The relation between capital and the state is central to an understanding of developments in the world today. It is thrown up in a whole series of apparently different discussions: on the future for the Third World, on the relations between the superpowers in the aftermath of the Cold War, on the prospects for successful economic restructuring in the USSR and Eastern Europe, on the repeated rows within the Tory government over European integration, on the significance of the United States’ war against Iraq. These issues have created considerable debate on the left. They have been the subject of an intermittent discussion among contributors to this journal for a decade and a half, and among the wider left there has been much greater confusion. 
The most common view of the capitalist state among Marxists is to see it simply as a superstructure, as external to the capitalist economic system. Capitalism, in this view, consists in the pursuit of profits by firms (or, more accurately speaking, the self expansion of capitals) without regard to where they are based geographically. The state, by contrast, is a geographically based political entity, whose boundaries cut across the operations of the individual capitals.
The state may be a structure that developed historically to provide the political prerequisites for capitalist production-to protect capitalist property, to police the dealings of different members of the ruling class with each other, to provide certain services which are essential for the reproduction of the system, and to carry through such reforms as are necessary to make other sections of society accept capitalist rule – but it is not to be identified with the system itself.
This view of the state claims to be based on the Communist Manifesto: “The executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie.” But its origins do not lie in Marx himself so much as in the classical economists who preceded him: in the Communist Manifesto Marx simply takes their insistence on the need for a minimalist, “nightwatchman” state and draws out its class character.
Nevertheless it is the view that is to be found in most modern academic Marxism. So, for instance, it was to be found on both sides of the debate which took place in New Left Review between Ralph Miliband and Nicos Poulantzas.  Miliband argued what has been called the “instrumental” view of the state: it was tied to the capitalist class because its leading personnel came from the same milieu as the owners of private capital. 
Poulantzas argued that this was to see a merely contingent relationship between the state and capitalism, to see the state’s character as depending simply on who manned its top structures. He argued what has been called the “functional” view: the state has to fulfil the needs of the society of which it is part; since this is a capitalist society it is necessarily a capitalist state. The state is, as Poulantzas puts it, “a condensate of class forces”, and the forces it “condenses” are capitalist forces. 
Despite their apparent opposition to each other, both Miliband’s and Poulantzas’ views can lead to the conclusion that the capitalist state can be used to reform capitalist society. If it is the character of its personnel that guarantees the capitalist nature of the state then changing the personnel could change the character of the state, allowing it to be used for socialist purposes. If the state is a function of the society of which it is part, then if that society is racked by deep class struggles, these would find their expression through the state. The “condensate of class forces” could express both ruling class and working class pressures – which perhaps explains why Poulantzas could move from Maoism to Eurocommunism without any fundamental change in his theoretical framework.
More recently, another variant of the view of the state as external to capital has emerged on the left. Within academic Marxism there is a growing tendency for people to counterpose the capitalist system, as a system based upon the drive of firms to accumulate, to the “system of states” within which it has been enmeshed historically.  In a few cases this has led to the conclusion that the great wars of the present century have not resulted from any drive of capitalism towards war, but rather from the clash of “ancien regime” empires which capitalist development is now in the course of dismantling. 
Nigel Harris comes from a very different tradition – a revolutionary tradition – to that of academic Marxism. His writings have always expressed an unbridled hatred for the state and complete contempt for those who believe it is possible to reform capitalism. But in his attempt to come to terms with the internationalisation of capital over the last 20 years he has turned to an account of the state which belongs to the “state simply as superstructure” school.
He argues that the interests of capital are increasingly international interests, not bounded by any national borders. Each individual capital grew up within a particular nation states, but can now operate within virtually any state, bending it to its will. The particular state was a necessary instrument at one stage of capitalist development – a superstructure once needed by capital accumulation – but is no longer. Capitalism is led to challenge the state which has accompanied its growth in the past, to act “against the arbitrary and corrupt absolutist state”, to “move to the completion of the bourgeois revolution” in a way reminiscent of 1848. 
Nigel does not mean that the state simply withers away. Far from it. The bureaucratic structures of the state remain intact. They have interests of their own to preserve, interests that are tied to a particular national geographic area, interests in maintaining class peace, interests in attracting capital in competition with other states, interests in building up military prowess. And so the modern world is characterised not just by an increasing volume of trade in goods and capital, but by state boundaries which impede that trade in a manner which is, from a capitalist point of view, irrational. There is “bread”, but there are also “guns”.
While most of the left has seen the state and capital as opposed, there has been a minority tradition that equates the state with capital. Its intellectual origins go back to the insights of Lenin and Bukharin in their books on imperialism written at the height of the First World War.  They spoke of the state “merging” with capital, of “state monopoly capitalism”, or simply of “state capitalism”. It was these insights that Tony Cliff used when he developed the only coherent Marxist analysis of Stalin’s Russia  and various ex-colonial countries. 
But Mike Kidron went further and extended the “insights” into what he claimed was a complete “theory” of ageing capitalism.  In Kidron’s account individual states and individual capitals become completely congruent with each other: every state acts at the behest of a set of nationally based capitals, and every significant capital is incorporated in a particular state. If you talk about the interests of British capitalism, you are talking about the interests of the British state; if you talk about the British state, you are talking about the operations of British capitalism. This does not mean that there are no exceptions to the rule – no capitals that temporarily escape from the control of national states or no national states that temporarily act against the interests of nationally based capitals. But these exceptions, for Kidron, are a hangover from the past, relics which will disappear with the further development of the system. Indeed, the logic is for all elements of the superstructure, even trade unions, to become simple expressions of the drive of national capital to compete with its foreign rivals. Certain academic Marxists hold views which in some ways parallel Kidron’s. These belong to the “logic of capital” or the “state as capital” schools. For them, the behaviour of the state is determined by the logic of capital accumulation, although they tend to see it as the logic of private capital within the individual state rather than of a state capital in competition with other state capitals. 
There are problems of analysis and implications for political practice associated with both sets of views. If the state is simply a superstructure, then it is possible to contend that the problems that arise in the political sphere and those that arise economically are separate and distinct from each other. The struggle against the police or against racism then has nothing to do with the class struggle; the blow against the boss ceases to be a blow against the bomb. 
