Peter Binns


State Capitalism


from the collection, Marxism and the Modern World, Education for Socialists No.1, March 1986.
Published by the Socialist Workers Party (Britain).
This is shortened version of an article first published in International Socialism journal.
Transcribed & marked up by Einde O’Callaghan for REDS – Die Roten.

As socialists we cannot avoid the question of Russia. Every time we argue for a socialist revolution here at home we have the example of Russia thrown back in our faces: the “socialist” slave camps of the Gulag Archipelago, the “socialist” tanks that invaded Czechoslovakia in 1968, the “socialist” helicopter gunships in Afghanistan, the “socialist” imprisonment of free trade unionists in Eastern Europe.

There is an urgent need to confront these questions. Does a serious Marxist analysis of Russia really reveal it to be socialist? Does it reveal it to be, as some people on the left argue, a superior form of society that is on the road to socialism? If so then we may as well forget about Marxism. It would lose all credibility as the theory of the liberation of the masses of ordinary working people.

But this is not our view. A proper understanding both of Russia today and of Marx’s analysis of capitalism will reveal Russia to be state capitalist, not socialist. Russia is not a superior social formation to those of the West but an imperialist capitalist power just as they are. It cannot be made socialist by just a few reforms here and there, but, as in the West, it will require a full-scale workers’ revolution against the ruling class and the entire social fabric that preserves their rule.

To see why this is so, we must begin by looking at Russia today.

In Russia today workers exercise control neither over industry nor over the state. The last remnants of workers’ control over production, the “Troika”, was abolished in 1929. In its place stepped the manager whose orders were to be unconditionally binding on his subordinate administrative staff and on all workers. [1] Trade unions were stripped of all functions, and particularly their right to negotiate wages. An internal passport system was introduced into the country, and in 1930 all industrial enterprises were forbidden to employ workers who had left their former jobs without permission. [2] Forced or slave labour was introduced on a massive scale as Stalin’s terror campaign against the working class gathered momentum in the I 930s. As the Russian authorities themselves cynically put it: “With the entry of the USSR into the period of socialism, the possibility of using coercive measures by corrective labour have immeasurably increased.” [3]

In Russia the state owns the means of production, but who owns the state? Certainly not the workers! The Russian state was intended, by those Marxists who made the revolution in 1917, to be a union of soviets, or workers’ councils, in which delegates were elected from the workplace. Today all efforts to start any independent workers’ initiatives, let alone workers’ councils, are suppressed and rewarded with extreme forms of repression. As Kirov, Stalin’s henchman, accurately prophesied: “We shall be pitiless [to] those lacking in firmness in the factory and the villages and who fail to carry out the plan.” [4]

Thousands of managers were imprisoned for not repressing their workers enough. so it takes little imagination to realise the fate of workers who went so far as to demand some measure of workers’ power. Hundreds of slave labourers were shot down in 1953 for striking in protest at the failure of the authorities to carry out their promises that there would be an amnesty. [5] The viciousness of this response is typical, and has been repeated many times before and since.

Even in bourgeois parliamentary terms the “Soviet” regime is a complete fraud: elections are a sham and the “Supreme Soviet” has only formal, not real, powers. For instance none of the five or seven-year economic plans and none of the sharp turns in Stalin’s foreign policy were discussed by this supposedly supreme state body until after they had been implemented. “Elections” for the Supreme Soviet take place in constituencies where there is never more than one candidate (nominated from above). This candidate never gets less than 93 per cent of the poll, and sometimes – as Stalin himself did in 1947 – gets as much as “147 per cent”! [6]

So while the state owns production, it would obviously be complete nonsense to believe that the workers own the state.



The capitalist process

What kind of society is it then in Russia? Certainly it is not socialist, and certainly it contains no private owners of capital competing with each other-as is normally the case in the West.

First of all let us examine what capitalism is. We encounter some difficulties when we attempt to define it. These arise because capitalism is really a process, continually in motion, not something fixed.

