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Subject Area: Political Theory

Corporate State Capitalism: Coal - Leonard P. Liggio, Literature of Liberty, October/December 1978, vol. 1, No. 4 [1978]

Edition used:

Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.

Part of: Literature of Liberty: A Review of Contemporary Liberal Thought, 20 vols. 19781-982

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


Corporate State Capitalism: Coal

Charles Medalen

“State Monopoly Capitalism in Germany: The Hibernia Affair.” Past and Present 78 (February 1978): 82–112.

The Prussian government attempted in 1904 to secretly purchase shares of the Hibernia Coal Mining Company. This sparked a formidable battle between the Prussian state bureaucracy and the private owners, managers, and bankers who formed the active beneficiaries of the Coal Syndicate, a cartel that controlled over 88 percent of Prussia's coal supply. What triggered the government's policy may have been its belief that the coal operators were creating vertical coal and steel trusts, in emulation of America's U.S. Steel. A trust would be intolerable to the Prussian state for it threatened the stability of the State's military power based on its free access to coal and steel resources not under state control. On the other hand, the government feared pure competition because of the adverse political effects of cyclical fluctuation of prices, wages, and employment. Therefore, it preferred to maintain the coal cartel. Ownership of Hibernia Coal Company would give it the leverage to dominate the cartel and prevent the formation of a trust. Also at issue was the larger question of whether the state bureacracy or the coal and steel magnates and their banker allies would dominate the State.

The Hibernia Affair has become a crucial event among Marxist historians who interpret it as the early phase of the process by which large scale capitalist enterprises and state power integrate into a single mechanism of “state monopoly capitalism.” In Germany it was the occasion for capitalists to test their power. They aimed at defying the bureaucratic will of the Prussian State to bring to heel all possible challengers to its dominance. Skirmishes continued until 1914 when the war fever caused the State to co-opt private industry into the state war machinery.

During this affair, private bankers used naive government officials for their private ends. Bankers played a key role in organizing the resistance of the Coal Syndicate. This meant the continual failure of the cartel to maintain its agreed price and supply structure, provoking in turn mounting fears among the syndicate members and the government that competition would thwart their aims. The government's own coal mines were so inefficient that only the cartelized price structure made the government's product marketable. Medalen concludes that the Prussian government's failure to nationalize the Hibernia Coal Company was a significant victory for the “bourgeoisie.” Germany did not get “state socialism” but rather what American historians call “corporate state capitalism.”