This was the logic which led Bernstein and Kautsky to drop their differences and to claim that it was possible to fight militarism during the First World War without turning the imperialist war into a civil war. It is the same logic which led Edward Thompson in the mid-1980s to talk about military competition between states as “exterminism”, which had nothing to do with old style capitalism and which could be fought by men and women of good will from all classes.
The implications of the view of the state and capital as merging completely are just as great. The forms of oppression maintained by the state are seen as flowing directly from the accumulation needs of capital. There can be no clash between them. Sexual oppression, racial discrimination, the structure of the family, bureaucratic hierarchies, political panics, even national trade union organisation, are all products of the “logic” of the state as capital.  The consequence of such a view is to drop any distinction between fundamental social clashes which challenge the very basis of capitalist rule and less fundamental ones that can be contained by reforms to the existing institutional structure. The result is either ultra-leftist spontaneism – as with Lotta Continua and then the Italian autonomists in their heyday – in which the revolution is seen as imminent in each and every struggle, since every form of oppression flows from the immediate requirements of capital accumulation. Or it is a variant of reformism, which sees the structures essential to capital as being undermined by piecemeal rejection of each particular oppression. The strategic aim becomes the establishment of “rainbow coalition” alliances between various “autonomous movements”, each seen as just as important as any other. 
You cannot correctly grasp the relationship between the state and capital today unless you reject both the “simple superstructure” and the “state as capital” positions. Instead, you have to understand the concrete ways in which capitals and the capitalist state necessarily interact in the course of historical development. Existing national states did arise out of the developing capitalist organisation of production, as superstructures. But they feed back into that organisation, helping to determine its tempo and direction.
Marx pointed out in Volume Two of Capital that capital appears in three forms – as productive capital, as commodity capital and as money capital. Every process of capital accumulation involves repeated changes from one form to the other: money capital is used to buy means of production, raw materials and labour power; these are put together in the production process to turn out commodities; these commodities are then exchanged for money; this money is then used to buy more means of production, raw materials and labour power, and so on.
The forms of capital are continually interacting as one changes into the other, so that at any given point in time some of the total capital will take the form of means of production, some of commodities waiting to be sold, and some of money. But there can also be a partial separation of these three different forms. The organisation of direct production, the selling of commodities and the supply of finance can devolve upon different groups of capitalists.
It is this separation which creates the illusion that capital is an object that grows in size by some magical process. For it does for those capitalists who simply buy and sell commodities, and for those capitalists who simply advance money and reap interest payments in return.
Each of these forms of capital has had, historically, a different relationship to the body which has a monopoly of political violence in any particular geographic locality – the state. Money capital can (or at least could, in its classical form, when gold was the main means of payment) operate regardless of state structures. It could flourish, as Marx noted, long before the development of capitalism generally. Money lenders in one part of the world would make loans to borrowers in other parts of the world, relying on the recipients’ need for further loans to guarantee repayment with interest. So it was that Italian bankers could finance the French absolute monarchy and south German bankers the Spanish absolute monarchy. Financiers did not need to be tied to a particular state to flourish provided they could find ways of making sure the state did not actually confiscate their wealth.
Commodity capital could also flourish in all sorts of political structures – in slave societies of medieval antiquity, amid the battling lordships of the early feudal period, in the centralised absolutist states of late feudalism. Yet the more it developed, the more it came to require the protection of state structures it could influence. Otherwise those who controlled states could present obstacles to it: pillaging merchant convoys on the road, allowing pirates to intercept seaborne traffic, imposing local customs dues that prevented the growth of a truly national, let alone international, market, imposing price controls that restricted the potential for profit making.
So from quite an early period onwards, merchants tended to encourage the growth of political structures under their own control. As Braudel tells of the medieval period, there arose:
... business rivalries between individuals, between cities and between “nations” as a national group of merchants was called. Sixteenth century Lyons was dominated by ...organised rival groups, each living as “nation” ... Their presence meant the establishment of empires, networks and colonies in certain areas. Trade circuits and communications were regularly dominated by powerful groups who appropriated them and who might forbid other groups to use them. Such groups are easy to find when one starts looking for them, in Europe and even outside Europe. 
Productive capital is necessarily much more dependent than merchants’ capital upon state power. It cannot function without, on the one hand, a guarantee of its own control of means of production (a guarantee which, in the last resort, relies upon “armed bodies of men”), and, on the other, a labour force which has been “freed” from coercion by any other social group (slave owners or feudal lords) and from any control over means of production.
If local state power prevents these conditions arising, the development of productive capital is stunted: there were absolutist states in which finance capital flourished but productive capitalism barely took root, and medieval cities in which artisans produced commodities for the market without the separation of workers from the means of production which was required to move from simple commodity production to capitalist production. 
When Marx wrote about the “primitive accumulation of capital” he was not just describing the (very barbaric) means by which the early capitalists built up their fortunes. More importantly, he was pointing to the social and political measures which were needed to concentrate means of production in capitalist hands and to “free” the labour force. The full development of capitalism requires that productive capital subjugate commodity and money capital to itself. Only productive capital – the exploitation of workers in the labour process – guarantees a continually growing pool of surplus value and, with it, a source of ever larger profits for capitalists of all sorts.
If the development of productive capital, and to a lesser extent commodity capital, is entangled with the development of the geographic state, then so is the development of capitalism as a whole – even if in the form of money capital capitalism seems to have no need for the state.
The point is important – money capital often seems to be the “pure” form of capital, the form in which the self expansion of value is most vividly to be seen. But like the other forms of capital, it is in reality, as Marx put it, “not a thing but a relation”, a relation which involves the exploitation of people at the point of production. And that exploitation needs to be underpinned by the political structures of the state.
Any productive capital grows up within the confines of a particular territory, alongside other sibling capitals (they are, as Marx describes them, “warring brothers”). They are mutually dependent on each other for resources, finance and markets. And they act together to try to shape the social and political conditions in that territory to suit their own purposes.
This involves an effort to “free” labour from the control of other classes, to remove obstacles to the sales of their products, to create an infrastructure (ports, roads, canals, railways) to fit their requirements, to establish sets of rules for regulating their relations with each other (bourgeois property laws) and to create an armed power which will protect their property both from domestic and external threats. Their efforts to achieve all these things will be aided if they can supplant a mass of local dialects and languages with a single form of spoken and written speech. Their aim, in short, has to be to create a national state power – and with it a national consciousness and language.
