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p The growing acuteness of the contradictions in the process of reproduction is evidence that capitalism, as a social system, has outlived itself, that the universal triumph of socialism is dictated by the need for further progress of the productive forces. To prolong its life-span, capitalism has to resort to a variety of measures, the most important of which is state-monopoly economic regulation. State-monopoly capitalism is the imperialist response to the objective circumstances precipitated by the growth of the productive forces and dictating the need for transition to socialism.

p It would be wrong, however, to imagine that state- monopoly capitalism takes shape solely on the basis of the growing social character of production. In fact, state-monopoly economic regulation also occurs primarily as a result of the sharpening of all of imperialism’s contradictions: social and political, domestic and international. State-monopoly capitalism develops in close connection with such basic factors of capitalism’s general crisis as imperialist wars and militarism, the division of the world into two systems, the growth and consolidation of the socialist system and its success in the competition with capitalism, exacerbation of the interimperialist struggle, disintegration of the colonial system, and upsurge in the working-class movement.

p The extremely contradictory nature of state regulation of the capitalist economy, its instability and limited effectiveness, its militaristic tenor—all these and numerous other traits of state-monopoly capitalism stem from the fact that the historical need for an economy run from a single centre emerges in circumstances where the capitalist system itself, through the domination of private property in the means of production, stands opposed to a centrally-planned economy.

p But monopoly capitalism, in its attempts to resolve the acute domestic socio-economic contradictions, can resort to no other means but state control of the economy, that is, the very measures which flout the basic principles of capitalism and which actually contradict these principles. This is evident in the whole complex course of present-day 79 capitalism, in all the ups and downs of state-monopoly capitalism.

p Lenin analysed the swift progress of state-monopoly capitalism during the First World War, emphasising the iorced nature—the war-time need—of this rapidly increasing intrusion of the state in economic affairs. He wrote: “. . . monopoly capitalism is developing into state-monopoly capitalism. In a number of countries regulation of production and distribution by society is being introduced by force of circumstances." (Italics ours.—Authors.)  [79•1 

p During the years of temporary stability that immediately followed the war, state economic regulation descended from the heights it had attained in wartime. Throughout the capitalist world central planning was relegated to the background largely giving way to the monopolies’ traditional methods of running the economy. Government arms contracts lost their significance; so, too, did centralised (with decisive government participation) allocation of raw materials, fuel, capital, credit, labour, food and consumer goods.

p Neither Europe nor Japan, however, went back to the Gold Standard, one of the oldest principles of capitalist economics, under which freely circulating paper money is redeemable on demand in gold.  [79•2  The Gold Standard was replaced by the Gold Bullion Standard (Britain, France, Japan) and the Gold Exchange Standard (Germany), where gold retains its function as the measure of value of commodities and as a world money currency, but no longer acts as a medium of domestic exchange.

p This largely undermined the free-play mechanism of money circulation (through gold flowing out of the reserves and back again), which meant that the state was playing a much greater role than before the war in the sphere of credit, money circulation and foreign trade.

p An end to temporary stability and the onset of the 1929- 33 economic crisis against the background of Soviet progress in socialist construction led to a further heightening of statemonopoly regulation. The imperialist countries switched to an aggressive protectionism in foreign trade marked by rigid tariff and currency controls and the establishment of 80 currency areas for sterling, the dollar, the franc and the yen. The role of government agencies greatly increased in controlling money in circulation and the capital loan market. Under the buffeting of the slump, the post-war vestiges of the Gold Standard eventually succumbed and it has never again appeared in any form.

p Changes in the home policy of some imperialist states were mainly associated with a further aggravation of the unevenness in inter-imperialist contradictions. Japan’s attack on Manchuria in 1931 and the nazi take-over in Germany in 1933 marked a new stage in imperialist aggression, which eventually led to the Second World War. State regulation in these two countries and in Italy, which were shortly to band together in the Anti-Comintern Pact, was largely an instrument for militarising the economy.

p In these countries, preparation for war brought in its wake higher taxation, the inflationary issue of paper money and a simultaneous increase in government contracts and in the number and role of mixed, state-private, and state enterprises and companies.

