The Online Library of Liberty

A project of Liberty Fund, Inc.

• Preface
• Author’s Note
• The State
• Introduction
• 1.: The Capitalist State
• Violence, Obedience, Preference
• Title and Contract
• The Contours of the Minimal State
• If States Did Not Exist, Should They Be Invented?
• Inventing the State: the Social Contract
• Inventing the State: the Instrument of Class Rule
• Closing the Loop By False Consciousness
• 2.: The Adversary State
• Repression, Legitimacy and Consent
• Taking Sides
• Tinker’s Licence
• The Revealed Preference of Governments
• Interpersonal Justice
• Unintended Effects of Producing Interpersonal Utility and Justice
• 3.: Democratic Values
• Liberalism and Democracy
• Through Equality to Utility
• How Justice Overrides Contracts
• Egalitarianism As Prudence
• Love of Symmetry
• Envy
• 4.: Redistribution
• “fixed” Constitutions
• Buying Consent
• Addictive Redistribution
• Rising Prices
• Churning
• Towards a Theory of the State
• 5.: State Capitalism
• What Is to Be Done?
• The State As Class
• On the Plantation

5.

State Capitalism

What Is to Be Done?

State capitalism is the fusion of political and economic power. It ends the anomaly of armed force being centred in the state, while the ownership of capital is dispersed throughout civil society.

People will finally be stopped from claiming through politics what is denied them by economics.

When he laid down the agenda for the out-of-power elite in “What Is to Be Done?,” Lenin wanted his party to conquer by professionalism, secrecy, centralization, specialization and exclusivity. Harsh and chilling, his programme was not the sort the seeker after power can openly lay out before a public he needs to seduce. Laying it out would have spoilt his chances, had they ever depended on broad public support or any manner of capturing supreme power, other than by the previous tenant’s default, that is to say by the collapse, in the chaos of a lost war and the February 1917 revolution, of the defences of the regime he sought to replace. He was for taking society unawares, securing the essential instruments of repression and using them without much regard for popular consent. As he put it almost on the eve of the Bolshevik assumption of power in October 1917, “people as they are now” rather than as they are supposed to become in “anarchist utopias,” “cannot dispense with subordination,” which “must be to the armed vanguard of all the exploited and working people, i.e. to the proletariat,”1 undiluted by petty-bourgeois cant about “the peaceful submission of the minority to the majority.”2 He thought it “splendid” of Engels to declare that “the proletariat needs the state, not in the interests of freedom but in order to hold down its adversaries.”3 Once in power, he scolded that “our government is excessively mild, very often it resembles jelly more than iron”;4 he called for the fiction of an impartial judiciary to be forgotten, stating ominously that as organs of proletarian power, “the courts are an instrument for inculcating discipline,”5 and explaining that there is “absolutely no contradiction in principle between Soviet (that is socialist) democracy and the exercise of dictatorial powers by individuals.”6 (This truth must be treated as a powerful one, derived as it is from the “material base” of society, for “unquestioning subordination to a single will is absolutely necessary for the success of processes organised on the pattern of large-scale machine industry.”7 In effect, in its first six months, Lenin’s government largely liquidated the Menshevik or just plain grass-roots nonsense about the decentralized authority of factory soviets, share and share alike, worker self-management and the proliferation of pretexts for endless discussions and “meetingism” at all levels in the name of direct democracy.)

This was all quite strong stuff, unpalatable and unashamed, fit for the victors’ ears and not designed to reconcile the victims. The agenda for an incumbent state depending on the consent of more than a minute “vanguard,” seems to me diametrically different. Excepting the case of taking over a state laid flat by defeat in a major war, a cynical minority is as likely as not to spoil its own chances by its very cleverness, so uncongenial to the rest of society. Instead of professionalism, the incumbent state at the start of the road to discretionary power needs amateurism; instead of secrecy and exclusivity, openness and broad co-option.8

A consent-dependent incumbent state must not talk or act too knowingly and professionally about power, how to get and how to use it. It must not for a moment appear, nor even see itself, as (an albeit benign) conspiracy, about to take in society while pretending to stay subjected to its mandate. It must, indeed, sincerely feel that it is obeying the popular mandate in its own way (the only way in which it can be “really,” “wholly” obeyed).

If the effect of its policies is to entrap its subjects and to deprive them of the independence of livelihood they need for withholding their consent, this must take place as a slowly emerging by-product of constructive state actions, each of which they find easy to approve. Entrapment, subjugation should no more be the consciously set aims of the state than monopoly profit the aim of the innovating entrepreneur.

The state’s tenure is precarious to the extent that its power remains one-dimensional, merely political power. This is largely the case in historical settings where economic power is dispersed throughout civil society, conforming to the inherently dispersed nature of the institution of private property. Such settings may look natural to us, but they are by no means the historical norm. From an analytical point of view, too, they are a freak, an anomaly.

In the face of the state’s monopoly of organized armed force, it is an illogical oddity to find economic power lodged, as it were, in other places. Is it not an oversight, a strange lack of appetite on somebody’s part for the duality of these two sources of power to persist for any length of time? For the emphasis, by modern historians of various persuasions, on the possible causal relations running both ways between capital ownership and state power, merely deepens the mystery of why money has not yet bought the gun or the gun has not yet confiscated the money.

One type of political theory, not without twisting and turning, defines away this anomaly by flatly denying the separateness and autonomy of political power (except for “relative autonomy,” which is too conveniently elastic a concept to merit serious attention). Political and economic power both cohabit in the metaphysical category “capital” and jointly serve the “objective” need of its “expanded reproduction.” However, if we deny ourselves the facility of such a handy solution, we are left with what looks like a remarkably unstable system.

A tilt of the system toward anarchy or at least a measure of ascendancy of civil society vis-à-vis the state, would correspond to the dispersal of hitherto centralized political power. Once it got going, such dispersal could easily gain momentum. In a full-blown process to disperse political power, private armies, by keeping the tax collector away from their territory, would bankrupt the state, contributing to the atrophy of the state army and presumably to the further spread of private armies.9 There is not the least trace at present of a tendency for social change to take any such turn. The eventuality of a dispersal of political power to match dispersed economic power looks a purely symbolic “empty box.”

A tilt the other way, towards state capitalism with the ascendancy of the state over civil society, corresponds to the centralization of hitherto diffuse economic power and its unification, in one locus of decision, with political power. The summary answer to the incumbent’s rhetorical “what is to be done?” is “fuse political and economic power into a single state power” and “integrate citizenship and livelihood” so that the subject’s whole existence shall be ruled by one and the same command-obedience relation, with no separate public and private spheres, no divided loyalties, no countervailing centres of power, no sanctuaries and nowhere to go.

In the consciousness of state and public alike, this apocalyptic agenda must take on a prosaic, quiet, down-to-earth and anodyne aspect. It should, and quite easily does, translate itself into some formula which the ruling ideology has rendered largely inoffensive, such as “the strengthening of democratic control over the economy” so that “it should function in harmony with society’s priorities.”

When I say that contrary to the ruthless cleverness stipulated by Lenin, the state can best maximize its power over civil society by being at the outset somewhat amateurish and candid, the benefit of transparent confidence in the painless and benign character of economic and social engineering is foremost in my mind. It is positively good for the state to believe that the measures found necessary to establish “democratic control” over the economy will in due course have, as their principal effect, an enhanced say by the people in the proper use of the country’s productive apparatus (or consequences of a similar description). It is good for it sincerely to consider voices which assert the exact opposite as obscurantist or in bad faith.

It is conducive to the state’s ultimate purposes to substitute conscious direction of the social system for automatism, for every such “voluntarist” step is likely, by cumulative systemic changes, to induce a need for more guidance in some of the most unexpected places. The less efficient (at least in the sense of “the less self-sustaining,” “the less spontaneous” and “the less self-regulating”) the workings of the economic and social system become, the more direct control the state will have over people’s livelihoods. It is one of the numerous paradoxes of rational action that a degree of well-intentioned bungling in economic and social management and the usual failure to foresee the effects of its own policies, are peculiarly appropriate means to the state’s ends. It is government incompetence which, by creating a need for putting right its consequences, steadily enlarges the scope for the state to concentrate economic power in its own hands and best contributes to the merging of economic with political power. It is very doubtful whether government competence could ever get the process going from a democratic starting position.

