Tony Cliff

State Capitalism in Russia

Chapter 5:
The common and different features of state capitalism and a workers’ state



None of the Marxist theoreticians doubted that if the concentration of capital could reach such a stage that one capitalist, a collective of capitalists or the state, concentrated the total national capital in its hands which competition on the world market continued, such an economy could still be a capitalist economy. At the same time, all the Marxist theoreticians emphasised that long before the concentration of capital could reach such a level, either the antagonism between the proletariat and the bourgeoisie would bring about a victorious socialist revolution, or the antagonisms between the capitalist states would drive them into such a destructive imperialist war, that society would totally decline.

While state capitalism is possible theoretically it is indubitable that individual capitalism through evolutionary development will in practice never arrive at the concentration of the entire social capital in one hand. Trotsky clearly explained why this would not happen.

Theoretically, to be sure, it is possible to conceive a situation in which the bourgeoisie as a whole constituted itself a stock company which, by means of its state, administers the whole economy. The economic laws of such a regime would present no mysteries. A single capitalist, as is well known, receives in the form of profit, not that part of the surplus value which is directly created by the workers of his own enterprise, but a share of combined surplus value created throughout the country proportionate to the amount of his own capital. Under an integral “state capitalism”, this law of the equal rate of profit would be realised, not by devious routes – that is, competition among different capitals – but immediately and directly through state bookkeeping. Such a regime never existed, however, and, because of profound contradictions among the proprietors themselves, never will exist – the more so, since, in its quality of universal repository of capitalist property, the state would be too tempting an object for social revolution. [1]

The last two factors – the “contradictions among the proprietors themselves” and the fact that if it were the “universal repository of capitalist property, the state would be too tempting an object for social revolution”, explain why it is most improbable that traditional capitalism will develop gradually till it reaches 100 per cent state capitalism. But do these two factors exclude the possibility that after a ruling working class is overthrown, not traditional capitalism, but state capitalism, is restored? The revolutionary proletariat has already concentrated the means of production in the hands of one body, and so eliminated the first factor. As regards the second factor, in any case any oppression and exploitation of the workers by the state makes the state a “tempting ... object for social revolution”; the political expropriation of the working class is thus identical with its economic expropriation.

The only argument that could be given against the possibility of the existence of state capitalism is that if the state becomes the repository of all capital, the economy ceases to become capitalist; in other words, theoretically state capitalism is impossible. This argument, indeed, has been given by Burnham, Dwight MacDonald and others. Thus, for instance, Burnham writes:

The term “state capitalism” seems to be due to a misunderstanding ... When the state owns only a part, and a minor part, of the economy, with the rest of the economy remaining capitalist private enterprise, we might correctly speak of ‘state capitalism’ in connection with that minor state-owned part: since, as we have seen the economy remains in its balance capitalist and even the state-owned part may be directed primarily to the benefit of the capitalist part. But the “capitalism” in “state capitalism” is derived not from the state-controlled part. When the latter disappears, or becomes negligible, then the capitalism has disappeared. There is no paradox in saying that 10 times 10% state capitalism, far from equalling 100% capitalism, equals 0% capitalism. The multiplication is of state, not of capitalism. Though the mathematics would be much more complex, it would be nearer an analogy to say that, just as 10% state capitalist economy equals only 90% capitalist economy, so 100% (or even 80% or 70%) state economy would have eliminated capitalism altogether. [2]

Of course if state capitalism is a contradiction in terms, the name of such a society in which the competition on a world market, commodity production, wage labour, etc., prevail, will be quite arbitrarily chosen. One may call it managerial society, or bureaucratic collectivism, arbitrarily determining its laws. Bruno R. tells us that bureaucratic collectivism leads automatically to communism. Burnham tells us that in managerial society production will rise uninterruptedly (pp.115-6), that a capitalist crisis of overproduction will not break out (p.114), that unemployment will never exist, that managerial society will develop the backward countries (pp.154-5), that it will become more and more democratic (pp.145-7), and because of all this it receives the enthusiastic support of the masses (p.160). As against this Shachtman tells us that bureaucratic collectivism is barbarism.

