1. Introduction.

Recent events have revealed significant changes in the relationship between heads of western governments and their populations. Almost the first Presidential act of ‘socialist’ Francois Hollande after his election in France, was to rush to meet Germany’s Angela Merkel, a politician who most clearly reflects the needs of international capital. This spectacle came only months after electoral practice in Greece and Italy was ignored and democracy bypassed in favour of appointment to national power of civil servants. It was an imposition in the form of  senior civil-servants loyal to the centralised power of finance capital in the EEC. Such prompt responses are simply the latest development in the changing historic partnership between capital and the state.

The development of capitalism, from its European origin within the preceding Feudal economy, to the present, has seen many changes. From pre-industrial forms of production, to the industrial; from water-powered production, to steam and later electrical power; from mechanisation to automation. The scale of production and its technical development has revolutionised not only the economic spheres of life, but also the social, political educational and psychological spheres. Alongside that have come changes in the nature and direction of the state and its institutions. The present generation of anti-capitalist face a situation which is different in many respects to that existing, when anti-capitalist theories and tactics were first developed.  Three such differences are of considerable importance.

First. In the advanced countries the economic location of the mass of workers has changed, from private industries and commercial outlets to public sector occupations.  There are now also large numbers of non-workers (unemployed, pensioners, students, etc.,) who have become dependents of state benefits. Second. The major capitalist organisations are no longer national but international and after 50 or so years of growth, the ones who have prospered are now enormous.  Third. The nation state no longer dominates, corporate industry and finance, but is instead dominated by both these international aspects of capital. Hence, the dependence on, and subordination of the European and North American states and their political leaders, to the international financial bond-markets and their counter-parts in the IMF,  the World Bank and the European Central Bank.

Discussions concerning the uses and abuses of the state have a long history among anti-capitalists, dating back to Marx and the anarchists within the 1st International. The future of the relationship of capital to the globe and the nation states was again debated by V. Lenin and K. Kautsky in the early 20th century. In his ‘The collapse of the Second International’, Lenin thought that international agreements would be temporary and that national interests in the end would prevail. Kautsky on the other hand argued that;

“..a new ultra imperialist policy, which will introduce the joint exploitation of the world by united finance capital in place of the mutual rivalries of national finance capital.” (Kautsky. quoted by Lenin.)

In our own late 20th and early 21st  century experience we can see that the neo-liberal global developments of finance capital and the multi-national production of commodities and services, that Kautsky was onto something.  Of course nothing is final or fixed within a system so contradictory and crisis prone.  Until the present system is superseded, many things can change or be reversed. Meanwhile it is worth considering in outline, the changes which have happened, over the period of capitalist hegemony, to the relationship between owners of capital and the state.

2. Capital captures the state.

The national (and often localised) roots of capitalist production and accumulation allowed the capitalist class to first challenge and then seize hold of the national form of government in certain countries. The bourgeois revolutions of the 17th and 18th centuries. This seizure of national governments and state institutions, from the feudal aristocracy, gave overwhelming power to the capitalist class and their supporters. This enabled them to ensure economic and social developments suitable, and remove impediments detrimental, to capital’s expansion. It also allowed them to use the states financial power to institute public infrastructure measures, necessary, but too expensive for individual capitalists to develop.

A strong state was needed by the capitalist class for both collective defence and to prevent the excessive domination of some national private capitals against other national ones. Thus the capitalists needed the state to guarantee their own; political supremacy; property rights; land tenure; law; commercial and industrial liberalisation; business protocol regulation; labour availability; common utilities; currency production and regulation; collective capital accumulation; education; infrastructure; social order; armed forces; and diplomacy. Some of these needs, were less important than others and of course the emphasis on one or other of them was to change over time.

The control of national statehood, by the capitalist class, in certain advanced countries, led to the rapid development of both commercial and then industrial capital on a scale which overwhelmed the national and existing foreign markets.  Faced with either scaling down production or finding external markets and sources of raw materials, the latter was chosen and the era of European colonial expansion opened up or in some cases exploded. An international capitalistic division of labour, based upon slavery and colonial possessions developed. This insatiable expansion of trade eventually brought those early capitalist countries into conflict with each other over markets and sources of raw materials.

3. Capital utilises the state.

The state was then used by the capitalist class and its supporters to defend and extend existing international markets and colonies. It did this by funding armies and navies, leading to the successive stages commonly designated as Colonialism and Imperialism. During those periods capital (with some exceptions) was overwhelmingly nationally based.  For a long period, the needs of nationally based aggregated capital dominated the individual companies and corporations.  As such the nation state wielded the supreme power of each country. It was a power which rested in the hands of whichever representative faction of the capitalist class, (Industrial, commercial or financial) managed to dominate politics and the government.