p Within the United States, state regulation was carried on as a drive to wipe out the consequences of the Great Depression, the bourgeois euphemism for the 1929-33 crisis. Here the monopolies chiefly employed public works schemes for the jobless, and government programmes for maintaining farm prices and for providing guarantees to monopoly credit institutions. While these projects did meet with some success in hoisting the capitalist economy out of the crisis, in the 1930s capitalism did not achieve the usual post-crisis boom.

p During the First World War, Lenin wrote: “When capitalists work for defence, i.e., for the state, it is obviously no longer ‘pure’ capitalism but a special form of national economy. Pure capitalism means commodity production. And commodity production means work for an unknown and free market. But the capitalist ‘working’ for defence does not ‘work’ for the market at all—he works on government orders, very often with money loaned by the state."  [80•1 

p These economic traits appeared with extra vigour during the Second World War. It was not just the war itself, with 81 its untold misery and suffering, that demonstrated the bankruptcy of the private capitalist form of economy; it was also its methods of mobilising military and economic resources. At a time of a war for the repartition of the world, when the very existence of capitalism was at stake, it deserted its principles and introduced centralised economic regulation.  [81•1 

p In contrast to the First World War, when state regulation involved only the European nations, this time it was a feature of every industrial nation in the war, including the U.S.A., Canada and Japan. Governments controlled all investment, allocation of raw materials, equipment, food and labour, in addition to monopolising all economic contacts with other states. Up to 40 and 50 per cent and sometimes the bulk of the national product was channeled through government agencies and realised through the treasuries or under state control, instead of the free market.

p After the war, one would have expected a trend towards economic “liberalisation” in the sense of the economy being liberated from state control. And this did, in fact, happen. The bulk of war-time state regulation measures was 82 abolished. However, the transition from a war-time to a peacetime economy occurred in circumstances quite different to those after the First World War.

p Despite the rout of the interventionists and whiteguards, the international imperialists had still cherished hopes during the early 1920s for a restoration of capitalism in the U.S.S.R.; they were hoping that the remnants of the exploiting classes would return to power. After the Second World War, these hopes were dashed by the formation and consolidation of the world socialist system.

p The major role played by the Soviet Union in defeating the Axis powers, the establishment of the world socialist system and the fresh upsurge in the working-class and national liberation movements—these are all factors that caused a radical shift in the world balance of power, intensified the general crisis of capitalism and made socialism the decisive force of our day. Economically, socialism has literally forced capitalism into competition, especially in economic growth rates.

p Back in the 1930s it was still fashionable to refer ironically to the Soviet “growth rate mania”. Today, however, there is not one country of monopoly capitalism whose government does not pursue a policy of stimulating the economic growth rate.

p Thus, the last fifty years have shown the extremely complex character of the laws of state-monopoly capitalism; without a knowledge of these laws, it is impossible to understand the nature of the system.

p Though state-monopoly capitalism was engendered by the social character of production, it is by no means directly dependent on the further intensification of this process, on greater monopoly concentration of production and centralisation of capital. Economic factors have an influence on the growth of state-monopoly capitalism not only, and even not so much directly, but essentially through the prism of political and social contradictions.

p The objective demand of overall state economic regulation, dictated by the growing productive forces, is linked with an inevitable variety of forms of state control over monopoly enterprise. Hence the dissension within the ruling class over the various forms of control, with its two basic trends: a) preservation and extension of state regulation, 83 and b) fold up of controls and “liberalisation” of the economy. Both trends exist within monopoly capitalism and are reflected in the ceaseless domestic fighting over issues of state economic policy, a common feature of present-day bourgeois politics.

p It is objective necessity that prevails. Despite the zigzags of history, economic progress during capitalism’s general crisis is accompanied by growing state regulation. The conflict of the two trends, however, tends to give this growth a very complex and contradictory character, and in particular has an effect on the forms of government control.

p In the constant fluctuation and tremendous diversity of forms and methods of state economic control in the various countries, two basic forms are apparent: state property and state participation in redistributing the national income. These two forms are supplementary and, in some respects, even contradictory. Therefore, an analysis of the part of each and of both is especially important for understanding the nature and prospects of the entire process of statemonopoly regulation. (a) State Property

p Because state property frequently occurs in mixed, stateprivate enterprises, it is hard to examine the role of state enterprises in the’economy and make cross-national comparisons: the indexes used tend not to be identical for all countries.

