Thus Spoke Lenin: On Prussian State Capitalism (Pt. II of III)

“State Capitalism would be a step forward as compared with the present state of affairs in our Soviet Republic. If in approximately six months’ time State Capitalism became established in our Republic, this would be a great success and a sure guarantee that within a year Socialism will have gained a permanently firm hold and will have become invincible in this country. I can imagine with what noble indignation some people will recoil from these words. ‘What! The transition to State Capitalism in the Soviet Socialist Republic would be a step forward? Isn’t this the betrayal of Socialism?’ We must deal with this point in greater detail.”

-Vladimir Lenin, “The Present-Day Economy Of Russia,” From The Tax in Kind, ca. 1921

Is there any room for serious discussions of State Capitalism in the 21st century? We live in a world where Liberal Capitalism is rapidly being questioned and concerns about “Illiberal Capitalism” grow with increasing intensity. Thus, it is necessary to distinguish State Capitalism from Illiberal Capitalism because, although both rely on the Double-Entry Account Bookkeeping System, their political structures carry more nuanced distinctions. The economic factor cannot be accounted for without understanding the roles and functions of the political. Always remember that economic life does not exist independently of the political and social lives of a Totality.

There are two things which receive the open resentment of the 20th century Political Left, the sentiments more or less resonant in the contemporary Political Left. Those are “Authoritarianism” and “Capitalism.” When people on the Political Left accuse something of being “fascism,” they are not exactly referring to State Corporatism. In actuality, they are referring to Illiberal Capitalism, which sometimes receives the technical designation of “Authoritarian Capitalism.” This is hardly an appeal to “Liberal Socialism,” however: it is more so a deep-seated concern about the state of Neoliberalism within the State of Total Mobilization.

Could it be that “Liberalism” contains some sort of ‘off-switch’ that enables itself to become “Illiberalism?” Would such a scenario involve a Carl Schmitt-esque State of Exception, a declaration of war, or some fundamental contradiction discernible from the philosophical underpinnings of the ideology? The Political Left has entertained such ideas for decades, especially during the Cold War when the Jeffersonians supported regimes with Authoritarian political structures and Capitalist economic governance. In fact, some of the nations that had applied aspects of Developmentalism during the Cold War employed Authoritarian Capitalist methods in order to prevent dissent from disrupting economic growth until enough Economic Liberalization has been achieved to yield Social Liberalization and later Political Liberalization.    

As I had pointed out in my Economic History Case Studies Entries, Developmentalism was an economic phenomenon associated with the reign of Bretton Woods. The Death of Bretton Woods, not to mention the various other trends of the 1970s, has ensured that Developmentalism has ceased to become a practical ideology worth preserving long-term. Most Developmentalist nations have since gravitated toward the Market/Mixed Economy, which coincided with the adoption of Parliamentary Democracy. With so many nations applying aspects of Liberal Capitalism or perceived as being at risk of adopting Illiberal Capitalism and so few being truly State Capitalist, one has to seriously wonder if State Capitalism is still relevant.

The State Capitalist model is rather straightforward. A State acts as the primary driver of economic life. Harnessing the Double-Entry Account Bookkeeping System and the Fractional-Reserve Banking System, the State Capitalist regime allocates immense Quantities of Kapital and Schuld toward economic activities that benefit itself, the national economy, and the Totality in that order. Under the Incentives of Supply and Demand, the State emphasizes certain Economic Sectors and Industries because their economic activities bring the most Kapital compared to others. The Industries in question could be anything that the Empire of Liberty deems valuable. If something fetches a lot of Kapital from Exporting it abroad, the State is guaranteed to invest in its associated Industry over another Industry, even from the same Economic Sector.

The national economy could be either a Mixed Economy or a Planned Economy. A State Capitalist Mixed Economy is more likely to lose its Manufacturing Sector than their Planned Economy counterpart as Economic Liberalization grows in influence. A State Capitalist Planned Economy might be resilient enough to preserve its Manufacturing Sector, assuming it is able to keep its own Economic Foreignization (EF) under control.

Moreover, its economic organizations and governance structures are also distinguishable from State Corporatism and State Socialism. State Capitalist economic organizations are split between State Enterprises and large Private Enterprises that conduct themselves as Mixed Corporations (split between State and Private ownership), Cartels, Oligopolies, and Monopolies. These large Private Enterprises seek to gain as much control over the Market, not only to ensure their own survival (as paradoxical as this may sound to a Liberal Capitalist reader), but also to rationalize how the Market operates. If the State Capitalist regime relies on Economic Foreignization (EF) in its economic activities, Foreign Enterprises will also be at some variance with the large Private Enterprises. This model does differ from State Corporatism, where the “Corporate State” works alongside the “Business Community” and “Organized Labor.” It also differs from State Socialism, in which the “Council State” is controlled by a Totality presiding over State and Social Enterprises.     