Such was the economic logic of the self-expansion of capital with its ever increasing  capacity and productivity, that local and regional skirmishes between the capitalist maritime powers, became more frequent, leading to serious, large-scale wars between contending capitalist countries of Europe, during the 19th century. The nation-state during this period, became the fully armed, collective expression of the assertively grasping, capitalist class in each country. This belligerent competitive greed led eventually to the two ‘great’ (sic) wars, the First World War (1914 – 18) and the Second (1938 – 45.). Prior to the outbreak of the Second World War the rising technical level of capitalist inspired production in general had even by that time had resulted in a crisis of overproduction and slump. This economically inspired social and political crisis, resulted in two important and radical developments with regard to state formations under systems dominated by capital.

4. The state controls capital.  

One adaptation was with regard to Europe. National irritations with the increasing failure and collapse of the capitalist mode of production and the incompetence of its political elite, led to corporatist developments in some countries, culminating in the spectre of Fascism. Under Fascism, the state took direct control of the economic direction and pace of capitalist development. It did not eliminate private ownership of capital or profit. Workers remained workers and capitalists remained capitalists. The state elite, under this political form, attempted to harness and control both sides of this unequal relationship for what were perceived by them as the best interests of the nation state. The state and the nation was everything, individuals in some cases nothing. Fascism in slightly different corporatist forms was introduced in Italy, Germany and Spain but proved disastrous to the working and oppressed classes.

Another example of adaptation of state control, took place first in Russia and later in China. In both these cases, the state and its institutions took control of everything. The capitalists had their capital (in all its major forms, land, property, money, shares, etc.) annexed to the state. From that point, decisions on what to invest, how much to invest and where to invest, were taken by the political elite organised in the orgburo or politburo of the ’Party’.  This was the ultimate form of total state organisation and planning. The workers remained workers and were employed by one or other of the states productive projects or institutions.

The terms and conditions of workers, their wages or salaries along with their civil rights and responsibilities were all decided by the party elite.  In this development the state had become the stern guardian and controller of social capital, and its elite, the recipient and controllers of the surplus value extracted from the workforce. This was a monolithic economic, social and political stewardship of the social capital. It was an oligarchic control  which was to last for the duration of the state’s existence.

However, this form of centralised political and economic organisation could not wither away, the state and its employees had a momentum and interests of their own. In this sense the characterisation of these societies as ’State Capitalist’ as Lenin and others concluded about the economic nature of the soviet state, is essentially correct. The characterisation by Leon Trotsky of the soviet state in Russia being a ’deformed workers state‘, was therefore something of wishful thinking rather than a serious socio-economic analysis.  The state did not in any sense of the word – or at any time – belong to the workers, but at all times to the party elite.

It certainly became a bureaucratically ‘deformed’ state but the deformation was not from a previous condition of workers self-organisation and control of the production of commodities and services. As Lenin admitted in 1922 (Col. Wks. Vol. 33 page 428/429) , it was a deformed, adaptation of the previous Czarist state, increasingly modified to meet the needs of a sectarian political tendency. Its eventual 20th century collapse allowed large portions of the accumulated state-capital, physical and intellectual, to be released into private hands. The same was true  – and still is – of the Chinese form of state-capitalism, which under the guidance of its oligarchic political elite, has now allowed private capital to flourish alongside state capital, and the workers have remained wage-slaves throughout, with no control over production or their own surplus value creation.

5. The state saves capital.

After the Second World War, the state in the UK and elsewhere, was used by the supporters of capital, to revive capitalism, in several important ways. The first was by a process of nationalisation. This rescued war-depleted capital in two ways. An extensive nationalisation programme, relieved the capitalist owners from the need to replace or renew worn-out or destroyed capital equipment and buildings. The state using tax-payers money began to this mammoth task for them. The high levels of compensation granted to the previous owners was also instrumental in injecting fresh capital in to new enterprises and into the finance-capital sector.  European states also began to prod reluctant capitalists into rationalisations and amalgamations.

The second way the state was used by pro-capitalists, in Europe, was to inhibit and control income levels for workers (in the UK under Wilson etc.) and later, (under Thatcher), to effectively destroy the strength of the trade union movement. Taking one section of workers at a time, the trade union and shop-stewards movement was defeated in various struggles.  This state orchestrated class war, left the way open for the reduction of wages, salaries and living standards – a downward process which is still with us. The subsequent government de-nationalisation (privatisation) programme allowed these industries to be re-purchased at knock down prices and to become once again a source of profit for the share-holders of capital stocks.