Capitalism in the middle of the last century was largely based on a free market and production by wage-labourers within independent enterprises. But this was not always the case. In fact capitalism began in England in the 17th and 18th centuries with slave-labour and looting in the colonies as part of its base. It also began with trade, but trade based on the vigorous intervention of the state and the denial of a free market (the so-called mercantile system).

In discussing the dawn of capitalism Marx stresses not only the growth of the wages’ system. “The discovery of gold and silver in America, the extirpation, enslavement and entombment in mines of the aboriginal population, the beginning of conquest and looting in the East Indies, the turning of Africa into the warren for the commercial hunting of black skins, signalised the rosy dawn of the era of capitalist production ... Great fortunes sprang up like mushrooms in a day: primitive accumulation went on without the advance of a shilling.” [7]

And instead of the “invisible hand” of the laws of supply and demand, in Britain there was a systematic combination, embracing the colonies, the national debt, the modern mode of taxation, and the protectionist system. These methods depend in part on brute force, e.g. the colonial system. But they all employ the power of the state ...” [8]

That is why Marx warns us: “If, then, the specific form of capital is abstracted away, and only the content is emphasised ... Capital is conceived as a thing, not as a relation ... [but] capital is not a simple relation, but a process, in whose various moments it is always capital.” [9]

Because it is a process, and one which contains contradictions, it is always changing itself as it develops. We need to understand its dynamic – the underlying principle according to which it changes and develops. Capitalism remains capitalism throughout its various changes because its central dynamic, its internal motor, remains unchanged, and it is to this that we now turn.



Accumulation: the key

The thing which links the early stage of capitalist development, based on monopoly, looting and slavery, with later stages such as those of 19th century private capitalism and 20th century state monopoly capitalism, is the nature of the accumulation process.

Marx thus characterises capitalism in The Communist Manifesto as where “... the labourer lives merely to increase capital, and is allowed to live only in so far as the interest of the ruling class requires it. In bourgeois society. living labour is but a means to increase accumulated labour. In communist society, accumulated labour is but a means to enrich, to widen, to promote the existence of the labourer. In bourgeois society, therefore, the past dominates the present: in communist society the present dominates the past.” [10]

In his book Capital, Marx stresses that the motive force of capitalism is not the consumption of the capitalist, but the fact that in order to fulfil his role as a capitalist he has to accumulate: the capitalist’s “own private consumption is a robbery perpetrated on accumulation ... Accumulate, accumulate! That is Moses and the prophets! ... Therefore, save, save, i.e. reconvert the greatest possible portion of surplus value, or surplus product, into capital! Accumulation for accumulation’s sake, production for production’s sake ...” [11]

The drive for accumulation as a means to still greater accumulation, which is the essence of capitalism. is due to two main factors. Firstly, workers are separated from the means of production. If they controlled production as a whole, it would be subordinated to use, to consumption. In so far as they decided to accumulate, it would only be as a means for the further end of consumption. Secondly, there is competition between the capitalists. Without it each capitalist could decide freely whether to consume the surplus product, to accumulate it, or even to return it to the workers who created it. It is competition which makes him accumulate and it does so by threatening him with extinction by rival capitalists if he doesn’t. That is why “competition makes the immanent laws of capitalist production to be felt by each individual capitalist, as external coercive laws.” [12]



Competition: the mainspring

But competition, which Marx saw as “nothing other than the inner nature of capital, appearing in and realised as the reciprocal interaction of many capitals with one another” [13], is actually continually subverted by the production process which it creates. For this increases the size of the capitals which confront each other, not only by ploughing back the maximum surplus, but also by reducing the number of independent owners of capital. Competition thus leads both to the concentration and centralisation of capital.