Stressing the paradox, we might go a little further and argue that the spirit which best helps the state emancipate itself from its ungrateful role of democratic drudge is one of confident innocence and uncomprehending sincerity. In my choice of adjectives, I am inspired by the example of a tract by a socialist theorist on the programme of the united French Left prior to its 1981 electoral victory. In this work, it is explained in manifest good faith that nationalization of large-scale industry and banking would reduce statism and bureaucracy, provide an additional safeguard for pluralistic democracy and create a really free market.10

Schematically, the state would find itself advancing, by small and steady degrees, towards discretionary power by first merely following the standard liberal prescription. It should at the outset “rely on prices and markets” for the allocation of resources “and then” proceed to redistribute the resulting social product “as justice required.”11 The inconsistency between an allocation and a distribution arrived at in this way, should alone suffice to bring about partial imbalances, false signals and symptoms of waste. In the face of the emerging evidence that “markets do not work,” industries fail to adapt to changes in time, unemployment persists and prices misbehave, support should build up for the state to launch more ambitious policies. Their intended effect would be the correction of malfunctions induced by the initial policy. One of their unintended effects may be to make the malfunctions worse or cause them to crop up somewhere else. Another is almost inevitably to make some existences, jobs, businesses if not whole industries, wholly dependent on “economic policy,” while making many others feel some partial dependence.

This stage—often approvingly called the “mixed economy,” suggesting a civilized compromise between the complementary interests of private initiative and social control—has, however, merely pierced, without razing to the ground, the maze of obstacles, ramparts and bunkers where private enterprise can in the last resort, and at a cost, shelter the livelihood of those, owners and non-owners alike, who have occasion to oppose the state. Only the abolition of private capital ownership ensures the disappearance of these shelters. A “mixed economy” needs to go to extreme lengths in terms of state controls in order for private enterprise to cease being a potential base of political obstruction or defiance. Planning, industrial policy and distributive justice are promising yet imperfect substitutes for state ownership; the essential, almost irreplaceable attribute of the latter is not the power it lends to the state, but the power it takes out of civil society, like the stuffing you take out of a rag doll.

The transition to socialism, in the sense of an almost subconscious, sleep-walking sort of “maximax” strategy by the state, both to augment its potential discretionary power and actually to realize the greatest possible part of the potential thus created, is likely to be peaceful, dull and unobtrusive. This is its low-risk high-reward approach. Far from being any noisy “battle of democracy... to centralise all instruments of production in the hands of the state”; far from involving some heroic revolutionary break with continuity; far from calling for the violent putting down of the propertied minority, the transition to socialism would probably be the more certain the more it relied on the slow atrophy of initially independent, self-regulating subsystems of society. As their free functioning was constrained, the declining vitality of successive chunks of the “mixed economy” would eventually lead to a passive acceptance of a step-by-step extension of public ownership, if not to a clamour for it.

In a section of his Capitalism, Socialism, and Democracy devoted to the sociology of the intellectual, Schumpeter makes the point that intellectuals (whom he defines, a shade severely, as people “who talk and write about subjects outside of their professional competence” and “have no direct responsibility for practical affairs”), “cannot help nibbling at the foundations of capitalist society.” They help along the ideology that corrodes the capitalist order which is notoriously impotent at controlling its intellectuals. “Only a government of non-bourgeois nature... under modern circumstances only a socialist or fascist one—is strong enough to discipline them.” With private ownership of capital and the autonomy of particular interests (which they are busy ideologically to undermine), the intellectuals can to some extent hold out against a hostile state, protected as they are by “the private fortresses of bourgeois business which, or some of which, will shelter the quarry.”12 State capitalism offers greater (and in terms of such intangibles as social status, being listened to at the top and having a captive audience at the bottom of society, incomparably greater) rewards to compliant, non-nibbling intellectuals than does private capitalism. Such rewards may or may not compensate them for the latent risk, in a world of no “private fortresses,” of having nowhere to shelter should they find themselves nibbling at the system after all. Why intellectuals, of all groups, strata, castes or whatever, should have a privileged relationship with the socialist state, why they are solicited and rewarded, is a puzzling question;13 that it is “strong enough to discipline them” seems to me, if anything, a reason for not soliciting and rewarding them. That the socialist state attracts the intellectual is understandable enough, given the role of reason in the formulation and legitimation of activist policy. (I have argued the natural leftward bias of the brainy in chapter 2, p. 102). What is less obvious is why this love does not remain unrequited, why the socialist state accepts the intellectuals at their own valuation—a strange position to take on the part of a monopsonist, the sole buyer of their services.

Even if there were some hard-to-fathom yet rational reason for pampering them, nobody else need be pampered. The above and regrettably inconclusive digression about intellectuals was to provide sharper relief to this thesis. Trotsky’s deduction in the Revolution Betrayed, that once the state owns all capital, opposition is death by slow starvation, perhaps overstates the case. It is nonetheless right in sensing the potent constraining force that comes down on bread-winners when the political and the economic, instead of broadly cancelling each other out, are amalgamated and encircle a person. The subsistence wage needed to reproduce labour may or may not have an ascertainable sense. (I would certainly argue that at least in Marx’s theory of value, it is a tautology. Whatever wage happens to be paid, no matter how low or high, it is identically equal to the subsistence wage.) But if the subsistence wage did have objective meaning, only state capitalism would have the assured ability to keep everybody’s actual wage down to subsistence level.

Recourse by the dissatisfied wage-earner to the political process and appeals to the state for distributive justice are, of course, absurd in a world where the state is both party and judge, i.e. where it has successfully merged economic and political power. The point for the state in achieving such a merger is not primarily that opposition to it becomes slow starvation, though that is a valuable enough result. It is rather that it can obtain non-opposition in return for mere “subsistence,” or if that term is too fluid to serve, in return for less than it would have to pay for consent in a competitive political setting.

In what is for some reason regarded as a substantial contribution to the modern theory of the state, the American socialist James O’Connor considers that if its surplus were not spent on social investment, or dissipated in the interest of such privately owned “monopolies” as may survive, state-owned industry could lead to the “fiscal liberation” of the state.14 By implication, if there are no, or only few, “private monopolies” left to dissipate the surplus on, and the state is under no competitive pressure to undertake more “social investment” than it sees fit, it will have achieved its rational purpose, for which “fiscal liberation” is a perhaps narrow but evocative label. Not only is it maximizing its discretionary power by making the most of a given social and economic environment (for instance, the environment defined by democratic politics and a “mixed economy”), but it has improved the environment itself by cleansing civil society of the economic power that was diffused within it. In such an environment, far more discretionary power is potentially available for the state to maximize, so that in creating it and making the most of it, it has, so to speak, maximized the maximum.

Is, however, its success complete? A crucial link seems to be missing for state capitalism to be a workable system. For if the state is the sole employer, it can liberate resources for its own discretionary use by telling people what to do, without overpaying them for their obedience. But what is to prevent a rival from spoiling all and bidding for political power by promising higher wages—as he would bid for political power under private capitalism by promising more distributive justice? What is to stop politics from undoing economics? Can we, to be more specific, take it for granted that once economic power is fully concentrated in the state, democratic political forms ipso facto lose their content and, even if piously preserved, become empty rites?

For all his pragmatism, J. S. Mill was, for one, quite categoric on this point: “if the employees of all these different enterprises were appointed and paid by the government, and looked to the government for every rise in life; not all the freedom of the Press and the popular constitution of the legislature would make this or any other country free otherwise than in name.”15 What he describes is, substantially, the socialist position (though presented with the seamy side up). For fully fledged socialists the idea of the owner of capital voluntarily surrendering his dominance by bowing to the caprice of the ballot box is, at best, comic. For them, the replacement of bourgeois by socialist democracy entails safeguards of one sort or another against the ballot box producing retrograde results. Electoral outcomes must respect the realities of the new “relations of production” and the question of the state losing tenure to some demagogic rival must not arise.

All states, however, do not first acquire a socialist consciousness and then set about nationalizing capital. Doing things in that order is a distinctly third-worldly scenario. Elsewhere, it is not necessarily the most feasible. The state of an advanced society may both want and have to embark on its self-emancipating, “maximizing” course while still committed to the “bourgeois” democratic rules. Though their competitive aspect may have reduced it to drudgery, it will submit to these rules both because it has, at least as yet, no power to do otherwise, and because it has at the outset no convincing reason for taking the risk of bending them. It can advance—or should we say sleep-walk?—some way towards the goal of “maximax,” and perhaps pass the point of no return, without first transforming “bourgeois” into “people’s” democracy. Electoral politics is in fact a natural promoter of state ownership, once the “mixed economy” has lost enough of its capacity (and willingness) to adapt to change for nationalization to become the obvious saviour of industries and jobs in jeopardy. The state can with advantage let itself be carried some way down this social democratic road, where the continuing operation of the competitive politics of consent serves as a spur to the growing concentration of economic power in its own hands.

