Video | Understanding state capitalism

Gareth Dale and Owen Miller introduce a discussion on the contemporary relevance of state capitalism

State capitalism and development in east  Asia since 1945 is published by Haymarket books

Edited transcript

Gareth Dale

This is the first serious book length work that really develops the state capitalist argument that we’ve seen in a long time. By the state capitalist argument, I mean the case that the so-called communist states are capitalist states in disguise. There’s more to it than that and I’ll get to that in a minute. A second reason why the book is so relevant is that it registers that there has been a historic shift in the so-called communist countries. When I was a lad most of them were in Europe, Russia, Czechoslovakia and so on. Now none are in Europe, one is in the Caribbean, that’s Cuba most are in Asia, that’s Vietnam, Laos, North Korea and China. North Korea and China have been so-called communist countries for 76 years, that’s longer than Russia. Its so-called communism lasted only 74 years. So, from that angle it’s high time that there’s a book that looks at East Asia from the vantage point of state capitalism theory and we are grateful to Owen for having delivered it. A third reason why it’s so relevant and important is that East Asia is not only interesting for state capitalism theory due to the presence of China, Vietnam, Laos, North Korea, it is also the location of some of the most statist versions of capitalism in the western camp too, above all South Korea. So the book includes a chapter on South Korea, how heavily stratified its economy was in the 1960s and 1970s, with the nationalisation of banks and with five year plans pretty similar to the Soviet model. Even though South Korea was a very loudly anti-communist regime.

I should say as well a little more about why state capitalism theory is critical to our theory and practise as revolutionaries. Partly it’s central to our argument about communism. Communism is not something that can be imposed by tanks as were the regimes of Eastern Europe. Communism we understand as revolutionary worker’s democracy and as such is the antithesis of the Stalinist and Maoist regimes. The state capitalist approach is I think the only theory that can really make sense of those regimes. If you disagree, I look forward to discussing in the Q&A and hearing the arguments. State capitalism theory is also central to our understanding of capitalism. If you’re theorising capitalism of course as a Marxist you will rely heavily on Das Capital, but the focus of that book is on commodities, wage labour, capital obviously, and crisis. Where does that leave the state? Well at one point Marx when he was mapping out the book envisaged Capital as the first book in a series of six: capital, landed property, labour, foreign trade, the world market and the state. Unfortunately, he died before he had completed even the first of those on capital. Now Das Capital also includes lots of chapters on labour and rent. So arguably the books on labour and landed property were folded into it, but not the books on foreign trade or the world market or the state. It’s a pity he didn’t survive to write those. If the state is theorised as an interstate system as I think it should be, all these categories are international, foreign trade, the world market and then the state system. It’s in these dimensions, the world as a whole, that capitalism forms and operates, and so really to theorise capitalism in its origins and evolutions you have to take that global approach. And states play a key part through Interstate competition etc. That competition is the basis of the original version of state capitalist theory, at least the version that we adhere to in this book and in rs21. It’s through interstate competition that the law of value, or market forces if you like, are transmitted. 

So, what I’m suggesting then is that state capitalism theory isn’t simply an approach to understanding the so-called communist bloc or societies, it also operates at a deeper level of analysis, it’s about the nature of capital relations themselves. These are never simply economic. Capital relations are yes of course about exchange relations on markets selling on markets etc, but they’re also about power and the organisation of exploitation, economic power and in all of this business has an indissoluble link to state power. For a particularly ugly and naked example of this look at Trump and his billionaire friends. But in general, this is the case. So, states in the international sphere, in the global market, don’t simply bat on behalf of their businesses, they’re driven to intervene in muscular ways in the economic field in all its dimensions. At some conjunctures in history, they intervene very directly indeed, they take over entire sectors of industry. 