The national state and different nationally based capitals grow up together, like children in a single family. The development of one inevitably shapes the development of the others. This does not mean that the structures of the state are an immediate product of the needs of capital. Many of the elements of the pre-capitalist state are restructured to fit in with the needs of the capitals that arise within them, rather than simply being smashed and replaced. But they we actively remoulded, so as to function in a very different way than previously, a way that corresponds to the logic of capitalist exploitation.
Capitalist production began in Western Europe in the late medieval period. Industrial and agrarian capitals were usually not nearly powerful enough to shape the whole of the political structure. But their presence could be a significant counterweight to the old baronies, so making it easier for kings to replace the decentralised feudalism of the early medieval period with absolute monarchies. The “mercantilist” policies of these monarchies then provided the impetus towards a wide development of commercial capital and a much more limited development of productive capital within the confines of each state.
This growing weight of capitalist interests became decisive when the absolutist states themselves entered into crisis. In England in the 1640s and France in the late 1780s and early 1790s they were able to ensure that the social and political crisis was resolved by the establishment of unitary national state structures that would serve their interests. The only viable alternatives to the crisis were those which encouraged capitalist development (even if those, like Cromwell in Britain and the Jacobins in France, who imposed these alternatives did so in opposition to the immediate desires of some powerful capitalist interests).
These national states then became the model for those elsewhere who wanted to break out of the backwardness of decaying feudalism or to escape foreign colonial control. Sometimes this was a case of already developing bourgeois or petty bourgeois groups seeking to establish a national state under their own control; on other occasions intellectuals or army officers saw their own interests as best advanced by using state power to impose capitalist forms of exploitation and accumulation on the rest of the population.
In every case the development of groups of industrial and agrarian capitals is inseparable from the transformation of the geographic area in which they are based into a national state with its own language, system of laws, banking system and so on.
Classical economics provided an account of capitalism in which the state played a negligible role. It was a theory of pure capital, of self expanding capital which took no regard of national frontiers. It was this theoretical account which Marx took up in Capital and carded through to its logical conclusion, showing how capitalism contained inbuilt contradictions even when considered in the most abstract manner. 
But the real, concrete history of capitalism was always very much intertwined with the history of the state. Classical economics was, in fact, an empirical description of only one, historically limited, phase of the system, that of the mid- 19th century. Things were very different when Adam Smith wrote, as he himself recognised when he complained about the devotion of Britain’s business classes to its empire:
To found an empire for the sole purpose of raising up a people of customers may at first sight appear a project fit only for a nation of shop keepers. It is, however, a project altogether unfit for a nation of shop keepers, but extremely fit for a nation whose government is influenced by shop keepers. 
The growth of British capitalism in the two centuries before Smith had, in fact, been very dependent upon sponsorship by the state and the economic activities of governments. The enclosure acts, the navigation laws, the great state sponsored monopolies headed by the East India Company, state expenditures on equipping the armed forces, especially the navy, all played a vital part in that growth. A very long spell of state sponsorship, of “mercantilism”, was necessary for British capitalism to develop sufficiently to be able to dominate the world on the basis of the free trade urged by Smith.
The Smithian doctrine did not become the practice of British capitalism until the 1840s and 1850s (with the repeal of the Corn Laws and the removal of India from the control of the East India Company) and even then the forces of the British state still played a central role in imposing free trade on other parts of the world. The Opium Wars are just one example.
What is more, this “classical” phase did not in practice last much more than half a century. By the 1880s and 1890s British governments were carving out new colonies in Africa to supplement their old ones in Asia and the West Indies. And although there were not to be formal measures (tariffs, quotas) tying the colonial economies to Britain until the establishment of “imperial preference” in the 1930s, there were a mass of informal links.
Capitals had established themselves in Britain through close links with the national state. Once established they had then used this national base to encompass the rest of the world. And when, after a few decades, capitals from other countries began to challenge their dominating role, they then turned once again to their own national state to establish areas of privileged access for them.
The newer centres of capital accumulation that emerged alongside Britain in the 19th century were as dependent upon national state support as British capitalism had been previously. German, Italian and Yankee capitalists all looked to a national state which would use its power to impose protectionist measures against outside competition: the rise of indigenous capitalist firms in these countries was closely tied to the establishment of unitary states prepared to accede to their demands (the unification of Italy, the victory of the North in the American Civil War, the establishment of the German Empire under Bismarck).
Capitals aided the creation of the unified state – and success in the struggle for unification usually gave an enormous boost to indigenous capital (e.g. the tremendous growth of American capitalism in the decades after the Civil War and of German capitalism after the Franco-Prussian War).
Historically, then, capitals have never developed according to the anti-statist schemas of classical economics. They have influenced and been influenced by the state structures in which they have found themselves. This has left its impact on the specific features of the individual capitals.
Regarded simply as accumulations of wealth, all capitals may have the same character, differing only in their size. But each individual capital, like each individual commodity, has a twofold character. As well as being measurable in terms of exchange value, it is also a concrete use value – a concrete set of relations between individuals and things in the process of production. Each particular capital has its concrete ways of bringing together labour power, raw materials and means of production in the production process, of raising finance and getting credit, of establishing networks for distributing and selling its output.
It inevitably turns for assistance in all of these tasks to other local capitals and to the state in which it is located. Capitals in a particular geographical location do not merely compete with each other; they also co-operate with each other and with the state to establish mechanisms for achieving mutual goals. And this co-operation inevitably leaves its imprint on the internal make up of each capital, so that a particular capital would find it very difficult to cope if it were suddenly to be torn apart from the other capitals and the state with which it has co-existed in the past.
The groups of capitals and the state with which they are associated form a system in which each affects the others. The specific character of each capital is influenced by its interaction with the other capitals and the state. It reflects not only the general drive to expand value, to accumulate, but also the specific environment in which it has grown up. The state and the individual capitals are intertwined, with each feeding off the other.
This interaction takes place in different ways. The legal code of the state and the way it raises revenue, influence, and are influenced by, the internal organisation of each capital – the relationship between owners and managers, accounting procedures, even the ease with which it can recruit and lay off labour. They also affect and are affected by the relations between capitals – the extent to which there is a fusion between productive capital and merchant capitals (with firms doing their own marketing), or between finance capital and productive capital (with firms depending on “their” banks to raise money).
