State capitalism

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State capitalism is usually described as an economic system in which commercial (i.e. for-profit) economic activity is undertaken by the state, with management and organization of the means of production in a capitalist manner, including the system of capital accumulation, wage labor, and centralized management.[1] This designation applies to economies regardless of the political aims of the state, even if the state is nominally socialist.[2] State capitalism is characterized by the dominance of state-owned business enterprises in the economy. Examples of state capitalism include corporatized government agencies (agencies organized along corporate and business management practices) and states that own controlling shares of publicly listed corporations (acting as a shareholder). State capitalism is usually used as criticism of states that named themselves socialist;[2] for instance, many communist and Marxist tendencies argue that the Soviet Union did not establish socialism, but rather established state capitalism.[2][3]

State capitalism has also come to refer to an economic system where the means of production are owned privately but the state has considerable control over the allocation of credit and investment,[citation needed] as in the case of France during the period of dirigisme. Alternatively, state capitalism may be used (sometimes interchangeably with state monopoly capitalism) to describe a system where the state intervenes in the economy to protect and advance the interests of large-scale businesses. This practice is often claimed to be in contrast with the ideals of both socialism and laissez-faire capitalism.[4]

There are various theories and critiques of state capitalism, some of which have existed before the 1917 October Revolution. The common themes among them are to identify that the workers do not meaningfully control the means of production and that commodity relations and production for profit still occur within state capitalism. Vladimir Lenin notably described the economy of Russia as state capitalism. Socialists of a libertarian or anarchist persuasion, such as Noam Chomsky, use the term "state capitalism" to refer to economies that are nominally capitalist, such that the decisive research and development is performed by the public sector at public cost, but private owners reap the profits.[5]

Marxist literature typically defines state capitalism as a social system combining capitalism—the wage system of producing and appropriating surplus value—with ownership or control by a state. By that definition, a state capitalist country is one where the government controls the economy and essentially acts like a single huge corporation, extracting the surplus value from the workforce in order to invest it in further production.[6] Friedrich Engels, in Socialism: Utopian and Scientific, argued that state ownership does not do away with capitalism by itself, but rather would be the final stage of capitalism, consisting of ownership and management of large-scale production and communication by the bourgeois state. Yet, the tools for ending capitalism are found in state capitalism, he said.[7]

Some even use the term to refer to capitalist economies such that the state provides substantial public services and regulation of business activity. This could refer to several ideologies ranging from social liberalism and social democracy to fascism. The term is also used by some in reference to a private capitalist economy controlled by a state, often meaning a privately owned economy that is subject to statist economic planning. In the 1930s, Italian Fascist leader Benito Mussolini said that were Fascism to conform itself to modern capitalism, it would end up as being "state socialism turned on its head".[8] This term was often used to describe the controlled economies of the great powers in the First World War.[9]

Origins and early uses of the term[edit]

Wilhelm Liebknecht - "Nobody has combatted State Socialism more than we German Socialists"







Lenin argued the state should temporarily run the economy, which would eventually be taken over by workers.[19] To Lenin "state capitalism" did not mean the state would run most of the economy, but that "state capitalism" would be one of five elements of the economy.[18]

Use by socialists[edit]

State capitalism has been used by various socialists, including anarchists, Marxists and Leninists.

Use by anarchists[edit]





Use by the Russian communist left[edit]



Use by Mensheviks and 'Orthodox' Marxists[edit]



After 1929, exiled Mensheviks such as Fyodor Dan began to argue that Stalin's Russia constituted a state capitalist society.[29] In the United Kingdom, the orthodox Marxist group the Socialist Party of Great Britain independently developed a similar doctrine. Although initially beginning with the idea that Soviet capitalism differed little from western capitalism, they later began to argue that the bureaucracy held its productive property in common, much like the Catholic Church's.[30] As John O'Neill notes:


Use by Schachtmanite "Trotskyists"[edit]


The discussion goes back to internal debates in the Left Opposition during the late 1920s and early 1930s. Ante Ciliga, a member of the Left Opposition imprisoned at Verkhne-Uralsk in the 1930s, described the evolution of many Left Oppositionists to a theory of state capitalism influenced by Gavril Myasnikov's Workers Group and other Left Communist factions.[33] On release, and returning to activity in the International Left Opposition, Ciliga "was one of the first, after 1936, to raise the theory [of state capitalism] in Trotskyist circles".[34] George Orwell, who was an anti-Stalinist leftist like Ciliga, used the term in his Homage to Catalonia (1938).



