchies in Western Europe in 16^th – 18^th centuries. In the midst of a general crisis of feudal society, and in fulfilling its task of preserving the existing property relations, the state balanced between the competing claims of the landowning classes and the rising bourgeoisie; sometimes favouring the claims of one, sometimes of the other, but always with the overall aim of stabilizing the mode of production based on feudal property. In carrying out this function, the absolute monarchy frequently had to directly clash with the most powerful factions of the nobility, as in England during the reigns of Henry the 8^th and Elizabeth the 1^st. The despotic inroads which the royal authority made on the power of the Parlements and Estates in France during the 17^th century are another example of the often bitter clashes between the absolutist state and feudal landowners.

However, a considerable degree of autonomy of the state from the ruling class is not limited to the decadent phase of a mode of production, as the example of Bonapartism will make clear. Marx and Engels provided particularly detailed analyses of the phenomenon of Bonapartism in the ascendant phase of capitalism (the 19^th century). The Second Empire of Louis Napoleon is the classic example of the Bonapartist state, which in order to assure the socio-economic power of the bourgeoisie must break its political power:

“the individual bourgeois can continue to exploit the other classes … only on condition that their class be condemned along with the other classes to like political nullity; that in order to save its purse, it must forfeit the crown, and the sword that is to safeguard it must at the same time be hung over its head as a sword of Damocles.” (Marx, The Eighteenth Brumaire)

In another text by Marx, the extent to which the Bonapartist state could achieve autonomy vis a vis the economically dominant class was even more starkly presented:

“The army is no longer to maintain the rule of one part of the people over another part of the people. The army is to maintain its own rule, personated by its own dynasty, over the French people in general. It is to represent the State in antagonism to the society.” (Marx, The Rule of the Pretorians)

That this was no more than a tendency under the conditions of ascendant capitalism, and a short-lived one at that, was clearly demonstrated by the subsequent evolution of the Bonapartist state (which Marx self-charted). In its final decade, the state apparatus, with Louis Napoleon at its head, took on a more ‘normal’ relationship to the French bourgeoisie, ceasing its draconian intervention into the economy, becoming increasingly subject to direct control of the bourgeois class itself – all of which indicated the coming transition to a state form more in keeping with the general conditions of a capitalist society at its apogee: the parliamentary republic.

Both the rule of Louis Napoleon and the Bismarkian state in Prussia-Germany are examples of Bonapartism. According to Marx, the Bonapartist state corresponds to a period in ascendant capitalism when the class struggle temporarily balances the power of the contending classes (bourgeoisie and working class), thereby making both necessary and possible the provisional assumption of power by a Bonapartist dictator at the head of the state bureaucracy in order to prevent capitalist society from being torn apart by endless internecine warfare.4

The examples of a considerable degree of state autonomy from the ruling class in ascendant capitalism even led Engels to raise the question of whether the direct political rule of the bourgeoisie in its own right (in the classic form of a parliamentary republic or a constitutional monarchy) is the exception and not the rule:

“It is becoming clearer to me that the bourgeoisie doesn’t have the stuff to rule directly itself, and that therefore where there is no oligarchy as there is here in England … a Bonapartist semi-dictatorship is the normal form; it carries out the big material interests of the bourgeoisie even against the bourgeoisie, but deprives the bourgeoisie of any share in the ruling power itself.” (Engels to Marx, April 13, 1866)

What concerns us in this letter is not the conclusion Engels drew – which was certainly a great exaggeration, though one produced by the political ineptness of the bourgeoisie on both sides of the Rhine at the time of writing – but the fact that it clearly demonstrates that the reality of state autonomy from the ruling class was taken for granted by Marx and Engels.