Neither the state nor the particular capitals can easily escape this structural interdependence. The particular capitals find it easier to operate within one state rather than another, because they may have to profoundly restructure both their internal organisation and their relations with other capitals if they move their operations. The state has to adjust to the needs of particular capitals because it depends on them for the resources – particularly the revenues from taxation – it needs to keep going: if it goes against their interests, they can move their liquid assets abroad.
This structural interdependence explains why the capitals that grow up in one particular state tend to differ in certain ways to those that grow up in other states. For instance, the level of monopolisation of British capital tended to be less than that of German and American capital in the early years of the 20th century; the role of the banks tended to be different in pre-First World War Britain to their role in Germany or France; the state was much more important in the formation of a skilled labour force in Germany than in Britain in the 19th century; today Japanese firms typically raise finance in a rather different way to British or American firms; the influence of the state on private capital investment is much greater in Japan or France than in the US.
Such structural adjustment of states and capitals to each other is necessarily accompanied by something else – the intermingling of their personnel so emphasised by the “instrumental” view of the state. The relationship between the capitals based in a particular country and their state is not simply a relationship between impersonal structures. It is a relationship between people, between those engaged in exploiting the mass of the population and those who control bodies of armed men. Personal contact with the leading personnel of the state is something every capitalist aims at – just as every capitalist seeks to cultivate ties of trust and mutual support with certain other capitalists.
Relations between the rulers of the state and the capitalists who have accumulated wealth within its orbit tend to be much closer than either’s relations with outsiders. The fact that the leading personnel of the state went to the same schools as the leading capitalists, go to the same clubs, and are intermarried with each other, is very important to the individual capitalists in much the same way as are interlocking directorships between firms, their suppliers and their bankers. To deny this, as some critics of the “instrumental” account of the state do, is not to take account of the fact that both the state and the capitals are concrete complexes of social relationships, in which the character of the leading personnel is of enormous importance.
The market models of classical and neo-classical economics portray capitals as isolated atoms which engage in blind competition with other capitals. In the real world, capitalists have always tried to boost their competitive positions by establishing alliances with each other and with ambitious political figures – alliances cemented by money but also by intermarriage, old boy networks, mutual socialising.  Knowing the right people is an important complement to adequate finance for any successful capitalist – indeed, often an indispensable precondition for getting that finance.
The networks of who knows whom have grown up within the orbit of particular national states, usually around particular major cities. For instance, in the United States in the mid-1970s there was a “concentration of corporate head offices”, with most of the top 500 corporations being located in the “mid-Atlantic” and “East North Central” regions. Despite the growth of “sunbelt” industry, only 12 percent of head offices were in the South.  Even in multinational corporations, what is sometimes called “the headquarters effect” is at work. As one commentator has noted:
Multinationals tend to locate the activities which create the greatest added value and which give them the greatest competitive edge as close as possible to their headquarters. 
The extent of the linkages which have grown up between national states and the capitals within their boundaries is shown by the difficulties the European Community has in overcoming:
the refusal by governments, utilities and monopoly industries to purchase from suppliers outside their own countries. At stake is a market valued at £281 billion, or 10 percent of European Community economic output. It is a big—and sometimes sole—source of demand for products ranging from turbine generators to telephone exchanges and has long been used by governments to promote national champion industries at the expense of foreign rivals ... Fewer than 5 percent of all central, regional and local public orders go to bidders from other countries and many are awarded on a non-competitive single tender basis. 
There are cases in which those who control the state break with those who control the capitals within their territory. The Nazis did confiscate Thyssen’s wealth and establish their own Hermann Goering Werke as an important component of the German economy. Peron’s first government in Argentina did seize the super-profits of the agrarian capitalists and redirect them into state controlled industrial development. Nasser in Egypt and the Ba’athists in Syria did dispossess big capital (both indigenous and foreign) and transform it into state capital. Those who controlled the state machines of Eastern Europe after the Second World War did use them to impose almost complete statification of the means of production.
There are also many cases in which the individual capitals behave in ways detrimental to the interests of “their” state – moving funds and investment abroad, doing deals with foreign capitalists that undercut other local capitals, even selling weapons to states fighting their own. Yet there are limits to the extent to which the state can break free of its capitals, and capitals of their state.
The limiting case for the state is that, even if it overrides the interests of particular capitalists, it cannot forget that its own revenues and its own ability to defend itself against other states depend, at the end of the day, on the continuation of capital accumulation. Thus the Nazis could expropriate Thyssen, they could seize the wealth of Jewish capitalists, they could establish the horrific machinery of the death camps without it providing any appreciable benefit to German capital, they could even insist on continuing the war after it was clearly going to be lost and the interests of German capitalism would have been served by attempts at a negotiated peace. But they could only do all of these things so long as they ensured that capitalist exploitation took place on the most favourable terms for capital (state and private) and, therefore, that accumulation continued. The same applies to Peron, Nasser, the Ba’athists, the East European regimes and so on.
The limiting case for the individual capital is that though it can, with considerable difficulty, uproot itself from one national state terrain and plant itself in another, it cannot operate for any length of time without having some state to do its will. It is too vulnerable to try to operate in a “Wild West” situation in which there is no effective state, leaving it prey both to forces below which might disrupt its normal rhythms of exploitation and to other capitals and their states.
A break, either of the state with its capitals or of the capitals with their state, is a difficult and risky business. If the state turns on private capital, it can create a situation in which people begin to challenge not merely private capital but capital accumulation as such and, with it, the hierarchies of the state. If a private capital breaks with “its” state it risks being left to fend alone in a hostile and dangerous world. So there is neither an easy, peaceful road to state capitalism nor an easy shift of industrial capitals from one metropolitan centre to another.
Most discussions of the state and capitalism never even touch one major question – the class character of the state bureaucracy itself. The assumption is usually that it is simply a passive creature of a capitalist class whose own position is defined by its private ownership of the means of production. Sometimes the bureaucracy is presented as having interests of its own which may make marginal encroachments on the interests of private capital, but this is rarely spelt out: it is usually no more than an ad hoc assumption thrown in so as to make sense of individual events.
