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Workers’ International News, November-December 1948


The Tendency Toward Statification

A Necessary Correction


From Workers’ International News, Vol.5 No.7, November-December 1948, pp.8-18.
Transcribed by Ted Crawford.
Marked up by Einde O’Callaghan for ETOL.


The Political Bureau considers it necessary to review the document entitled Capitalist Statification, issued in 1947 for discussion. (The document was published in Socialist Appeal, mid-August, September, mid-September, Oct)

In Marxist literature of the past, the inevitable development towards statification has been referred to on several occasions, Most notable of those references are by Engels in Anti-Dühring, by Lenin in his polemic with Kautsky and in his remarks prefacing the work of Bukharin on Imperialism. In Capital, Marx also discusses this tendency, in passing reference, when dealing with the inevitability of the trend towards concentration and centralisation of capital.

Nevertheless, it was inevitable that in the above named works, this question of statification did not receive an exhaustive analysis. The reason is to be found in the nature of the periods in which those works were written, periods which did not present this trend to the degree that it assumes today, In view of the tendency towards statificatien in the capitalist economies on a world scale, which has assumed the character of a major trend, and in Britain has assumed an important piece in the economy, the above named document was issued in an attempt to discuss the theoretical implications of this tendency, and so equip the Party to face up more concretely to the problem, and also to the problem of the Soviet Union.

On reconsideration, the Political Bureau has arrived at the conclusion that whilst Part II of the document The Tendency Towards Statification in Britain (which was voted upon and carried at the 1947 Conference of the RCP) is substantially correct, Part I – The Evolution of Capitalist Monopoly – The World Tendencies to Statification (which was not voted upon by the Conference on the grounds that further discussion was necessary) contains certain basic errors which must be corrected.

Abstract Character of the Question

The whole of Part I of the document was abstract in character. That is to say, it confined itself to a discussion of economic processes without concretely relating them to their historical context, the social processes in which the laws of the economy operate.

For example, assuming the characterisation of the economy (described in the document as “State Capitalism”) to be correct, it does not necessarily follow from the thesis in the document that the development of such a society from “private” capitalism is inevitable. The conflict within the national economies, and between the various national economies, the convulsions of war and the class struggle, the dialectical process of forward surges and backward lapses, all in turn militate against a smooth development of the trends in the economy, and make for a background of crises and explosions. They pose the conclusion, previously formulated by Lenin, that long before such a “state capitalist” society could develop, the class struggle would cut across the process.

But despite the abstraction of the document in the sense described above, an attempt was made to discuss the features of such an economy and its laws.

Basis of Error

The Political Bureau has come to the conclusion, quite apart from the abstract tone referred to above, that “State Capitalism” is a contradiction in terms, insofar as it is considered that such an economic form embraces the whole of a national economy.

In Part I of the. document, the sections headed: The State as Arbiter Between the Monopolies, The State as Buyer of Commodities, State Bonds as a Field of Investment, The State as Regulator of the Labour Market, The State as Investor of Capital can remain as written. They are, in essence, an ABC statement of the process in the development of the concentration of capital. This, of course, provided it is understood that the references to “State Capitalism” apply to partial measures of statification – i.e. measures in relation to that or that sector of the economy, while the main sector remains on the basis of “private” property.

It is in the conception that an economy in which the entire means of production are in the hands of the state would remain capitalist that the error is committed. In the document, particularly in the section State Capitalism and the Capitalist Crisis, the whole schema of such a hypothetical “state capitalism” is presented in an entirely incorrect and formalistic manner, briefly thus:-

  1. The development from the laissez-faire period of “free” competition to the period of monopoly, whilst developing a certain planning within larger sectors of the economy, accentuates the contradiction between the various units and deepens the anarchy in the production relations as a whole.
  2. The development from monopoly capitalism to “state capitalism” therefore, has the same effect, and far from eliminating the crisis, merely aggravates it.

The reason for this is

  1. Whilst in the development of monopoly there is established a greater equilibrium in the various sectors of the economy, there is in effect less equilibrium in the economy as a whole. The disproportion between accumulation and consumption has been accentuated in the economy as a whole, the contradiction between the various sectors becomes sharpened. The increased lack of equilibrium can only be met by more intense crises than previously.
  2. So with “State Capitalism.” Just as the contradictions and lack of equilibrium are accentuated by the development of monopoly, so, ipso facto, with the development of “state capitalism” the acuteness of the crisis must be proportionally deepened.

Statification of the Entire Economy Prevents Crises

Statification of the entire means of production, not only gives the possibility of planning production, but makes such planning an indispensable corollary of this production relationship and cuts completely across the process which under private ownership makes for crises. Control of the operations of industry through such a plan is not only one of technical detail. On the contrary, by far the most important factor, indeed the basic factor, is that such relationships create the basis for a conscious control of the division and allocation of the surplus value.

