The Different Ways That the U.S. and Chinese Governments Use Their Power to Regulate Capitalism

Article by Richard D. Wolff

"The socialist left now, as during earlier centuries, advocates for an economic system that does not yet exist in any nation. However, the socialist left does so with the knowledge of what happened to those experiments in socialism that turned out to be and still are forms of state capitalism. Hopefully, 21st-century socialism will not need to repeat those experiments."

Russia’s war on Ukraine both reflects and deepens a global split that should remind us of Karl Marx’s famous remark: “No social order ever disappears before all the productive forces, for which there is room in it, have been developed; and new higher relations of production never appear before the material conditions of their existence have matured in the womb of the old society.” The United Kingdom already lost its particular social order—its empire—while the United States is now losing its. Despite differences, both of these social orders shared a mostly private form of capitalist relations of production (the organization of enterprises centered around private employers and employees). That social order has given way to a different, mostly public form of capitalist relations of production where state officials are major employers. The latter form of capitalism is developing most dramatically in China.

As defined by its core productive relation of employer/employee, capitalism is now developing its productive forces and its gross domestic product (GDP) growth faster in China’s public form of capitalism than in the United States’ private form of capitalism.

The role of the state is central to this decline of capitalism in one area and form and its ascent in another area and form. In the West, the relation between capitalism, and especially its defenders and ideologues, on one side, and the actuality of the state apparatus, on the other, is hypocritical. Endless hostility toward and denunciations of the state match systematic reliance on and support for strong state apparatuses and the economic interventions imposed by them (especially to help manage capitalism’s endlessly recurring crises). Consider the parallels with the endless rejections of racism in societies that institutionally reproduce that racism or with celebrations of family within societies that systematically undermine them.

The need to denounce what the system relies on has tangible effects. Western capitalist economies are declining in good part because they throw obstacles in the way of their states’ participation in managing their economies. The developing economies, such as China, have strikingly avoided that pattern. Their defenders and ideologues celebrate their states’ powerful economic management position even when they criticize a particular policy or official. It is how they explain China’s ability to grow its GDP three times faster than the United States consistently over the last generation.

Part of China’s embrace of a strong state emerged from its affiliations with the USSR and the history of socialism in the 19th and 20th centuries. Most socialists then ascribed to one or another version of the idea that the transition from capitalism to socialism required the workers to seize the state via ballots or bullets. The state became key to this transition to a socialist system. Many socialists advocated strong state apparatuses on the basis of what they hoped such states might then do, namely make the social transition to socialism beyond capitalism, i.e., beyond the employer/employee production relationship. Yet those states, where and when socialists achieved power, proved to be limited. They never accomplished that transition beyond short-lived experiments. Ever since, socialists have analyzed and debated the lessons of those experiments.

A more basic and important cause of today’s developing state capitalism is the history of capitalism itself. Its earliest incarnations in Western Europe emerged from and against the strong states of dying feudalism (as seen in Europe’s “absolute monarchies”). Early capitalisms had thus strongly advocated against strong state commitments in concepts such as “laissez-faire,” “free enterprises,” and “free markets.” When British and then U.S. capitalisms achieved profitable global empires, they credited their professed success to their anti-statism. The hypocritical tendency of this claim resurfaces in the fact that it was their state apparatuses whose military arms acquired and secured their colonies and whose administrative arms ruled them.

Competing capitalist empires produced catastrophic world wars and global economic crashes. They learned the need to increasingly rely on, fund, and legitimize strong states. That learning found expression in various fascistic impulses and movements, in Keynesian economics, and in the ever-greater popularity of socialist interpretations of what strong states could and should do. As the earlier Western capitalisms accommodated ever-stronger states, their ideologues’ anxiety and ambivalence about doing so generated imaginary reasons for rejecting what was happening. Ayn Rand’s influence, libertarianism, and free market advocacy spread and got louder in proportion to the system’s movement in the opposite direction. Where socialists today decry the global economy as “capitalist,” these libertarians insist that it is not genuinely capitalist enough (or not capitalist at all) precisely because the state has so much power over the economy.

After World War II, the majority of the world that broke free of colonial subjugation immediately embraced strong states in their Keynesian or socialist forms to accomplish the “economic development” that they prioritized. Western capitalism was yet again torn in its ambivalence. Capitalists wanted to grab the profits of rapid growth. Ideologues warned against the strong states in the “emerging economies” as the leaders of that growth. The result was a global resurgence of both strong-state-led economic growth on the ground and intense ideological reversion to anti-statism. No wonder the name “neoliberalism” stuck to the time.

Both old Western capitalisms and the newer mostly Eastern capitalisms have evolved considerably over the last generation. Those evolutions are now offering a limited resolution for the inherited tension between actually enhanced social tendencies toward strong state capitalisms and the remaining ideological objections thereto. Everywhere, even in the United Kingdom and the United States, those ideological expressions are weakening. The strong states are now increasingly advocated by “conservatives” such as former U.S. President Donald Trump and current British Prime Minister Boris Johnson, as well as social democrats and liberals. China’s economic performance has carried the day even as Western capitalists try not to admit that publicly.