If Adam Smith came to life today, he would have found great difficulty in discovering any similarity between the economy of, let us say, Nazi Germany, with its tremendous monopoly organisations, its state regulation of raw material distribution, state regulation of the labour market, state purchase of more than half the national product, etc., and the manufacture of the nineteenth century based on the employment of a few or at most a few score workers, free competition between enterprises, active participation of capitalists in organising production, non-existence of the capitalist crisis of overproduction, etc. A perusal of the gradual development of capitalism from one state to the next makes it easier to see what is common to both economies, and that the laws of both are capitalist. The difference between the Russian economy and the Nazi economy is much smaller than the difference between the Nazi economy and the economy of Adam Smith’s time. It is only the absence of the gradualness of development through the stage of monopoly capitalism, which makes it difficult to grasp the similarities and differences between the Russian economy and traditional monopoly capitalism, and the dissimilarity of state capitalism and traditional capitalism on the one hand, and a workers’ state on the other.

Seeing that state capitalism is the extreme theoretical limit which capitalism can reach, it necessarily is the furthest away from traditional capitalism. It is the negation of capitalism on the basis of capitalism itself. Similarly, seeing that a workers’ state is the lowest stage of the new socialist society, it must necessarily have many features in common with state capitalism. What distinguishes between them categorically is the fundamental, the essential difference between the capitalist system and the socialist system. The comparison of state capitalism with traditional capitalism on the one hand, and with a workers’ state on the other, will show that state capitalism is a transition stage to socialism, this side of the socialist revolution, while a workers’ state is a transition stage to socialism the other side of the socialist revolution.



State capitalism – a partial negation of capitalism

The regulation of economic activity by the state is, in itself, a partial negation of the law of value [A], even if the state is, as yet, not the repository of the means of production.

The law of value assumes the regulation of economic functions in an anarchical way. It determines the exchange relations between the different branches of the economy, and explains how relations between people appear, not as direct, crystal clear relations, but indirectly, lost in mysticism. Now, the law of value holds absolute sway only under conditions of free competition, i.e., when there is free movement of capital, commodities and labour power. Therefore, even the most elementary forms of monopolistic organisation already negate the law of value to a certain extent. Thus when the state regulates the allocation of capital and labour power, the price of commodities, etc., it is most certainly a partial negation of capitalism. This is even more the case when the state becomes an important buyer of products. On this question Lenin said:

When capitalists work for defence, i.e., for the government treasury, it is obviously no more “pure” capitalism, but a special form of national economy. Pure capitalism means commodity production. Commodity production means work for an unknown and free market. But the capitalist “working” for the defence does not “work” for the market at all. He fills the order of the government, and in most cases for money that had been advanced to him by the treasury. [3]

With the increasing monopolisation of the economy, the partial negation of the law of value becomes progressively more extensive. Banking capital received a social form long before industrial capital. As Marx noted: “The banking system ... presents indeed the form of common bookkeeping and distribution of means of production on a social scale, but only the form.” [4]

This is even more the case when the state becomes the main form of investment for money capital. It reached its extreme when the capitalist state takes the banking system into its own hands.

Capitalist private property is also partially negated by the monopoly structure. Whereas under the capitalism of free competition, the capitalist was the absolute owner of his own private property, under monopoly capitalism, and especially its most extreme form, state capitalism, the individual capitalist no longer has absolute ownership of the means of production. In share companies, capital becomes “directly endowed with the form of social capital ... It is the abolition of capital as private property within the boundaries of capitalist production itself.” [5]

This is even more true when the state regulates the flow of capital. In such a case, private property is deprived of its freedom of contact. Private capital disappears, while individual appropriation continues. This reaches its extreme when the state takes the means of production into its own hands. The bondholder as an individual ceases to have any control whatsoever over his part of the social capital.