When are these conjectures and why do these highly statist forms of capitalism emerge? I would highlight four main factors. The first is the scale of organisation of leading industries. If we caricature just a little, in the 18th century the scale of ownership and production in most of the leading industries in a country like England or Britain was local. In the 19th and early 20th centuries it was national and from then onwards it has been global. Think for example of industries like wheat or beer or iron or furniture or vehicles. In all of those industries, and many more, that sort of local/national/global breakdown applies. A second factor is geopolitics. At times of intense interstate rivalry especially, including arms races, including wars, states tend to take over the arms industry and other strategic sectors. Particularly those that provide input into the arms industry, but well beyond that as well. Many features of the Soviet economies, including the emphasis on heavy industry, including the very high savings ratio, including allocation by direct political command, including the use of ideological appeals to enjoin the population to increase output, all of these are typical of war economies in the 20th century. In this regard in its economy, and the other features that I mentioned, 1930s Germany was quite similar to 1930s Russia. And wartime Britain wasn’t all that different either. 

So, the first factor is the scale of organisation of leading industries, the second is geopolitics. A third factor we can summarise as catch-up industrialisation. What I’m talking about here is where states use their power to push or to force through measures to industrialise, to funnel revenues to certain industries, to strategic industries, to suppress popular consumption in order to syphon more revenues from the population and so on. This is what Trotsky was talking about when he described Russia under the tsars in the late 19th, early 20th century as seeing capitalism emerge as the offspring of the state. That catch up industrialisation is the third factor.

The fourth factor is whenever we see major economic crises we tend to see some extra degree of state capitalism. An industry goes under, and the state might take it over. Especially if it’s in a crucial infrastructure sector like rail or telecoms. If we take those factors together, they help explain why a particularly extreme form of state capitalism predominated at certain times and in certain places in the 20th century. We find it in particular economic sectors where natural monopolies exist as in the transport sector, or sectors that are seen as strategic, oil, electricity. Many of the world’s biggest oil companies are state owned, they are state capitals. State capitalism thrives where states are trying to punch their way to the top of the world hierarchy, they thrive in societies that are geared to war, which is why Germany in 1914/18 was an example that inspired a lot of discussion on the role of the state and theories of imperialism etc. State capitalism thrives during bouts of deglobalisation, periods when trade networks and financial networks are collapsing, and states intervene to fashion some sort of alternative framework. The 1930s was a classic case in point and today we’re experiencing not a period of deglobalisation, but a period of globalisation stalled, and some return to state capitalism around the world today.

When we take all those factors together, they help us to make sense of why a particular form of national statism was so very prevalent in the middle of the 20th century. In the 1930s think of Turkey, in the 1940s think of Japan, in the 1950s think of Rákosi’s Hungary or Nehru’s India or Tito’s Yugoslavia. In the 1960s think of Egypt under Nasser, in the same decade think of Brazil and into the 1970s think Brazil, Peru, Vietnam. In all of these regardless of whether they paint themselves communist or capitalist, in all of these (capitalist societies in our understanding) there was a very high degree of state ownership, state control, particularly strategic industries but broader than that as well. and many of them saw a steep ascent industrialisation with central planners trying to force through growth as rapidly as possible. All of them saw a bias towards heavy industry and the large arms sector and relative autarchy. In quite a few of them we had rule by a single party in some countries communist, in others it was called something else, but a single party the goal of which is to lash all societies institutions into a national corporate unity that is subordinated to the goals of rapid industrialization and military might. I think to understand the last 200 years using state capitalist analysis is really crucial it helps us to make sense of the commonalities among those different regimes, and we can be grateful to Owen with his book for taking this further and focusing on the commonalities and some differences among the East Asian state capitalist powers and regimes today.

I would just say one other thing about the so-called communist regimes. In a very superficial sense their existence has been wonderful for the promulgation of Marxism, more people know about Marx as a result, but it has come about at the cost of its complete bowdlerization. I recall when I moved to East Germany in 1989, I was teaching at a university there. I went straight to the library and took out books on Marxism. I was really curious to see how they understood Marxism. The textbooks were on Marxism -Leninism and it was just fascinating to read this stuff. It’s utterly unlike anything in Marx or Engels, or Lenin for that matter. It was pure technological determinism and the chapters on dialectical philosophy centred on the incantation of strange scholastic formulas, the negation of the negation and so on. 

