The State is No Saviour

The state as Engels described it, is “the ideal personification of the total national capital.” (Socialism: Utopian and Scientific) and he recognised “The more productive forces it (the state) takes ever into its possession, the more it becomes a real aggregate capitalist, the more citizens it exploits. The workers remain wage-workers, proletarians. The capitalist relationship is not abolished, rather it is pushed to the limit. (Engels, Socialism: Utopian and Scientific)

 The nature of capitalism is distorted by those who draw their model of capitalism from its early competitive stage and describe its essence as the competition among individual capitals within a nation-state. Marx himself did not confine his analysis to a description of the stage of competitive capitalism, but grasped the basic laws of development leading to greater concentration and centralization of capital. Even in speaking of stock companies, he refers to this form of ownership as being “social capital” which represents “the abolition of capital as private property within the framework of capitalist production itself.” (Capital, Vol. 3) In the Soviet Union today the state had become the chief framework within which capitalist production is organized even though capital in the form of individual private property has been abolished. The ruling class in the Soviet Union can be described as state capitalists, since they command  the highly centralized Soviet economy and oppresses and exploits the working class directly through its stranglehold on the state apparatus. This class does not individually own the means of production, but this fact makes it no less a capitalist class. The central question to pose in determining whether the Soviet Union is capitalist or socialist is thus not whether the principal means of production have been nationalised, but which class holds real political and economic power. This power is held in state bureaucracy by the nomenklatura and apparatchiks , which controls and disposes of state property and gears the whole economy towards the maximization of surplus-value extraction, towards “accumulation for accumulation’s sake, production for production’s sake.” (Capital, Vol. l)

To understand more clearly the difference between socialism and state capitalism we need to start by understanding the difference between use value and value in commodity production. Use value refers to the useful aspects of products which satisfy human wants and needs, while value is the abstract worth given to products for the purposes of exchange and based on the socially necessary labor time that went into creating them. Surplus value is the difference between the value the worker creates with his labour and the value he or she receives in payment, this difference being pocketed by the capitalist.

Marx pointed out that in the case of slavery the slaves were oppressed and exploited in order to produce use values for the slaveowners. This is distinct and different from the exploitation of the working class by the capitalist class, whose goal, as Marx puts it, is “the production of surplus value as the absolute law.” Under socialism, although the value of products, based on socially necessary labor time, must be taken into account, still commodity production is made subordinate to the goal of producing use values for the working people, such as food, clothing, housing, health care, transportation.

The basic functioning of the Soviet economy revealed that the extraction of surplus value is indeed the guiding principle. The Soviet bureaucrats has been able to maximize capital accumulation  through the national economic plan. The real power of the state bosses is wielded through its control over the national economic plan, in which it is able to fix the rate of output and the rate of capital accumulation for the Soviet economy as a whole, and determine the utilization of the labor force and the total wages that will go to the working class.

 Despite its high level of organization, it would be misleading to characterize the state ruling class  as one monolithic class, since it is composed of a number of different, competing, and conflicting wings, just like any other capitalist county. Capital is always “private” in the sense that a capitalist class controls it and makes decisions about it in its own narrow class interests. But capital is not, in essence, an individual private affair. Moreover, the existence of capital as state capital by no means gets rid of the anarchy of production. There is competition among the different wings or special interests of the Soviet elite.

 Marx notes, that capitalism produces not only surplus value, but also the class relations between exploiters and exploited. It is not in the class interests of the Soviet working class to work hard to produce surplus value for the state bourgeoisie, and working-class resistance is taking a number of different forms. These include demands for higher wages, a constant search for better jobs, or just simply doing as little work as possible on the job. The lack of labor discipline has become a common theme in Soviet economic literature. Losses of working time are substantial. One of the results has been a continual drive by the Soviet bourgeoisie to intensify labour in order to raise productivity. Institutions like the trade unions, which are supposed to defend the workers interests, remained bound hand and foot to the ruling class.