Furthermore, state capitalism is a partial negation of labour power as a commodity. For labour power to appear as a “pure” commodity in the market, two conditions are necessary: firstly, the worker must be “free” of the means of production, and secondly, he must be free of any legal impediments to the selling of his labour power. Under state regulation of the labour market, e.g., under fascism, the worker ceases to be free to sell his labour power. If them the state becomes the actual possessor of the means of production, the choice of employer is entirely abolished, while the choice of place of work is much restricted. And if state capitalism is accompanied by a freezing of wages, compulsory mobilisation, etc., this freedom is even more negated.

Partial negation of the law of value does not, however, free the economy from this law. On the contrary, the economy as a whole is subordinated to it even more. The difference lies only in the form in which the law of value expresses itself. When one monopoly increases its rate of profit as against other industries, it simply increases its share in the total surplus value, or it increases the rate of exploitation of its workers by compelling them to produce more surplus value. When one industry receives subsidies from the state, and thus sells its commodities below its cost of production, a part of the total cost of production is simply transferred from one branch to another. When the state regulates prices, the point of departure is always costs of production. Under all these conditions, whatever their specific form, wage labour continues its antagonism to capital, surplus value continues to be produced, and continues to be converted into capital. The total labour time of society and the total labour time directed to the production of the necessities of life of the workers as a whole determine the rate of exploitation, the rate of surplus value. The total labour time allotted to the production of new means of production determines the rate of accumulation. While the price of every commodity does not exactly express its value (this did not happen, except accidentally, even under individual capitalism) the division of the total product of society among the different classes, as also its allotment to accumulation and consumption is dependent on the law of value. Where the state owns all the means of production and the workers are exploited while the world economy is as yet disunited an atomised, this dependence receives its purest, most direct and absolute form.<</p>



State capitalism – a transition to socialism

Everything that centralises the means of production centralises the working class. State capitalist brings this concentration to the highest stage possible under the capitalist system, state capitalism brings the working class to its greatest possible concentration.

The partial negation of capitalism on the basis of capitalist relations of production, means that the productive forces which develop in the bosom of the capitalist system so outgrow it, that the capitalist class is compelled to use “socialist” measures, and manipulate them in their own interests. “In spite of themselves, the capitalists are dragged, as it were, into a new social order, a transitional social order from complete free competition to complete socialisation.” [6]

The productive forces are too strong for capitalism, and “socialist” elements therefore enter into the economy (Engels called this “the invading socialist society”). But they are subordinated to the interests of the preservation of capitalism. Similarly, in a workers’ state, because the productive forces are insufficiently developed for socialism, the working class is compelled to use capitalist measures (e.g., the capitalist law applied to distribution) in the interests of building socialism.

State capitalism and a workers’ state are two stages in the transition period from capitalism to socialism. State capitalism is the extreme opposite of socialism – they are symmetrically opposed, and they are dialectically united with one another.

Whereas under state capitalism wage labour is partially negated in that the worker is not free to choose his employer, under the dictatorship of the proletariat, wage labour is partially negated in that the workers as a collective cease to be “free” of the means of production. At the same time, in a workers’ state, wage labour ceases to be a commodity. The “sale” of labour power is different from the sale of labour power under capitalism, because under a workers’ state the workers as individuals do not sell their labour power but put it at their own service in their role of a collective. Labour power ceases really to be a commodity, as here the exchange takes place between the workers as individuals, and these same workers as a collective, and not between two entities which are totally independent of one another except in their exchange. Whereas state capitalism brings about the fusion of the unions with the state until they are ultimately annulled as unions, the workers’ state raises the influence of the trade unions to the maximum. Whereas state capitalism signifies historically the totalitarianism of the state, a workers’ state brings the highest degree of democracy society has ever known. State capitalism signifies the extreme subjegation of the working class by a capitalist class in control of the means of production. A workers’ state means the suppression of the capitalists by a working class in control of the means of production.