Such a view made a certain sense when Marx was looking at mid-19th century British capitalism with its minimal “nightwatchman” state. State expenditure was at very low levels and taxation only marginally affected the pricing of goods or the level of people’s disposable incomes. However, this account of the state can make no sense of the absolutist period which witnessed the rise of “productive” capitalism or of capitalism in the present century. In both cases, the state bureaucracy itself is a very significant social layer, state expenditures play a very important part in determining the way society develops, and state taxation and borrowing decisively influence the general structure of prices and the disposable incomes of the different classes.
Marx went far beyond the view he put forward in the Communist Manifesto when, in 1871, he wrote that “the complicated state machinery ...with its ubiquitous and complicated military, bureaucratic, clerical and judiciary organs, encoils the living society like a boa constrictor ... Every minor social interest engendered by the relations of social groups was separated from society itself, fixed and made independent of it and opposed to it in the form of state interest, administered by state priests with exactly determined hierarchical functions.”
He emphasised that such a state bureaucracy did not merely live off exploitation by separate, private interests, but superimposed on them its own exploitative activities. The state was “not only a means of the forcible domination of the middle class” but also “a means of adding to the direct economic exploitation a second exploitation of the people, by assuring to their [i.e. the middle class’s – CH] families all the rich places in the state household.” The state bureaucracy arises to assure the domination of the existing ruling class, but in the process becomes a “parasite” which is capable of “humbling under its sway even the interests of the ruling classes ...” 
Under ageing capitalism, the proportion of the total income of society passing through the hands of the state is usually much greater than income going directly to private capital as profits, interest and rent. Investment directly undertaken by the state is often more than half total investment.  The state bureaucracy directly disposes of a very big portion of the fruits of exploitation and oversees a great amount of economic activity. Its class character is very important to the whole functioning of society.
There is enormous confusion among many professed Marxists as to what constitutes a class. They argue that class depends on individual ownership (or non-ownership) of property, and that therefore the state bureaucracy cannot be an exploiting class or part of an exploiting class – hence the claim that the ruling stratum in the Eastern states has not in the past been a class, although it is conceded that privatisation might now be transforming it into one.
But classes, for Marx himself, were aggregates of people whose relationship to material production and exploitation forced them to act together collectively against other aggregates. In an unfinished final chapter to volume three of Capital Marx insists that classes cannot be identified simply by the “sources of revenues” since this would lead to an infinite division into classes, paralleling the infinite fragmentation of interests and rank into which the division of social labour splits labourers as well as capitalists and landlords – the latter, e.g., into owners of vineyards, farm owners, owners of forests, mine owners and owners of fisheries.” 
What makes such diverse groups come together into the great classes of modem society, he argues elsewhere, is the way in which the revenues of one set of groups arise out of the exploitation of those who make up other groups. The social relations of production and exploitation divide society into two great groupings, one of which exploits the other. The historic opposition between them forces each to band together against the other, to behave as a class. 
Feudal lords form a class because each depends for his survival on the surplus which he forces the serfs to hand over to him and therefore will unite with other feudal lords against all serfs: whether he participates in the exploitation of the serfs as an individual landowner, as a dignitary in a religious order or as a royal official, is a secondary matter compared to this fundamental definition of his class position. For this reason, holders of high office in a state based upon feudal relations of exploitation are part of the feudal ruling class: both their own existence and the functions they fulfil in the state depend upon them identifying with the prevailing form of exploitation.
In the same way, under mature capitalism, the directing layer in the state bureaucracy is dependent upon successful capitalist exploitation and accumulation. It cannot get the revenues it requires if this is not happening. And so it is forced to provide conditions which will encourage capital accumulation within the boundaries of its state – on the one hand to make sure that resistance to exploitation by the mass of the population is kept to a minimum, on the other to enhance the competitiveness of nationally based capital as opposed to capital that is based abroad.
Any state bureaucracy which fails to accomplish this is going to see the resources it needs for its own privileges and its own functioning dry up. Whether it likes it or not, it is compelled to act as an agent of capital accumulation and to identify its own interests as national capitalist interests in opposition both to the interests of foreign capital and the working class.
It is this requirement which sets the most fundamental limits on the “autonomy” of the state. Just as the individual capitalist can choose to enter in one line of business rather than another, but cannot avoid the compulsion to exploit and accumulate in whatever line he goes into, so the state bureaucracy can move in one direction or another, but cannot ignore the needs of national capital accumulation without risking its own longer term future. Its “autonomy” consists in a limited degree of freedom as to how it enforces the needs of national capital accumulation, not in any choice as to whether to enforce these or not.
The dependence of the state bureaucracy on capitalist exploitation is often concealed by the way in which it raises its revenues – by taxation of incomes and expenditure, by government borrowing or by “printing money”. All of these activities seem, on the surface, to be quite different from capitalist exploitation at the point of production. The state therefore seems like an independent entity which can raise the resources it needs by levying funds from any class in society.
But this semblance of “independence” disappears when the state’s activities are seen in a wider context. State revenues are raised by taxing individuals. But individuals will attempt to recoup their loss of purchasing power by struggles at the point of production – the capitalists by trying to enforce a higher rate of exploitation, the workers by attempting to get wage increases. The balance of class forces determines the leeway which exists for the state to increase its revenues. These are part of the total social surplus value – part of the total amount by which the value of workers’ output exceeds the cost of reproducing their labour power (i.e. their take home wages). 
In this sense, state revenues are comparable to the other revenues that accrue to different sections of capital – to the rents accruing to landowners, the interest going to money capital, the profits from trade going to commodity capital and so on. Just as there is continual conflict between the different sections of capital over the sizes of these different revenues, so there is continual conflict between the state bureaucracy and the rest of the capitalist class over the size of its cut from the total surplus value.
The state bureaucracy will, on occasions, use its own special position, with its monopoly of armed force, to make gains for itself at the expense of others. In response to this, the other sections of capital will use their own special position – industrial capital its ability to postpone investment, money capital its ability to move overseas – to fight back. Yet in all this the different sections of capital cannot forget their mutual interdependence.
The state, money capital and commodity capital cannot increase their revenues unless surplus value is being generated in the domain of production. Productive capital cannot get surplus value unless the state ensures a plentiful supply of “free” labour with sufficient skills, and provides means of physical defence. It also requires that commodity capital ensures realisation of the surplus value and that money capital can provide the funds for further expanding production. Commodity capital cannot function effectively unless the state lays the basis for the operation of a stable national market and uses its influence to open up foreign markets.