With regard to the Mode of Production, State Capitalism seeks to wield Production for Profit and Production for Utility by consolidating them in the vested powers of the State. The State acts as the main conductor of Kapital and enhancer of Utility. Similar to Social Corporatism (“Tripartism”), Developmentalism, and most Social-Democracies, this combination does lend credence to the philosophical logic behind Vladimir Lenin advocating for State Capitalism in his later works.

When Lenin promoted State Capitalism towards the end of his life, he was of the view that a Socialist Nation, regardless of its stances on Marx and Engels, will eventually figure out the inner-workings of Capitalism. Not to achieve mastery over it or excel where the Liberal Capitalists had failed, but to determine what needs to be removed and what needs to be preserved before advancing toward Pure Socialism. With State Capitalism, anyone who is not already a Liberal Capitalist could reorganize the economic governance model and redefine the economic organizations. They can deduce that certain economic activities are more conducive to Liberal Capitalism. Some are obviously predicated on Production for Profit, others are fixated on Production for Utility.   

Most Taxes can be cut and the State can then eliminate Welfare Capitalism without creating any unwanted socioeconomic problems. With the bulk of wealth created by the State and large Private Enterprises, the Totality can live within the means of production afforded by their national economy. The Welfare Capitalist programs will be removed because the Totality will already be achieving high enough standards of living that there is no point for them to be relying on them.  

There may be specific economic activities in the Natural, Manufacturing and Services Sectors that are more supportive of Pure Socialism than others. Those which could be preserved can be kept alive through economic organizations like Cooperatives or State-Administrated Enterprises (SAEs). Moreover, one can conclude that specific technologies are counterproductive to the realization of Pure Socialism, the Financial Regime should be revolutionized to eliminate Kapital and Schuld from its everyday functions, and   

Of course, the real challenge, as I had pointed out in The Work-Standard (2nd Ed.) and more so in The Third Place (1st Ed.) is how to go beyond those two Modes of Production to yield a third Mode of Production, which I had called Production for Dasein. Knowing what needs to be done and actually doing them are two separate things. The Work-Standard has proven instrumental in figuring out how a Socialist Nation could go from State Capitalism to State Socialism. Everything else can then be left to the discretions of the State and the Totality applying the Work-Standard.

Categories: Philosophy

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3 replies

  1. Great article, did Lenin also support state capitalism because he believe it would industrialize the country faster or am I mistaken?


    • In a certain sense, Lenin justified NEP in order to create the foundational groundwork for Socialism in Soviet Russia. He was following the Historical Materialist methodology that before Socialism can be achieved, Capitalism has to be created first. Now, as I have been arguing in recent months after drawing a connection between “The Work-Standard (2nd Ed.)” and Slavoj Zizek’s discussions about the Chinese Birdcage, Lenin had to have known that certain Capitalisms tend to be more conducive to specific Socialisms than others. Even Spengler in “Prussianism and Socialism” and Jünger in “Der Arbeiter” were arriving at similar conclusions in reference to the same Prussian State Capitalism that Lenin took as his model for NEP.

      There is of course a problem about trying to follow Lenin’s NEP and by extension Prussian State Capitalism. If a Proletarian Socialist Nation does adopt that course, it must always realize that Lenin did not have the Soviet Union embark on NEP and let it stay there forever. In fact, Lenin was hoping that the Soviet Union will consolidate the fruits of NEP to begin the development of State Socialism. He made that eloquently clear in “On Ascending a High Mountain,” which I believe is an Aesopian fable from “Notes of a Publicist”:

      This brings me to another point that I have heard from people like Zizek, which is the idea that the Chinese Socialist Market Economy was derived from Lenin’s NEP. While some aspects were borrowed, not everything came entirely from Lenin’s NEP. A significant inspiration, which I had point out in “The Work-Standard (2nd Ed.),” for the Socialist Market Economy was Chen Yun’s the concept of the “Birdcage Economy,” which functioned almost identically to the current Socialist Market Economy. In essence, create two economic governance structures where State and Social Enterprises coexist alongside Private and Foreign Enterprises, and have both sets overseen and scrutinized by a Council State. Time will tell if Mainland China will ascend my Economic Governance Chart in the 21st century.



  1. Thus Spoke Lenin: On Prussian State Capitalism (Pt. III of III) – The Fourth Estate

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