Some  argued that the Soviet Union cannot be capitalist because the Soviet elite does not really enjoy great material privileges. The whole line of argument on material privileges, of course, is a red herring since it misses the essence of capitalism, which involves the accumulation of surplus value, not its consumption in the form of luxurious use values by the ruling class. As Marx states about the capitalist, “as far as he is personified in capital, it is not values in use and the enjoyment of them but exchange value and its augmentation, that spur him into action.” (Capital, Vol. l) But evidence was sufficient to demonstrate that there was a qualitative gap between the wealth of the Soviet ruling class and the income of the working people which cannot be justified on any rational basis according to the principle of bourgeois right. Moreover, if these privileges were justified as a material incentive to create greater loyalty and labour, why was the access to these privileges kept from public view?

Those Stalinists and certain Trotskyists who believed that the working class held state power in the Soviet Union were led into vulgar apologetics for glaring injustice, exploitation, and oppression in Soviet society, that led them to approve Soviet imperialist adventures abroad, whether slaughtering peasants in Afghanistan or napalming them in Eritrea. Such a stand betrays the interests of not only the Soviet working class which has accomplished so much in the past, but also the various peoples of the world who are oppressed and exploited by their Soviet “saviors.”

State-owned Exploitation

Following on from the previous blog-post on co-operatives, the other panacea often presented is state-capitalism, sometimes described by the oxymoron term state-socialism.

Public ownership by the State is not socialism – it is only State capitalism. What many on the Left will do is add a caveat - that nationalisation with workers control is socialism. That too is erroneous. It still means state capitalism. Socialism is not state ownership or management of industry, but the opposite. Socialism abolishes the state.Industry is not transformed into the state, but industry is transformed into common ownership,  functioning industrially and socially through new administrative associations  of the producers, and not through the state. Socialists reject the idea that State capitalism is a phase of socialism. State capitalism can never become socialism  precisely because there exists  a state. A bait is offered to the workers of a “democratized” State capitalism by “democratizing” the government, placing it in the hands of “the people.” This policy is equally condemnable as strategy and tactics, – as strategy, it dispenses with the necessity of overthrowing the state as an indispensable phase of the Social Revolution; as tactics, it strengthens the state and weakens the proletariat by obscuring the fact that its power resides in ownership and control of the production process. The tendency toward a bureaucratic  autocracy is strengthened. The centralisation of economic management into the hands of the state has little to do with working class rule. Control of the nationalised industries is vested in boards which are appointed and even if elected just how could they change the nature of the capitalist beast - the requirement  to compete and make profits. State capitalism cannot exist without inflicting hardships on the workers.

Workers’ control implies the existence of a capitalist (or state capitalist) management. Workers’ self-management, co-operative production under the joint control of the workers in an enterprise, can also be achieved under capitalism, indeed has been on many occasions. Under capitalism it can only lead to workers driving down their own conditions as a result of capitalist competition or to the collapse of the enterprise.

The vast majority of British industry is not owned privately by individuals but corporately owned; by banks, by finance or insurance companies, by monopolies or by the STATE. These are all forms of capitalism in which capitalist property relationships remain intact. Surplus-value is still appropriated and production is governed through the market by the operation of the law of value and commodity exchange. These laws operate whether private companies or the state control production. The essence of capitalism is property relationships; ownership is merely a formal question, which can take MANY forms.

To portray nationalisation as a means of making inroads into the capitalist system is to ignore the central role of the state. The nationalisation fallacy is based on the misconception of the role of the government, which according to those who desire “public"-ownership, represents a neutral group representing the nation “above” both the workers and capitalists. Bitter and long experience has shown that the government, far from being a neutral in the struggle of the classes, is in reality a representative of the ruling class. Workers will find themselves prisoners caught between two expressions of the same capitalist class – the capitalists themselves and their government lackeys. Hence nationalisation can never be a means of making inroads into capitalism. To argue so is to deny the fundamentals of Marxian economic. For all these reasons there is no advantage, either strategic or tactical, in calling for the nationalisation of private industry. It is irrelevant to the real interests of the working people of Britain whether profits are in private or state hands. It diverts the fight for socialism to a fight for reformism and gradualism. By presenting nationalisation and other forms of state intervention as “socialist”, the Left has helped to turn people away from socialism by identifying it with the suffocating bureaucracy that characterises the capitalist state machine.