Popular sovereignty and competitive politics with free entry, however, are ultimately inconsistent with the raison d’être of state capitalism and would in fact break it up as a working system. Under democracy, people are encouraged to try and get, by the political process, what the economic one denies them. The whole thrust of chapter 4 was to isolate and present the awkward consequences, for state and civil society, of this contradiction. Though awkward and in their cumulative effect malignant, however, they are not lethal for a system where political and economic power and responsibility are reasonably separate. On the other hand, when these are united, the contradiction becomes much too powerful. Multi-party competition for tenure of the role of sole owner of the economy and employer of the entire electorate, would be combining mutually destructive features in one system. It would be tantamount to asking the wage-earners to fix, by voting, their own wages and workloads. An effort of imagination is needed to visualize the result.16 Social democrat or democrat socialist, the state cannot for long live with rules which inexorably produce a self-devouring social system.

Owner and employer, it now has sufficient power to start bending the democratic rules to escape demagogic and incompatible outcomes, adapting the old political process to the functional requirements of the new social system with its new “relations of production.” Possible solutions available to it are of two basic types. One is to retain bourgeois democracy with multi-party competition, but progressively to restrict the scope of popular sovereignty, so that the winning party is not awarded tenure of all state power, but only power over areas where decisions cannot produce incompatibilities with the planned functioning of the economy. (Whether such areas can be found at all depends, of course, in part on how hard you look for them.) The hiring and firing of people, command over the army and the police and matters of income and expenditure, must be reserved to a permanent executive not subject to election and recall, for (as responsible citizens can readily see) otherwise demagogic overbidding would rapidly lead to breakdown. The non-elected permanent executive would in time find that to ensure consistency of the sources and uses of all resources, it is obliged to assert its leading role over all areas of social life including the educational and the cultural, although it may (at some risk to public calm) admit the consultative role, in non-critical matters, of some elected multi-party assembly.

The other type of solution is to restrain and reform political competition itself, notably by regulating entry, to the effect that while an elected assembly continues technically to dispose of state power as a whole, it becomes difficult and eventually impossible to elect people who would dispose of it inappropriately. For instance, the state executive in place could screen prospective candidates adhering to several parties from such a point of view. Since all are state employees (as are their parents and children, spouses, relatives and friends), it could discourage the candidature of those who might not respect its necessary leading role. Such screening would permit the free democratic election of responsible, non-demagogic representatives. Caring as much for the well-being of their families as for that of the country, they could be relied upon to support (in informal consensus, formal coalition or “national front” and purged of petty party rivalry) the responsible, non-demagogic government of the state—affording it the security and continuity of tenure which it needs for the steady, unhurried realization of its ends.

There may well be other, more insidious and unobtrusive ways for competitive democratic rules to bend, lose their content and become empty rites so that competition for state power ceases to be a genuine threat to the incumbent. In no way a “historical necessity,” nor something which happens of itself “untouched by human hand,” this result is yet the logical corollary of preponderant state ownership and a necessary condition for the functioning of the social system of which such ownership is a part.

Recall, then, is abolished in practice. One way or another, people are stopped from using the political process for dismissing their own employer. Failing such prevention, the employer-employee relation would assume farcical shapes: would-be employers would have to ask the employees to employ them, work would become round-the-clock consultation and pay would be self-assessed (to each according to what he says he deserves).

With the abolition of recall, revolution moves up on the scale of political alternatives. From last resort, it is transformed into the first and in fact the sole recourse of the disappointed political hedonist, the non-conformist, the man hating to be lied to, as well as the man hating his job. For the really deep, all-pervading change brought about by the Gleichschaltung of economic with political power is that as dispersed, autonomous structures of power are flattened, all strain becomes a strain between state and subject.

Little or nothing can henceforth be settled in bilateral negotiations between subjects, owners and non-owners, employers and employees, buyers and sellers, landlords and tenants, publishers and writers, bankers and debtors. Except clandestinely and criminally, there is little give and take where, at least by rights, only the state can give. Bargaining and contract are largely displaced by command-obedience relations. Independent hierarchies disappear. Groups between man and state become, at best, “transmission belts” and at worst false fronts with emptiness behind.

This may well be a great facility for the state. However, it is also a source of danger. Everything now is the state’s fault; all decisions that hurt are its decisions; and tempted as it may be to blame “bureaucracy” and “loss of contact with the masses” for smelly drains, boring television programmes, uncaring doctors, overbearing supervisors, shoddy goods and apathetic shop-girls, it is in a cleft stick. As a state it must not admit to being at fault, yet it can disavow its servants and proxyholders only so often.

Thus, totalitarianism is not a matter of fanatical minds and bullying wills “at the top,” nor of the terrifying naivety of their ideologists. It is a matter of self-defence for any state which has played for high stakes and won, exchanging one predicament for another. Having gathered all power to itself, it has become the sole focus of all conflict, and it must construct totalitarian defences to match its total exposure.

What is to be done to protect state capitalism from revolution? It may be that the danger is largely academic, an empty box, a mere matter of logical completeness, for revolutions have been made obsolete by technical progress. Quick-firing weapons, armoured vehicles, water-cannon, “truth drugs” and, perhaps above all, central control of telecommunications, may have made the position of the incumbent state much easier to defend than to attack. Not for nothing is the successor state of Kathedersozialismus called that of Panzersozialismus. Lately it is being said that the computer has reversed the technical trend in favour of the incumbent state. Though it is hard for the layman to grasp why this should be so (the contrary looks prima facie more likely), we must leave the question for more qualified minds to resolve. In any event, if modern revolutions are at all conceivable, there is a presumption that for the very reasons that oblige it to be totalitarian, state capitalism runs greater risks and needs stronger defences against revolt than states that do not own, but merely redistribute what others own.17

Terror and state television sum up the commonplace conception of what is needed for state security. No doubt they both have their roles in obviating recourse to actual repression, rather in the manner of preventive medicine reducing hospital and medical costs. However, the best defences start at a deeper level, in the moulding of character and behaviour, in inculcating the belief that certain basic features of social life, the “leading role,” the non-recall and continuity of the state, its monopoly of capital and its primacy over individual right, are immutable. The state’s determination to use its subjects should never waver, never wax and wane. Their lot must be preordained, stable; it should not worsen significantly yet should improve only with deliberate slowness; rapid change either way is bad, but of the two, rapid change for the better is more dangerous. As in economics “it is all in Marshall,” so in sociology “everything has been said by Tocqueville.” Three chapters in his Ancien régime et la révolution tell it all: how rising prosperity and the advance toward equality brought on revolution (Book III, ch. IV); how bringing solace to the people made them rise up (Book III, ch. V); and how the royal government prepared the ground and educated the people for its own overthrow (Book III, ch. VI).

Prospects of change for the better make people excitedly unhappy, fearful of missing out, aggressive and impatient.18 “Safety-valve” type concessions and reforms, whether great or little, early or late, nearly always turn out to be too little too late, for as a matter of historical experience they raise expectations of change more than in proportion to the actual change. If this possible feature of social psychology has a high probability of being the case in any given conflict of interest between state and society, it must always be wrong for the state to yield. Even if it was a mistake to start off with the reins too short, it is yet better to hold them steady than to loosen them too perceptibly.

Except for the paroxysm of indiscriminate terror in 1937-8 and the few years of haphazard experimentation after 1955, both of which came close to endangering the tenure of the regime and were ended none too soon, Soviet practice since about 1926 seems to me a successful application of these prescriptions. The stability of the modern Soviet state, despite the many good reasons why it should have collapsed on its clay feet before now, is at least consistent with the hypothesis that reform, relaxation, social mobility, dynamic striving for innovation and decentralized initiative, whatever they may do to a society’s efficiency and material well-being, are not the ingredients needed to keep it calm, docile, enduring and submissive in the face of totalitarian demands upon it.

The State as Class

The right bureaucracy may help make capitalism “responsible” and lend socialism “a human face.” Its control, however, is too precarious to shift the constants of either system.

If there must be class conflict in a world of scarcity, who but the universal capitalist can act out the role of dominant class?

It is hardly extravagant to claim that a pattern of ownership is well enough described by simply answering the question, “who owns what?” It is by a plain answer to this plain question that we can make the doctrinally least pretentious distinction between private and state capitalism, and most easily understand alternative configurations of power in society.19 The hopeful assurance that when it is nationalized, capital is “socially owned,” for all that it is meaningless, can be a useful euphemism for policy purposes. The more ambitious claim, that there is some ascertainable difference between “state” and “social” or “socialist” ownership, so that the suspected despotic potential of state ownership is not present in social ownership, need not be taken seriously until it is shown how the operation of “society” exercising its property rights, differs from that of the state exercising them.

In the Anti-Duehring, Engels protests that mere state ownership is spurious socialism unless the means of production have “actually outgrown management by joint-stock companies,” for otherwise even state-owned brothels could be regarded as “socialistic institutions.”20 Just how large would brothels have to grow, then, to qualify as socialist instead of merely state-owned establishments? Seeking in size the magic quality which transforms state property into socialist property clearly will not do. The scientific socialist notion of the means of production “outgrowing” joint-stock company management has long since succumbed to the test of a century of industrial growth.