Under “private” capitalism, the anarchy of competition between the different enterprises, the different industries, gives rise to certain basic laws. Competition spurs on the development of technique, and consequently a changing ratio in the composition of capital, i.e. between the two basic component parts of capital – constant and variable. And whilst, through the attraction and repulsion of capital between the different sectors of the economy, there is an equalisation of the rate of profit into an average, the heightening of the value composition of capital brings in its wake a tendency to a decline in the rate of profit.

The “two-faced law” of capitalist accumulation, i.e., that the general extension of accumulation must take place at such a pace as to offset the effects of the falling rate of profit, does not contain within itself the solution to this problem of the capitalists. Even assuming the most favourable conditions for capitalist accumulation, there is a limit to this process. The absolute limit is the exhaustion of the reserve army of the unemployed. (The consideration that under the whip of a totalitarian state the living standards of the masses can be depressed even below the physical minimum, does not alter the problem. It may stave off the evil day of crisis for a time, but it will not eliminate it.)

Dilemma of Capitalists in Overcoming Crises

At such a stage, when there is an absolute over-production of commodities, when capital has presented itself as the absolute barrier to further capitalist production, the capitalist class is placed on the horns of a dilemma. Either raise the consuming power of the masses and thereby eliminate the “glut”, or depress the consuming power still further and restore the rate of profit. Whichever way the capitalist turns he cannot avoid the crisis, but he is compelled by the blind laws of the economy to follow the latter course as one of the basic means of restoring equilibrium in the economy.

Wages and social services are slashed, the overproduced commodities go further beyond the reach of the masses, production slows down, masses of machinery and masses of workers stand idle – this is the only way out for capitalism. Constant capital is devalued and allowed to waste without replacement, consumers goods, however slowly, percolate through the economy; the rate of exploitation is increased. Thus the rate of profit becomes restored and the economy revives.

The reason why the capitalist class cannot adopt the first course, that of raising the purchasing power of the masses, is very simple; to do so would be to aggravate the very cause of the crisis itself. The fall in the rate of profit leads directly to the crisis. To increase the consumption of the
masses at such a stage would mean to eat further into the rate of profit. It would be like giving a man who is dying from poisoning more poison instead of an emetic.

This is the factor that the reformist economists of the Under-Consumptionist school fail to recognise.

That this problem remains with capitalism in the transition from “free” competition to the stage of monopoly, and is even aggravated, is undoubtedly true. But in an economy where the entire means of production are in the hands of the state, there is an entirely different relationship.

Why Capital Becomes a Barrier to Capitalist Production

In the crisis of capitalism, whilst the need to depress the living standards of the masses, is a vital necessity, by far the most important factor is the devaluation,(by whatever means) of the constant capital. This essentially flows from the fact that the barrier to further capitalist production is capital itself. What does this latter statement mean? It means that, on the basis of the laws of the market, the anarchy of competition, too much capital has been produced in relation to the needs of capitalism itself.

Of more concrete importance is the question: how does this express itself? The answer to this is the only means of explaining how competition really begins with the period immediately prior to the slump.

So long so accumulation takes place at a sufficient rate to offset the effects of the falling rate of profit, the capitalist class, collectively, and as individuals, are not confronted with any important problem. Providing that the mass of profit is sufficient to make further investment profitable, the particular role of profit (whether it be 5%, 3% or 1% is not decisive under such circumstances. It is at the stage when the decline in the rate of profit has become so catastrophic as to make further investment unprofitable, that the real problem arises.

At that stage there inevitably develops an intensified competition between the various individual capitalists. There is a process of “jostling” to decide whose capital shall remain “fallow” and whose shall remain in the process of production and accumulation. There is a conflict between old capital and the new. That, nothing else, is what is meant when we state that too much capital has been created for the needs of capitalist production. And the further creation of capital merely makes more formidable the barrier to further production. At that stage the economy “jams.”

The Essence of Crisis is “Private” Character of Capital

The essence of this “jostling”, the essence of this competition, is the existence of various private capitals, organised into separate units within the national economy. Once there has been established a unity of all these capitals in the hands of the state, once there has been established a single capital; the basis for the clash of the various capitals has been eliminated.

The distribution of capital in the various sections of the single unit of economy is consciously planned. The “jostling” as a result of the laws of the market is a thing of the past.

Will accumulation still take place? Will there still be a tendency to a falling rate of profit? The answer to these questions is in the affirmative. But to imagine that they will have the same meaning as in a capitalist society, i.e. where there are private owners competing, is to completely miss the essence of the matter.

