Capitalism and the State

Capitalism everywhere in history has been born with the assistance of the state and its repression and compulsion. This was so in the birth of capitalist relations in Britain. The facts of history are covered over by those philosophers, economists, statesmen, politicians who have talked or written in sonorous phrases about the freedom created by capitalist property ownership and market exchange.

Following the war, state 'planning' developed to a far greater extent, due in large measure to the anti-capitalist upsurge of the working class and, in the colonial countries the upsurge of nationalist feelings.

The rank and file of unions were demanding the carrying out of traditional demands of nationalisation of industries. In Britain, the Labour government which was swept into power carried forward the nationalisation of mines and railways, demands which had been swept through a Labour Party conference before the war ended. In Germany every political party was compelled by the feeling among the mass of people to call for the nationalisation of the powerful combines that had done well out of fascism. The movement was held down by the occupation troops and diverted into the co-determination and consensus joint committees in factories.

State actions assisted the re-constitution of capitalist economies in Europe. In Britain, the nature of nationalisation measures was very clear. They were a response to the radicalisation of the working class but under the prevailing capitalist economy they became a way of preserving capitalism.

The reality of the period since the end of the war finally and historically registered as utopian the reformist state socialism theories - that through piece by piece nationalisation, using the capitalist state, a parliamentary government of Labour would bring about socialism. Pushed to an election which gave them an overwhelming victory the Labour leaders were compelled to go ahead with nationalisation. They had used vague, woolly phrases about socialist change but determined their politics on adjustments to capitalism..
Bankrupt capitalist enterprises were reorganised by the state. Capitalist owners reaped a harvest from nationalisation just as four a decades later they had a bonanza from privatisation. With the capitalist class remaining dominant in control and ownership in industry and with control of the state, the nationalisation policies were basically shaped to their interests and expansion.

The nationalisations released locked up capital with very generous terms of compensation. In Post-war Britain, Alam Sked and Chris Cook wrote:

As time went on the defects of the programme became ever more apparent. To start with, it seems that many of the previous owners had been compensated over generously, £164,600,000 was paid out, for example, to the mine owners, leaving miners to think that the fruit of their labour was destined even yet - and for some time to come - to find its way into familiar pockets. moreover, since these former owners were now able to invest this money in much more profitable enterprises, it seemed as if the Government had really rewarded capital instead of labour
....In practice all that happened was that the state bought out the former owners and allowed the former management to remain. Labour was accorded no greater say in industrial decision-making, and since it shared in no profits it gained no economic benefit either....Cripps said:"I think it would be almost impossible to have worker-controlled industry in Britain, even if it was on the whole desirable."(


Engels in the nineteenth century pointed out that the contradiction in capitalism between social production and private appropriation compelled the state to intervene. It took over the running of industries, as for example, the capitalist state in certain countries took over the railway system to bring together the capital to construct an infrastructure on which a rising capitalist society could be built.(2) But by pointing to an action by a capitalist state to overcome a contradiction of capitalism in specific circumstances Engels was by no means declaring that here was a tendency that could change capitalism's basic realities by simple evolution.

The central role of state ownership, control or guidance in a capitalist society, whether under reformist governments or conservative, has been to assist private capitalism, either immediately or in the long term. The state serves the dominant class relations. Even in the most difficult periods for capitalism during the period of war for example it is individual profit which is dominant in state controls, with the leading capitalists heading the control body just as the leaders of industry were the Fuehrers in the German fascist economy.
In the last decades of the twentieth century, however, the ideology of 'economic liberalism' preached the free market and excoriated the 'command economy' and state interference. The selling off of nationalised industries has been taking place all over the world. It would seem that the whole direction has been altered so that the capitalist state is withdrawing from intervention in the economy. In fact that is an illusion created by this ideological offensive.

Thatcherism attacked state intervention while carrying out an offensive against the working class which would have been impossible without state help and state planning. At its centre was the defeat of the unions. That was prepared in Britain by the state legislation and the plans of the state to smash the miners who had been responsible for the defeat of Heath's Tory government in 1972 and 1974.(3)

The dismantling of the Welfare State, the cuts in public expenditure, the drastic reduction of what had become known as the 'social wage' thus lowering the floor for wages: all have been carried out by government legislation with the use of state institutions.
In the reality the policies of 'neo-liberal' governments are far from meaning reliance on the untrammelled working of market forces - the 'hidden hand' which ensures the benefit of all. Professor Hayek, himself, the great guru of 'economic liberalism' was not for unfettered laissez faire. In his address in 1947 to the first conference of the Mont Pelerin Society, which he formed, he defined economic liberalism as:

… a policy which deliberately adopts competition, markets and prices as its ordering principles and uses the legal framework enforced by the state in order to make competition as effective and beneficial as possible - and to supplement it where, and only where, it cannot be made effective...