In fairness to Engels, it is his Anti-Duehring again which provides the plainest formulation of a more durable Marxist alternative for identifying kinds of property and social systems. He explains that in a world of scarcity (alias “in the realm of necessity”), the division of society into antagonistic classes must continue. Class conflict, of course, entails the existence of a state to ensure the dominance of one class. Thus the “socialist state” is not a contradiction in terms. The state which owns all the means of production is a repressive socialist state. As there are still classes, it could not yet have withered away, it must continue to repress the exploited on behalf of the exploiter. It can only wither away once abundance has replaced scarcity, i.e. when class conflict has ceased. (If socialism never overcomes scarcity, a contingency Engels does not explicitly treat, the state will never wither away and it will, in perpetuity, own the means of production. As long, therefore, as the state does not succeed too well in “setting free the forces of production” and hence does not inadvertently bring on a world of abundance, it is safe.)

Pending abundance and the withering away of the state, “socialism in a world of scarcity” and “state capitalism” are, for practical purposes, synonymous. The division of labour is still a necessity; production is for exchange rather than for need; there are two functionally distinct classes, with the oppressor class appropriating the surplus value produced by the oppressed class. Unlike in private capitalism, the surplus is appropriated, albeit in spite of the oppressed class but in its long-term interest (or in that of the whole society). Who, however, is the oppressor class?

Putting it in less moth-eaten language, the drama is ready to be played but an actor and a role do not match. The state owns, the oppressed do not, but nor do the presumable oppressors. There is no ruling class with a power base cemented in ownership. In its place, usurping its prerogatives, is supposed to stand a peculiar social category, a hermaphrodite body which has a class interest without being a class, which dominates without owning: the bureaucracy.21

Before the bureaucracy can rule, ownership must lose its significance. Hence schemes of social explanation built on the threesome of citizenry, bureaucracy and state always contain some variant of the familiar case about the “growing separation of ownership and control.” For this thesis, ownership has come to be reduced to a right to any (private or social) dividends the managing bureaucracy chooses to distribute. Control is, among other things, the discretion to allocate people to capital and vice versa in decisions to invest, hire and fire, and to judge the deserts of those concerned when allocating and distributing.

Each society will have bred its distinctive bureaucracy. England is credited with having an Establishment, France indisputably has her grands corps (just as, the other way round, the grands corps possess their France), Russia used to have the higher grades of the tchin and now it has the nomenklatura, remotely echoed in the USA by the top half-million lawyers and corporate officers. Without any risk of contradiction, all societies can be said to be governed by their “power elites”; much of modern industry is undoubtedly run by professional managers; while the intellectual demi-monde keeps unveiling such ruling entities as “the media,” “the bearers of authority” or the “technostructure.”22

Granted the tacit assumption that separation of ownership and control entails loss of control by the owner, rather than the much less drastic delegation of control with possibility of recall (an assumption I shall look at presently), rule by the bureaucracy can be deduced from a stripped-down version of Michels’s “iron law.” Every organization needs but a few organizers for many organized. It is the former who man the bureau. Once they are in, the bureaucrats rule because those outside are ill placed and insufficiently motivated to dislodge them.

In a very uncharacteristic utopian mood, Lenin assured us that one day administration will be so simple as to be “within everybody’s scope,” “easily performed by every literate person,”23 allowing “the complete abolition of bureaucracy,”24 where “ all will govern in turn.”25 (His practice, of course, was to discourage with the utmost firmness any attempt at “governing in turn.”) For the time being, however, administration is said to be getting, if anything, more complex. Though many of us are already bureaucrats, the prospect of the rest of us taking turns at it is both impractical and unattractive. This supports the notion that the bureaucracy is a category apart.

The more literally one takes the assumption that ownership does not entail control over property, the larger loom the implications. Ownership of capital becomes irrelevant to power, both in the usual sense of power to make people do things and in the sense of power over the “appropriation of surplus value,” including the capitalist’s dividend. There is only a grace-and-favour dividend to the putative owners, to “the people” in socialism, to “shareholders” in private capitalism. Why fight about property, then? Nationalization, the wrecking of the “private fortresses of bourgeois business” becomes a pointless and misguided endeavour. A bureaucracy controlling the instrument of the state and safely usurping some of the most important prerogatives of ownership, could with impunity steer society one way or another, enthrone private property or abolish it, or split the social system down the middle, without its interests being visibly better served by one course than by the other. Whether it took the “capitalist road” or the “socialist” one, or just chased its own tail, would be a toss-up.

In reality, however, bureaucracies usually have manifest reasons for coming down on the side of the status quo. They do not normally seek to change it. Indeed, Trotsky’s suspicion of Stalin preparing a new Thermidor “to restore capitalism,” would look less grotesque if he had found reasonable grounds for supposing that Stalin and the “bureaucracy” he directed would at least not lose the power, control or whatever they possessed and prized, if “capitalism were restored.” Yet almost in the same breath in which he uttered his bizarre accusation, Trotsky removed its possible ground by pointing out that the Soviet bureaucracy is “compelled” willy-nilly to protect the system of state ownership as the source of its power, implying logically that a system of private ownership would not have yielded as much power to it even if the new private owners were to have come from its own ranks, with each deserving apparatchik becoming a top-hatted cigar-smoking capitalist.

The most interesting implication of the “ownership is not control” thesis, however, is the support it gives to the belief in our fate being largely a matter of the mores and moods of the office-holders above us. Whether a social system is acceptable or awful, whether people are on the whole contented or miserable under it, depends very much on the variable personal traits of members of the bureaucracy. When the civil service is arrogant or corrupt or both, the managerial elite stony-hearted, the media mercenary and the “technostructure” soullessly specialist, we have the “unacceptable face of capitalism.” When those in charge genuinely want to serve the people and respect its “legitimate aspirations,” we get the Prague Spring and “socialism with a human face.” It is not so much systems of rule, configurations of power which are conducive to a good or bad life, but rather the sort of people administering them. If the bureaucracy is not “bureaucratic,” the corporate executive is “socially minded” and “community-conscious” and the party apparatchik “has not lost contact with the masses,” private or state capitalism can be equally tolerable.

This is a tempting belief and easy to adopt. In turn, it gives rise to a live concern with how to make sure, or at least how to shorten the odds, that the right sort of people get to play the controlling, administering and managing roles. Each culture has its recipe for recruiting a good bureaucracy. Some place their faith in breeding and a stake in the land (England before the Second World War, as well as Prussia, spring to mind), others in the passing of examinations (France, Imperial China and lately perhaps the USA, are cases in point), while the socialist prescription recommends calloused hands or at least a credible claim to “working-class origins.” (Mixed and contradictory criteria should not surprise us. An aristocrat with the common touch, a welder who went on to get an MBA or conversely the graduate who learnt all about life by doing a stint at manual labour, are particularly acceptable recruits into the “power elite.” Among contradictory and mixed criteria, minor ones can in time become major. It is said that a contributory cause of Khrushchev’s downfall was the embarrassment felt by the Soviet public, especially vis-à-vis the outside world, at his bumptiousness, clowning and lower-class Ukrainian accent.)

Hopeful ideas about the right way of recruiting the “power elite” and the difference its personnel makes between “savage” and “responsible” capitalism, “despotic” and “democratic” socialism, condition civil society’s approval of the composition of the bureaucracy. They also help explain the passionate interest of modern sociology in the statistical parameters of particular hierarchies, for if the behaviour of “power elites” depends critically on where their members come from, it must matter a great deal whose father did what and went to which school. This preoccupation with “socio-economic origins” is really the complete negation of the belief that existence determines consciousness and hence the bureau determines that of the bureaucrat.26 On the latter view, whether it is principally made up of the sons of toilers, schoolteachers or of other bureaucrats, the institutional interest and hence the conduct of a bureaucracy will be essentially the same, give and take minor cultural variations of style between the moderately nice and the rather nasty. For the former view to hold, the bureaucracy must be completely autonomous and obey no master, in order to be able to follow its own personal tastes and dispositions. For the latter, its master is its own existential, institutional interest, which may or may not happen to coincide with the “maximand” of the ultimate beneficiary the bureaucratic institution is supposed to serve—the state in state capitalism, shareholders in private capitalism. On either view, the bureaucracy calls the tune, though which tune it calls depends on the further particulars. Either view is contingent on the thesis that the owner does not control, the bureaucrat does. How good is this thesis?