An important part of the SPGB’s work must lie in exposing the socialist pretensions and in opposing the false strategies of the Trotskyists who demand that they nationalise more and more industries. The Old Labour left demand nationalisation as a means of making inroads into the capitalist system – as a form of creeping socialism. The SWP and  SPEW (Militant) say that they are making “transitional” demands, that their approach is different to that of the Labour left but in essence their strategy is just as reformist. They claim that slogans for more nationalisation raise the question of state power and heighten the consciousness of the workers. Objectively, in the real world, all these organisations are serving the capitalist class in that they are attempting to mobilise the working class in order to bring about the expansion of state capitalism in many cases to rescue bankrupt private enterprises. The strength of the working class lies in their labour and their relationship to the means of production – let us help them to learn to use it! Not government ownership but common ownership.  

State ownership or common ownership

The term “State capitalism” (sometimes misleadingly designated as State Socialism) is an economic form in which the state performs the role of the capitalist employer, for instance the Post Office(at least for the moment). Under State ownership or State control of industry, the exploitation of wage workers continues. Surplus-values are appropriated by the capitalist class just the same. The government now functions as the exploiting agent of the capitalists who receive their incomes in the form of interest on government bonds or on loans to the government. Although the exploitation may be less direct, the profits go to the capitalists as formerly. The workers are not any better off. That is what Engels meant when he said, “State ownership does not do away with the capitalistic nature of the productive forces.” Millions of employees are now in the State sector and the capitalist class are just as rich while the working class are just as insecure and just as poor, as before. But state property is not socialism for the workers are still not the masters of their labour conditions and remain separated from the production process.


“State ownership of the productive forces is not the solution... [in Marx and Engels’ view, for] neither the conversion into joint-stock companies nor into state property deprives the productive forces of their character as capital... The workers remain wage-earners, proletarians. The capitalist relationship is not abolished; it is rather pushed to an extreme.” (Anti-Dühring)

The Danger of State Capitalism

In an earlier post we discussed nationalisation, it is worth going into such an economy where the state is the main owner.

Socialists envisage a society in which there will be no classes and no state. Many on the Left, including Lenin, have regarded state capitalism as a stage on the way to socialism. They view it as a necessary transitional stage. But history has the grave dangers of state capitalism.

State capitalism concentrates an overwhelming power in the hands of the State, and places workers completely at the mercy of the State. The State is not in the hands of the working-class but an all-mighty bureaucracy.

Under private capitalism in a democratic State the government has no substantial direct income. It raises revenue and makes expenditure by the authorisation of Parliament. This gives to Parliament a degree of control over the executive.

Under state capitalism, the government derives its income automatically from the economic enterprises of the State. It thus has a tendency to free itself from parliamentary control, to become the master of Parliament and to turn the MPs into obedient civil servants.
The State, as the owner of banking industry, agriculture and transport etc becomes the universal employer, the universal landlord. It controls everything on which the fate and happiness of the individual citizen depend.

The worker is dependent upon and at the mercy of the State as regards his or her employment, housing, food, education, transport and leisure facilities. This enormous power of the State over the individual strengthens tendencies towards a dictatorship. The right to organise in trade unions and to strike under State capitalism is even more essential than under private capitalism.

State capitalism does not solve any of the outstanding problems. It does not abolish crises, the classes, the wage system. Under state capitalism there is production of commodities for sale, not production for use. There still remains the rationing of prices and the limits on the purchasing power of wages.

What Is Socialism? It is not nationalisation

“It was our lifelong dream coming true. It was a utopia. We were for it 100 per cent. What celebrations there were! The industry which had broken generations of miners was ours at last.”

On the 1st January 1947 miners took an unofficial holiday. The red flag was hoisted over the pits and the miners social clubs rang to choruses of the workers’ anthems of the Red Flag and the Internationale. The euphoria did not last.