Each element branches out on its own, like nerves in a human body. but still cannot escape its dependence upon huge ganglions where it intertwines with all the others.
These ganglions, knots where the mass of different capitals are entangled with the state bureaucracy they sustain and depend upon, are the national capitalist economies.
Those who run the different elements can act, up to a certain point, as if they had complete autonomy. In particular, money capital and commodity capital can act as if they had no dependence upon the geographically rooted means of production of industrial capital. In the same way, those who run the state can act, up to a certain point, as if their revenues did not depend upon successful capitalist exploitation and accumulation. This is what happens when reformists, populists or even fascists get control of pans of the state structure and use them to carry through social change.
Yet at the end of the day the mutual interdependence of the different elements asserts itself in the most dramatic fashion, through crises – the sudden collapse of the system of credit, the sudden inability to sell the commodities, sudden balance of payment crises or even the threat of state bankruptcy. The “autonomy” of those who run the state is, in this sense, a bit like the “autonomy” of the banker, the commodity speculator or the individual industrialist. Each is able, up to a certain point, to act as if the overall drive to exploit and accumulate can be ignored.
The banker can lend without any real consideration of the ability of the debtor to pay back. The commodity speculator forgets the dependence of his profits on consumption that can only take place if there is an expansion of capitalist production. The individual entrepreneur can be lulled by temporary success and allow his enterprise to lag behind in the drive for further investment and innovation. Those who command the state can embark on all sorts of ambitious schemes that weaken the ability of nationally based capital to compete with its rivals elsewhere. But all are eventually forced back into line by the pressures of the total system.
This has very important implications for the class position of those who direct the bureaucracies of the state. They may not own individual chunks of capital. But they are forced to behave as agents of capital accumulation, to become, according to Marx’s definition, part of the capitalist class.
Marx points out in Capital that with the advance of capitalist production there takes place a division of function within the capitalist class. The owners of capital tend to play a less direct part in the actual organisation of production and exploitation, leaving this to highly paid managers. But, insofar as these managers continue to be agents of capital accumulation, they remain capitalists. The Austrian Marxist Hilferding developed the argument further, pointing to the divisions within a single capitalist class between the mass of rentier capitalists, who rely on a more or less fixed rate of return on their shares, and “promoter” capitalists who gain extra surplus value by gathering together the capital needed by the giant corporations.  We can add a further distinction, between those who manage the accumulation of individual capitals and those who, through the state, seek to promote the development of the sibling capitals operating within an individual state – what may be called state capitalists or political capitalists.
There are many finance capitalists who are also merchant capitalists and productive capitalists. There are many entrepreneurial capitalists who are also share owning capitalists. In the same way, those who concern themselves with accumulation at the nation state level often come from the ranks of entrepreneurial or shareholding capitalists and will often return there at a later date.
So it is that in Britain the heads of giant private companies have included individuals who made their careers first by rising to the top of nationalised corporations: in two well known cases, those of Alf Robens and Richard Marsh, using political success within the Labour Party as a stepping stone to running the state corporations and then moving into the private sector. So it is that in France the career of Calvet, the head of the giant private sector car firm Peugeot, has involved spells in both public and private sector. So it is that in Japan it is normal for people who have made careers in public agencies of accumulation, like the powerful Ministry of International Trade and Industry, to move to top jobs in the private sector. So it is in Italy that the management structure of the key nationalised enterprises, IRI and ENI, has long been intertwined with the political hierarchies of the governmental parties, particularly the largest, the Christian Democrats.
One account of a notorious Italian financial scandal, by a Financial Times journalist, tells:
To raise money in Italy is to secure a loan from a bank. The banks, however, can in turn be heavily conditioned by the politicians ... [In the early 1980s] some three quarters of the Italian banking system was owned by the state. And in many cases the senior posts are politically conditioned appointments, the accepted spoils of power. 
In the 1960s, “the Christian Democratic Party ... moved to increase its control of the banking system and the constellation of public sector corporations ...”  With the formation of “centre left coalitions” there was an intensifying struggle for top public sector jobs’ between the different governmental parties:
The Christian Democrats and Socialists have split into factions competing as much against each other as against the theoretical Communist opposition ... These factions and cliques...have found their new battleground in the banks and other appendages of the state. 
A new breed of entrepreneur was emerging. Technically its members represented state enterprise and the public sector; but in practice they moved like financial barracuda, acting sometimes on their own behalf sometimes for their political patrons, but unfailingly with money from the public purse ...
The fiercest of the barracuda was Eugenio Cefis, chairman of ENI, the state oil group. And his hand was behind the most dramatic example of this “politicisation” of industry in 1968, when ENI secretly built up a controlling shareholding in Montedison, Italy’s biggest, and hitherto privately owned, chemical concern. 
Years before this the first head of ENI, Enrico Mattei, had used the funds under his control “to dominate the politicians ... to the extent he was considered the most powerful single figure in Italy”  even setting up – with funds that theoretically belonged to the state-his own newspaper, Il Giorno. 
Today ENI is estimated to be the fourth biggest industrial corporation in the world outside the US. 
The individual “political capitalists” do not owe their highly privileged position in society to the size of their individual holdings of stocks and shares. Political influence and personal guile are usually the key. But they have in common with shareholders and private entrepreneurs an interest in maintaining the level of exploitation and accumulation. The Financial Times recently noted of France:
The chairmen of state owned companies are appointed for three year terms. These days the best way of ensuring your appointment is renewed – whatever your political friendships – is to produce profits. 
In behaving like this, the state appointees behave as much like capitalists – as living embodiments of capital accumulation at the expense of workers – as do private entrepreneurs or shareholders.
Imperialism: the merger of finance capital, industrial capital and the state
We are now in a position to make sense of the “merging of the state and capital” which was so central to the writings on imperialism of Lenin and Bukharin. The logic of capitalism leads to the growing concentration and centralisation of capital – the replacement of many small capitals by a few large ones. The groups of these that operate within any single country are dependent on each other and the national state, laying the basis for a new integration of industrial, commercial and finance capital around the state. Each national state becomes the nodal point around which capitals cluster, even when their activities lead them to branch out from it to penetrate the rest of the world.