It is necessary to look here at the other side of the process of the heightening of the organic composition of capital. There are two sides to this process – that of value and that of technique – both indissolubly linked. The heightening of the value composition means the development of technique and vice versa. Thus, another way of expressing the tendency to the falling rate of profit is in the increase of productivity through the introduction of new machinery.

Far from this becoming a barrier to further production in an economy where the total capital is one single entity, it in fact can only act as a spur to further production. The cheapening of the means of production gives the possibility of an enormous extension of production itself, because the limits of production are no longer determined by the limits to which the process of “jostling” between the individual capitals can be taken. The limit to production is in the capacity of technique, which
means that there are no limits.

In this sense, accumulation, which under capitalism is the “raison d’être” becomes merely the medium for the limitless extension of production, where the division of the surplus value is something which is consciously controlled and not pre-determined by the blind laws of the market.

The Relationship Between Accumulation and Consumption

The relationship between the purchasing power of the masses and the extent of accumulation becomes entirely different from that under private ownership of the means of production. As we have seen, not only the individual capitalists, but the capitalists as a class, force the depression of the masses’ consuming power in the period of crisis. The reason is that the depression of the wages of the coalminer is just as vital to the engineering capitalist as it is to the mineowner. The rate of profit throughout capitalism is averaged out. Any lowering of the specific rate of profit in the mines through a successful struggle of the miners also makes inroads into the general “pool” of profits, and consequently the average profit, which is as vital to every capitalist as it is to the mineowner. Thus, the alignment of the capitalists as a class against the struggle of any section of the workers.

But while there is this alignment of the class, all is not well within. There is the struggle of each against all. This struggle reaches its sharpest expression at the approach of the crisis. And in this competition, based upon nothing other than the private ownership of the means of production, each and every capitalist strives to reduce the costs of production and heighten the rate of exploitation in his individual enterprise. This means that each and every capitalist must strive to depress the living standards of the masses. Thus with the individual capitalist, so with the class. Under-consumption in relation to the needs of the masses, and over-production in relation to the needs of the economy are but the two sides of the same resultant, flowing from the division of the total capital in the economy into various privately owned sectors.

However, just as capital no longer confronts society as the absolute barrier to further production when there has been established the unity of the various capitals in the hands of the state, so the other side of the picture no longer remains. The inevitability of the underconsumption of
the masses no longer exists. With each rise in the productive capacity there is no law which prevents the raising of the standards of the masses. The level of consumption has no limiting factor other then the level of technique (here we are not discussing bureaucratic excesses, mismanagement, waste etc – what we are concerned with are the laws inherent in the economy).

The Two Departments of Production

Of particular importance in this connection is the relationship between the two departments of production – that producing producers goods and that producing consumers’ goods. In a “private” capitalist economy, the relationships between these departments are blindly conditioned by the market. In the disproportion which develops between the departments, the chaos in capitalism receives one of its sharpest expressions. There is no controlled relationship between the two.

Production has a certain logic. Producers goods have their outlet in the production of articles of consumption. The overproduction of capital in the crisis means that the disproportion between the two departments has become so acute that the outlet for new capital goods is “blocked up.” The struggle between the competing capitals intensifies – but chaos remains and increases. Profit is the motive force; there are no means by which the process can be consciously regulated.

Under a unified economy the possibility is immediately given for a conscious planning of the two departments. The “blind” flow of capital to and from the various sectors, is replaced by a conscious regulation. Disproportions are eliminated as they arise. The development of technique assists this. The “overproduction” of consumers goods is replaced by a raising of the living standards of the masses. The relationships between constant and variable capital are consciously controlled. What is impossible under capitalism now become a conscious feature of the economic process.

Necessity and Freedom

This does not mean that, depending upon the level of technique, society can arbitrarily play around with the relationship between consumption and accumulation. Within limits, this can be done, but the limits are strictly set by the level of technique. Society does not leap overnight from the realm of necessity into the realm of freedom. But the higher the technique develops the less will be the problems, and what is central to this question is that the problem which periodically besets capitalism, with its private ownership of the means of production, – the problem of “overproduction” – is completely abrogated.

That is why we now consider that the characterisation, “State Capitalism”, in relation to an economy in which the whole of the means of production are in the hands of the state, is a contradiction in terms. It is, in fact, no longer capitalism. The basic law of capitalism, the law of crisis no longer applies.

National “State Capitalism” and World Economy

However, it is necessary to discuss the relationship between a national “state capitalism” and world economy in dealing with Part I of the Statification Document. The idea set forth in that document is that even if the whole of a national economy were in the hands of the state, the relationships between such a national economy and world economy would be basically the same as those between the individual enterprise and the national economy under “private” capitalism. That is to say, the relationships which make for crisis would still remain., but on a tremendously extended scale. Crises would not be eliminated, but on the contrary would be aggravated.