In order for the separation of ownership and control to mean what its disparate proponents, from Berle and Means through Trotsky,27 Burnham and C. W. Mills to Marris and Penrose intend it to mean, it is trivial merely to show that the bureaucracy administers and the managers manage with little apparent reference to their ostensible masters. A more telling argument would be to establish that they have non-trivial discretionary power. Evidence for such discretion would be some measure (if a convenient one could be found) of a divergence between the owner’s presumable maximand and the maximand the managers seem in fact to be pursuing.28

This is not really feasible if the future consequences of the manager’s present actions are uncertain, hence he can always be supposed to have aimed at consequence A (best for his employer) rather than B (best for him, less good for his employer), regardless of whether the actual result of his action turned out to be A or B. For instance, Montgomery’s generalship in North Africa can be seen as self-serving, in that he would only really engage Rommel once his “bureaucratic” insistence on a large sufficiency of resources gave him odds-on chances of spectacular victories. Yet it can always be argued (and it is hard “objectively” to disprove) that though he earned fame at no risk by brazenly “hogging” resources for the Eighth Army, he was in effect serving Britain’s best long-term interest (e.g. because the resources he “hogged” would not have done any greater good to the war effort in any other theatre). Likewise, the corporate manager who, in apparent pursuit of self-aggrandizement, goes for market share at the expense of current profit, can always pretend to be making future profit larger than it would otherwise have been—the sort of business school or management consultancy waffle one can dismiss with a shrug but not refute with science.

Nevertheless, it is at least possible deductively to assert that only security of tenure provides the sufficient condition for the state bureaucrat, the corporate manager or other hired power-elitist to exercise discretionary power regularly and in significant conflict with the owner’s interest. The corollary of secure tenure is that in delegating control, the owner has somehow awarded it for keeps and has lost the faculty of recall, i.e. he has lost control. The standard argument to this effect is that once ownership has become fragmented and many owners have delegated managerial power to a single tenant (a bureaucracy, a management), each owner has only an infinitesimal influence on the tenant’s tenure, and insufficient motivation to shoulder the cost of mobilizing fellow owners for joint action. In technical language, the bureaucratic tenant is protected by an “externality.”

Precisely such an externality may protect a state from its unorganized subjects. The sheer money value of liberty to the subjects of a despotic state may be much larger than the money cost of suborning the praetorian guard, buying arms, copying machines or whatever it may take to topple such a regime. Yet no political entrepreneur would come forth and shoulder the cost if he considered it impracticable to recover it from the liberated subjects. He would lose his outlay if their liberty were an externality for which they could not be made to pay (except by enslaving them again).

The most casual reader of the financial pages of newspapers knows, however, that there is no such obstacle to organizing revolt against self-serving or just plain unsuccessful corporate managements. The take-over bidder, conglomerator, “raider,” “asset stripper,” proxy solicitor have (despite the regulatory hurdles well-meaning authorities put in their way) several ways of “internalizing” some of the potential benefit accruing to the owners from the recall of the sitting management. These ways can be devious and unscrupulous, in keeping with the unscrupulous defences (such as “scorched earth,” self-denunciation on anti-trust grounds and “saturation bombing” with frivolous lawsuits) put up by sitting managements to “protect corporate property” from shareholders at the latter’s expense. All in all, “unfriendly” takeovers even in the face of desperate defences are often successful enough to shake the average hired management’s confidence in its security of tenure.29

If the hold of the bureaucracy is precarious in the face of an unorganized multitude of dispersed owners, it is a fortiori precarious in the face of a single, concentrated owner. No externality protects the bureaucracy from the state it is supposed to serve. The discretionary power of a bureaucrat or a bureaucratic institution, no matter how important in the whole apparatus of the state, must not be confused with that of the state proper from which it is derived.

Nor is there much excuse for falling into traps of the “good king, bad councillors” or conversely the “wicked lord, kind-hearted bailiff” type. The bailiff may be kind-hearted, close to the villeins and especially to any relatives he may have among them, but his personal interest is seldom so far divorced from that of the lord as to make him let off the serfs all that lightly. He, too, wants the manor to function properly as a going concern. The reason the bureaucracy on the whole does serve the state’s ends is not only that it has to, on pain of losing its precarious place, but also that, except in rare and easily identified historical situations where state power has just passed to an invader, a usurper or at least a culturally alien contender, there is a large and genuine harmony between their respective maximands. The greater the discretionary power of the state, the more scope the bureaucrat is likely to have for the fulfilment of his ends. He need not have the same ends the state is striving to realize. It is sufficient that his ends should be non-competing or subordinated. A loyal bureaucracy will find much of its happiness in a strong state. It would take disloyalty, safety from being found out, or perhaps a credible excuse in terms of the “real,” “long-term” interest of the state, for it to side with civil society against its master. The chance of imposing its own will on both state and civil society by acting the role of ruling class looks, for all these reasons, doubly remote.

The true place and role of the bureaucracy in relation to the state were suggestively summed up by the historian Norbert Elias in what he called the Monopoly Mechanism. The state is the monopolist of “the army, land and money” while the bureaucracy is the body of “dependents upon whom the monopolist depends.” Of course the dependents are important, of course their qualities, their human types are interrelated with the type of state which depends on them; in Elias’s example, while the free feudal nobility went with an earlier type, a later one produced the courtly nobility.30 In a less neat sequence, we might add the clerics, the lay legists and commoner court servants, the landless administrative nobility, Chinese mandarins, Prussian Junkers, French “enarques,” American congressional staffers, dollar-a-year men and socialist party apparatchiks. Within each type, there is no doubt room for human variations leaving their stamp on the life of the society they help administer. Undeniably, they can lend socialism a human face, or an inhuman one. It is very much a matter of each subject’s personal destiny what proves to be of greater import to him, the system or its face.

For any schema of social explanation which runs in terms of classes, however, putting the bureaucracy or some rough equivalent administrative, managerial, insider, expert and authority-carrying category in the place of the ruling class is liable to prove confusing. Doing so is to attribute to such a category a durable and well-defined identity (“the New Class”?), a degree of discretionary power and a liberty of action which it can in general hardly possess. It is to lose sight of the political significance of the pattern of capital ownership, reducing it to irrelevance in terms of power over others. Finally, it is by implication to allot to the human qualities of this category an overriding influence on the quality of social life, as if the variable disposition and character of office-holders could altogether swamp the systemic constants which are the source of the power delegated to such offices. Confusion of this sort yields such gems of incomprehension as that a certain despotism was, or has resulted from, “bureaucratic distortion” or the “personality cult.” If the system of state capitalism is to be thought of in traditional class terms, the role of the ruling class can only be ascribed to the state itself. This imposes no anthropomorphism and does not require the state to be personified by a monarch, a dictator or the party elders. Nor need it be identified with a specific institution, assembly, central committee or cabinet. More non-committally and generally, it is sufficient for the state (to adapt a famous phrase of Marx) to be armed force and capital endowed with consciousness and a will.31

On the Plantation

Money, markets and the habit of choice are best weeded out by shaping the social system as a well-run plantation.

The universal employer, not content with pushing string, will have to end up owning his employees.

Completing mastery over civil society in maximizing discretionary power can be seen as a chain of corrective moves, each one being aimed at making the social system both amenable to the state’s purpose and internally consistent, although these two requirements are not necessarily or even probably compatible. Each corrective move is consequently capable of creating some new systemic inconsistency and of necessitating other corrective moves. This sequence drives in the political dynamics, such as it is, of state capitalism.

The first and perhaps most decisive of these moves, whereby civil society is purged of decentralized capitalist ownership and the state becomes the universal owner and employer, removes the inconsistency between political and economic obedience involved in serving two masters. As I argued at the beginning of this chapter, however, the fusion of political and economic power into state power is in turn inconsistent with electoral competition for its tenure. Having to run for office would involve the universal employer in soliciting his employees to keep voting themselves more money for less work. The next corrective move, therefore, must be one from competitive to monopolistic politics, to match the corresponding changeover in the pattern of ownership. Classical “bourgeois” democracy needs to be transformed into socialist or people’s democracy, or whatever else it may be called as long as it is a set of adequately enforced rules under which consent to the tenure of the essentials of power is not subjected to electoral tests.

Under the resulting system, then, the tenant of the state is not menaced by recall; it cannot be unseated by non-violent means; it owns all capital, though its subjects continue to own their labour. Inconsistency, however, manifests itself again, calling for new moves, new adaptations of the social system.

The state alone owning or hiring all factors of production, it must alone take (or delegate) all the who-does-what decisions, whereby inputs of capital and labour are allocated to produce various outputs. This is not only a responsibility but also a satisfaction; to direct resources to chosen uses, to cause certain goods rather than certain others to be produced, is a natural component of any plausible maximand, of any worthwhile employment of discretionary power. Its prosaic symptom is the state’s (and its ideology’s) treatment of “planning” as a coveted prerogative rather than a chore.

Jointly with factor allocation, the state must make the matching distribution decisions. The two sets of decisions are mutually entailed. This is so if only because various people must be rewarded for performing various allotted tasks. (It is probable, though not certain, that the state as sole employer can get them to perform their tasks for less than private capitalists, competing against each other, would have ended up conceding. The relative wage under the two systems would depend, in part, on how much labour of what kind would be wanted under either arrangement. Our argument does not require that the particular “subsistence wage” which a rational monopsonist would agree to pay, should always be less than the wage competing capitalists would have offered.)