The Tsarist autocracy of the 19^th century is another example of state autonomy in the ascendant phase of capitalism. Indeed, in the case of Russia, the Tsarist autocracy itself took the lead in actually creating the social bases for capitalism within the frontiers of Russia, and breathed life into a bourgeois class that had until then been virtually non-existent on Russian soil. From the liberation of the serfs to at least the outbreak of the revolution of 1905, the Tsarist autocracy balanced between a bourgeoisie too weak to take political power in its own right and a landowning class too powerful to be disciplined in the interests of capitalist development except through a despotic state.

Before concluding our account of the Marxist theory of the state, we must take a look at a mode of production which is incomprehensible to vulgar Marxism with its simplistic concept of the state as nothing but an instrument of the economically dominant class. This is a mode of production in which the state and its bureaucracy does not achieve autonomy from the ruling class, but rather one in which the state and its bureaucracy IS the ruling class. We are speaking of the Asiatic mode of production, based on the payment of tribute – by the village communities that constitute the economic foundation of this society – to the despotic state; in short, a mode of production in which the surplus is extracted from the exploited class directly by the state in the form of tribute. The relevant point here is to show that the existence of a state and its bureaucracy as a ruling class, far from being unthinkable to Marx and Engels, was the very basis of their understanding of Asiatic-type societies (China, India, etc.).

The purpose of this account of the Marxist theory of the state is not to make either the state as ruling class in the Asiatic mode of production or the various examples of state autonomy from the ruling class into a model for state capitalism. While it is true that under state capitalism the state and its bureaucracy is the ruling class, it is so precisely because it has become the personification of CAPITAL, i.e. the capitalist class. State capitalism, unlike the Asiatic mode of production, is not a distinct socio-economic formation with its own laws of motion, but a transformation internal to the capitalist mode of production itself. Similarly, state capitalism is not an example of the autonomy of the state from the ruling class (comparable to the absolutist monarchy or the Bonapartist state) but rather a case where the state and the ruling class are one and the same. However, the origin and development of state capitalism, though having its cause in the permanent crisis of capitalism as a mode of production, proceeds through the ever greater autonomy of the state and its bureaucracy from the bourgeoisie. In sum, it is the tension between the state and the economically dominant class, which is basic to the Marxist theory of the state, that explains the actual genesis of state capitalism as an effort to preserve capitalist relations of production and maintain the proletariat as an exploited class, even against the opposition of the bourgeoisie.

STATE CAPITALISM AND THE LAW OF VALUE

Within the revolutionary movement one of the greatest obstacles to an understanding of state capitalism has been the inability to clearly distinguish between the real social relations of production and the juridical forms in which the actual property relations appear. As a result, the nationalization of the means of production, which is simply one juridical form of capitalist private property, was mistakenly conceived as the abolition of private property itself. The result was that an economy in which the means of production were nationalized was erroneously seen as, by definition, non-capitalist. Once we penetrate beyond the appearance of juridical forms, it becomes clear that the essential capitalist social relations of production, based on wage labour, are perpetuated under the juridical form of nationalization. Indeed, capitalist private property can exist under a variety of juridical forms: individual private property, the joint stock company, trusts and cartels, state ownership (either de jure or de facto). While a recognition of the fact that nationalization is one form of capitalist private property is a necessary condition for grasping the reality of state capitalism, it is not – as we shall see – sufficient. It is equally important to understand the changes in the operation of the capitalist law of value which inexorably produce the nationalization or statification of the means of production as a condition for the very survival of capitalism.

Those revolutionary organizations which recognize state capitalism as a universal tendency in the decadent phase of the capitalist mode of production have seen it exclusively in terms of the necessity for a redivision of a saturated world market or the necessity for the destruction of a mass of overaccumulated capital – proceeding through inter-imperialist world war and requiring the organization of a war economy. One of the clearest analyses of this causal thread which leads to state capitalism is found in a text by P.L. Tomori (pseudonym for Etienne Balazs) written just after World War 2:

“What characterizes state capitalism in the final analysis is that it doesn’t have recourse to war as an expedient, as an extraordinary and abnormal means to re-establish its regular valorization, but that it is forced to institute the production of the means of destruction as its normal mode of production; that it can no longer live without a war economy which is both the cause and effect of statification. If for monopoly capitalism war was a reprieve, for state capitalism it is its only chance, the ultima ratio of capitalism.” (Qui Succedera Au Capitalisme?)