p In most monopoly capitalist countries, the post-war years saw a decline in the state’s share of the national wealth.

p The military concerns and government-owned land (which accounts for more than one-quarter of the total amount of state property) apart, government ownership in U.S. civilian production does not appear to be very high. The exceptions are the power industry (13 per cent of total capacity) and transport and communications (although here, too, in contrast to Western Europe, private corporations predominate).

p In post-war Japan, the liquidation of government military property simply meant that it was transferred to private monopolies. Today, straightforward government property is to be found in only a few factories and sectors. In 1960, the state owned 18.5 per cent of the national wealth.  [83•1  Further, 84 the factories it owned brought the state no more than 0.6 per cent of the national income, with the figure having a tendency to diminish (2.3 per cent in f949). This is primarily due to the fact that the government owns mainly non-income bearing assets (though requiring considerable capital outlays) like parks, armaments, administrative buildings, and forests and land of no industrial or agricultural importance. Moreover, the state-owned factories and utilities are frequently marginal or sub-marginal.

p Thus, in Japan, where thirty odd years ago state property occupied a prominent position in the militarised large-scale, particularly heavy, industry, the government is now left only with transport, communications, administrative buildings and waste land and forest.

p In West Germany, state property dominates the railways, airlines, road transport and communications; it is also well represented in the capital of industrial enterprises. The proportion of state enterprises in West German production may be gauged from the following figures: 71 per cent in aluminium, 38.7 per cent in iron ore, 34 per cent in shipbuilding, 24.4 per cent in coal, 16.3 per cent in electricity, 14.3 per cent in coke, 8.8 per cent in lignite and 6.1 per cent in oil. The state proportion of West German share capital is approximately 18 per cent (DM3,600 million: 19,700 million). Over half the state-held shares are in power, approximately one-seventh in coal, and one-fifteenth in iron and steel.  [84•1 

p In Britain, there was a noticeable decline in the 1950s in the state share of the national wealth. In 1950, private capital owned 51.7 per cent of the national wealth (land, real estate, stocks of finished and primary products, means of transport, and securities), with the government and non-profit agencies owning 48.3 per cent. By 1960, the ratio had shifted in favour of private capital: 59.5 and 40.5 per cent, respectively. In the ten years between 1952 and 1962, government enterprises accounted for about one-fifth of the finished social product.  [84•2  As in other developed capitalist countries, state property is primarily concentrated in transport, communications, the extractive and power industries, municipal 85 services and land holdings. The British Government owns just over one-twentieth of total production in the manufacturing and building industries.  [85•1 

p France presents the following picture. In 1957, the state (national and local municipal bodies) owned 32-36 per cent of the national wealth. According to the estimates of Charles Bettelheim, state-owned factories in industry and transport (including mixed factories in which the state owned over half the capital) employed about 1 million persons or some 14 per cent of the total industrial and commercial labour force.  [85•2  The state accounts for a sizable part (from one-fifth to one-quarter) of total industrial production, including 97 per cent in coal and 85 per cent in electricity. In contrast to West Germany and Britain, the French state also holds a leading position in manufacturing, accounting for twothirds of the aircraft output, about one-third of shipbuilding, about the same in automobiles and tractors, and a large proportion in armaments.

p Italy, like France, is among the countries with a high level of state property. At the beginning of the 1950s, about onethird of all Italian workers employed in heavy engineering and transport were state employees. Some ten years later, in 1962-63, the proportion of state employees was 57 per cent in manufacturing and 40 per cent in trade and the services. The share of state-owned companies in total capital investment (agriculture apart) stood at 13 per cent. In 1961, Italy’s biggest state-monopoly organisation, IRI, accounted for 77 per cent of iron ore production, 82.3 per cent cast iron, 51.2 per cent steel, 55.2 per cent rolled metal, 25 per cent electricity and 24.5 per cent machine-building.  [85•3 

p The Austrian state occupies a rather special place in the share of the national wealth held by the state. At the end of the last war, the Austrian workers forced the government to nationalise all property belonging to Germans and collaborators. As a result, the state sector in 1964 employed some 20.4 per cent of the total labour force. The share of 86 the state (including nationalised banks), the provinces and the communes in industrial output was 30 per cent. Further, between three-quarters and four-fifths of all joint-stock capital, which means the biggest and most influential companies in Austria, belongs to the state and is under its control. The state also holds 66-75 per cent of the banking resources, virtually 100 per cent of the power facilities and nearly 90 per cent of the railways. Of the ten biggest industrial concerns eight are state-owned.  [86•1 