In the first place, it is necessary to remind ourselves that when Marx discussed the problems of the laws of capitalist economy, basic among which is the law of crisis, he did not take into consideration the external factors of the world market. Whilst not attempting to minimise the effects of the world division of labour, and whilst showing the importance and the interconnection of that world division of labour, he assumed for the purpose of his investigation, a shut-in national economy, independent of its connections with the world market, and devoid of the problem of the supply of raw materials.

He showed that the cause of crisis was inherent within that national economy, inherent in every stage of the process of production. In the foregoing we have shown how these inherent laws are abrogated by the complete statification of the means of production.

World Division of Labour

Would the world division of labour have any effect on the functioning of such a national “state capitalism”? The answer is – yes, but not in such a way as to alter its basic laws.

The world division of labour has two sides: the division of labour in the production of raw materials for industry, which has a geographical basis (tin is mined in Malaya, coffee is grown in Brazil etc.), and the division of labour in a technical sense due to the diverse manner in which modern industry has been developed. At the root of this world division of labour is the division between industry and agriculture.

The interdependence of the capitalist countries through the world division of labour; interdependence which prevents any insulation for any section of world capitalist economy against the crisis of overproduction on a world scale, is not just a series of links between the various national economies. It is constituted by a whole network of threads linking the various units within each national economy to the various units in the rest of the world, etc. All of these units are in competition one with the other. The process of the production of surplus value and of accumulation are dictated by this competition; each individual capital is controlled blindly by the market on a world scale.

The insulation against the shocks of the world market, which exist only very partially (protection etc) in “private” capitalism, becomes a reality in “state capitalism” through the monopoly of foreign trade based on the unity of the national capital. With the world slump, such a single national economy, would not be beset with the same problems as the capitalist countries.

In the first place, the whole of world economy does not shut down. Production is considerably reduced, but trading relationships continue. Such a national economy with a high level of technique, which required to change industrial products for other commodities necessary to its own economy, would not find the pressure of the capitalist countries sufficient to prevent the functioning of its own economy. The heightening of the organic composition of capital, the curse of the capitalist countries, would be its greatest weapon. “Dumping” would become possible on an unprecedented scale.

On the other hand, such a notion and economy in the process of developing its technique, like the Soviet Union, could consciously develop its plan on the basis of the existing world division of labour, and thus make it even more free from the shocks of the world market.

That is important in this whole connection, is that whatever the particular productive capacity of such a national economy, the abrogation of the laws of capitalism within the economy, by way of the statification of the means of production, also provides the basis for an insulation against being dragged down into the vortex of a world slump involving the capitalist countries.

But once having said that, it is necessary to state that such an isolated national economy will obviously suffer certain disabilities as a result of the madhouse of the capitalist world, in which machinery and men stand idle. It will limit the pace at which it can advance its productive forces, even though it cannot prevent that advance taking place. In the same way, so long as such an economy remains isolated, the fetters imposed on productions in the capitalist countries will compel it to adopt wasteful measures and deploy sections of its capital into uneconomic enterprises. In short, its advance would be prevented from receiving its fullest expression so long as capitalism remained in the rest of the world.

But with the statification of the means of production, the unification of the capitals in other countries, which would then extend the range of planning from a national to an international level, then these temporary expedients forced upon the isolated national economy would become absolutely unnecessary. Every wasteful process would be cut out. Technique and the standards of the masses could advance with seven league boots.

The Conflict between the Social Mode of Production and Private Appropriation

Thus, the Political Bureau has reached the conclusion that the basic laws, the crises, of capitalist society cannot be separated from the ownership of the various sectors of the economy in the hands of private, individual capitalists. The conflict between the social mode of production and private (i.e. capitalist) appropriation is the root from which all else flows. At the stage when the state takes the entire means of production into its hands, whether or not capitalism still remains in the other countries, the capitalist relations are “transformed into their opposite”. A new society exists.

The establishment of such relations in the economy is possible only by the revolutionary action of the working class. The establishment of such relationships in the economy is the first basic task of the working class in power. To conclude, from the fact that to-day there is a general tendency in world capitalist economy towards the statification of the means of production, that capitalist society can peacefully evolve in this direction, is to ignore the tremendous social convulsions brought about by capitalism itself.

Economic contradictions produce social antagonisms, which in turn develop their own logic, not awaiting the further growth of the productive forces. “Time is by no means a secondary factor when historic processes are in question”. The social process has its transitions from quantity into quality. The tendency towards statification finds its expression in a period of capitalism in decline, a period in which the convulsions of wars and revolutions have become a permanent feature. The peaceful development of this trend, which in its conclusion would transform capitalism into its opposite, is absolutely excluded. Thus, “State Capitalism” is not only a theoretical absurdity, but an entirely unhistoric notion.

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