But that is not the end of the matter. The mutual interdependence of each national state and a few large capitals gives rise to a tendency for the boundaries between the state and the capitals to break down. The capitals turn increasingly to the direct use of personal influence (rather than the indirect use of market pressures) to determine how the state acts, and the state bureaucracy increasingly interferes in the internal management of particular firms.
The interpenetration of national capitals and the national state finds expression in an important change in the way in which capitalist competition itself takes place. It is increasingly regulated within national boundaries, while assuming the form of military, as well as (or even instead of) market competition internationally.
This “new dimension of competition” does not at all negate the dependence of the capitals and the state bureaucracy upon capitalist exploitation and accumulation. Acquisition of the means of destruction on the necessary scale to assure success in war depends upon the same drives as acquisition of the means of production on the necessary scale to assure success in the struggle for markets – the driving down of wages to the cost of reproduction of labour power, the driving up of the productivity of labour to the level which prevails on a world scale (so that nothing is lost in translating national concrete labour into international abstract labour), and the drive to use the surplus for accumulation.
The only difference, in this respect, between military and economic competition is the form the accumulation takes – whether it is in terms of an accumulation of use values that can be used to produce new goods or of use values that can be used to wage war. In either case the importance of these use values to those controlling them is determined by comparison with use values elsewhere in the system, a comparison which transmutes them into exchange values. As Lenin emphasised, periods of “peaceful” competition prepare the way for periods of all out war, and periods of all out war prepare the way for periods of “peaceful” competition. 
So even in periods of “peace” the relations between the different capitals are not simply dependent, as in Marx’s model in Capital, on their market relations. Conditions are those of an “armed peace” in which the relative influence of the different states helps determine the relative success of the different blocs of capital associated with them. And this relative influence depends at the end of the day on their ability to accumulate military hardware: it is this which determines their ability to build empires, acquire client states and create alliances.
I have outlined the history of this phase of capitalist development in Explaining the Crisis and there is no point in repeating it here.  It suffices to say that the trend towards the merger of state and industry – the “imperialism” of Lenin and Bukharin – began in the late 19th century. But it did not reach its fullest development until the 1930s, when individual “private” capitals seemed incapable of recovering from economic crisis if simply left to their own devices. Then for more than 40 years the march of statification seemed unstoppable. Everywhere the state sector grew remorselessly, with state control or ownership of basic older industries like coal, steel, transport and electricity generation, and state sponsorship (and sometimes ownership) of the most technologically advanced industries.
The process went furthest, of course, in the bureaucratic state capitalisms of the USSR, Eastern Europe and China. But in countries as diverse as Japan and Brazil, Argentina and Italy the state exercised an enormous degree of influence over the activities of the great corporations, “private” or nationalised, with people flitting from high positions inside ruling parties or state bureaucracies to the management of the great corporations and back again. To be a power in the Japanese Liberal Democrats, the Italian Christian Democrats or the Argentine Peronist Movement was to influence the decision making – and gain from the revenues – of industry as well as the state. Even in the most “liberal” of the Western capitalisms, that of the US, the key role of the military sector gave the state enormous leverage and cabinets tended to be to a large extent staffed with corporation heads. What was good for General Motors was good for the United States, and a Robert McNamara could move from helping to run Ford to bombing Vietnam and then to trying, as head of the World Bank, to create successful capitalisms in the Third World.
The rise of state capitalism was accompanied by a decline in the proportion of economic transactions that crossed state frontiers. Each national capitalist complex attempted to undertake as wide a range as possible of economic and military functions within its own boundaries, each trying to build national steel, car, chemical, shipbuilding, electronic, munitions and aircraft industries. Trade in manufactures as a proportion of world output had risen from an index figure of 1.0 in 1900 to 1.2 in 1914. It fell back to 1.1 by 1920 arid 1.0 in 1930 and then slumped to 0.7 in 1940 and 0.6 in 1950. 
Merchandise trade was equal to 43.5 percent of Britain’s national product before 1914. In the 1950s it was down at 30.4 percent. There was a similar decline for other countries: from 11.0 to 7.9 percent for the US, from 29.5 to 18.8 percent for Japan, from 38.3 to 35.1 percent for Germany, from 28.1 to 25 percent for Italy.  It reached its low point after the great slump of the 1930s, when all the major powers and many of the minor ones took the path of military state capitalism.
For a generation, then, trade and financial flows between capitalist powers were subordinated to the demands of competitive accumulation within national state boundaries. Transactions across state boundaries were dependent upon negotiations at the state level. The national state provided each of the rival sections of capital with:
Mike Kidron’s picture of a world of self contained, competing state capitals is very much an abstraction from this period. Yet as an abstraction it misses out very important elements of concrete reality. For the different phases in the cycle of capital continue to exist even in .a world of state capitals, and the need to fulfil them leads to divergent pressures within the state-industrial complex.
Thus even a self contained state capital can accumulate more quickly if it can gain access to funds, to money capital, outside its boundaries. And some state capitals can increase their own rates of accumulation if they can invest outside the national state – especially if this provides privileged access to commodity markets. The fact that state diplomacy mediates the flow of money capital and commodities does not mean such flows do not occur.
So even where there is a complete merger of the state and capital the different phases capital goes through create different interest groups within the single state capitalist class. Where a complete merger was never achieved in the first place, there are tendencies towards fission as well as fusion. The different elements of capital and the state will be bound together, but will also be continually trying to pull apart.
The differing pressures of military and economic competition will likewise produce a combination of divergent and convergent interests: sections of the state apparatus will identify with accumulation of military hardware and will succeed in getting sections of the industrial structure to make the same identification. Other sections of industry will be more interested in accumulation directed at market competition and will endeavour to win sections of the state bureaucracy to their side.
The result is that even at the high point of state capitalism “national planning” was very much a myth: what in reality occurred was a continual jockeying for position between different interest groups, each using political influence to get its way. Yet there could never be a complete breakdown of the national entity since access to political influence meant putting forward a programme which seemed to relate to the interests of the whole state capital. The divergent particular interests of different sections of capital and the state were still bound together by a mutual dependence on national accumulation and national state power.
1. M. Kidron, Two Insights Do Not Make a Theory, International Socialism (old series) 100; C. Harman, Better a Valid Insight Than a Wrong Theory, a reply to M. Kidron, in International Socialism (old series) 100, and Explaining the Crisis, ch.3; N. Harris, Of Bread and Guns and The End of the Third World; A. Callinicos, Imperialism, Capitalism and the State Today – a review of Nigel Harris’s The End of the Third World, Internationalism Socialism 2:35.