Marx remarked: “Today, therefore, the force of attraction, drawing together individual capitals, and the tendency to centralisation are stronger than ever before ... In any given branch of industry centralisation would reach its extreme limit if all the individual capitals invested in it were fused into a single capital. In a given society the limit would be reached only when the entire social capital was united in the hands of either a single capitalist or a single capitalist company.” [14]

In Marx’s own lifetime the dominant means for the centralisation of capital was not the monopolistic merger, but the conversion of an individual’s capital into his part-ownership of a joint- stock company. Of this process Marx said: “This is the abolition of the capitalist mode of production within the capitalist mode of production itself, and hence a self-dissolving contradiction, which prima facie represents a mere phase of transition to a new form of production. It manifests itself as such a contradiction in its effects. It establishes a monopoly in certain spheres, and thereby requires state interference. It reproduces a new financial aristocracy, a new variety of parasites in the shape of promoters, speculators and simply nominal directors; a whole system of swindling and cheating by means of corporation promotion, stock insurance, and stock speculation. It is private production without the control of private property.” [15]

Updating this passage in the 1890s, Engels commented: “Since Marx wrote the above, new forms of industrial enterprise have developed ... the old boasted freedom of competition has reached the end of its tether and must itself announce its obvious, scandalous bankruptcy ... in some branches ... competition has been replaced by monopoly.” [16]

Yet, in spite of these clear and obvious points, apologists for Russia’s present economic and social structure have taken an opposite view. They have taken one stage in the development of capitalism, where there was individual ownership of capital and price competition, and then argued that since no such things existed in Russia today, no new social revolution is needed there.

For instance Ernest Mandel justifies this conclusion by saying that planning is “a specific set of relations of production resulting from the suppression of the private property of the means of production and the beginning of the withering away of commodity production. through which the labour performed in collectively-owned factories is recognised as immediate social labour.” [17]

Taking the logic of this view seriously we would have to conclude that capitalism had ceased by the end of the 19th century, for as Engéls commented against those wanted to argue similarly in the Erfurt Programme: “I know of capitalist production as a social form, as an economic stage: and of capitalist private production as a phenomenon occurring one way or another within that stage. What does capitalist private production mean then? Production by a single entrepreneur, and that is of course becoming more and more an exception. Capitalist production through limited companies is already no longer private production, but production for the combined account of many people. And when we move on, to the Trusts, which control and monopolise whole branches [of production], then that means an end not only to the private production, but also to the planlessness.” [18]

The message is clear. Such apologists for the supposedly “non-capitalist” nature of Stalinist Russia are entirely mistaken. Nor are the consequences of their views confined to Russia. For if they were right, then most of the West would now be wholly or partly “non-capitalist” too, for here too monopolisation and even the direct involvement of the state in the accumulation of capital has proceeded apace.

Already by the 1960s in Italy the state was responsible for the majority of fixed capital formation; in Bangladesh it holds 85 per cent of the assets of what it has termed “modern industrial enterprise”; in Algeria it moved from being the employer of 1.5 per cent of the workers in industry, construction and trade in 1965 to 51 per cent in 1972; in Turkey it was responsible for 40 per cent of the value added in industry in 1964; in Brazil for more than 60 per cent of all investment in the mid-1970s; and in Britain for 45 per cent of fixed capital formation in the same period.” [19]

Should we therefore conclude that Italy and Brazil, for example, already have a “socialist economic base” for the majority of their industry? Should we regard virtually all the other Western economies as “in transition” – many of them very rapidly – to such a “socialist” substructure?

The real position is rather different. Planlessness and private production is but one stage in the development of capitalism.

Yet for all that, competition is capitalism’s “inner essence”. Obviously competition must be able to take on forms other than price competition between commodities produced by private capital for an anonymous market.

Such considerations as these formed the starting point for the most fruitful developments of Marxist economic theory in this century, in particular Lenin’s and Bukharin’s theories of monopoly and imperialism. Based upon these premises they argued that “peaceful” competition more and more turned into war, taking the form of physical seizure of raw materials, exclusion of rival capitalists by the erection of tariff walls, and so on.

It is impossible to understand the enormous expansion in the role played by the capitalist state in the 20th century unless one also understands that it serves to create competitive coercion. That is why the form that the capitalist crisis has taken has changed dramatically since the I 9th century. Then the ups and downs of the trade cycle periodically bankrupted sufficient numbers of firms to ensure that production could soon resume its upward spiral once more. The monopolisation and “statisation” of capital on a world-wide scale – not just in Russia alone, although this represents an extreme case – has meant that today this is no longer possible. Only a world war – and therefore a nuclear war – could fulfil this role in modern conditions.