Lenin clearly formulated the relation between state capitalism and socialism in these words:

the measure called “war socialism” by the German Plekhanovs (Scheidemann, Lensch, and others) is in reality war-time state monopoly capitalism. Or to speak more plainly and clearly, it is military penal labour for the workers, military defence of the capitalists’ profits.

But try and substitute for the Junker-capitalist, for the landowner-capitalist state, a revolutionary democratic state, i.e., such as would destroy all privileges in a revolutionary way without being afraid of introducing in a revolutionary way the fullest possible democracy – and you shall see that, in a truly revolutionary democratic state, state monopoly capitalism inevitably and unavoidably means progress towards Socialism.

... For Socialism is nothing but the next step forward from state capitalist monopoly. In other words, Socialism is nothing but state capitalist monopoly made to benefit the whole people; by this token it ceases to be capitalist monopoly. [7]

Bukharin, who dealt extensively with the question of state capitalism, formulated the relation between state capitalism and the dictatorship of the proletariat very clearly:

In the system of state capitalism the economic subject is the capitalist state, the collective capitalist. In the dictatorship of the proletariat, the economic subject is the proletarian state, the collectively organised working class, “The proletariat organised as state power.” Under state capitalism, the production process is that of the production of surplus value which falls into the hands of a capitalist class, which tries to transform this value into surplus product. Under the dictatorship of the proletariat the production process is a means for the planned satisfaction of social needs. The system of state capitalism is the most complete form of exploitation of the masses by a handful of oligarchs. The dictatorship of the proletariat makes any exploitation whatsoever altogether unthinkable, as it transforms collective capitalist property and its private capitalist form into collective-proletarian “property”! Notwithstanding their formal similarity, these are diametrical opposites in content. This antagonism determines also the antagonism of all the parts of the systems under discussion, even if formally they are similar. Thus, for instance, the general labour duty under state capitalism means the enslavement of the working masses; as against this, under the dictatorship of the proletariat it is nothing but the self-organisation of labour by the masses; in the former case the mobilisation of industry means the strengthening of the power of the bourgeoisie and the strengthening of the capitalist regime, while in the latter it means the strengthening of socialism. Under the state capitalist structure all the forms of state compulsion represent a pressure which will assure, broaden and deepen the process of exploitation, while state compulsion under the dictatorship of the proletariat represents a method of building up communist society. In short, the functional contradiction between the formally similar phenomena is here wholly determined by the functional contradiction between the systems of organisation, by their contradictory class characteristics. [8]

Much earlier than either Lenin or Bukharin, Engels put forward what were fundamentally the same ideas in Anti-Dührung.

The more productive forces it [the state] takes over, the more it becomes the real collective body of all the capitalists, the more citizens it exploits. The capitalist relationship is not abolished; it is rather pushed to an extreme. But at this extreme it changes into its opposite. State ownership of the productive forces is not the solution of the conflict, but it contains within itself the formal means, the handle to the solution. [9]




A. For a fuller explanation of this, see Chapter 7.



1. L. Trotsky, The Revolution Betrayed, London 1937, pp.232-233.

2. J. Burnham, The Managerial Revolution, London 1945, pp.103-104.

3. V.I. Lenin, Works (Russian), Vol.XXV, p.51.

4. K. Marx, Capital, Vol.III, Chicago 1909, p.712.

5. ibid., p.517.

6. V.I. Lenin, Imperialism, the Highest Stage of Capitalism, London 1942, p.20.

7. V.I. Lenin, Collected Works, London, Vol.XXI, Book 1, pp.210-211.

8. N. Bukarin, Oekonomie des Transformationsperiode, Hamburg 1922, pp.131-133.

9. F. Engels, Anti-Dühring, op. cit., pp.306-307.


Last updated on 24.8.2002