2. H. Gulalp quite rightly observes that the discussion between Miliband and Poulantzas over the “autonomy” of the capitalist state accepts “the liberal theory of the state”. They both “start from the premise of an analytical distinction between the economic and the political. This leads to the conception of the state as an independent entity with a power distinct from the relations of class domination”, while in reality the state has the job of maintaining the overall conditions for capital accumulation. Capital Accumulation, Classes and the Relative Autonomy of the State, Science and Society, vol.51 no.3, Fall 1987.
3. See R. Miliband, The State in Capitalist Society; Reply to Nicos Poulantzas, New Left Review 59, January-February 1970; Analysing the Bourgeois State, New Left Review 82, November-December 1972; Debates on the State, New Left Review 138, March-April 1983.
4. N. Poulantzas, Political Power and Social Classes; The problem of the Capitalist State, New Left Review 58, November-December 1970; Controversy over the State, New Left Review 95, January-February 1976; Dual Power and the State, New Left Review 109, May-June 1978. This is what I take to be Poulantzas’ argument. But I have to admit that Poulantzas’ way of writing was so convoluted and obscure I could be wrong. I suspect few people will take the pointless labour of ploughing through his prose to see if that is so.
5. This was, for instance, the sense of the contributions by P. Anderson and F. Halliday to the discussion after Robert Brenner’s 1987 Isaac Deutscher Memorial Lecture in London.
6. This, essentially, is what A. Barnett argues in his Soviet Freedom, 1988.
7. N. Harris in Socialist Worker Review (London, September 1987). He is referring specifically to the demonstrations in South Korea of August 1987, but it is clear that he sees his comments as having wider implications, as being part of a trend towards the emergence of a genuinely international capitalist class.
8. V.I. Lenin, imperialism: the Highest Stage of Capitalism; N. Bukharin, Imperialism and the World Economy (with and introduction by Lenin) and The Economics of the Transformation Period (with marginal notes by Lenin).
9. State Capitalism in Russia, which originally appeared in cyclostyled form in 1948.
10. Deflected Permanent Revolution, which originally appeared in the old series of IS in 1963 and has since been reprinted in Neither Washington Nor Moscow 1982.
11. M. Kidron, Two Insights Don’t Make a Theory, op. cit.
12. This is a criticism Cohn Barker makes on them in his articles The State as Capital, International Socialism 2:1, 1978; A Note on the Theory of the Capitalist State, Capital and Class, no.4, Spring 1978.
13. “A blow against the boss is a blow against the bomb” was the slogan of the International Socialists in the early 1960s.
14. This is effectively what M. Kidron argues in Two Insights Don’t Make a Theory, and a somewhat similar view is present in S. Clarke, Althusser’s Marxism, in S. Clarke and others, One Dimensional Marxism (London, 1980).
15. In fact, as the case of some of the Italian “workerists” shows, revolutionary “spontaneism” often passes over into movementist reformism: the same development was visible in Britain in the case of the small group Big Flame and the publishing house, Pluto Press when it was partly run by Kidron.
16. F. Braudel, The Wheels of Commerce (Civilisation and Capitalism, vol.II), London, 1982, p.213.
17. See the account of 16th century Lille and Leiden in R.S. DuPlessis and M.C. Howell, Reconsidering the Early Modem Economy: The Case of Leiden and Lille, Past and Present, February 1982.
18. His original 1857 draft outline for Capital includes plans for a fifth and sixth book on the state and on foreign trade. But he never had time to do any work on these, and in the parts of the work he completed he consciously excluded “competition in the world market” from the scope of his studies. See the account of Marx’s work in R. Rosdolsky, The Making of Marx’s Capital, London 1980, pp.14 and 22.
19. The Wealth of Nations, quote in Financial Times, 21 July 1990.
20. For a useful discussion on the literature about these networks, see J. Scott, Corporations, Classes and Capitalism, London 1985.
21. D. Clark, Post Industrial America, 1984, p93.
22. C. Lorenz in the Financial Times, 20 June 1988. The issue has recently been much discussed in relation to R. Reich’s, The Work of Nations: Preparing Ourselves for 21st Century Capitalism. See the review of this book by P. Riddell in Financial Times, 14 March 1991, and the criticism of the book by C. Lorenz, Financial Times, 15 March 1991.
23. Financial Times, 13 November 1989.
24. All quotes from first draft of The Civil War in France.
25. In countries like Italy or Brazil this can be half of total productive investment; in the case of the US arms expenditure, an “unproductive” form of investment, has been equal to total productive investment for long periods of time.
26. Capital, vol.III, Moscow 1962, pp.862-3.
27. As Marx put it in his notebooks for Capital: “Capital and wage labour only express two factors of the same relations. The capitalist is only a capitalist insofar as he embodies the self-expansion of value, insofar as he is the personification of accumulation”; the worker is a worker only insofar as “the objective conditions of labour” confront him or her as capital.
28. To be absolutely accurate, it is the total state revenues minus that portion of them that flows back to the working class in terms of welfare benefits, subsidies etc that is part of the total surplus value; and the value of labour power is total take home wages plus these benefits, subsidies etc.
29. R. Hilferding, Finance Capital, London 1981.
30. R. Cornwell, God’s Banker: an Account of the Life and Death of Roberto Calvi, London 1983, p.24.
31. R. Cornwell, ibid.
32. R. Cornwell, ibid., p.25.
33. R. Cornwell, ibid., p.40.
34. R. Cornwell, ibid., p.113.
35. R. Cornwell, ibid., pp.75-6.
36. R. Cornwell, ibid., p.113.
37. Financial Times, 9 May 1990.
38. See, for instance, Imperialism: the Highest Stage of Capitalism, London 1933, p.108.
39. C Harman, Explaining the Crisis, London 1984.
40. Calculation by A. Winters, contained in Financial Times, 16 November 1987.
41. Figures, based on S. Kuznets, given in Financial Times, 16 November 1987. W.W. Rostow provides figures which show similar trends, with world output growing 80 percent between 1929 and 1950, but world trade falling about 8 percent. [Quoted in Hobsbawm, The Age of Imperialism, London 1989, p.319].
Last updated on 27.10.2002