Use by later left communists and council communists[edit]


Use by Maoists and "anti-revisionists"[edit]

From 1956 to the early 1980s, the Communist Party of China and their Maoist or "anti-revisionist" adherents around the world often described the Soviet Union as state-capitalist, essentially using the accepted Marxist definition, albeit on a different basis and in reference to a different span of time from either the Trotskyists or the left-communists. Specifically, the Maoists and their descendants use the term state capitalism as part of their description of the style and politics of Nikita Khrushchev and his successors, as well as to similar leaders and policies in other self-styled "socialist" states.[36] This was involved in the ideological Sino-Soviet Split.

After Mao's death, amidst the supporters of the Cultural Revolution and the exploits of the "Gang of Four", most extended the state capitalist formulation to China itself, and ceased to support the Communist Party of China, which likewise distanced itself from these former fraternal groups. The related theory of Hoxhaism was developed in 1978, largely by Albanian president Enver Hoxha, who insisted that Mao himself had pursued state capitalist and revisionist economic policies.[37]


Use by liberal economists[edit]

Murray Rothbard advanced a right libertarian analysis of state capitalism

Murray Rothbard, a laissez-faire capitalist philosopher, uses the term interchangeably with the term state monopoly capitalism, and uses it to describe a partnership of government and big business in which the state intervenes on behalf of large capitalists against the interests of consumers.[38][39] He distinguishes this from laissez-faire capitalism where big business is not protected from market forces. This usage dates from the 1960s, when Harry Elmer Barnes described the post-New Deal economy of the United States as "state capitalism." More recently, Andrei Illarionov, former economic advisor to Russian President Vladimir Putin, resigned in December 2005, protesting Russia's "embracement of state capitalism."[40]


Use by Italian Fascists[edit]



Mussolini denounced supercapitalism for causing the "standardization of humankind" and for causing excessive consumption.[44] Mussolini claimed that at this stage of supercapitalism "[it] is then that a capitalist enterprise, when difficulties arise, throws itself like a dead weight into the state's arms. It is then that state intervention begins and becomes more necessary. It is then that those who once ignored the state now seek it out anxiously."[45] Due to the inability of businesses to operate properly when facing economic difficulties, Mussolini claimed that this proved that state intervention into the economy was necessary to stabilize the economy.[45]

Mussolini claimed that dynamic or heroic capitalism and the bourgeoisie could be prevented from degenerating into static capitalism and then supercapitalism only if the concept of economic individualism were abandoned and if state supervision of the economy was introduced.[46] Private enterprise would control production but it would be supervised by the state.[46] Italian Fascism presented the economic system of corporatism as the solution that would preserve private enterprise and property while allowing the state to intervene in the economy when private enterprise failed.[46]

In Western countries[edit]




There are limits, according to arguments that state capitalism exists to ensure that wealth creation does not threaten the ruling elite’s political power, which remains unthreatened by tight connections between the government and the industries while state capitalist fears of capitalism's “creative destruction,” of the threat of revolution, and of any significant changes in the system result in the persistence of industries that have outlived their economic usefulness and an inefficient economic environment that is ill equipped to inspire innovation.

In European studies[edit]


Current forms in 21st century[edit]


People's Republic of China[edit]

Many analysts assert that China is one of the main examples of state capitalism in the 21st century.[50][51][52] In his book, The End of the Free Market: Who Wins the War Between States and Corporations, political scientist Ian Bremmer describes China as the primary driver for the rise of state capitalism as a challenge to the free market economies of the developed world, particularly in the aftermath of the 2008 financial crisis.[53] Bremmer describes state capitalism thus:[54]




Singapore's version of state capitalism[edit]

Singapore's government owns controlling shares in many government-linked companies and directs investment through sovereign wealth funds.[57] Singapore has attracted some of the world's most powerful corporations through business friendly legislation and through the encouragement of western style corporatism, with close cooperation between the state and corporations.