While the constant need to prepare for and to wage inter-imperialist war, to mobilize the mass of the population (and in particular the proletariat), to organize a war economy, as a result of the permanent crisis of capitalism, is a decisive factor in the development of state capitalism, it is not the only one. What even the clearest of revolutionary organizations have failed to grasp is the fact that state capitalism is not the result of a single causal chain – a view which is characteristic of reductionism and schematism – but rather the outcome of a meshing of several causal chains. In this connection it is absolutely essential to recognize the no less decisive role played by the epochal change from the formal to the real domination of capital in the development of state capitalism.

Marx’s discussion of the formal and the real domination of capital is to be found, for the most part, in the Grundrisse and in the Results of the Immediate Process of Production, texts which remained unpublished until the 1930s (and virtually unknown until the 1960s), though their basic concepts would have been incorporated into the later volumes of Marx’s projected Capital had he lived to complete them. The inability of the epigones Kautsky and Bernstein to grasp the importance of these manuscripts and to publish them (itself part and parcel of the degeneration of Marxist theory at the hands of the Second International) meant that the communist left did not have access to an important part of the Marxist conceptual apparatus when its clearest elements and fractions developed their theory of state capitalism. What is inexcusable was the complete failure of organizations like the ICC to grasp the importance of these texts when they were finally published – particularly since they contained the theoretical bases for overcoming its incomprehensions concerning the phenomenon of reconstruction and the modifications in the operation of the law of value under state capitalism. If those revolutionaries who recognized the universal tendency to state capitalism failed to grasp the importance of the change from the formal to the real domination of capital in the confluence of causal chains producing the statification of capital, those elements who insisted on the significance of these unpublished texts of Marx were themselves incapable of seeing the vital link between the change from the formal to the real domination of capital and the development of state capitalism (or even recognizing the existence of this latter). Within the framework of the present article, we cannot analyze the epochal character of the change from the formal to the real domination of capital, from a form of capitalism based on the extraction of absolute surplus value to one based on the extraction of relative surplus value, or even the inextricable link between this change and the decadence of capitalism, its permanent crisis.5 Rather, we will limit ourselves to a survey of those features of the real domination of capital and the real subsumption of labour under capital which necessitate the statification of capital. It is only by recognizing the particular features of this specific causal chain, and its interaction with the causal chain which necessitates the butchery of a redivision of the world market, the violent destruction of capital living and dead and its accompanying war economy, that we can grasp the actual course of the social development which both produces state capitalism and perpetuates its barbaric reign until either a proletarian revolution smashes the capitalist state everywhere and begins the transition to communism or decadent capitalism destroys the human species in the orgy of a third inter-imperialist world war.

The change from formal to the real domination of capital, from the formal to the real subsumption of labour under capital, which Marx traces in Results of the Immediate Process of Production (hereafter, Results), involves the recomposition of the working class, in which “the real lever of the labour process is increasingly not the individual worker” (Results, in Capital, vol. 1, Penguin Books, p.1039-1040), but “labour power socially combined” (ibid.), what Marx calls the collective or the “aggregate worker” (ibid.). This collective worker (Gesamtarbeiter) which produces relative surplus-value includes productive activity far removed from manual labour, productive activity strictly dependent on “ … the use of science (the general product of social development), in the immediate process of production ….” (ibid., p.1024). In contrast to the phase of the formal subsumption of labour, when productive activity is largely confined to a mass of individual workers performing manual labour and in which capital exploits labour-power as it finds it, so to speak, in the phase of the real subsumption of labour, capital must consciously shape and produce its collective worker through the provision and organization of science, education, training, health-care, transportation, leisure, etc., without which the extraction of relative surplus-value cannot take place. This task cannot be left to the free play of the market, to the individual capitalists or even to huge trusts and cartels. It requires the coordinating and centralizing activity of the coercive state apparatus, the personification of the total social capital (on a national scale), which is the complement to the aggregate worker of the real domination of capital.