The technical level and sophistication of production in general, during the 20th century, was paralleled in the field of military affairs. The result of this technical development was two prolonged and costly wars in which resources commandeered by the state (financial, material and human), were squandered and destroyed to an unprecedented degree. It became obvious, that an alternative, to such self-defeating aggression between the advanced capitalist countries, needed to be devised. The previous attempt in the form of the League of Nations, had failed, so a new attempt was needed. The meetings at Yalta and later at Bretton Woods in 1945, between the political leaders of USA, Britain and Russia, were the initial stages of a post-war process, by which a new international situation, with new institutions, would be created.

The agreement at Bretton Woods, in particular, signalled the end of military warfare as a means of preventing capitalist expansions or settling territorial and trade disputes, between the allied countries of the capitalist west and the axis forces of Europe and the east. Henceforth, aggressive military wars would only be pursued against non-advanced countries, through two new collective institutional means (dominated by the allied powers) – the United Nations and NATO. Of course, the expansion of capital, in its state form or its original private manifestation, was still seen as absolutely necessary by all participants. For this reason in the west, international economic institutions were given a new form. Supra-national agreements such as GATT and supra-national entities such as the International Monetary Fund and the World Bank were the new mechanisms for peaceful competition.

During the 20th century, the technical level of production advanced so rapidly, that the previous levels of worker involvement was drastically reduced.  Automation and machine tool sophistication developed, in engineering, transport, goods handling etc., so far that more could be produced with fewer workers, than at any time previously.  The application of automated and later computerised methods led to parallel changes in the commercial and clerical fields.  As noted in the introduction, the resulting levels of unemployment, were mitigated to some degree by the states role in the post-war development of the welfare state.  Using the state as a tool of social control, welfare provision required increasing levels of employment in education, civil services, social services and health services. The ratio of industrial workers to state workers reversed dramatically, until in Europe and the UK, the state has become the largest employer of waged and salaried labour.

The new form of international production was by the development of multi-national companies, whilst the new form of international finance, initially took the form in Europe of Euro-dollars and Euro-bonds. Despite the existence of large temporary post-war nationalisation programmes in European countries, each of these developments weakened the national states control of commodity production, distribution and capital flows. By the 1970’s and 80’s capitalist activity in the UK and Europe was already dominated by multi-national companies and international financial arrangements. The treaty of Rome and the emergence of the European Free Trade Agreement (EFTA), the EEC, the EU and a single currency were the logical development of the needs of an expanding capitalism predicated upon peace between advanced capitalist countries.

6. Capital overwhelms the state.

So modern capitalism at the levels of production, commerce and finance, is now predominantly an international phenomena and is intertwined and inter-dependent. Its scale is so large it can overwhelm any national attempt to control or restrict its activities, within the present national system of politics. The massively inflated financial sector is particularly internationally fluid, has no physical borders to cross and thus is beyond the reach of national governments. For this reason, nationality no longer makes economic or financial sense for large-scale capital nor for labour. The division of labour created by capitalism is also international and workers in one country have for a long time been entirely dependent upon workers in other countries for their everyday needs. Nationalism and patriotism, continues to be promoted as an idea, but it is one which is reactionary and retrograde.

The owners and controllers of capital in each nation, therefore, no longer needed the nation-state for the full defence of their wealth accumulation against other national capitals. Henceforth their national armed forces represented just subordinate battalions of the International military regime of NATO, stimulated by the powerful military-industrial complex in the USA. National elites, however, need the nation state as a repressive means of control over their own citizens in defence of their wealth against the demands of their workers.  Hence the global relaxation of national controls on the movement of goods and finance and at the same time a tightening of national control upon the citizens of each country. Under the pretext of anti-terror, the governing elites of all capitalist countries have massively strengthened the states policing of communities and severely restricted the possibilities of protest and demonstration. Hence the shift in state emphasis from a degree of post-war paternalistic citizen protection to a stress on discipline and repression – a process which started in the UK as far back as 1964.

Nevertheless, the very economic, political and military mechanisms which have allowed the massive expansion of international capitalism, has also allowed the systemic contradictions of the capitalist mode of production to also expand and explode.  The previous period of rapid capitalist neo-liberal expansion has led to a further overproduction of commodities and capital, which has sought markets and investment opportunities.  The creation of the EEC and later the EU, in particular has resulted, in the 21st century ability of all EU governmental elites to preferentially dip into the bountiful trough of interest-seeking finance capital to fund whatever took their inflated fancies. Those in charge of the nation states, borrowed massively and repeatedly!  Some borrowed to fund and annually parade, unnecessarily large armed forces, others to indulge in ostentatious public works and all to progressively enhance their own privileged life-styles.

