Why State Capitalism Is Worse Than Socialism

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December 12 – Fort Russ News –

Valery Gavrilin for Nikolay Starikov Blog, translated from Russian by Kristina Kharlova 

“Who gets the profits in USSR? The workers. In capitalist countries – the exploiters”

Original source: The Great Fatherland Party

A regular contributor to the column “Private opinion” and “Economics” on the website of the Great Fatherland Party Valery Anatolyevich Gavrilin presented another important issue. Our partymate drew attention to the fact that today the terms “socialism” and “state capitalism” are often used interchangeably. Valery Gavrilin does not rule out that this fact can be attributed to inaccuracies of the authors or unclear wording. But he is convinced that in fact, such a substitution of concepts achieves a specific objective: deliberate deception of citizens, the manipulation of consciousness. Let’s try to sort it out.

“When they talk about capitalism, they always have in mind a system of private ownership of the means of production, market of capital, goods and labor. The purpose of capitalist production is profit in favor of the owner of the means of production. In other words – the growth of capital.

State capitalism – is a type of capitalism, when the owner of the means of production is the state. But the state does not need profit beyond what is necessary to exercise the state functions. The state does not need luxury, diamonds, foreign elite real estate, etc. which is what billionaires spend their wealth on. Where do the state profits go?

In the modern world, when the market is almost completely divided, and multinational corporations run everything, there has been a fusion of the capitalist state with big business. It is not the state that controls the economy but the big businesses control the government, if not directly but through their agents of influence. They decide not only specific decisions of the Government, but also the overall policy. Most of the revenues received by the state, go not towards social purposes, but for providing for national defense and order, not for the development of the country, but is redistributed in favor of the biggest players in private capital. Thus, when we talk about state capitalism, we are talking about a kind of conglomeration of the state administrative apparatus and the owners of the biggest property. Power and property are merged into one.

It is clear that under capitalism the state will protect the interests of the ruling class – the bourgeoisie.

It was quite different in the Soviet Union. Under socialism there is no legal way to transfer public property which is in the form of state property into private property: there is no private ownership of the means of production, or its owners. Under socialism, there are managers of state property. But owning and managing are two totally different things. Under socialism, the property and power are separated. Public servant of the highest rank receives a salary. He enjoys certain preferences from his position (business car, a summer house [those summer houses of Soviet officials were never really their property and were passed down to the next official, just like Stalin’s summer house – KK], special rations, etc.), but he can not appropriate income from the property entrusted to him. More precisely, he can try, but will inevitably be subjected to criminal prosecution, possibly by a firing squad.

The socialist state protects the interests of the whole society, not allowing significant stratification between rich and poor. There are many examples when top producing workers were compensated higher than factory managers, or the minister who oversaw the enterprise. Power and wealth under socialism are not synonymous. You cannot achieve great wealth with power. You can not gain power with wealth.

Why do we so persistently instilled the idea that the Soviet economic model was state capitalism?

It’s very simple. Since the Soviet Union and modern Russia are no different in their socio-political system, then there were no dramatic changes after the ‘liberal reforms’. As there has been state capitalism, so it remained. What has changed? People were given rights and freedoms, the ability to do business. Some managed to better leverage the new opportunities, some were worse. No need to envy, the problem is with yourself: your own laziness, inertia, unwillingness to change something in your life, lack of hard work and entrepreneurial ingenuity. This scheme masks the fundamental differences between the Soviet system and the present.

What is the purpose of the enterprise under socialism? — To create a product needed by society. What is the purpose of the operation of the same enterprise as a state corporation under state capitalism? — To produce maximum profit.

Soviet poster: Day and night the bourgeois is working hard with your sweat

Accordingly, under socialism (before the reforms of Kosygin-Liberman, when ‘market elements’ were introduced into socialist production) the company’s efficiency was assessed by how much resources  (labor, raw materials, machines, energy, etc.) were used for production (of metal, machinery, fabric, tools, etc.). Under capitalism the efficiency is measured only in money (how much money is spent, how much is received after the sale of a manufactured product).

The difference is significant (more on this in the article “Is private ownership really efficient?”). That the company, being a state corporation, is owned by the state, doesn’t change the fact that it’s purpose is to make a profit. How  profitability is increased – does not matter – it could be mass layoff of “redundant” workers, reducing their wages, deteriorating working conditions, elimination of social support (workers’ health resorts [yes, those all inclusive spa resorts focused on disease prevention existed in USSR and were free to workers – KK], kindergartens etc.). If the state enterprise and the industry in the socialist system ensured the fulfillment of some particular function (for example, rail transport has provided transportation of goods and people), the same enterprise in the state capitalist system provides profit (railway transport gets more expensive, unprofitable lines are just closed). The state does not provide for the needs of society, it provides paid services. Of course, if these services are unprofitable, they cease to be.

State monopolies tend to increase their rates in order to gain super profits. At the same time expenses are artificially inflated to increase the income of the managing apparatus. As a result most of the cost is passed on to the shoulders of the population, an increasing proportion of revenues is redistributed to the pockets of public officials, holding the highest posts in the corporation. The seat of the official becomes a feeding place. The income received from his office by some director of the corporation has no relation to his labor and his skill as a manager. Young sons of high-ranking officials holding a top position becomes a norm. Nobody is surprised when a simple civil servant leads the life of a millionaire, with foreign real estate, private yachts and aircraft.

A state corporation has a dual nature. On the one hand, it enjoys all the possible privileges from the state – debt relief, favorable government contracts, regular increase of prices. On the other hand, the state corporation operates for its own interest, it is not concerned with the interests of the state. The country has no money, but “Rosnano” is flush with it!

Not surprisingly, sometimes private companies in which the controlling stake belongs to the state, can do damage to state interests. For example, solving the problems of hostile states, if it brings them financial benefit.

State capitalism is only a stage of development of capitalism. In modern conditions of close economic relationships between countries, state corporations will inevitably turn into multinational or grow to their level (which in modern conditions is very difficult), or become their property, because they are not able to compete with stronger players.

The logic of the development of state capitalism in one country is obvious. National enterprises are gradually bought up by international capital. Privatization reduces the presence of the national state in the economy. The state weakens. The country ceases to be sovereign. The state no longer manages its monopolies, but transnational corporations completely subjugate the state. The situation is reminiscent of the middle ages – the feudal lords become much more influential than the king, they have more power, more land, more property. The king no longer has any influence. The country splits into several mini-states, or becomes a part of the country-conqueror.

Our country today is a typical example of a country with state capitalism. When socialism was replaced with capitalism, Soviet citizens were not asked at a referendum. They were promised freedom. In fact, there is much less freedom today. The liberal reformers made a masterful substitution of notions.

Russia is gradually digested by the global capitalist system. The conditions under which we are sucked into this system, to put it mildly, are not too favorable (see my article “The New world order system of global parasitism”), all that will be left of Russia (its fragments in multiple states) will be the object of parasitism for “civilized countries”.

The development path of state capitalism – is a road to nowhere, slipping into the abyss. The only way out is a return to the socialist path of development.

Valery A. Gavrilin, 

a member of the Moscow branch  of The Great Fatherland Party

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