The concept of State Capitalism and the Systems of the Soviet Union and China

13 January 1985  
Issue No. 33 of ‘Henkaku,’ 
the official newspaper of the Socialist Workers' Party

The following is the full text of a lecture given by Hiroyoshi Hayashi at a symposium titled ‘Thinking About Socialism Today’ held in Osaka on 16 December 1984.

1. The fundamental issue was whether it was Socialism or not.

After listening to the various presentations by other speakers, I feel somewhat confused, but I would like to proceed at my own pace.

I joined the Japanese Communist Party in the early 1960s, prior to the protests against the Japan-U.S. Security Treaty (ANPO Struggle). I experienced criticism of Stalinism within the party, and when the Communist League was formed, I enthusiastically joined it. At the time, there were about 50 Communist Party members at Komaba Campus of the University of Tokyo, but roughly one-third remained in the Communist Party, one-third grew disillusioned and withdrew from political struggle, and the remaining one-third joined the Communist League. It was a rough estimate, but I believe the ratio was roughly that. Among them, I was the most left-wing, believing that the Communist Party had betrayed the working class for decades and that it was absolutely necessary to establish a new party. That was the mindset with which I joined.

At that time, those who remained in the Communist Party had shifted to structural reformism, and they were not staunch supporters of the Party Central Committee. Instead, leaders such as Noguchi and Kuroba emerged, promoting a system theory that ‘the east wind will overwhelm the west wind.’ In essence, this was a highly abstract argument that if a ‘socialist’ country could economically develop within the framework of peaceful coexistence, the balance of power would naturally shift, leading to a world advantageous to socialism. (The debate with them) boiled down to whether it was about peaceful coexistence or class struggle.

It was a time when Khrushchev became prime minister and said that in 20 years, the Soviet Union would surpass the United States in terms of production capacity, so there was a side to the arguments of those who remained in the Communist Party that seemed somewhat reasonable.
Was the ‘socialist’ country really a socialist system? This was the fundamental question.

Later, the Bund (Communist League) collapsed, and we formed a study circle with the conclusion that ‘political struggle is impossible.’ By the time we became the Marxist Workers' Alliance in 1972, we had reached the conclusion that it was a kind of capitalism. Until then, the Soviet Union and China existed as very large countries, or had come to play a very significant role in world history and politics through the First and Second World Wars. Without reaching a conclusion on how to understand these ‘socialist’ countries as systems, our movement could not move forward. Various issues in international politics were naturally related to this. Or, if we were to develop class struggle and seek socialism, and if that socialism took the form of countries like the Soviet Union or China, could we really fight for it? These were practical issues we faced.

This is not a problem that only we faced. For example, even within the Trotskyist movement, which lasted for decades—well, the Trotskyist movement only developed in the form of circles and never emerged as a major political party in any country—there were repeated discussions within the movement about what the Soviet Union was and what Stalinism was, leading to mutual criticism and repeated splits. Trotsky himself, during World War II, argued that Stalinism must be overthrown, but that the Soviet Union must be defended, and this too became one of the causes of internal conflict within the Trotskyist movement. 

Given this history, we too were forced to consider what kind of system this was.  

2. The period leading up to the conclusion of ‘State Capitalism’

In the 1960s, economic liberalisation began in the Soviet Union. In 1952, Stalin published a paper titled ‘Problems of Socialist Economy in the Soviet Union,’ and while some of its ideas were incorporated, a liberalisation policy emerged that criticised it. We have studied these developments, critically summarised them, and examined the history of the Soviet economy since the New Economic Policy (NEP), as well as Lenin's revolutionary strategy theory. While Lenin is often seen as a simple socialist revolutionary, his writings from around 1905 reveal him to be a democratic revolutionary. There was a party called the SR Party, which advocated an immediate socialist revolution and followed the tradition of the Narodniks, or populists. Lenin criticised such people quite harshly, saying that advocating an immediate socialist revolution was something only a fool would say.