Nationalisation (or in some cases municipalisation), is sometimes called “state socialism”, but more accurately it amounts to a form of state capitalism. The Post Office, would serve as an example of a “socialist” public service or the National Health Service. Or the BBC. But in the past we have had coal mines, the railways, the electricity and gas networks and tele-communications all owned by the state. Nationalisation has been wrongly equated with socialism. State ownership does not mean socialism. Nationalisation is a complete distortion of the idea of common ownership. The Labour Government has not only performed an essential service for British capitalism but at the same time has been able to hold in check the class aspirations of the British workers by representing such measure as the beginnings of socialism. So-called socialists demnding the re-nationalisation of the privatised industries and the new fresh nationalisations of key parts of the economy are committing an old fraud. Nationalisation does not facilitate the revolutionary task and are state-capitalist measures, not socialist ones.

At the dawn of capitalism, when the individual factory was usually quite small, it was normal for the capitalist to fill all three functions of ownership: he owned it, controlled it (in the sense of making all the operative decisions on the policy on the firm) and personally managed it. Today, in all the big corporations, ownership by shareholders is usually divorced from control by the big financial or and both are far removed from management which is exercised by (highly paid) salaried managerial employees. Private enterprise has become less private, less enterprising. Instead of the image of the self-confident businessman, owning his own factory, we now have the giant, impersonal monopolies, reliant on state contracts or subsidies. So what the form of ownership is not the decisive question; what matters are the interests in which industry is being run. Instead of individual ownership, the capitalist class as a whole owned the railways, the mines and energy producers.

Nationalised industries are said to be for the profit of the community but they are for the benefit the capitalist class and when they no longer serve that function, they are privatised. Certain industries, delivered up to the greed of private companies, become instruments for the exploitation of other sections of the capitalist class, and so powerful they grow that they disturb the whole bourgeois system. Capitalism is forced to make attempts to overcome its own anarchy of production if it is to continue to survive under modern conditions. The first attempts in this direction are represented by the organisation of cartels and trusts; later the direct intervention of the state become increasingly necessary. On the world market, state control is needed by the capitalist, in order to render the national industries better able to compete. While many saw nationalisation as a step towards the socialist planned economy it was merely the natural consequence of the modernisation of the out-of-date industries by the capitalist state in order to render British capitalist industry as a whole more able to compete. The whole reason for the nationalisation measures of the Labour Government 1945-51 was that the recovery of the whole economy would have been endangered without cheaper access to transport and fuel.

Naturally the whole process of state control over industry remains in the hands of the capitalist class and its representatives. In Britain the management of the nationalised industries stayed in the hands of much the same people who ran them previously—plus a number of loyal labour lieutenants of capitalism who were rewarded for services rendered with jobs. By December, 1949 of 131 names listed by Mr. Attlee on central nationalised boards, sixty-one also held directorships in private companies, twenty-three were knights, nine were lords, and three were generals. It may not be altogether unfair to suggest that their devotion to the socialist idea was not primary. In such a state-controlled economy the profit motive—the fundamental cause of capitalist crises—naturally remains untouched. In fact the control itself exists solely for the maintenance and the increase of profits.

In capitalist society a private industry only becomes a State service in order to better serve the interest of the bourgeoisie. We witnessed that with the state take-over of the failed banks of Northen Rock, Royal Bank of Scotland and the Halifax Bank of Scotland to preserve the integrity of the financial sector as a whole. Nationalising the banks have been instrumental in maintaining the class structure of British society. It was a nationalisation which feathered the bed of the capitalists and the banking oligarchs remained safe in their beds. The capitalist bank nationalisations is the clearest proof that capitalists are prepared to concede formal ownership of the means of production to the state provided that it is in what they call ’the national interest’ (i.e. in the interests of their class as a whole, as represented by their state). Ownership is a secondary matter; there are all kinds of private, collective and state forms of ownership - what is important is the class reality which lies behind these legal arrangements in that the capitalist class is still in power and in control of its capitalist state.