The extraction of relative surplus-value from the collective worker has as its concomitant the dramatic rise in the organic composition of capital. It is not merely the proportion of constant to variable capital which dramatically rises in the phase of the real domination of capital, but more particularly the fixed component of constant capital (machinery, technology). This ever increasing weight of fixed capital in the production process has a decisive impact on the unfolding of economic crises:

“From the moment … when fixed capital has developed to a certain extent – and this extent, as we indicated, is the measure of the development of large industry generally -- … from this instant on, every interruption of the production process acts as a direct reduction of capital itself, of its initial value …. Hence, the greater the scale on which fixed capital develops … the more does the continuity of the production process or the constant flow of reproduction become an externally compelling condition for the mode of production founded on capital.” (Grundrisse, Penguin Books, p.703)

In short, in the phase of the real domination of capital interruptions or shut downs of the production process constitute a destruction of the value of capital itself. This phenomenon is heightened further when the growth of fixed capital is accompanied by an ever growing mountain of debt (the inevitable complement to the real domination of capital), which continues to demand its pound of flesh in the form of interest payments even if the plant and machinery lie idle. This destruction of capital in an economic crisis is, of course, not peculiar to the phase of the real domination of capital. But, whereas in the phase of the formal domination of capital, with its relatively low organic composition of capital and comparatively small burden of debt, the interruption of the production process leads to a shakeout of the weakest and least competitive capitals, under the conditions of real domination it would be precisely the most technologically advanced capitals which would be destroyed by a shutdown of production. That is why capital, in the phase of real domination, must shun like the plague any deflationary crisis, with its accompanying interruption in the cycle of production, as a means to effect the necessary devalorization or destruction of excess capital. (And when this devalorization becomes unavoidable, it must be deflected onto rival capitalist states through the medium of inter-imperialist war.) However, only the centralization of capital in the hands of the state, and its draconian intervention into all levels of the production process (particularly, as we shall see, through the massive creation of fictitious capital), can make possible the avoidance of regular deflationary crises.

In contrast to all pre-capitalist modes of production, capitalism has an inherent tendency to operate as if production were an end in itself, to continually expand the scale of its productive activity in its frenzied quest for surplus-value. However, it is only in the phase of the real domination of capital that this tendency is fully actualized:

“’Production for production’s sake’ – production as an end in itself – does indeed come on the scene with the formal subsumption of labour under capital. It makes its appearance as soon as the immediate purpose of production is to produce as much surplus-value as possible …. But this inherent tendency of capitalist production does not become indispensable, and that also means technologically indispensable – until the specific mode of capitalist production and hence the real subsumption of labour under capital has become a reality.” (Results, p.1037)

This tendency, actualized in the phase of real domination, tendentially clashes with the much more rigid limits of the world market to realize the ever greater masses of surplus-value which are spewed forth. Yet the reproduction of the total social capital requires not simply the extraction of surplus-value from living labour (and that at an adequate rate and mass of profit), but the realization of this surplus-value on the world market, which alone makes possible the capitalization of the greater portion of this surplus-value and hence the enlarged reproduction of capital. Only if the effective demand to realize the ever increasing mass of surplus-value is present can the circuit of capital be completed. Failing that, a crisis of over-production will ensue, interrupting the cycle of production and in the phase of real domination – as we have seen – bringing about the destruction of the most technologically advanced capitals. Thus in its phase of real domination, capital faces the absolute necessity of mobilizing or creating the otherwise deficient effective demand, without which the system will collapse!