p All these figures indicate that state property does not dominate the economic scene in any country of statemonopoly capitalism, notwithstanding the great unevenness of development between the various countries and economic sectors. On closer scrutiny of its structure, it is quite obvious that, with few exceptions, private capital everywhere holds the commanding heights in production—engineering and agriculture, commercial credit and farmland, and farm and timber resources. These are the linchpins of the reproduction process responsible for producing the final product and monopoly super-profits.

p Even where state property is fairly extensive, it is largely confined to the service branches of the economy: transport, communications, electricity, gas, water, and other utilities, and—in some countries—the extractive industry as well.

p All these sectors are not profitable enough to attract private capital, chiefly because, first, there is no immediate prospect of a quick return on capital and, second, in the prevailing social climate, price increases in these sectors are most difficult to push through. There is always a public outcry against any price increases in the transport services, communications and the public utility services. The monopolies do not want to be the targets of these protests. With profits at a minimum or even losses covered from the budget, the capitalist state assures the monopolies of a supply of power and the products of the extractive industry at minimum prices.

p The restricted role of state property within the system of state-monopoly capitalism is due to its very nature. Clearly, a greater share of state property can be profitable for the 87 monopolies up to a point. No matter how great the pressure of economic and political circumstances militating in favour of greater state intrusion in the economy, the finance oligarchy and bourgeois government invariably exert all efforts primarily to prevent any threat to the monopoly positions of private capital in the national wealth.

p Indeed, the monopolies and their governments as a rule strive to denationalise, wherever state property has become extensive for various historical reasons, such as the post-war nationalisation of German monopoly property in Austria, and the nationalisation of a number of French industries when the Communists were in the government. (b) The State in the Distribution of the National Income

p The experience of the past few decades shows that it is the redistribution of the national income and not the growing volume of state property that is the principal instrument of state-monopoly manipulation of the economy.

p Distribution of the national income is a very complex two-phase process: the initial allocation among workers, capitalists and landowners in the form of wages, profit and rent; and the redistribution of the national income already allocated in wages and profit.

p State-monopoly control mainly takes a hand in the second phase—in the redistribution of the national income— through the state finance and fiscal system. To obtain a clearer idea of the exact economic role of the state, it might be better to view it as the corporate capitalist body, and this actually corresponds to its social nature. The individual capitalist divides the profit he receives into two parts, one of which he puts by for accumulation, and the other turns to personal consumption. The capitalist state does exactly the same. One part of the share of surplus value assigned to the state is spent on state consumption, the other goes to accumulation.

p State consumption includes outlays non-returnable in financial terms and economically not directly connected with production. First, there are the outlays on the upkeep of the state apparatus, including salaries to all civil servants, armed services personnel, etc., and the maintenance of government administrative buildings, barracks, armaments, etc. Consumption outlays also include state expenditure on social security, education and the health service.

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p Non-investment outlays, i.e., consumption expenditure, are everywhere over one-half, and usually about two-thirds, of total state expenditure; furthermore these have been soaring under the pressure of militarisation and wars.

p Besides, the state, a corporate capitalist, also takes part in the accumulation of capital, like any individual capitalist. At the second and third stages of capitalism’s general crisis, state participation in accumulating capital greatly increased. This type of participation sometimes serves as a means of militarisation, sometimes as a factor stimulating economic growth on the basis of scientific and technical progress; but normally both factors are intertwined.

p The state budget and taxes, as the main source of state revenue (especially of stepped-up capital accumulation), are everywhere the chief means by which the state redistributes the national income. The budget is closely connected with state operation of the credit system.

p A characteristic feature of capitalism’s general crisis, particularly of its second and third stages, is that the central banks of issue have finally come under complete state control and, further, have become the pivot of the state system of active pressure on the loan capital market through a combination of fiscal and non-fiscal, administrative measures.