State employees, like workers in private employment, strike and engage in a struggle with the exploiters. Even if the new state owners desired to improve the lot of those employed would they be able to do so? The work-places of the state and municipality are prisons quite as bad as private workshops, if not worse. But those “revolutionaries” will have to mount guard over the general interests of society served by the socialised industries, and in particular over the interests of those directly engaged in them. The state ownership of the Post Office in this country since the 18th century has meant neither improved conditions for the post office workers, nor any advantage to the working class as a whole. We witnessed the same despotic rule and saw that those who worked most and hardest would still get the least remuneration.

There is no question of syndicalism or “guild socialism”: each factory and work-place will not be owned by its own workers. They will be “owned” by the working class collectively. Nor will the question of competition (and conflicts) between various factories arise through a system of “”market socialism.”

Surely, today, nobody believes that thanks to a British Rail or a National Coal Board, we will reach the New Jerusalem. We have learned from the political failures of the past just how disastrous the idea is that socialism can be established over time by a “working class government” through nationalisation and state control. Yet nationalisation under workers’ control is the now the cry being raised in some quarters but it is a call for the working class to undertake the management of their own exploitation.

Within this model wage labour would still function and it follows that so too would capital. Capital accumulation out of surplus value would be the overriding imperative of this system. At the end of the day what we have is just another class-based society parading as one in which the means of production are purportedly publically-owned but actually owned by the state-apparatus. It is the Left’s mistaken belief mistaken belief that “socialism” is simply a change in administration and so if nationalisation gives the appearence of worker-control it must be well down the road to socialism.

Although they left no detailed blueprint of a socialist society, the viewpoint of Marx and Engels, was that socialism would be a new mode of social production that would in essence be an “association of free and equal producers", not a system where the administrator of production and distribution would be the state, but rather the producers and consumers themselves to whom these functions of ownership and control would fall. The path to socialism is not through nationalisation, public corporations or even trade union control, but through a fundamental change in class relations. Socialism is rule by the working people. They will decide how socialism is to work. This was how Marx defined socialism. To-day there is no difficulty whatever in creating wealth far in excess of our requirements and the motto, “From each according to ability, to each according to needs,” now ceases to be utopian and becomes a reality.

Chinese Capitalism

"As a party member, I will work hard and teach other people how to get rich together and let more people benefit by getting rich," Wang Dongxin, the general manager of Jiangxi Luhuan Animal Husbandry, a pig-breeding company,  said to hundreds of Communist Party members in Beijing's Great Hall of the People.

Chinese president Hu Jintao said China was still in the "primary stage of socialism" and still needed to pursue "socialist modernisation" as its main task, aiming to double the 2010 per-capita income of both urban and rural residents by 2020. Hu has previously said China's modernisation drive under one-party rule would take "several, a dozen or even dozens of generations". [a generation is generally defined as about 30 years so it will be a long transition!- Socialist Courier]

The New York Times reported last month that the extended family of Premier Wen Jiabao had amassed assets worth $2.7 billion.

Hu Jia, a leading rights activist, said Hu's speech and remarks by Xi at the congress were full of "hackneyed phrases". He said the highly orchestrated congress was "completely an 'emperor's new clothes' show". Hu Jia and scores of other dissidents and activists were detained, threatened or held under house arrest in what rights group Amnesty International said was a intensifying crackdown in the run-up to the congress.

Six more Tibetans set fire to themselves to protest about Chinese rule on Wednesday and Thursday, escalating a campaign that has seen about 70 self-immolations in the past two years.

The Red Capitalists

For much of the last decade, while Bo Xilai, Communist Party chief in the city of Chongqing, a large metropolis with province status, and a member of the Politburo, was busy moving up the ranks of the Communist Party, and even striking populist themes aimed at improving the lot of the poor, his relatives were quietly amassing a fortune estimated at more than $160 million. His elder brother accumulated millions of dollars’ worth of shares in one of the country’s biggest state-owned conglomerates. His sister-in-law owns a significant stake in a printing company she started that was recently valued at $400 million. And even Mr. Bo’s 24-year-old son, now studying at Harvard, got into business in 2010, registering a technology company with $320,000 in start-up capital.