Based on the history of the Soviet Union, Lenin's ideas, the experience of the New Economic Policy, and the collectivisation of agriculture and shift to heavy industry in the name of socialist construction from the late 1920s to the 1930s under Stalinism, we concluded that it was still capitalism.

As for China, it was the era of the Cultural Revolution, and the theory of permanent revolution under proletarian dictatorship was being advocated. The so-called Deng Xiaoping faction, which was "de facto ruling group" and "capitalist roaders", was severely oppressed at that time. However, even in that era, we believed that Mao Zedong's Cultural Revolution would end in fantasy and that "de facto ruling group" would eventually make a comeback. Of course, we based this outlook on our theory of State Capitalism.

Around 1980, Deng Xiaoping made a comeback and the current bourgeois line of China emerged. In this context, we believe that the theory of State Capitalism has been proven in practice in the course of history.

In the Soviet Union, towards economic liberalisation has stalled, but China and Eastern Europe (with the exception of Romania) are moving in that direction.. The Soviet Union is also strengthening that trend, although it is difficult to say for sure.

As a form of capitalism, it is clear at first glance that this is a special kind of capitalism. However, even the Trotskyists said that it was not socialism, and I think that the Communist League, which was established in 1958, and the New Left movement in general did not recognise it as socialism. Overall, I believe Trotsky's perspective is that it is a ‘transitional society,’ not a socialist society, but a transitional society that has become fixed, stagnant, unable to move forward, a degenerate workers' state, with bureaucrats holding power, but these bureaucrats are part of the working class.

The reason bureaucrats are part of the working class is that, in essence, it is a society where the means of production are nationalised. Therefore, no matter how reactionary the bureaucrats become, they cannot dismantle the foundation of nationalised means of production. They cannot undermine the very foundation that gave rise to bureaucracy. Therefore, it is a workers' state, even if it has degenerated. This is Trotsky's perspective, and I believe the Bund—the Bund being the Communist League, a precursor to the New Left movement established in 1958—shared a similar viewpoint.

We didn't think it was socialism from the outset, but is it possible to imagine a transitional society lasting for decades? When viewed as societies, both the Soviet Union and China have clearly developed as single social organisms. Is it possible to simply describe them as transitional societies? That was our thinking.

3. Stalin's views and the ‘evolution’ of the Soviet system

In the process of establishing the theory of State Capitalism, we also critically examined Stalin's concepts.

In his 1952 essay, Stalin emphasises that socialism can coexist with commodity production, and that commodity production is distinct from capitalism, possessing a separate set of characteristics. However, from a conventional perspective, commodity production and capitalist production are inherently intertwined. This is evident from reading works such as ‘Capital,’ and is also apparent when observing actual capitalist systems. Yet Stalin argues that socialism and commodity production can coexist, and that capitalism and commodity production are distinct—and indeed, conceptually they are distinct, and even in ‘Capital,’ the analysis begins with commodity production. However, this does not mean that they are directly equivalent to capitalist production.

However, Marx begins with ‘commodities’ in the sense that commodities are the basis of capital, commodity production is inseparable from capitalist production, and the former inevitably transforms into the latter. This is the opposite of what Stalin says.
After Stalin, during the liberalisation phase of the 1960s, it became clear that not only were commodity production and capitalism separate, but also that the concept of profit was separate from capitalism.

In Stalin's era, as we can see in his writings, means of consumption are commodities, but means of production are not commodities; they are directly distributed or allocated within the socialist planned economy. Prices are assigned, but these are merely for economic calculation or to measure corporate efficiency, as he states.

Ultimately, commodity production exists even in socialism, which is a very pragmatic view, and from the perspective that commodity production is being utilised, it is argued that socialism is compatible with commodity production.

However, is this really the case? The concept of scientific socialism is that commodity production or value production is impossible as long as labour is expended as part of communal labour. Through commodity production, the exchange of labour products mediates the social relations of labour, which means that labour is expended privately. This is as Marx analysed at the beginning of Capital.