Faced with a situation in which production outstrips effective demand, not just periodically, as in the phase of formal domination, but permanently (the quintessential feature of the decadence of capitalism), several responses are open to capital.6 Each of them requires that the capitalist state assume an increasing and finally controlling role in the enlarged reproduction of capital, in the circuit of capital.

Through the spoilation of the peasantry, the urban petty-bourgeoisie, and small capitalists, it is possible to mobilize a considerable effective demand with which to temporarily disengorge a saturated market. This process of spoilation, however, is only possible through the coercive power of the state, which through taxation, regulation, etc., can effectively expropriate a mass of independent producers and small capitalists who could not be eliminated by the free play of the market itself, and whose savings and holdings can be converted into so much effective demand by the state.

The spoilation of imperialist rivals, their elimination as competitors on the world market, the seizure of their assets and capital can also temporarily relieve the saturation of the world market and mobilize a new source of effective demand. This type of spoilation too – the outcome of inter-imperialist war – is only possible through the creation of a war economy, under the aegis and complete control of the capitalist state, in short, through state capitalism!

Not even the most thoroughgoing spoilation of small producers and imperialist rivals – essential though they are – can possibly mobilize sufficient effective demand to keep pace with the enormous mass of surplus-value which capital in its phase of real domination turns out – the realization of which is an absolute necessity if the circuit of capital is to be completed. Therefore, capital – under pain of extinction – must create a fictitious demand, the counterpart to the creation of an ever growing mass of fictitious capital. This fictitious capital is created through the mechanism of the credit system. While credit and fictitious capital played a role even in the phase of formal domination of capital, it was no more than an ancillary factor in the productive process and did not necessitate the statification of the credit mechanism. In the phase of the real domination of capital, however, fictitious capital becomes the veritable linchpin of the economy, and its creation in the requisite quantities necessitates a vast process of statification of the monetary and credit system. The very character of money is transformed: from asset money (gold and silver) to liability money (the monetization of debt). This process whereby debt is converted into fictitious capital (and thereby into fictitious demand) is only possible when the monetary and credit system is under the complete control of the capitalist state (on an international scale when this system is under the control of the dominant state), in other words, only when capitalism assumes its statified form.

The extent to which the state through its indebtedness is the source of the fictitious demand which alone permits decadent capitalism to survive between orgies of destruction, is patently clear. Whereas in the ascendant phase of capitalism, the state in the advanced industrial societies consumed on an average no more than 3-5% of the global product, at the present time, in full decadence, the state in these same societies consumes 40-50% of the global product directly!7

It is apparent that the development of state capitalism involves profound modifications in the operation of the law of value. However, this does not involve “a restriction in the law of value’s field of application” as the ICC has said. Quite the contrary! The phase of the real domination of capital and its corollary, state capitalism, involves not a restriction but a vast expansion of the field of application of the law of value. In the phase of formal domination, production, circulation and consumption were still largely separate spheres, and the law of value was for the most part confined to the first of these, and virtually totally excluded from the last. By contrast, in the phase of real domination, the law of value directly lays hold of each of these spheres, which become one, organized and controlled by the state apparatus. However, this does not mean that the state ‘commands’ the economy. Indeed, the capitalist law of value ‘seizes’ the state, and the state apparatus is directly subordinated to the imperatives and logic of the enlarged reproduction of capital. The capitalist state is transformed into the crystallization of law of value in the phase of real domination. Through the state, the law of value penetrates into every aspect of social and personal life. The abstract rationality of the commodity form spreads from the process of material production to the whole of social being (politics, leisure, family, culture and science), which the capitalist state attempts to organize as a totalitarian whole.