p In this context, the share of credit resources at the government’s disposal is frequently not of prime significance. In the U.S.A., average annual figures for the 1946-60 period show that the federal government’s monetary resources did not increase in the slightest, while the net increase in resources belonging to the various states and local authorities amounted to just under 5 per cent of the total monetary capital accumulated in the country. It is true that, because of the growth of the national debt during the war and the post-war years, the amount of credit resources at the disposal of the state has increased: the proportion of state savings bonds in the savings of the population grew from 4.7 per cent in 1940 to 14.6 per cent in 1960. But this does not give a full picture of the part played by the state on the loan capital market.

p Of greater importance in U.S. state-monopoly control is the rapidly growing role of the Federal Reserve System, headed by the Federal Reserve Board, who are appointed by the U.S. President and confirmed by the Senate. The 89 purpose, structure and operation of the Federal Reserve System are a vivid illustration of the coalescence of the banking monopolies and the state power, an example of how finance capital uses the state power to attain the fullest utilisation of credit resources for its own ends.

p Despite great differences in form, exactly the same thing is happening with the central banks of issue and their relations with the private banks in all the countries of monopoly capitalism.

p The share of state credit institutions in the total volume of credit resources in the various countries of Western Europe and Japan fluctuates greatly, between 15 per cent in West Germany to 65-67 per cent in Austria (amount of bank credits). But, principally, the position is everywhere the same: the central banks of issue together with other state credit institutions pursue a certain credit policy, relying not only on their financial resources, but also on non-financial, administrative measures, on their authority, and ability to apply effective sanctions against those who refuse to toe the line laid down by the supreme state credit-financial agencies where the government acts in unison with the monopolies.

p Today, finance associations and monopoly federations play an ever bigger part in state-monopoly regulation. In the U.S.A. there is the National Association of Manufacturers, in Japan the National Federation of Industrial Unions, in West Germany the Federation of German Industries, in Britain the Confederation of British Industry, in France the National Council of French Industrialists, and in Italy “Confindustria”. These and others like them are often justly called the unofficial government of their country. Their activity is principally concerned with elaborating government policy on the basis of the common interests of the bourgeoisie, first and foremost of its monopolistic cabal. They do not simply dictate to governments and parliaments the political course they want; to some extent they also engage in “feed back" by acting as vehicles of government policy. The recommendations made by the ruling bodies of these federations play an important part in implementing all kinds of measures of state-monopoly control.

p Another feature of contemporary capitalism is the mounting importance of special government agencies with ministerial powers, like the French General Planning 90 Commission, the British Ministry of Economic Planning, the Italian inter-ministerial Committee for Economic Development, the Japanese Economic Planning Executive, and the President’s Council of Economic Advisers in the U.S.A. One of their most important functions is to frame economic programmes and forecast economic trends.

p Economic programmes of the 1960s embrace various sectors of the economy irrespective of the degree of state participation, but their real importance is to provide financial resources for state control with maximum effect. Their powers of direction are of secondary importance: the monopolists pay heed to state economic plans only to the extent these yield a profit or contain the threat of state sanctions (the loss of lucrative government contracts, loans, subsidies, etc.), that is, chiefly within the bounds determined by state financial resources.

p The real economic basis on which state-monopoly control rests is no more than between 2-3 and 10-15 per cent of the social product from state-owned factories, 25-40 per cent of state participation in the distribution of the national income, and up to one-third participation in total investment. All other means, lying outside state property and finance, may be substantial but are not crucial.

p No analysis of state-monopoly control would be complete without examining the concrete manifestation of state economic policy in the post-war period, and here militarism has been playing a much bigger part than it did between the wars.

In late sixties and early seventies, U.S. military expenditure accounted for some 10 per cent of gross product, British and French about 6 per cent, and West German more than 4 per cent. Militarism implies far more than the squandering of an immense mass of value from the process of reproduction. It lays it’s imprint on the whole process of state economic control, making it extremely bureaucratic and facilitating control of the economy by the most reactionary groups of the ruling classes, the military-industrial monopolies and the military clique. In the U.S.A., direct military expenditure accounts for more than one-half of all government outlays and over one-half of the government non-investment spending. This means that in the environment of the cold war and international tension, produced by the aggressive U.S. policy, state participation in the economy 91 bears many features of war-time state-monopoly capitalism. The vast military spending and its tendency to increase are accompanied in other countries by severe restrictions on the government’s social spending and on government investment in the non-military sectors of the economy.