Just a few weeks before his fall from power, Bo Xilai wrote an inscription in calligraphy, praising the Chongqing Water Assets Management Company, and urging support for its operations. What he did not say was that a foundation controlled by his younger brother, Bo Xicheng, had acquired a stake in a subsidiary of the water company. Mr. Bo had done something similar in 2003, while serving as governor here in Liaoning Province. He said his province would make supporting the Dalian Daxian company, a conglomerate engaged primarily in electronics manufacturing, one of the most important tasks of the next five years. A few years earlier, another company controlled by the same younger brother was listed as the owner of nearly a million shares in Dalian Daxian, worth about $1.2 million.

Bo Xilai’s downfall has cast the spotlight on the hidden wealth and power accumulated by the Communist Party’s revolutionary families, and by the sons, daughters, wives and close relatives of the nation’s high-ranking leaders. Two of Bo Xilai’s three brothers are well-established businessmen with close ties to state companies.

 His elder brother, Bo Xiyong, 64, has invested over the years, according to Hong Kong records, in a series of offshore investment vehicles like Advanced Technology and Economic Development, partly owned by a British Virgin Islands entity, and Far Eastern Industries. But little about the companies is publicly available. Bo Xiyong is also vice chairman of China Everbright International, a division of the Everbright Group, a giant state-owned company. His annual salary is about $200,000 and his stake in the company during the past decade is about $10 million, based on shares he has sold and the value of his current stock options, according to public filings. In addition, Bo Xiyong is a deputy of the Chinese People’s Political Consultative Conference, a government advisory body, and until recently he served as deputy chairman of HKC Holdings, a Hong Kong company controlled by the family of an Indonesian billionaire. In 2010, the big American private equity firm TPG invested about $25 million in HKC, which specializes in infrastructure and alternative energy projects in China and has won numerous state contracts.

Bo Xicheng, the younger brother, Bo Xicheng has served as a director of several big state-owned companies, including Citic Securities, one of China’s largest investment houses. He is also the founder of a small company that makes fire extinguishers and other equipment, called Beijing Liuhean Firefighting Science and Technology, whose products are used in government agencies, luxury hotels, power plants and in Tiananmen Square in Beijing. He has ties to several companies that operated in Dalian and Chongqing, the two cities where Bo Xilai served as a high-ranking official. His charitable foundation, the Beijing Xingda Educational Foundation, has on its board of directors the heads of two real estate developers, the Dalian Huanan Group and Chongqing Tianyou, as well as Weng Zhenjie, the chief executive of the Chongqing International Trust Company. Among the advisers to the foundation, which has already raised more than $20 million, are two academics from the Chinese Academy of Social Sciences who publicly supported Bo Xilai’s “Chongqing model” of development. The foundation owns a $2 million stake in Chongqing Water Group, a company now valued at about $5 billion.

Two of Bo Xilai sisters-in-law - Gu Wangjiang and Gu Wangning - have earned millions of dollars in publishing, real estate and other ventures. Together they own about $120 million worth of shares in the TungKong Security Printing Company in eastern China. The TungKong Web site says the company has contracts with some of China’s biggest state-owned enterprises and government agencies, including the tax authorities and the Central Bank. Gu Wangning also helped Bo Guagua establish a technology company in Beijing in 2010.

Bo Zhiyue, a senior fellow at the National University of Singapore’s East Asian Institute. “The relatives of other party leaders are also doing lots of business deals, and people will begin to ask: What about them? Was the Bo family the only one doing this kind of thing?”

They are conduits of power. Laurence Brahm, a former lawyer who has written books on China’s economy and political scene explained “By virtue of the fact that they are a son or daughter of someone, when they visit the provinces they’ll get red carpet treatment from the leaders there. The businesspeople can tag along.”

http://www.nytimes.com/2012/04/24/world/asia/bo-xilais-relatives-wealth-is-under-scrutiny.html?pagewanted=1&_r=1&nl=todaysheadlines&emc=edit_th_20120424