The interdependence of the allocation and distribution decisions means that the two need be consistent and not that they are bound to be. If under the set of distribution decisions, wage-earners get sums of money to be spent as they choose, nothing ensures that they will choose to spend them on the stream of goods the set of allocation decisions is causing to be produced. There is no built-in mechanism stopping them from (unwittingly) repudiating the plan.

Inconsistencies between the supply of goods and the demand it entails, manifest themselves differently under flexible and fixed prices. The symptoms under the latter—queues, quotas, black markets and (on the road to abundance) piles of leftover goods—seem to be less repugnant to socialist states than those under the former—waltzing prices. Regardless of its symptom, however, the inconsistency will subsist and react back on allocation and distribution, frustrating the state’s plan. If it allocates workers to produce guns and butter, and they want more butter than they are producing, the sub-plan dealing with gun production will run into difficulties which may be only a little more (or is it a little less?) manageable if butter is rationed than if its price goes up.32

How, then, can consistency be ensured? “Market socialism” is the most frequently recommended solution. It amounts to adjusting output to what people want, in return for the effort they agree to exert in producing it. This can be done, without further ado, by banks of computers feeding on market research and production engineering, solving some very large number of simultaneous equations and using the results for enticing people into the activities which will produce the precise pattern of supply of goods which people engaged in those activities can usually be relied on to want. All that is required is that the equations should correctly express enough of the relevant relations between people’s tastes, capacities and skills, the capital equipment and materials available and the known ways in which all possible inputs can be combined to produce given outputs.

If this suggestion is ruled out as facetious, recourse could be had to real, non-simulated markets and to letting their feedbacks reconcile allocation and distribution. This is done (to summarize the workings of delicate mechanisms rather radically) by the touch of the invisible hand acting on some out of a large number of separate, decentralized decisions, each of which had best be relatively small. Under state capitalism, the marginal touch of the invisible hand can only perform what is expected of it, if the managerial bureaucracy is made severally to maximize the separate profits of a large enough number of “profit centres.” This, in turn, means that bureaucrats must be exposed to the incentives and penalties dealt out by the sellers of labour and the buyers of goods, rather than by the state. Asked to serve two masters, the success of the bureaucracy would then depend on how well it served one of them.33

Bureaucrats would increasingly find themselves in the anomalous position of quasi-owners, deriving a measure of autonomy and security from the market success of the enterprises or profit centres they managed. No totalitarian state in its right mind can risk condoning such an evolution, the less so as the resulting political threat is to its tenure while the advantages of greater economic efficiency accrue in part, if not wholly, to its subjects. The on-again-off-again history of experiments with decentralization, markets, self-regulating mechanisms in the economic management of socialist states, is strong circumstantial evidence that totalitarian regimes seldom lose sight for long of the “primacy of politics.” They do not, except in absent-minded moments, let their security of tenure be jeopardized for the sake of pleasing shoppers.34

Yielding to the temptations of market socialism would take care of the consistency of allocation with distribution through decentralized decision-making, inspired by money and markets. This, in turn, would generate a new inconsistency between the imperative need that people (including the managers) should be dependent on the state, and the economic mechanisms which would restore some independence to some of them.

Any mechanism, however (even if it could be politically neutral and innocuous, in the manner of networks of docile computers), under which resource allocation is subjected to what people want, is at bottom a surrender of some of the state’s hard-won power. The rational state, finally possessing and intending to hold on to the extensive power afforded by the joint monopoly of arms and capital, should seek a method of adjustment involving no such surrender. Rather than letting junk food, porno-pop video, amphetamines, socially wasteful private motorcars and other deleterious trash be produced because people wanted them, it can produce “merit goods” and cause people to want them instead.35

Adjustment to the resource allocation the state wants must then take place, if at all, through the bending of people’s tastes, mode of life and character to what they are offered. It may be a slow process to make them actually like, say, wholemeal flour, national defence, Schönberg’s music, sensible hard-wearing clothes, public transport (and no traffic-choking private cars), fine government buildings and fully standardized housing. While letting time and habit do such slow work as they will, the state can advance more rapidly towards these objectives through a short cut. It can directly attack the habit of choice itself, from which many of its troubles are derived, by no longer paying people with the universal voucher, money.

Having money provides wide scope for choice and trains people in its exercise. Specialized vouchers you can only spend on a much narrower class of goods, only on lunches, the education of children, transport, vacation accommodation, medical care and so on, restrict the scope of choice; they also help unlearn the habit. As a perhaps secondary convenience, they render consumer demands somewhat easier to predict for planning purposes. More fundamentally, they transfer part of the power over the disposal of incomes from the recipients to the state, which can within reasonable limits vary the “mix” of vouchers and can, consequently, shape the kind of life people will live. Vouchers, therefore, provide direct satisfaction to the state which wishes to have its subjects live in a particular way, say healthily, for whatever reason, because it is good for them to be healthy, or because they work and fight better when healthy, or because it just values health.

Anything special vouchers do, the truck system will do better. A luncheon voucher or a food stamp at least leaves the choice of the actual food, and an education voucher the choice of school, to personal whim. It recognizes and to some extent even encourages a consumer sovereignty of sorts. Factory and office cafeterias, a range of basic and nourishing foodstuffs at giveaway prices, an allotted dwelling, the sending of children to a designated school and the sick to a specific dispensary, remove some of the remaining occasions for choice and affirm the state’s prerogative to decide. Life for the subject becomes simpler, its conundrums fewer and his communal (as distinct from individual and family) existence more all-embracing.

Beyond paying people less money and more selected goods, lies the limiting case where they are not paid at all, but just get their specific needs provided for by the state. Exclusion, with people’s access to goods regulated by the money or vouchers they earn, is then replaced by free access: subway tickets are abolished, hospitals do not charge, there is free milk, free concerts and free housing (though not everybody gets all the houseroom he would like), and certain goods which people need but do not want, such as safety helmets or edifying printed matter, are given away to all comers pending the time when all have to come and get them. The frontier between public goods and private goods, ill-marked at the best of times, becomes unguarded, and state planning displays a steady bias in favour of public goods, which will be “over-produced” (at least by the standard of a Pareto-optimum satisfying the taste of a “representative man”—the useful fiction allowing us to pretend, without saying so, that everybody is like everybody else and all are unanimous).

Public goods by their intrinsic character and private goods by virtue of the progressive atrophy of money and markets, are supplied to people as a function of who they are and where they are situated (e.g. citizen, town dweller, mother, student, member of the hierarchy of a given “collective” such as a place of work, school, or housing development, a police officer or bureaucrat of a given rank, etc.), their place in life largely determining their access to goods. Somewhat sweepingly, we can say that they all get what the state considers appropriate to their existential situation. Putting it more directly, they get what they need. It is in this way that the state’s rational interest ultimately converges upon the matching ideological tenet—which is a prediction and a command as well—of giving “to each according to his needs.”

As ever larger numbers of people get things primarily as a function of their nominal life-situation and rank, rather than as a function of how well they do what they do, however, one systemic inconsistency is resolved at the cost of provoking another. There are always those who positively enjoy certain kinds of effort, say teaching or driving in traffic, and have the good luck of being entrusted with a classroom or a taxi. But why should the rest do what the plan of resource allocation calls for them to do, and why should they do it well when they would rather shirk and bludge? The shape the evolving social system is taking at this point encourages, or at least fails to deter, shirking. Moreover, where people work in groups, the group imposes shirking, a slow rhythm of work or poor workmanship on its members on pain of ostracism, contempt or retaliation against the Streber (“striver” does not convey the ironic hostility of the German term). This phenomenon is an upside-down replica of the sanctions a group needing a high level of group effort will use against the free rider who will not exert himself.

If this inconsistency between the need for effort and the lack of any built-in reason for exerting oneself were not corrected, the state sitting on top of this social structure would be maximizing its potentially accessible ends no better than if it were pushing string.

The corrective move is to enforce the quid pro quo that goes with the provision of needs. If the state looks after people’s subsistence, it is hardly justifiable for them to continue owning their labour, withholding it partly or wholly as the mood takes them, and devoting it, if at all, to jobs of their own choosing. In equity, they owe their capacity for effort to the state, so that it may fully be used for the common good.