Russian-born economic historian Alexander Gerschenkron noted in his 1962 Economic Backwardness in Historical Perspective that the state becomes more crucial to capitalist development the later capitalism settles in as a region’s dominant economic system. His notion needs to be amended and extended globally in light of the last 60 years of history. In China, a powerful state apparatus combines with a powerful political party apparatus to supervise and control an economy divided into private capitalist enterprises (private individuals as employers and employees) and public capitalist enterprises (state officials as employers and private individuals as employees). China’s performance not only of economic growth but also of remarkable initial control over containing the spread of COVID-19 suggests that the final stages of capitalism may well be in the state-capitalist forms such as the form the Chinese have developed. The state can transform “backward” forms of capitalism into more “advanced” forms.

Before a post-capitalist system (where the employer/employee relation gives way to democratized workplace organizations that reject the employer/employee division) can take hold, the state-capitalist form enables the system’s productive forces to be most fully developed. We are living through that period right now. We might add that the social left thus finds itself in a situation rather like what it faced at the end of the 19th and early 20th centuries with an important difference: The socialist left now, as during earlier centuries, advocates for an economic system that does not yet exist in any nation.

However, the socialist left does so with the knowledge of what happened to those experiments in socialism that turned out to be and still are forms of state capitalism. Hopefully, 21st-century socialism will not need to repeat those experiments. It can attend to what they lacked, namely the transition at the micro level of workplace organization. That means transitioning enterprises (factories, offices, and stores) from the employer-versus-employee organization to the democratic community (or worker cooperative) organization. The state that achieves that transition will thereby accomplish the end of the capitalist social order. With it might then come that decline of a social necessity for the state that Vladimir Lenin theorized as its “withering away.”

This article was produced by Economy for All, a project of the Independent Media Institute.

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  • Gary Fitzgerald
    commented 2022-05-08 18:39:23 -0400
    I have some questions about this article that remain unanswered. Perhaps you can answer them. Here goes.
    Your article concerns the transition from capitalism to socialism. It proceeds from Marx’s opinion that the transition from capitalism to socialism can only occur once capitalism has developed all the productive forces and a new higher relationship of production appears. Over time, a flaw in this thinking revealed itself. The flaw is that the capitalists are not interested in developing all the productive forces because, as they develop the productive forces in one area, the internal contradictions of capitalism starts to reduce their ability to make money and they move on to another geographical area where they can reproduce the kind of development that maximized their profit returns. The abandoned area then reverts to a pre-capitalist development level thus thwarting the conditions that Marx considered necessary for the transition from capitalism to socialism. (I’m thinking of the “rust belt” as a good example of this.)
    The solution to this problem was the development of state capitalism. State capitalism’s goal is not the maximization of profit, it is the development of the productive forces to a level where a socialist transition can occur. But, because it relies on a form of capitalism, state capitalism inevitably generates excess profits that state comes to rely upon. And, given the nature of humans, it fosters corruption, creating a powerful block of state actors and the people who benefit from the corruption. As a result, in countries that have adopted state capitalism, there are, and have been, no efforts to transition any productive forces from capitalism to socialism. One of the failures of socialist States in the 20th century was to conflate the establishment of state capitalism with socialism.
    Your article goes on to address this failure by stating that the solution to the problem of the transition from capitalism to socialism is to democratize the workplace. Something, I’m a big supporter of it. But, it seems to suggest that we don’t need to rely on capitalism – state or private – to develop the productive forces. Establishing democratized workplaces can develop the productive forces themselves. (Even though you don’t address it here, in your other writings, you’ve pointed to the Mondragon Corporation as a prime example of how democratized workplaces can develop the productive forces.) If this is correct, it raises the question was Marx wrong in stating that capitalism must first develop the productive forces before a transition to socialism is possible. In spite of this contradiction, your article still maintains that the road to socialism is through state capitalism.
    Now, you are correct in stating that a socialist economic system does not yet exist in any nation. And, there is no guarantee that the widespread establishment of democratic workplaces will lead to the eventual withering away of the state. However, supporters of the concept of democratic workplaces need to acknowledge the problems with the concept of democracy itself as identified by the Greeks thousands of years ago. The founding fathers seem to think that education plus checks and balances were the solution to the problems but the inherent nature of greed has been able to prevail over these solutions as witnessed by the lack of democracy historically and currently. (An argument can, and has, been made that what we consider democracies are really just political systems where the rich and powerful are divided into 2 camps with neither being able to take complete control. Yet, both striving to achieve complete control. My exhibit A, the announcement by a number of top Democratic leaders that they would vote for Trump rather than vote for Bernie Sanders.)
    In summary, your article seems to suggest that Marx was wrong in suggesting that the way to socialism was through capitalism, even though you accept Marx’s assertion that capitalism is necessary for socialism’s establishment. In addition, there also needs to be more discussion about how democratic workplaces deal with the inherent problems of democracy. Capitalism has succeeded by relying on the powerful motivating force of greed. How can democracy counter this force?
  • Richard Wolff
    published this page in Blog 2022-04-30 16:41:54 -0400

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