The state isn’t a threat to capitalism: it enables the free market, and always has. If we look to the state to save us from capitalism, we’re fooling ourselves.
The visit of Chinese president Xi Jinping is already providing a masterclass in the hypocrisy of the British establishment. Only hours before the president’s plane was due to arrive on Monday evening, Theresa May was promoting the government’s latest counter-terrorism strategy on the Today programme, where she explained that British values include democracy and tolerance of those with different faiths. Meanwhile, the Chinese government routinely uses torture, including torture of thousands of members of the religious sect Falun Gong – and not just against them, claims Human Rights Watch, but against their lawyers. Mind you, with Prince William scheduled to lecture the Chinese people about the ivory trade on television and British and Chinese flags fluttering side by side in front of Buckingham Palace, we have here one unelected head of state meeting another unelected head of state, so the moral high ground isn’t really ours to occupy.
The most striking thing about Xi’s visit, however, is what it tell us about the role that the state plays in modern capitalism.
Myth 1: the state harms capitalism
It’s become the common sense of the right wing that state involvement in the economy must be minimal. This argument is, at the moment, regularly made against Jeremy Corbyn, who, for example, favours renationalisation of the railways – as does the British public, by a margin of three to one. During Labour Party conference, the Telegraph reported on “corporate unease with Corbyn” about, among other things, the possibility of “more state intervention.”
So, big business wants the state to leave it alone. Except, as Xi’s visit makes clear, it doesn’t – the trip is all about the Chinese and British states getting involved in business. On Wednesday, Xi will attend a UK-China business summit, visit telecommunications company Huawei Technologies and then make a speech at the Guildhall where he will describe his plans to make London the global centre for offshore Chinese finance. Chinese businesses are also being encouraged by the British government to invest in Hinckley Point C, a £24.5 billion nuclear power plant in Somerset. Xi’s visit follows, of course, on George Osborne’s own visit to China last month, where he encouraged Chinese companies to invest in his “northern powerhouse” project.
Business doesn’t mind this kind of state intervention, and when you look at the money involved it’s clear why. The government is spending £2 billion to prop up Hinckley C, without which companies wouldn’t be interested. (This, despite the environmental issues with nuclear power, and the doubts of the Secret Service about the involvement of a powerful foreign government in a project which is expected to produce 7 percent of the UK’s electricity.) Chinese investment is encouraged with smaller gifts, such as £3 million of British government money for a facility to train young Chinese footballers.
That’s small change, however, compared with the money involved in the Northern Powerhouse Investment Pitchbook which Osborne launched in China, and which features “a selection of £24 billion worth of investment opportunities in the North of England.” In city after city, Labour councils are ready to grease the wheels of business with public money. Manchester Place is a £3 billion project to construct 10,000 homes: Manchester City Council has £300 million to invest. Leeds South Bank is a £1.5 billion project to regenerate an area of the city centre over a square kilometre in size, to which Leeds City Council is contributing funding and land. The presence of a High Speed Rail station in the area – HSR2 will cost the government over £50 billion – makes the whole scheme more attractive to investors.
This friendly relationship between business and the state isn’t new: it’s been a central aspect of capitalism from its beginnings.
Myth 2: in the golden age of capitalism, the state didn’t involve itself in business
Far from functioning best with a small state, capitalist economies involve a massive increase in the size of the state compared with that under feudalism. Back at the start of capitalism, the economy of fifteenth century Florence, for example, was based on banking and wool production. Contracts were essential and the courts, which regulated those contracts, expanded – making lawyers some of the richest people in the city. In England, early capitalism involved a huge expansion of the state – after the dissolution of the monasteries Henry VIII controlled perhaps a quarter of the country’s land. Medieval monarchs didn’t control a standing army – it was up to feudal lords to provide troops when required – but by the 1770s British armed forces consisted of almost a quarter of a million men.
The expansion of the state continued in that golden age of free-market capitalism, the late eighteenth and nineteenth centuries. Local councils took over responsibility for services from sewage to street lighting. In 1792 the Home Office and Foreign Office each had a staff of nineteen: by 1902 the civil service employed around fifty thousand people. Britain was not alone: the French civil service was even bigger, reaching 220,000 employees in 1871. States played a role in the development of key infrastructure such as railways: the US federal government gave half a million square kilometres of land to rail companies to encourage construction, the French government built bridges and tunnels for train companies and Prussia nationalised its railways in 1880.
Far from undermining capitalism, then, the nineteenth century state facilitated its development, in a way very similar to Osborne’s relationship with China today. Marx described this relationship in The German Ideology, where he summed up the state as “nothing more than the form of organisation which the bourgeoisie necessarily adopts… for the mutual guarantee of their property and interests.” In the Manifesto of the Communist Party, he and Engels wrote that “The executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie.” For this reason, Marx wrote in 1871, “the working class cannot simply lay hold of the ready-made state machinery, and wield it for its own purposes.” That becomes all the clearer when you consider that the state includes such forces as senior army officers, police and secret services – bodies whose lack of public accountability is clear around the world, from the United States to Turkey.
This brings us to the final myth about the state, the one favoured by liberals and the left.
Myth 3: socialism means state control, so socialists should side with the state against capital
This accepts the idea that there is a deep conflict between capitalism and the state – but it then inverts the right-wing common sense that we should side with business against the state, and claims that the way forward is to side with the state against the free market. This equivalence of socialism with the state turned up recently in a YouTube video about socialism in the US from AJ+, Al Jazeera’s multi-media news channel targeting young people. Host Francesca Fiorentini first points out, reasonably enough, that advances such as weekends off work had been won by the labour movement, and that American icons such as Jack London and Helen Keller were socialists. She concludes by talking about the kind of corporate tax breaks discussed above. But in between, she identifies highways and bridges built as part of FDR’s New Deal as socialist, and then claims that, because socialism is the same as big government, the US military is socialist.
The idea that socialism equals state power runs all through the twentieth century. On the one hand, it has roots in the defeat of the Russian revolution and the rise of the Stalinist police state, tragically taken as a model by members of communist parties throughout the world. But its origins also go back to the traditions of the Labour Party, which looked to the state to smooth over the worst excesses of the free market.
State-led reforms, such as those introduced by the 1945 Labour government, have benefited workers – which is why people are fighting today to defend the NHS, as 20,000 junior doctors did in their protest on Saturday. Those reforms carved out a small space in society where limits applied to the making of profits, and the Tories are now trying to take that back. But change introduced from above by a bureaucratic state apparatus, however welcome, is a very different thing from the high points of history, where the exploited and oppressed took power into their own hands. From the strikes that ended apartheid to the Stonewall riot that began the modern LGBT movement, people involved in those struggles fought the state – fought it literally, in the form of the police. We need to oppose the state, not look to it to save us. That means our conception of socialism must be based on self-emancipation of workers and the oppressed – quite different from the traditions that have dominated much of the left for the last hundred years.