THE CAPITALIST CLASS UNDER STATE CAPITALISM AND THE FATE OF THE BOURGEOISIE

The development of state capitalism involves a recomposition of the capitalist class. This process is one in which the bourgeoisie, as the possessors of individual private property, gives way to a capitalist collective, as the possessor of statified private property. The capitalist class was always defined by Marx as the personification of capital, as the functionaries of capital. These functionaries, this personification historically takes on diverse forms, corresponding to the successive forms of capitalist private property and to the modifications in the operation of the capitalist law of value. The bourgeoisie is integrally linked to the individual private property or shareholding which prevailed in the ascendant phase of capitalism, in the phase of formal domination of capital. The bourgeois, inexorably bound to his discrete fraction of the total social capital, whose self expansion is his raison d’etre, increasingly gives way to the state and its bureaucracy, integrally linked to total social capital of their state, as the personification and the functionaries of capital. This point may be reached either by the virtually complete expropriation and elimination of the bourgeoisie (sometimes violent), or by the fusion of the bourgeoisie and the state bureaucracy. However, even in this latter case, which characterizes the advanced industrial societies of the American imperialist bloc, it is increasingly the individual’s role as a state functionary or manager and not his particular juridical property ‘titles’, that is decisive in his functioning as a capitalist. This outcome is a result of a whole period of intra-class, intra-capitalist, struggle, which depending on the strength or weakness of the particular national capital and the constellation of imperialist blocs can take the form of civil war or of constitutional struggle. The weaker the national capital, the more violent and brutal this intra-capitalist struggle is likely to be. While in the more powerful capitals (Western Europe, Japan, North America), the incorporation of the most powerful elements of the bourgeoisie into the bureaucracy has more normally followed a peaceful and organic form. (This does not mean that the ‘traditional’ bourgeois bound exclusively to his discrete portion of the total capital, to his company, has ceased to exist in the phase of state capitalism. He continues to exist as a residual social actor in the form of small and medium capital in the West, and even leads a marginal existence in the Stalinist countries.)

That capital, in its phase of real domination, “loses all its individual characteristics” (Results, p. ?) is simply the other side of the coin of the recomposition of the capitalist class in the present epoch of state capitalism, of the change from the bourgeois to the bureaucrat as the functionary of capital. The very social structure, based on value production, which historically gave birth to the bourgeois and his rule, in the course of its inexorable development abolishes him, and confers the function of personifying capital in its decadent phase on the state bureaucrat and manager. To the new form of capitalist private property, statified property, there corresponds a new type of capitalist: the state bureaucrat, the functionary of capital in its phase of decadence.

CONCLUSION

Marxism is based on the indissoluble unity of theory and practice. It rejects any sort of contemplative orientation to social being. In this sense, the aim of this text is to help forge the theoretical weapons which are vital to the struggle of the proletariat to overthrow a decadent capitalist system which has plunged humanity into a long night of barbarism. Without a clear understanding of the organization and mode of survival of capitalism in its phase of permanent crisis, i.e. an understanding of state capitalism, any ‘intervention’ in the class struggle will be at best futile and irrelevant, and at worst an obstacle to the development of the struggle of the proletariat.

The theoretical positions of the revolutionary milieu vis a vis the organization of capitalism in its decadent phase are reminiscent of the preparations of the French general staff in the period between the two World Wars. (Not in terms of any analogy between revolutionary organizations and the general staff of an army, but solely in terms of inability to grasp the fundamental changes in social reality which had made their cherished ‘theories’ completely outdated.) Just as the French general staff of the 1930s, with its Maginot line, was prepared to fight the last war, but hopelessly unprepared for the coming war, so the contemporary revolutionary milieu is ‘theoretically’ prepared to fight the Russian revolution of 1917, but largely ignorant of the basic changes which have reshaped capitalism in the last 70 years, and therefore completely unprepared to face the state capitalist adversary of today. The inadequacy of the revolutionary milieu’s understanding of state capitalism is what makes a thorough and open discussion of this question an urgent task for both revolutionary theory and practice.

MAC INTOSH

[from Internationalist Perspective #7, summer 1987]