How the United States and China use their power to regulate capitalism

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 until all productive forces, for which there is place, have been developed; and new higher relations of production never appear until the material conditions of their existence have matured in the bosom of the old society.

The UK has already lost its particular social order – its empire – while the US is losing its own. Despite their differences, these two social orders shared an essentially private form of capitalist relations of production (the organization of enterprises centered on private employers and employees).

This social order has given way to a different, predominantly public form of capitalist relations of production where state officials are the main employers. This last form of capitalism is developing more spectacularly in China.

As defined by its fundamental productive employer/employee relationship, capitalism now develops its productive forces and GDP growth faster in the public form of Chinese capitalism than in the private form of American capitalism.

The role of the state is central to this decline of capitalism in one area and in one form and its rise in another area and in another form.

In the West, the relationship between capitalism, and above all its defenders and ideologues, on the one hand, and the actuality of the state apparatus, on the other, is hypocritical. The endless hostility and denunciations of the state correspond to the systematic reliance on and support for strong state apparatuses and the economic interventions they impose (especially to help manage capitalism’s ever-recurring crises) .

Consider the parallels with the endless rejections of racism in societies that institutionally reproduce that racism or with the celebrations of family within societies that systematically undermine them.

The need to denounce what the system is based on has tangible effects. Western capitalist economies are declining in large part because they erect obstacles to the participation of their states in the management of their economies. Developing economies, such as China, have surprisingly avoided this pattern.

Their advocates and ideologues celebrate the powerful economic management position of their states even when they criticize a particular policy or official. This is how they explain China’s ability to grow its gross domestic product three times faster than the United States consistently over the past generation.

Part of China’s adherence to a strong state grew out of its affiliations with the USSR and the history of socialism in the 19th and 20th centuries. Most socialists then attributed to one or another version of the idea that the transition from capitalism to socialism required workers to take over the state through ballots or bullets.

The state became the key to this transition to a socialist system. Many socialists advocated strong state apparatuses on the basis of what they hoped these states could then do, namely effect the social transition to socialism beyond capitalism, i.e. to the beyond the employer/employee production relationship.

Yet these states, where and when socialists came to power, proved limited. They never made this transition beyond short-lived experiences. Since then, socialists have analyzed and debated the lessons of these experiences.

A more fundamental 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 the “absolute monarchies” of Europe).

Early capitalisms therefore argued strongly against strong state commitments to concepts such as ‘laissez-faire’, ‘free enterprise’ and ‘free markets’. When British and then American capitalisms created profitable global empires, they attributed their declared success to their anti-statism.

The hypocritical tendency of this claim resurfaces in the fact that it is their state apparatuses whose military arms have acquired and secured their colonies and whose administrative arms have ruled them.

Competing capitalist empires produced catastrophic world wars and global economic crashes. They have learned the need to increasingly rely on strong states, to finance them and to legitimize them. This learning found expression in various fascist impulses and movements, in Keynesian economics, and in the ever-increasing popularity of socialist interpretations of what strong states could and should do.

While earlier Western capitalisms welcomed ever stronger states, the anxiety and ambivalence of their ideologues about this generated imaginary reasons to dismiss what was happening. Ayn Rand’s influence, libertarianism and free market advocacy spread and grew stronger in proportion to the movement of the system in the opposite direction.

Where socialists today decry the global economy as “capitalist,” these libertarians insist that it is not 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 from colonial subjugation immediately embraced strong states in their Keynesian or socialist forms to accomplish the “economic development” they prioritized. Western capitalism was once again torn apart in its ambivalence. The capitalists wanted to grab the benefits of rapid growth.

Ideologues have warned against strong states in “emerging economies” as leaders of this growth. The result has been a global resurgence of both strong state-led economic growth on the ground and an intense ideological return to anti-statism. No wonder the name “neoliberalism” stuck with the times.

Both the old Western capitalisms and the new, essentially Eastern capitalisms have evolved considerably over the last generation. These developments now offer a limited solution to the inherited tension between the actually increased social tendencies towards strong state capitalisms and the remaining ideological objections to them.

Everywhere, even in the United Kingdom and the United States, these ideological expressions are weakening. Strong states are now increasingly advocated by “conservatives” such as former US President Donald Trump and current UK Prime Minister Boris Johnson, as well as social democrats and liberals.

China’s economic performance has won even as Western capitalists try not to publicly admit it.

Russian-born economic historian Alexander Gerschenkron noted in his 1962 Economic backwardness in historical perspective that the state becomes more crucial to capitalist development as capitalism establishes itself as the dominant economic system of a region. Its notion must be amended and broadened globally in the light of the last 60 years of history.

In China, a powerful state apparatus joins forces with a powerful apparatus of political parties to oversee and control an economy divided into private capitalist enterprises (individuals as employers and employees) and state-owned capitalist enterprises (state officials as employers and individuals as employees).

China’s performance not only in terms of economic growth but also remarkable initial control in containing the spread of Covid-19 suggests that the final stages of capitalism may well come in state capitalist forms such as the form that 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 relationship gives way to democratized labor organizations that reject the employer/employee division) can take hold, the state-capitalist form allows the productive forces of the system to develop to the maximum. We are currently living through this period.

One could add that the social left thus finds itself in a situation quite similar to that which it faced at the end of the 19th and the beginning of the 20th century, with one important difference: the socialist left today, as during the previous centuries, advocates an economic system that does not yet exist in any nation.

However, the socialist left does this knowing what happened to those experiments in socialism that turned out to be and still are forms of state capitalism. It is hoped that twenty-first century socialism will not need to repeat these experiences. It can take care of what they were missing, namely the transition at the micro level of the workplace organization.

This means moving enterprises (factories, offices and stores) from employer versus employee organization to democratic community organization (or worker cooperative). The state that achieves this transition will thus accomplish the end of the capitalist social order.

With that 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, which provided it to Asia Times.