Russia seen in isolation

How then does the Russian economy and state appear in this context? Two features, as we have seen, were necessary for the specifically capitalist tendency of accumulation for the sake of accumulation: 1. The separation of the workers from the means of production, and 2. Competition between the capitalists.

Obviously the first of these exists in an extreme form in Russia. It is more developed than in the West due to the increased powers of repression possessed by a totalitarian police state.

But what about the second feature? Overwhelmingly it is the case that within the Russian economy there is centralised administration of production. Individual productive units have rarely been autonomous or in competition with each other.

In Western capitalism we are used to the attempt to plan and co-operate within any given enterprise, coupled with competition outside it. Russia, considered purely on its own, lacks the mechanisms for introducing this competitive element. As Tony Cliff has put it: “The division of labour within Russian society is in essence a species of the division of labour within a single workshop.” [20]

If any one capitalist enterprise, say General Motors or IBM, had successfully managed to take over the whole world economy, capitalism would have ceased to exist. Competition between capitals would end, and therefore so too would accumulation for the sake of accumulation. This would not, of course, be socialism, but a new class society – one which Bukharin characterised as an industrial “slave-owning economy where the slave market is absent.” [21]

This gives us an accurate picture of what Russia might have been like had it been possible for it to remain in isolation from the rest of the world – just like this but on a smaller scale.

What this means is that if Russia were unaffected by the world around it, it could no longer be a society capable of explanation according to the laws of capitalism. Russia would have become a giant corporation in which the state had become the repository for all the means of production.



The beginning of state capitalism

But of course Russia never could have been isolated from the rest of the world. Lenin was an internationalist not just because he wanted world socialism, but because he knew that the only way to get socialism anywhere, including Russia, was for the working class to seize power in the dominant industrial capitalist countries. As he wrote: “We always staked our play upon international revolution and this was unconditionally right ... We always emphasised ... the fact that in one country it is impossible to accomplish such a work as a socialist revolution.” [22]

Again in March 1919, he repeated: “We do not live merely in a state but in a system>of states and the existence of the Soviet Republic side by side with imperialist states for any length of time is inconceivable. In the end one or the other must triumph.” [23]

Lenin made it clear that the source of this incompatibility was not just the military intervention of the imperialist powers (they had invaded Russia after the revolution), but Russia’s economic dependence upon the surrounding capitalist states; for he refers to the “international market to which we are subordinated, with which we are connected and from which we cannot escape.” [24]

The extreme backwardness of Russia in an age of imperialism forced it to industrialise rapidly. If the revolutions in Germany and elsewhere had succeeded in the early 1920s, plenty of means of production and skilled labour could have flowed into Russia to accomplish this task. But when the perspective changed, from stressing the need to spread the revolution internationally to stressing the building of “socialism” in a single country, as was proposed by Stalin in 1924, the situation was completely reversed. If industrialisation was to take place in Russia in isolation, this could only be by extracting huge surpluses from the peasantry and by forcing many of these peasants off the land into the mines and steel mills.

The Russian bureaucracy could only retain power in so far as it could succeed in this task. It required a vast apparatus of terror to subordinate the consumption of the masses to the need of the Russian state to accumulate. For a time Stalin tried to avoid this logic. He allied with the right wing of the Bolshevik Party, which spoke of “proceeding towards socialism at a snail’s pace”, without attacks on the peasantry. But this meant that what accumulation there was in the years 1923-28 went into the social services, education, agriculture and food, rather than into heavy industry. Little progress was made in these years towards catching up with the West.

An increase in international tension in 1927 showed the danger of this policy: without a more rapid rate of accumulation there was no way (other than international revolution, which had already been ruled out by Stalin) of defending Russia. Stalin was forced to break with Bukharin a year later and fallow a policy which went for all-out accumulation, regardless of the interests of Russian workers – or, for that matter, individual members of the ruling bureaucracy.