Formally, the means of production are nationalised, but in agriculture, immediately after the revolution, land was distributed to farmers, leading to the dominance of small-scale farming. Even when Stalin collectivised agriculture, as he himself stated, it was collective ownership (group ownership), not state ownership. Similarly, in the case of enterprises, the independent accounting system of the NEP era, which positioned individual enterprises as operational units or economic units, was not negated under Stalin's regime. Instead, the form of the enterprise as an entity was retained. 

This has become increasingly clear in the context of liberalisation, and in recent Chinese economic reforms, even at the level of individual factories, enterprise-style operations are now openly conducted. 

When we look at this situation, we cannot help but conclude that, although it is nationalised in form, it is a system in which management, or more fundamentally, labour, is not community-based, but rather private labour that is being expended.

Looking at individual companies, it is said that capitalist management is carried out solely for the sake of accounting calculations. However, while it may have started as a purely functional form, in practice, the intrinsic nature of capital is increasingly coming to the fore. 

Certainly, overt bourgeois relations were rejected by Stalin in the late 1920s. In China, too, there were various twists and turns. Liu Shaoqi emerged and implemented economic liberalisation policies at times, while at other times he adopted restrictive policies. After the Cultural Revolution, there were twists and turns such as the emergence of Deng Xiaoping, and of course, we cannot say that such twists and turns will never happen again. However, even if economic management were to take the form of a complete rejection of liberalisation, as Stalin did (Stalin himself said that it was only a matter of form, that it was only a matter of commodity production), such a form of ‘enterprise’ has been maintained and will continue to be maintained.

Taking all of this into account, we believe that the Soviet Union and China (modern ‘socialist’ states) should be evaluated as a kind of capitalist society or capitalist society.  

4. Based on Marx's materialist view of history

Our theory of ‘State Capitalism’ is a very important issue that is related to the evaluation of the Russian Revolution and the Chinese Revolution, but even in Marx's materialist conception of history—which began with The German Ideology and was developed in various forms in The Poverty of Philosophy, the preface to A Contribution to the Critique of Political Economy, and Capital— In the ‘Preface’ to ‘Critique of Political Economy,’ it is stated that socialism cannot emerge unless productive forces are fully developed and expanded within a nation's economy.

The socialist movement of the modern era also emerged as a scientific socialist movement based on the development of capitalism. Socialism prior to that time advocated socialism as an ideal, but lacked realistic conditions and was, to a greater or lesser extent, inevitably utopian. It was a utopian socialism. That is what he is saying.

In Europe, Marxism emerged within the context of the development of capitalism and productive forces, as well as the growth of the working class, and I do not believe there is any contradiction with the actual foundation or historical basis. However, the revolutions in Russia and China historically raised the question of what would happen if a proletarian revolution occurred in a place where the conditions set forth by Marx—that socialism is impossible unless productive forces have sufficiently developed within capitalism—were not met.

This is not a problem unique to Russia, but rather a problem that is quite common in developing countries, as reflected in the term ‘Third World.’ Even today, for example, in developing countries where political parties that do not identify as communist or Marxist have come to power, similar systems often emerge. Such systems, where the state and the economy become integrated, or where the ruling party and state power become integrated, exist in various forms, and it is inevitable to conclude that there is a fairly general issue at play here.

When I say proletarian revolution, I mentioned Lenin earlier, but what I mean by ‘Lenin's greatness’ is that his greatest achievement was to advocate a democratic revolution in opposition to the Socialist Revolutionary Party's theory of immediate socialist revolution (which considered the peasant revolution to be a socialist or communist revolution). Even after the revolution, during the period of War Communism, there may have been various left-wing statements, but overall, it was not possible to move directly to socialism. Instead, as seen in the form of the New Economic Policy (NEP), the view was that it was necessary to introduce a commodity economy and capitalist economy under the proletarian state. Some might argue that adopting such a perspective only exacerbated the confusion, but I believe that Lenin's greatness lies precisely in his ability to adopt such a perspective. Indeed, it was because he firmly adhered to Marxism that he could engage in a principled struggle against Trotsky's romantic utopianism or Narodnik illusions, grounded in reality. I consider this to be one of Lenin's greatest strengths.