In the past, state assistance has been necessary for capitalism to develop its infrastructure like railways where immediate returns on capitalism not forthcoming. Railways and public services, if they developed under private capital, did so heavily subsidised. Now, the parastic nature of present-day capitalism means that the state subsidises private buyers and speculators when it privatises industries. . In this day and age of capitalism, privatisation has provided a golden trough for capitalists all over the world. The profitable bonanza from privatisation, which opened up new profits for capitalist speculators and 'entrepreneurs', has been impossible without the guarantees and assistance of the state.
There is the whole historical development of the nation state, which the multinationals cannot wipe away. Their base still remains in their national country, and the biggest world combines, for instance, the oil companies of the US manipulate their own state internally and externally, diplomatically and militarily in their own interests. (For example in the 'oil price crisis' of 74).

The argument has impressed some Marxists that the state does not have the same role in capitalism because of the development of trans-national companies and of 'globalisation'. The state is a basic essential to capitalism an instrument for protecting the legal foundation of the capitalist property rights and its contracts. It grew under capitalism together with the nation guaranteeing the home market for capitalism and then providing protection and assistance for its overseas trade.The great imperialist powers are Germany, Japan and the US. In all of them their big international combines are closely linked with their state. North American strength and influence economically is bound up with its military and diplomatic might, which time and again clears the way for its powerful businesses. In fact, a great many of the possibilities of these transnationals depend upon the response of their own national state at home and the strength of their own national state in relation to that of the country in which they operate. Many of the operations of these national combines can only take place because with the strength of their national states.

The problems, contradictions and conflicts of the struggle for profit by the increasingly powerful transnationals have also meant an increase of national and ethnnic antagonisms and an increase in divisions between the most powerful nations and their blocs.
Unity of capitalist states can only come by the hegemony of one state bringing it about by force. It cannot come by a growing together of capitalist conglomerates or through calling an abstract world market a world state. This is what some writers conclude, who appear to see the movements in the world solely in terms of concepts,
The antagonisms in the capitalist world were held down by the overwhelming strength of United States capitalism for two and a half or three decades after the war. They broke out in the 1970s owing to the uneven development, which is a law of capitalism and Lenin stressed in his study of imperialism. (see below).

The organisations of representstives of nation states - United Nations, GATT, European Union go through increasing conflicts and threats of breaking up.


1. Post-war Britain. Penguin. 1990. Sir Stafford Cripps who had been a leader of the Labour left before the war was then a member of the Labour Government.

2. 'These productive forces themselves press forward with increasing force to rid themselves of their character as capital, to the actual recognition of their character as social production forces.
It is this pressure of the productive forces, in their mighty upgrowth, against their character as capital, increasingly compelling th4e recognition of their social character, which forces the capitalist class more and more to treat them as social productive forces, insofar as this is at all possible within the framework of capitalist relations. Both the period of industrial boom, with its unlimited credit inflation, and the crisis itself through the collapse of great capitalist establishments, urge forward towards that form of the socialisation of huge masses of means of production which we find in various forms of joint stock companies.....At a certain stage of development even this form no longer suffices; the official representative of capitalist society, the state, is constrained to take over their management. This necessity of conversion into state property makes itself evident first in the vast institutions for communication: the postal services, telegraphs and railways." Engels. Anti-Durhing. Lawrence and Wishart.

3. See Enemy Within. Seumus Milne. Pan Books. 1994:
“Tory Government and state planned and carried out intervention against the miners for many years:

The secret war against the miners has been the hidden counterpart to the open struggle by successive Tory governments against the NUM, a struggle which helped shape the course of British politics over two decades....
Confrontation between Tory administrations and the miners, for many years the most politicised and strategically important section of the country's workforce, have punctuated British twentieth-century history at its moments of greatest domestic political and industrial stress.”