With general obligations arising from people’s status crowding out specific ad hoc contracts, the state ends up owning its subjects. Its task becomes more ambitious and more exacting. Its attention must now extend to matters that used to be non-political concerns settled within civil society (as well as to questions that cannot arise at all except in a totalitarian system), rather along the lines of the all-embracing concerns of the rational plantation-owner in the ante-bellum South:

Most of the implications of having to run the state as a large, complex and self-reliant plantation, are fairly evident. Some are depressingly topical. They need not be laboured, but only touched upon. There has to be a degree of direction of labour to where it is needed rather than where it wants to go. Educational opportunity has to be allocated to raise and train the people needed to fill the future roles and situations the state expects to create. Armed force, surveillance and repressive capacity have to be doubled and redoubled, as they have to cope not only with political disobedience, but also with sloth, waste and free riding. The state cannot tolerate strikes. Nor can it tolerate “exit,” voting with one’s feet; the frontier must be closed for keeping its property in, and perhaps secondarily also for keeping any alien, discordant influence spoiling the condition of its property out.

Is this social system at last well-rounded, efficient in operation, perfectly consistent? Is no part of it geared to rub against, let alone clash with the working of another, ultimately breaking up vital innards? Does it deliver the satisfactions of governing—tempting the state to sit back and contemplate its finished design, concerned only with the enjoyment and preservation of its place within it, willing history to stop?

If there is a plausible answer to the question, another and equally speculative book would be needed to argue it. At first glance, however, the prospects for any definitive settlement of outstanding affairs between state and civil society look doubtful—perhaps reassuringly so. In the event the state’s striving for self-fulfilment were successfully to issue in a well-managed totalitarianism, the human types (the addict no less than the allergic) which such a system is apt to breed, would before long quite likely frustrate and disappoint the state’s expectations. That may indeed be its inescapable predicament, just as it is probably the inescapable predicament of civil society to be disappointed in the state.

This book is set in Electra. Introduced in 1937, the typeface was designed by William Addison Dwiggins for the Linotype machine and is characterized by its subtle irregularity and simple, crisp italic. Dwiggins was a graphic artist and skilled calligrapher who began designing type at the age of forty-four at the invitation of the Mergenthaler Linotype Company.

Printed on paper that is acid-free and meets the requirements of the American National Standard for Permanence of Paper for Printed Library Materials, z39.48-1992. (archival)

Book design by Louise OFarrell, Gainesville, Florida

Composition by G & S Typesetters, Inc., Austin, Texas

Printed and bound by Worzalla Publishing Co.,

Stevens Point, Wisconsin

[1. ]V. I. Lenin, “The State and Revolution,” in Selected Works, 1968, p. 296.

[2. ]Ibid., p. 279.

[3. ]Ibid., pp. 306, 325. The quotation is from Engels’s 1875 “Letter to August Bebel.”

[4. ]V. I. Lenin, “The Immediate Tasks of the Soviet Government,” in Selected Works, p. 419.

[5. ]Ibid.

[6. ]Ibid., p. 421, italics in text.

[7. ]Ibid.

[8. ]Even Lenin’s own creature has come a long way towards affecting this sort of consciousness: in the 1977 Soviet Constitution, it calls itself “the state of the entire people,” serenely unworried by the absurdity, at least for Marxists, of a state being everybody’s state!

[9. ]Weak medieval kings and strong territorial lords both exercised near-sovereign political power only over the land they “owned” (though this was but a quasi-ownership), the patterns of dispersed political and dispersed economic power coinciding as they have never done since. On the other hand, centralized political and economic power have often coincided. They still tend to go hand in hand in “second” and “third world” countries.

[10. ]Jean Elleinstein, Lettre ouverte aux Franç ais de la République du Programme Commun, 1977, pp. 140-51. Like the gentleman in the Park who mistook the strolling Duke of Wellington for a certain Mr Smith (“Mr Smith, I believe?”—“If you believe that, Sir, you will believe anything”), Elleinstein manifestly believed that nationalization would do these things rather than their opposites. It is this trusting simplicity that best suits the state (and of course its leaders) in the difficult transition from democracy to socialism.

[11. ]To readers of J. Rawls’s Theory of Justice, 1972, and of chapter 3 of this book, these phrases will have a familiar ring.

[12. ]Schumpeter, Capitalism, Socialism, and Democracy, 5th edn, 1977, pp. 146-51.

[13. ]If only it bore more lightly the burden of the influence of György Lukács, whose hermetic and foggy style its authors tend to follow, The Road of the Intellectuals to Class Power, 1979, by the Hungarian sociologists G. Konrád and I. Szelényi, would be a very worthwhile contribution to an eventual answer to this question. Their original ideas can only be approximately discerned through the swirling Lukácsist obscurity.

[14. ]James O’Connor, The Fiscal Crisis of the State, 1973, ch. 7.

[15. ]J. S. Mill, On Liberty (ed. by A. D. Lindsay), 1910, p. 165. It is edifying to reflect that it was none other than the Levellers who, in their democratic fervour, proposed to withhold the franchise from servants who, “depending on the will of other men,” could not be trusted with the vote. Cf. C. B. Macpherson, The Political Theory of Possessive Individualism, 1962, pp. 107-36.

[16. ]Free entry, secret ballot and majority rule, combined with preponderant state ownership of capital, means that tenure of state power and hence the role of universal employer, is awarded to the party offering higher wages and shorter hours than its rival. Productivity, discipline on the job, consumption, investment are all determined on the hustings. Political competition ensures their greatest possible incompatibility, resulting in a total shambles.

The “Yugoslav road to socialism” can be interpreted as an attempt to get round the contradiction between state capitalism and bourgeois democracy, not by the obvious method of suppressing all political competition, but by taking it out at the level of the state and putting some of it back at the level of the individual state enterprise. Employees cannot elect the government, but they elect a workers’ council and have some indirect say in the choice of the enterprise manager, the level of wages and profit-sharing bonuses and, hence, more indirectly still, in output and prices.

To the extent that this is so, the enterprise tends to maximize value added per employee, i.e. it will generally try to use more machines and materials and fewer people, than are collectively available. The resulting tendencies to chronic inflation accompanied by unemployment, are fought with complex administrative means. Politically, the system breeds insider cliques, caucuses and deals. Economically, it is prevented from being a total shambles by individual enterprises having, at least in principle, to compete for a living with each other and with imports on a spontaneously operating market; there is “commodity production for exchange.”

Capital is said to be in social rather than in state ownership. It is impossible to find out what this means. It does not mean syndicalism, cooperative ownership or municipal socialism. It seems to me that it is intended to mean “good state ownership” in opposition to “bad state ownership” (in much the same way as “social” planning means good and “bureaucratic” planning means bad planning). Most of the owner’s prerogatives are in practice exercised by state bureaux calling themselves “banks” rather than, as in orthodox socialist countries, “ministries” or “planning offices.”

If this hybrid system is less suffocatingly totalitarian than the thoroughbred state capitalist world to the northeast of it, this is perhaps due as much to history, character and accident as to “systemic” differences.

[17. ]One of the weakest of several weak reasons advanced by Trotsky why there is not and “there never will be” such a thing as state capitalism, was that “in its quality of universal repository of capitalist property, the state would be too tempting an object for social revolution” (Leon Trotsky, The Revolution Betrayed: What Is the Soviet Union and Where Is It Going?, 5th edn, 1972, p. 246). He has, however, a more compelling reason: in his order of ideas, state capitalism must be privately owned; the state, like some giant corporation, must belong to shareholders able to sell and bequeath their shares. If they cannot sell and their sons cannot inherit, the system is not state capitalism. (While being sure of what it was not Trotsky had some changes of mind about what it was. See also A. Ruehl-Gerstel, “Trotsky in Mexico,” Encounter, April 1982.)

It is sad to see a Marxist reduced to such a position. For Trotsky it ought to be “commodity production,” the alienation of labour, its domination by capital and the mode of appropriation of surplus value which define the “relations of production,” not whether shares are sold or inherited.

It must be added that Lenin’s use of “state capitalism” to designate a system of private enterprise under close state control, was no worthier of socialist respect. In particular, it is hard to see how the state, which (despite some “relative autonomy”) must, by virtue of the relations of production, be controlled and dominated by private enterprise, nevertheless controls it.

[18. ]Some of these and related ideas are formalized in the powerful essay “La logique de la frustration relative” by Raymond Boudon in his Effets pervers et ordre social, 2nd edn, 1979. Prof. Boudon seeks to establish that the good observed correlation of discontent and frustration with improved chances, need not depend on some particular psychological assumption, but can be deduced from rationality alone, along the lines of utility-maximization in the face of risk.

At the other, non-rational end of the spectrum of human motives, Norman Cohn’s classic work on medieval revolutionary mystics finds the same correlation between better conditions and prospects and revolutionary action. See his account of the German Peasant War of 1525: “The well-being of the German peasantry was greater than it had ever been... [the peasants] far from being driven on by sheer misery and desperation, belonged to a rising and self-confident class. They were people whose position was improving both socially and economically” (Norman Cohn, Pursuit of the Millennium, 1970, p. 245).