Singapore’s large holdings of government-linked companies and the state’s close cooperation with business are defining aspects of Singapore’s version of state capitalism.

State capitalism in Norway[edit]

The government of Norway has ownership stakes in many of the country's largest publicly listed companies (owning 37% of the Oslo stock exchange) and operates the country's largest non-listed companies including Statoil and Statkraft. The government also operates a sovereign wealth fund, the Government Pension Fund of Norway - whose partial objective is to prepare Norway for a post-oil future.[58]


See also[edit]


  1. ^ Williams, Raymond (1983). "Capitalism". Keywords: A vocabulary of culture and society, revised edition. Oxford University Press. p. 52. ISBN 0195204697. 
  2. ^ a b c Binns, Peter (1986). "State Capitalism". Retrieved 2007-05-31. 
  4. ^ Allan G. Johnson. The Blackwell Dictionary of Sociology. (2000). Blackwell Publishing. ISBN 0-631-21681-2 p.306.   In 2008, the term was used by U.S. National Intelligence Council in Global Trends 2025: A World Transformed to describe the development of Russia, India, and China.
  5. ^ ZNet Germany (18 May 2005). "State and Corp.". Retrieved 8 January 2014. 
  6. ^ [1][dead link]
  8. ^ Mussolini, Benito; "Address to the National Corporative Council (14 November 1933)". Fascism: Doctrine and Institutions,. Fertig, 1978. "Were we—it is a mere supposition—to give way to this latest phase of capitalism we should slide into State capitalism which is merely State socialism reversed. In either event, [whether the outcome be state capitalism or state socialism] the result is the bureaucratization of the national economy." - Benito Mussolini on modern capitalism in 1933."
  9. ^ David Miller, Janet Coleman, William Conolly and Alan Ryan, ed. (1991). Blackwell Encyclopaedia of Political Thought. Blackwell. 
  14. ^ [2][dead link]
  16. ^ Lenin's Collected Works Vol. 27, p. 293, quoted by Aufheben
  18. ^ a b "The Tax in Kind". Retrieved 2014-01-08. 
  19. ^ "The State and Revolution — Chapter 5". 2006-03-25. Retrieved 2014-01-08. 
  21. ^ "There Is No Communism in Russia" by Emma Goldman
  22. ^ "Listen, Marxist!" by Murray Bookchin
  23. ^ "H5. What is vanguardism and why do anarchists reject it?" at An Anarchist FAQ
  25. ^ Fox "Ante Ciliga"
  26. ^ EH Carr, The Interregnum 1923-1924, London, 1954, p80
  28. ^ Kautsky, K. 1919 [1983]. Terrorism and Communism. Cited from P. Goode (ed.), Karl Kautsky: Selected Political Writings. London: Macmillan, 1983, cited in ‘State Capitalism’ in the Soviet Union M.C. Howard and J.E. King
  34. ^ Fox
  36. ^ The Economics of Revisionism by the Irish Communist Organisation, 1967.
  37. ^ Imperialism and the Revolution by Enver Hoxha, 1978.
  39. ^ Rothbard, Murray (2000). "Egalitarianism as a revolt against nature and other essays". Auburn, Ala.: Ludwig von Mises Institute.  |chapter= ignored (help)
  48. ^ Ernesto Screpanti, Capitalist Forms and the Essence of Capitalism, “Review of International Political Economy”, vol. 6, n. 1, 1999; Ernesto Screpanti, The Fundamental Institutions of Capitalism, Routledge, London 2001.
  53. ^ Dyer, Geoff (13 September 2010). "State capitalism: China’s ‘market-Leninism’ has yet to face biggest test". Financial Times. 
  54. ^ Ferguson, Niall (10 February 2012). "We're All State Capitalists Now". Foreign Policy. 
  55. ^ Aligica, Paul and Vlad Tarko (2012). “State Capitalism and the Rent-SeekingConjecture”, Constitutional Political Economy 23(4): 357-379
  58. ^ "Norway: The rich cousin". The Economist. 2 February 2013. Retrieved 27 October 2014. 

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