The corruption of the national political and governing classes and their cosy interface with international capital was revealed by how they managed to avoid their own agreed rules and to mask the extent of their borrowing. Within the EU, there was an official agreement among the patronising heads of state to adhere to a ‘stability pact‘, which would limit each states borrowing to a small percentage of GDP. Serious, even sombre agreements were entered into. There was an sober commitment to reduce any levels of national borrowing which were above this allegedly safe limit. Yet almost from the start, there was a nod and a wink, to subvert this covenant solemnly entered into between their lavish banquets. In 2003, the nod and the wink was made official as the French and German political and state elites officially agreed to ignore or rescind the offending obstacle.

But of course, lurking in the wings of this Brussels orchestrated political charade, were the international financial institutions, always looking for a quick billion Euro’s, dollar’s or pounds – or two!  Armed with their latest complex financial invention, the now notorious ‘derivatives’ packages, they colluded with government agencies to use these to hide the real debt and the excessive amount of borrowing. They got billions of extra currency to add to their debt in those years, in exchange for complex derivatives and the promise to pay back – in an imaginary rose-spectacled future – the growing mountains of old and new debt.  However, the future did not arrive attired in a comforting shade of pink. It came blood red, with the over-extended failure of Lehman Brothers and the rapid degeneration of the banking system in 2008.  Nevertheless, the modern capitalist state remains mortgaged to international finance capital at astronomical levels and its agents continue to dictate its own terms.

7. Capital now controls many states.

Here’s an important update. Having bailed out the international banking system in 2008, by generous donations of nationally based public money, (without the permission of the public), the states political elite have allowed the financial and banking systems to continue as before. Such was the size of the debt, both publicly admitted and those hidden away, that this huge nationalised bailout did not sufficiently solve the problem. So in 2011 the supra-national European Central Bank (ECB) released trillions of Euro’s to the still dysfunctional international banks to help them become solvent. So guess what? The clever technicians of banking and the gurus of finance could think of no better use of this money than to lend it to bankrupt governments. They did this by buying more of their bonds – thus increasing each sovereign government debt further!!! International finance, metaphorically speaking, now holds the mortgage deeds to the home and workplace of every citizen of Europe and North America.

This is a huge level of politically-inspired debt, which ordinary citizens are expected – under the present system – to pay for by austerity measures, lower standards of living, lower wages, lower pensions and lower life-spans. Every moment this 1% elite remain in power, and the capitalist system remains in existence, the matter grows steadily worse. The governments of Europe and the UK could not pay their previous debts before the crisis, so they can in no way pay the additional amounts now entered into since 2011. They will, therefore, carry out the instructions of the international financial and commercial elites, until the whole economic system goes into a rapid spiral descent, like an out of control aircraft and crashes into the ground. At that point it will shatter the lives and welfare of even more millions of helpless passengers trapped in this erratic and dysfunctional economic system.

The current see-sawing antics of a political elite, left, right and centre, who outside of vote canvassing, don’t really care a jot about the socio-economic situation of the bulk of the 99% of the population, is pathetic. The televised pronouncements of an economic elite which hasn’t as yet fully grasped the economic logic of capitalism, are remarkable only for their banality. All this bodes ill for those who currently lie at the bottom of the economic and social pyramid. Both these sets of so-called ‘experts’, can be increasingly seen with the glazed expression of those who don’t understand and cannot comprehend what is happening around them. Their explanations do not even sound convincing to themselves or their interviewers, never mind anyone who has bothered to study the problem for themselves.

Yet, all of them, the right-wing conservatives, the liberal do-gooders, and the left wing socialist democrats, will all buttress the state and turn to its armed bodies of men, for protection, when the system predictably implodes. At that point, the armed bodies of the state will be once again used to confront the justified anger of the populations of Europe and elsewhere, who rise up and protest. The possibilities of martial law and the brutal treatment meted out to terrorists being applied to protestors, loom ever larger. Since that will not solve, the underlying problems caused by the system, those who suffer will be confronted by the fact, that if they and future generations of working people are to ensure justice and fair play, they will have to unite in solidarity and overcome the state and capital.

Roy Ratcliffe (May 2012.)

[See also  ‘Currencies are not the Problem’ and ‘The Riddle of History Solved’]