This policy required nothing less than a counter-revolution.

In 1917 the workers had completely smashed the old state apparatus and replaced it with a new one – a genuinely soviet state – which was based on recallable delegates from councils elected by direct workers’ power in the factories and barracks. The new state therefore pre-supposed both the existence of factories and of workers.

The tragedy, of course, was that this basis of the state was itself destroyed by the failure of the international revolution. As a result the workers’ state found itself blockaded and invaded by the armies of 16 imperialist nations. The vanguard of the working class left the factories for the Red Army, and the factories were unable to function because of the blockade. Production declined to one-fifth of its 1913 level and the remaining workers deserted the factories for the villages because they were starving.

Without workers and without production, the new state had lost its social base. For a time the Bolshevik Party substituted itself for the working class, with the perspective of helping the international revolution: for the international working class would then be able to aid the decimated Russian working class. But from 1924 Stalin changed all that. Not only did he seal the fate of the revolution by calling for “socialism in one country”, but he also destroyed the working-class basis of the party, swelling its numbers with former Tsarist officers, factory managers and so on, so that the party which had been more than 70 per cent working class in composition in 1923 was by 1927 only 30 per cent working-class – and it was completely bureaucratised too.

The Russian state was thus cut loose from its original social base. Having become heavily bureaucratised, it moved decisively to take upon itself the role of achieving massive capital accumulation in the first Five-Year Plan of 1928-33. It did so because of the increasing pressure from world imperialism. As Stalin put it in 1931: “No comrades ... the pace must not be slackened! ... On the contrary we must quicken it as much as is within our powers and possibilities ... To slacken the pace would be to lag behind; and those who lag behind are beaten. .. We are fifty or a hundred years behind the advanced countries. We must make good this lag in ten years. Either we do it or they crush us!” [25]

The last vestiges of workers’ control were eliminated from the factories. Real wages were slashed and a general speed-up was introduced. Peasants were forcibly driven off the land to become factory fodder in the cities. The bureaucracy thus began a massive, primitive accumulation of capital. The results were immediate. Investment in industry expanded by six times its 1923-28 level in the years 1928-33, and thereafter doubled in each of the succeeding five-year periods. [26]



Capitalist relations of production are imposed

In Russia, the subordination of consumption to the needs of accumulation took an extreme form. From the beginning of the first Five-Year Plan capital accumulation absorbed more than 20 per cent of national income, and it increased in subsequent Plans. [27] This was higher than any of the developed capitalist countries outside Russia (but about the same as the USA and Japan in their equivalent periods of development), and shows clearly that this most characteristic symptom of capitalist – the domination of society by capital accumulation – was fully developed in Russia.

Accumulation, not consumption, thus became the goal of production in Russia. Acting as the agent for the accumulation of capital, the bureaucracy emerged as the “collective capitalist”. At the same pace, the Russian economy itself took on the same features as the giant corporations in the nations of the West, against which Russia was competing.

The bureaucracy’s monopoly of foreign trade enabled it to seal off Russia from price competition. But strategic and military competition completely dominated the process of capital formation in Russia from the moment accumulation became the bureaucracy’s central concern in 1928. From the beginning of the Five-Year Plans armaments dominated the accumulation process. For instance in machine-building plants, which are probably the best gauge of the development of accumulation, already by 1932 munitions plants accounted for as much as 46 per cent of the total iron and steel consumed. By 1938 this figure had risen to a staggering 94 per cent [28], and virtually all other machinery plant construction had ceased.

Accumulation in the period before the outbreak of the Second World War, in 1939, was dominated by strategic and military competition with the Western nations. After the war, this was even more true. Between 1950 and 1965 approximately twice as large a percentage of the national income was spent on armaments as in the 1930s, even though the proportion of total income accumulated throughout the economy remained largely unchanged. [29] The effect of this was that armaments were directly responsible for around two-thirds of all capital accumulated in this period. [30]

Since 1928, therefore, not only has consumption been subordinated to accumulation, but in addition we can find the reasons for this in the competitive, coercive structure of world capitalism. This accounts for the vast bulk of Russia’s tendency to accumulation for the sake of accumulation. It is not the desires of the bureaucracy. then, which forces them to accumulate, but the logic of world capitalism.



