Letter: Is there State Capitalism in Russia? (1957)

Letter to the Editors from the January 1957 issue of the Socialist Standard

We have received the following letter from a reader who thinks we have erred in describing Russia and China as State Capitalist. Our reply follows.

Greenford, Mddx.,

9/12/56.

Dear Friend,

In the December issue of the Socialist Standard you class the system in Russia and China as State-Capitalism. Now if Capitalism is an exploiting system under which the workers produce profits for the owners of the means of production while they themselves merely get a subsistence allowance, what happens under State-Capitalism? When did Bulganin or Chou-En-Lie last declare a dividend to their fellow shareholders? And if they do not declare dividends, what are their motives? What is it that drives them along? And why do the Capitalists hate them so much—while they have nothing against the Capitalists of—say Germany—who went all out in the last war to pinch their markets and colonies from them?

Yours,

Tom Forde.

Reply:

Our correspondent’s first point is that if there is State Capitalism it must show itself in the form of “a dividend . . . to shareholders.” This is his first misconception. The British Post Office, the Coal Board, British Transport, and the other nationalised industries are State Capitalism and they never declare a dividend to share-holders. The essence of State Capitalism is that the payment of dividends to shareholders is replaced by the payment of interest to bondholders, who, unlike shareholders, are divorced from the control of the undertaking. The former shareholders in the railways, etc., and the investors who hold the government securities that make up the national debt receive the interest on their bonds from the Government, or under Government guarantee. And this is the arrangement that exists in Russia and China. Every State concern in Russia is legally under obligation to make a profit and to pay to the State interest on capital advanced by the Government or the State banks. The Government in turn pays interest to the bondholders or (as is now the dominant arrangement) pays out the equivalent of the interest in the form of lottery prizes—the system just borrowed from Russia by the British Government in their Premium Bonds. The Russian national debt held by the Russian bondholders totals something over £9,000 million. It is frequently added to by the raising of new loans.

Quite apart from this, the individual political leaders, industrial managers, popular writers and dramatists and other favoured groups, are able to receive large incomes in salaries, fees, and royalties, which enable them to live on a standard far beyond the condition of the mass of workers and accumulate property—incidentally in cynical disregard of Lenin’s dictum that Russia would be run on the lines that all functionaries were to receive wages on the level of the ordinary workers.

Our correspondent’s last point is really fantastic. He asks us to accept the view that because the Western Capitalists hate the Russian rulers this proves that Russia is not State Capitalist and is, presumably. Socialism. Yet our correspondent himself shows the absurdity of his own reasoning by his reference to Germany. In 1914-18 and again in 1939-45 the British and German Capitalists were at war and violently “hated” each other. Are we then to deduce from this that the British Capitalists hated the Germans because Germany was Socialist? (Incidentally the British and Russian rulers were on the same side and were declaring their mutual love in the common struggle against the Axis Powers). Capitalist groups come into conflict over markets, trade routes and strategic points and this applies as between the Western Powers and Russia as between all Powers. And has our correspondent forgotten the Pact of Friendship between Russia and Hitlerite Germany? And did he notice that on the Suez issue Russia and America joined together on United Nations to oppose Britain and France. There is no impossibility about a line-up between Russia and any other Capitalist Power in the jungle war of world Capitalism. And what is said above about Russia applies also to China.

Our correspondent is referred to our pamphlet Russia Since 1917 for further explanation of the State Capitalist nature of Russia.

Editorial Committee.