There is by now a sizeable body of literature in support of the thesis that revolutions typically follow the relaxation of pressures, the brightening of outlook, reforms. It seems to me important to stress that there may well be other good reasons for this than the supposition that reform is a symptom of the state being “on the run,” getting weaker, hence becoming fair game for prudent revolutionaries who calculate risk-reward ratios.

[19. ]It is interesting to find expressly non-Marxist reasons for defining state capitalism in the Leninist spirit as “the symbiosis of state and corporations” (in P. J. D. Wiles, Economic Institutions Compared, 1979, p. 51). What, then, is private capitalism, and how do we tell it apart from state capitalism? Wiles considers that the latter term is “abusively applied” to the Soviet Union because it “certainly has an ideology which sets it quite apart from real state capitalism.” Real state capitalism, being “more or less indifferent about property” is devoid of a proper ideology.

This is true only in terms of a convention to define real state capitalism as one which is indifferent about property. Which actually existing systems, which countries would such a definition cover? Take the testimony of a prominent state capitalist, a member of one of the Grands Corps at the summit of the French civil service, later to become Minister of Industry: “no amount of dirigisme is worth a powerful public sector.” (J-P. Chevènement, Le vieux, la crise, le neuf, 1977, p. 180, my translation.) His state capitalism is certainly not indifferent about property. If there are state capitalisms that are, they are not conspicuous. Are they, perhaps, too easy to mistake for private capitalisms?

[20. ]F. Engels, “Socialism: Utopian and Scientific,” in K. Marx and F. Engels, Selected Works in One Volume, 1968, pp. 421-2, note.

[21. ]The word is used here in a very general and non-pejorative sense, to include the category of hired managers and administrators who man the bureaux. It refers to a role in society and is not meant to express any like or dislike for it.

[22. ]Cogitation and field research have, as I understand it, jointly established that the technostructure is composed of people who make the decisions which require knowledge. (Obviously, few decisions are left for the rest of us to make.) The technostructure removes from ownership all reality of power. The “liturgical aspect” of economic life induces the technostructure to affirm the sanctity of private ownership. It is, however, equally adept at keeping in its place the private and the public shareholder. (Why, in that case, does it prefer to be faced by private shareholders, if only “liturgically”?) In any case, it would be “supreme foolishness” to fear one’s shareholders. The technostructure is more interested in growth than in profit. And so on. These revelations are drawn from J. Kenneth Galbraith and N. Salinger, Almost Everyone’s Guide to Economics, 1979, pp. 58-60.

[23. ]Lenin, “The State and Revolution,” p. 292.

[24. ]Ibid., p. 340.

[25. ]Ibid., p. 345.

[26. ]A political philosopher of quiet distinction, whose “socio-economic origin” was at least consistent with some insight into these matters (for his father was the Premier of his country of origin) has disposed of the question in the following “holistic” terms: “Why should we suppose that... [institutions], when they have to choose between their corporate interests and the interests of the classes from which their leaders are mostly recruited, will ordinarily choose to sacrifice their corporate interests?” (John Plamenatz, Man and Society, 1963, vol. II, p. 370).

[27. ]The exiled Trotsky’s social theory of the Soviet Union is that in it, capital belongs to the workers’ state (or, as he ended up by putting it, “the counter-revolutionary workers’ state”), but the working class is prevented from exercising the owner’s prerogatives by the bureaucracy, which has won control of the state. The reason why the bureaucracy succeeds in usurping the role of the ruling class is scarcity. Where people have to queue for what they need, there will be a policeman regulating the queue; he “ ’;knows’ who is to get something and who is to wait” (The Revolution Betrayed, p. 112).

That abundance is not the consequence but the enabling cause of socialism has always troubled socialist thought. It has led to much uneasy theorizing about the “transition period,” classes in a classless state, the state withering away by getting stronger, etc.

Readers are no doubt aware that making explicit a doctrinal inconsistency or awkwardness, as I have occasionally been moved to do, is severely condemned by Marxists as “reductionism.”

[28. ]Gordon Tullock, in a paper of great clarity dealing with some of these issues (“The New Theory of Corporations,” in Erich Streissler et al. [eds], Roads to Freedom, Essays in Honour of F. A. von Hayek, 1969), cites findings to the effect that apparent managerial deviation from profit-maximizing behaviour is greatest in regulated utilities and mutual savings-and-loan associations which have, so to speak, no owners or where regulatory barricades shield the sitting management from the owners.

[29. ]Cf. Peter F. Drucker, “Curbing Unfriendly Takeovers,” The Wall Street Journal, 5 January, 1983. There is ample evidence of the tendency, noted with some alarm by Professor Drucker, that American corporate management is increasingly motivated by fear of the bidder. It is thus driven to instant profit maximizing behaviour, living from one quarterly earnings report to the next and having no time for the long view.

This is a far cry from the contention that “owners want profit, managers growth,” or “peer approval,” or some other, discretionally chosen “managerial” maximand. In fact, the contrary contention is, if anything, closer the mark. Only owner-managers can afford to choose idiosyncratic ends. No hired chief executive could have ruled, as Henry Ford is supposed to have done, that “customers can have any colour car as long as it is black.”

[30. ]Norbert Elias, The Civilizing Process, vol. II, State Formation and Civilization, 1982, pp. 104-16.

[31. ]K. Marx, Capital, 1959, vol. 1, p. 152.

[32. ]If the inputs of all butter-making and gun-making efforts depended on the output of butter alone, there would be (at least) one ideal allocation of the labour force between the dairy and the armaments industries (which, incidentally, would have to start way back with the training of young people to be dairymaids and gunsmiths), ensuring the maximum output of guns. Putting too many people in the armaments industry would reduce the outputs of both butter and guns.

However, gun production is only one of the ends entering into the maximand of the totalitarian state; some of its other ends may conflict with giving people the amount of butter they want, particularly if eating butter makes them more rebellious, or raises their cholesterol level and hence the costs of health care. Beyond these pragmatic considerations, the state may feel that indulging people is bad, and it is not for them to say how much butter they should have.

[33. ]It could be argued that managers of private capitalist enterprises are also serving two masters, the owner and the customer. However, those who are very successful at serving the latter do not, by their success, endanger the tenure of the former. Managers are not the owners’ rivals.

[34. ]The case of Hungary which despite occasional backtracking has, since the late 1960s, gone quite a way towards decentralized profit maximization, meaningful prices and even the toleration of an undergrowth of private enterprise, is paradoxically enough a possible confirmation of this thesis. If the country is living proof that “market socialism works,” it is so by virtue of the trauma of the 1956 rising, suppressed by Russia, which has created a tacit understanding between the regime and its subjects. After its reinstatement by Soviet armour, the Hungarian state had the intelligence to grasp that its security of tenure is assured by geography and need not be doubly assured by the belt-and-braces of a social system where everybody’s livelihood is precarious. Civil society, having learnt its lesson, is treating politics with a shrug. Thus, although more and more managers of enterprises and spurious cooperatives, professional people, small businessmen and peasants are building independent livelihoods, there is no parallel rise in demands for political participation and self-government.

In these rare and propitious circumstances, the Hungarian state can safely afford to concede as much economic freedom as it can get past its neighbours and especially, of course, Moscow. The one real constraint is Russian devotion to a number of socialist principles and the mounting irritation of Russian visitors at seeing their conquered colony wallowing in superior standards of life.

Moscow, which has no larger neighbour’s friendly tanks to invite in and “normalize” matters should the leading role of the party be challenged by self-confident technocrats, fat peasants, perpetual postgraduates and all the other independents who proliferate without control when the vestiges of decentralized economic power begin to reappear, would no doubt be rash to listen to all the expert advocacy of “economic reforms.” It has more at stake than the greater efficiency of a self-regulating economy.

On the other hand, it is less clear why Czechoslovakia, whose peoples received in 1968 an albeit bloodless but no doubt nearly as effective lesson in political geography as did the Hungarians in 1956, refuses to let in the invisible hand to wake up the economy from its comatose sleep. It must be supposed that the national propensity to stay on the safe side, is attracted by the double security of dependent subjects and fraternal aid.

[35. ]“Merit goods” are considered by the state good for people. If A is a merit good, its supply is to be arranged in such a way that no one should be able to increase his consumption of any non-merit good B by reducing his consumption of A. It must not be possible, for instance, to swap school milk for lollipops, nor for beer for the child’s father. This is achieved when school milk is on tap, with every child drinking as much as he wants.

When beef cattle are fed from self-filling feed bins, they are believed to eat just enough. Likewise, when merit goods are on tap, the presumption is that people will consume just what they need. With some important merit goods, this leads to ambiguous outcomes. Free health care and free university education are notorious cases in point. Because of emulation, jealousy or other reasons, the consumption of these goods tends to get out of hand and seems almost impossible to stabilize, let alone to reduce.

[36. ]Robert William Fogel and Stanley L. Engerman, Time on the Cross: The Economics of American Negro Slavery, 1974, vol. 1, p. 202.