The dynamic of Russian society

Basically Russia is like one big factory. If it had existed in a vacuum the laws of capitalist development would have ceased to apply to it. But that is obviously not the case. Its actual behaviour is therefore based upon the same laws which govern the actions of other great corporations. Of course we know that when such corporations get very big and :monopolise markets and so on, we have to modify these laws. But the modifications are always on the basis of the original laws, and because of this they always preserve their basic tendencies and contradictions even if in a distorted form.

All this is another way of saying what we remarked upon at the beginning: that capitalism is a process in continuous movement, not an unchanging thing. We identify it by its Inherent tendencies, by its dynamic. That is why we look to Russia’s accumulation for accumulation’s sake, based upon competition with Western capitalism, as the key to explain changes in its internal structure-rather than the other way around.

If Russia is economically-speaking just like one huge corporation, then the familiar contradictions of capitalism must appear there too.

The Russian state capitalist ruling class is therefore constrained by just the same forces as apply in the West. More and more of its own activities contribute to and suffer from the rhythm of the world market. As in the West, only through a workers’ revolution which totally destroys the power of that ruling class and replaces it with workers’ power from below – and internationally – can socialism be achieved. There can be no halfway measures or fudged compromises. Russia today is not even a “partially progressive social formation”. Its ruling class is as much a barrier to socialism for Russian workers as the ruling classes of the West are for Western workers.




1. CPSU Central Committee resolution, September 1929, quoted in Tony Cliff, State Capitalism in Russia (London 1974), p.13.

2. Cliff, State Capitalism in Russia, p.23.

3. Tony Cliff, Russia – A Marxist Analysis (London 1965), p.31.

4. Victor Serge, From Lenin to Stalin (New York), p.68. The quotation is from the year 1933.

5. Cliff, Russia-A Marxist Analysis, p.286.

6. Pravda, 22 December 1947, quoted in Cliff, State Capitalism in Russia, p.109.

7. Karl Marx, Capital (Moscow 1961), vol.1, pp.751-3.

8. Marx, Capital, vol.1, p.751.

9. Marx, The Grundrisse (Harmondsworth 1973), p.258.

10. Marx and Engels, Manifesto of the Communist Party (Moscow), p.73.

11. Marx, Capital, vol.1, pp.592-5.

12. Marx, Capital, vol.1, p.592.

13. Marx, Grundrisse, p.414.

14. Marx, Capital, vol.1, pp.626-7.

15. Marx, Capital. vol.3, page 429.

16. Marx. Capital, vol.3, pp.428-9.

17. Ernest Mandel, Readings in State Capitalism (London 1973), p.34.

18. Engels, Critique of the Erfurt Programme, in Marx and Engels, Werke (Berlin 1963), vol.22. pp.231-2. Engels’ own emphasis.

19. Peter Binns and Mike Haynes, New theories of Eastern European class societies, in International Socialism 2:7 (Winter 1980), p.34.

20. Cliff, State Capitalism in Russia, p.203.

21. Nikolai Bukharin, Imperialism and World Economy (London), p.157, note.

22. Cliff, State Capitalism in Russia, pp.144-5.

23. Quoted in Leon Trotsky, The Third International after Lenin (New York), p.13.

24. Quoted in Trotsky, p.46.

25. Quoted in Isaac Deutscher, Stalin (London 1966), p.232.

26. Cliff, State Capitalism in Russia, p.39.

27. Tony Cliff, A Socialist Review (London 1966), pp.116-7.

28. Cliff, State Capitalism in Russia, p.46.

29. Cohn, Economic Development in the Soviet Union (Massachusetts 1970), p.71.

30. Schwartz, The Soviet Economy since Stalin (London), pp.45-6.


Last updated on 31.3.2002