p The relation between the state and the economy is one of the central issues in the life of capitalist society. New phenomena which are still developing first appeared in state-monopoly capitalism (SMC) in the 1970s and 1980s, and these largely determine the basic features of capitalism at the end of the century.

p The 17th-century English philosopher Thomas Hobbes gave the title Leviathan to his famous treatise on politics and politicians, the Biblical name for a sea monster which he used to show the role of government in the society. Since then, the name has come to denote the vastness and might of the state. In Hobbes’s day it was, of course, a dwarf compared with the giant state of today, which has key functions to perform within the system of the bourgeoisie’s class domination. Alongside its political and social role, the state has also an ever greater economic role to play.

p In the epoch of pre-monopoly capitalism, the bourgeoisie of the leading capitalist countries had no need for active interference by the state in the economy and, in fact, even resisted such interference. But in the 20th century, especially in the period of the general crisis of capitalism, the situation underwent a fundamental change, as the power of the state coalesced with that of the monopolies. For all practical purposes, private capital no longer operates without the state’s comprehensive involvement. The economic role of the state today has evolved as a result of long development, in the course of which there has been a constant change in the conditions, forms and methods of its influence. The development of state-monopoly capitalism is an objective process ultimately determined by the growing capitalist socialisation of production, and the forces generated by the formation of monopoly producer and financial complexes naturally promote the development of the state’s economic role and help to strengthen it. But the evolution of SMC is simultaneously a political process, which assumes concrete forms depending on the specific features of the state power in a given country, the pattern of class forces, the national 94 peculiarities and traditions, and the international situation.

p It is by no means willingly that the bourgeoisie accepts state intervention in its affairs, for whatever the forms of such intervention, it can always make people ask whether the private owners of the means of production should exist as a special class appropriating the lion’s share of the national income, since business can be handled by government agencies. That is why members of the bourgeoisie in the United States, for instance, insist that government enterprises, social security and curbs on the powers of business all add up to something like “socialism”, which has to be tolerated as an inevitable evil.

p SMC emerged during the First World War (1914-1918), which forced all the belligerent countries to concentrate resources in the hands of the state and under its control on an unprecedented scale. "War and economic ruin have forced all countries to advance from monopoly capitalism to state-monopoly capitalism," Lenin wrote.  [94•1  The world economic crisis of 1929-1933 (the Great Depression) had an exceptional role to play in shaping the instruments of state intervention and regulation. With output in the leading capitalist countries down to roughly one-half of the pre-crisis level, international trade at a standstill, tens of millions unemployed and class conflicts exacerbated, the bourgeois states found themselves forced to assume extensive economic functions in combating the crisis.

p The US version of SMC in that period was connected with bourgeois reformism and with retreats and manoeuvring by the ruling class in the face of the terrible reality and the demands of the popular masses. Laws were enacted somewhat to limit the power of capital and to protect the interests of the working people ( minimum wage rates, social security and unemployment benefits; government underwriting of bank deposits and loans; farm supports; more rights for the trade unions, etc.). Something was done to conduct a state anti-cyclical policy through public works and changes in the fiscal and credit system. Meanwhile, a militaristic and fascist version of SMC was taking root in Germany and to some extent also in Japan and Italy, with the whole economy geared to the preparation of war, and unemployment reduced through a vast increase in arms manufacture, while the communist and working-class movements were savagely suppressed, bourgeois democracy dismantled, and a regime of total terrorism and oppression introduced. The historical record shows that the economic and especially the political and social content of SMC can differ greatly, and that it can present a different kind of face to the working masses depending on the conditions.

p During the Second World War (1939-1945), the economy was geared to war objectives to an even greater extent than in the First World War. In the First World War, direct military outlays came to only 14 per cent of the US national income, and in the Second— 95 to 43 per cent; in Germany, the figures were, respectively, 42 and 68 per cent; and in Britain—37 and 56 per cent. A state machine for running the economy in close cooperation with the private monopolies was either set up or improved in all the belligerent countries.

p Postwar SMC in the United States and the other NATO countries is closely bound up with the shaping and functioning of their military-industrial complex, whose domination has alarmed even those who had taken a hand in building up its positions. It is a curious fact that the term "military-industrial complex" was first used by General Dwight D. Eisenhower. In his farewell speech upon the expiry of his term as US President in 1960, he warned the US people of the dangers of a close alliance between the industrialists, the military and the politicians, who regard the arms race and balancing on the brink of war as a source of profit and power.

p The postwar period has on the whole been marked by a strengthening of SMC trends, against the background of certain changes in the techniques of state intervention. Extensive use of STR achievements and the internationalisation of production and capital are the key features of postwar capitalism, and these have generated such important SMC forms as the crucial role of the state in organising R&D and inter-state economic integration, especially within the West European Common Market (EEC).

p The presence of the world socialist system and its influence on capitalism are also a factor of tremendous significance. The outgoing social system has responded to this historical challenge by extending the political, economic and social functions of the state and by constantly trying to adapt to the changing conditions of world development. When Soviet space successes in 1957 and 1958 revealed the lag of the United States, the latter’s reaction was very vigorous. A multibillion-dollar space programme was adopted, the education system was reorganised and state sponsorship of scientific research intensified. The state took steps to accelerate economic growth.

p In this way the present-day forms of SMC took shape over a period of decades. Just now they are in a state of crisis and redeployment. The Great Depression of the 1930s undermined the faith in the almighty and beneficial role of the “market” and put an end to the absolute sway of the private-monopoly element in the capitalist economy. The dominant view of the existing forms and methods of SMC regulation in the West is now one of scepticism. Indeed, it has gravely undermined itself. But whatever the forms of such regulation, capitalism can no longer exist without it, and that is one of the most acute contradictions of capitalist reality.

Bourgeois economists and sociologists admit that the state has been increasing its economic role, but naturally refused to accept either the Marxist term "state-monopoly capitalism", or its meaning. They reject the Marxist idea of the state coalescing with the monopolies and claim that the state has nothing to do with classes and takes care of the needs of all the strata of the population. Many bourgeois and reformist ideologists regard the growing 96 activity of the state as an element of a peaceful, evolutionary “ socialism”, which they contrast with the revolutionary transformation of the society. In actual fact, the state continues to be an organ of the bourgeoisie’s class domination, with the financial oligarchy playing the crucial role. Its functions, including its economic functions, are being extended because of the sharpening contradictions of capitalism and the new conditions and forms of the class struggle. At the same time, the growing consciousness and organisation of broad masses of people enable the progressive forces to exert greater pressure on the capitalist state.