A great book on this is Nigel Harris’s Beliefs in Society, one of the best books on how a revolutionary philosophy could be turned into conservatism. The way in which I understand these societies or which we do, our understanding through state capitalism theory, is essentially as forms of counter revolutionary modernisations. These were not old-style reactionary landlord-based forms of counter revolutionary regime. The one that arose in Russia was based on the destruction of the revolutionary project, a thoroughly, nakedly counter revolutionary moment, but it went on to assert itself as a modernising state. The cachet of a state that’s committed to educating the masses and rationalisation of healthcare systems and such like. That sort of radical bourgeois project can appeal to people on the left for reasons that we’ve all come to understand. As can the anti-imperialism that is involved in some of the revolutionary moments in the history of so-called communism, Yugoslavia’s revolution, the Cuban resistance against American imperialism, the 1949 revolution in China. In theorising these societies as state capitalist we are not negating those revolutionary moments but essentially arguing that they are forms of ultimately bourgeois revolution, of setting up centres of capital accumulation independently from the western dominated sphere. 

I’ve tailed off a little bit but I think they were main points I wanted to make and happy to return to discuss some of these in the Q&A.

Owen Miller

My thoughts are not very well ordered and I’m thinking on my feet as I was listening to Gareth. There’s one thing to pick up on which I thought was interesting, the point that Gareth made about forms of modernisation and state capitalism as a form of modernisation. This goes back to I something that I mentioned in the previous talk which is the idea that the Tony Cliff came up with of deflected permanent state capitalist revolution which I think is much shortened to state capitalist revolution. The idea that there were a series of places, mostly in postcolonial states or emerging global south states in the 50s, 60s and 70s that underwent these revolutions. Often led and centred around intellectual classes or military officers, middling but educated and ambitious groups within these societies that were stifled by the old comprador capitalists that were running their countries. They wanted to turn over a new leaf and really modernise their countries. This happened in a number of countries, and it did quite often happen under the banner of being communist. They tied their flag to the Soviet or Chinese mast. I think that’s a good way of thinking about it. Other people have theorised these things in a more Gramscian way as being passive revolutions. There’s not actually a revolution from below, there’s a revolution from the middle, or above, which is able to put the society on a new footing and carry out a number of reforms which weren’t possible previously. But that’s not a socialist revolution by any means. You see this for example in North Korea in the late 1940s. I was just teaching this to my students today, you see them introduce in 1946, when the Soviets have come in and occupied North Korea, whole series of modernising reforms which in a certain sense are very impressive when it has been a very suppressed country under Japanese colonial rule. Suddenly they’re bringing in gender equality law, they’re bringing in labour laws which limit the working day to 8 hours and ban child labour. They are nationalising industry. All these things sound great, wonderful, at the same time as I say to my students these are things that we would expect in a modern society, in any kind of liberal modern liberal democratic state. It would be not seen as a modern liberal democratic state if it didn’t have labour laws, and it didn’t have gender equality laws. These are radical in the context but not in any sense socialist reforms.

One other thing I was going to comment on is the question of the law of value which Gareth touched on as well. I wanted to mention that since the book was finished, I’ve been reading a bit more about various aspects of this. One thing I find very interesting is the way in which the Soviet Union reworked its thinking around the law of value. I think it was in the late 40s that Soviet economists declared that the law of value did operate in the Soviet Union, apparently Stalin himself was quite engaged with this debate. There’s this bizarre idea that you can have a post capitalist state in which the law of value is operating. To recognise that the law of value operates means, as Gareth was saying, that you are part of a system of competitive capital accumulation in which you are ultimately beholden to certain competitive forces. In this case the forces of international Interstate competition and inter-block competition. I think one of the contributions of the book is in the chapter about Mao’s China in which the author Kim Ha-young who is a Korean socialist has managed to dig out some fascinating primary materials about the way in which the Chinese ruling class was actually thinking about the law of value. They were carefully studying exactly the productivity in the Western countries and what gap China had to close in order to get anywhere near competing. That chapter shows a mechanism through which the law of value was operating in China in the 1950s.