5. Our Theory of ‘State Capitalism’

We use the concept of ‘State Capitalism.’ While the term itself is similar to Lenin's theory of State Capitalism, the content is different. Lenin considered capitalism within the permissible limits of a workers' state, but we consider State Capitalism to be more systemic. Or rather, we evaluate state power itself as a tool of State Capitalism, or as something that has already been transformed into such a tool—we evaluate so-called ‘Stalinism’ or Stalinist states from this perspective. In this sense, our concept differs from Lenin's.

Or there is Trotsky's ‘Betrayal View of History".’ Lenin also spoke about the prospects for socialism in Russia. He spoke about this in relation to the world revolution and the prospects for developing productive forces under the New Economic Policy (NEP). There is also the question of how to evaluate this.

Is it appropriate to discuss history from a mechanistic, fatalistic perspective? Isn't Soviet and Chinese State Capitalism fatalistic? Could there have been another path? Or is the problem Stalinism's betrayal? These are widely held views. I can understand these feelings, and we too were once caught up in such ideas. However, when evaluating the history of a major power like China or the Soviet Union, which has shaped the course of human history, or when considering the history of several decades—setting aside the specific number of years—it is impossible to view such matters as arbitrary or accidental. Moreover, evaluating them in such a manner yields no positive outcomes, as I now believe.

In that sense, there are various statements made by Lenin, such as ‘Socialist Russia will be born from the Russia of the NEP,’ but rather than dissecting every individual statement by Lenin, we believe that it is necessary to understand the socio-economic systems of the Soviet Union and China within the context of historical inevitability, and that without doing so, it will be impossible to reach a true and correct understanding.

Even though we refer to it as a proletarian revolution, the Chinese Revolution was not a proletarian revolution in form. Regarding the nature of the Russian Revolution (which I believe can certainly be considered a proletarian revolution in one sense), there was a trade union controversy around the time when the New Economic Policy (NEP) was adopted, that is, at the end of the period of war communism. In this debate, Lenin criticised Trotsky, stating, ‘Even if we call it a workers' state, it is merely an abstraction, nothing more than an abstract concept. In reality, we must consider the interests of the peasants, and furthermore, it is nothing more than a state distorted by bureaucracy.’

Even if we say that the Russian Revolution was a workers' revolution, we cannot speak in the same terms when discussing the prospect of a socialist revolution by workers in Japan. We must consider the concept of State Capitalism, including issues surrounding the Russian Revolution (which does not mean that we deny the great historical significance of the Russian and Chinese revolutions) and a summary of the Russian and Chinese revolutions themselves, or rather, a re-examination of them.

Even if we say that the Russian Revolution was a workers' revolution, we cannot speak in the same terms when discussing the prospect of a socialist revolution by workers in Japan. We must consider the concept of State Capitalism, including issues surrounding the Russian Revolution (which does not mean that we deny the great historical significance of the Russian and Chinese revolutions) and a summary of the Russian and Chinese revolutions themselves, or rather, a re-examination of them.

Certainly, commodity production or production for profit is incompatible with nationalisation and the sharing of the means of production. However, it does exist in reality. Moreover, it utilises commodity production (according to Stalin, it is possible to gradually eliminate commodity production and categories such as currency from the system by utilising commodity production). That was Stalin's thinking. However, as the situation developed in the 1960s in the Soviet Union and the 1970s in China, it took the form of profit-driven production, the dissolution of people's communes in China, and the cultivation of individual farmers or wealthy farmers. We must re-examine this reality from the standpoint of historical materialism, rather than simply dismissing it as betrayal, human arbitrariness, or ‘policy.’

Many people say that Marxism has failed, but I believe that only Marxism—which is basically a materialistic way of thinking—can solve problems or evaluate them.

Our theory of State Capitalism is not something we came up with on a whim, but rather a theoretical issue that we had to resolve in our practical work after the ANPO Struggle. We arrived at this conclusion through the analysis of the realities of the Soviet Union and China, as well as through a critical examination of Stalin's theories, and we believe it to be inevitable.
(End)