Part 1 – State Capitalism In The Capitalist States

I dedicate the book to the light memory of my Father, Comrade Nguyen Chon Tong (Le Thanh), an exemplary father who transferred the precious [brilliant] revolutionary traditions to his family, the man who inspired me to persistently carry on {go on with} Lenin’s doctrine and ideas of Ho Chi Minh about State Capitalism.
I dedicate the book to my mother Le Thi Hoa, a Mother who all her life overcame hardships and deprivations, grew a son, taught him to be a man.



State capitalism in the developed capitalist countries

State Capitalism in a capitalist system is a high degree of capitalist development, it is the form which the capitalist State uses to strengthen its economic power through a direct ownship or participation in any activity of capitalist enterprises. Participation of a capitalist State is usually has the followings forms: transfer of some enterprises into the hands of the State; building new enterprises due to the State budget or holding a control package [block] of shares in stock companies, etc.

State Capitalism in the bourgeois dictatorship is a modified form of capitalist ownship. Though a property may belong to the state, in its basis there is the system of private property on capital goods.

In fact, capitalists make the state to depend on them, use the state for the benefit of the capitalist class. State Capitalism increases the capitalists’ income, strengthens economic and political position of the dominating class of bourgeoisie. For this reason State Capitalism at capitalism (capitalist system, capitalist regime) is aiming to defend the capitalism. In imperialistic countries, State Capitalism is characterized (is shaped as) as the State monopolistic capitalism, i.e., monopolistic capital dominates on the basis of accumulation and concentration of capital at a high degree. When capitalism of free competition transfers to the stage of monopolistic capitalism, the monopoly plays the decisive role in economic and political life of capitalist countries.

Due to an accumulation and concentration of capital, there appear many large-scale enterprises, and such enterprises concentrate the main production in capitalist countries. This concentration of production is preparation for domination of monopolies. Monopolies merge into the ones who absolutely dominate in production. Monopolies capture the main economic arteries of capitalist countries. Bank monopolistic capital and industrial monopolistic capital merge into financial capital. Financial capital enters into a conspiracy with a state machine, totally buys it up and converts tinto reliable instrument of capital’s interests. The capitalist state becomes the monopolistic capitalist state at this juncture (at this moment).

Monopolistic state capitalism shows up in the followings forms: either monopolistic organizations attract (involve) state high-ups (high-ranked officials) to participate in Boards of directors of monopolistic capitalist companies or the capitalists from capitalist monopolies directly participate in the governments of capitalist countries. Which capitalist monopoly seizes the government and influences upon the government, that one gets investments and the public politics advantageous (profitable) for this monopoly, and vice versa. This is the reason why an extreemly furious fight sparkles between monopolies in the capitalist states to capture the state machine, to share portfolios in the government.

On this basis, we may assert that under capitalism the State Capitalism is a form of adaptation of capitalist production relations to a new level of development of productive forces, it is a result of process of socialization of production, he does not open a way out for this process, does not solve contradiction between the vital demands of socialization of production and narrow interests of capitalist class. These contradictions do not allow to realize socialization of production in the scales of the whole society.

Therefore in 1970-1980s there happened a long structural crisis. Again the capitalism finds new forms of adaptation to avoid economic difficulties of crisis, simultaneously to utillize the best technique and technologies in the process of economic development. That is a process of trans-nationalization of capitalist production.

The level of socialization of production at this time overpasses state boundaries and goes for internationalization. This is the most deep reason for emerging of multinational and transnational companies.

The principal reason of origin of multinational companies is the advantages of global production and distribution network. This comparative advantage grows more when daughter’s companies integrate horizontally and vertically.

Through vertical integration, any multinational company can reliably take over the deliveries of necessary raw material and semi-products from abroad and to overcome usual obstacles on foreign markets.

Horizontal integration of daughter’s companies allows multinational companies to create the best service and distribution network. Multinational companies have monopoly right to access to energy resourses, they can adjust their products to any local specifics and to maintain and improve the quality of products.

Comparative advantages of multinational companies also base on the system and structure of production organization, financial sphere, researches, acquirement of market information, etc. This anables them to win in labor division and product specialization against local companies in many countries.

A multinational company with its “daughter” company integrated into a foreign country usually has better conditions for expansion of international capitalist market as compared to pure national companies. Multinational companies have a lot of favourable terms for regulation of investment environment, and they also work better than pure national companies.

Multinational companies implement more instruments to avoid a failure in their production and business resulting into higher income as compared to pure national companies.

Nevertheless, along with these advantages, the foundation and activity of multinational companies also brings a lot of thorny problems both to investor countries and countries-recipients of investments.

For countries-investors

The most considerable affect to an investor country is reducing of jobs inside it as a result of direct investments abroad. Unskilled and semi-skilled types of labour are not needed inside the country, as labour cost is cheaper abroad. Exactly for this rason trade unions in countries with multinational companies oppose direct investments in foreign countries.
The export of high technics is co-ordinated with enterprises in foreign countries in collaboration for maximum profit, and if possible for favorable amortization of technics of investor country. However, nowadays, multinational companies incline to concentrating high-tech research inside their country, keeping front-rank technique for themselves. But this fact, from the other side, is unfavorable for the countries attracting investments with the purpose of importing high-tech.
Income re-investment of foreign “daughter”-companies, in fact, is none other than a loan in the local country, but without interest payment. If capital interest rate in an investor-country and in the local country are equal, the government won’t get a single dong if a multinational company transfer its profit to its home country.
And last, the growth of multinational companies on the international capitalist market can destroy the home money policy and complicate even more the country-investor’s government work on economics management.

For the countries-recipients of investments

These countries are affected in many spheres:

In economics: Multinational companies dominate in the economy of countries-recipients of investments. For example, in Canada: more than 60% of capital in machine-building industry is own by foreign states or managed from abroad, 40% of it belongs to the USA.
In a polics: Daughter companies of multinational companies usually unwillingly export goods to the countries unfriendly to their governments. In a number of cases multinational companies even forbid their daughther companies to export their products to countries unfriendly to them. The multinational companies of America pursued such a policy in relation to Vietnam previously and in relation to Cuba now.
In finances: More money borrowed from multinational companies – the greater difficulties arise in financial situation of the countries accepting investment. Foreign debt constantly grows causing inflation grow – economic and financial dependence on a foreign state becomes stronger.
In technique: Generally speaking, for the sake of national interest, multinational companies usually export old-aged or middle level technique, technologies and equipment strongly contaminating environment, especially to developing countries, but keep a front-rank technique and technologies in their country. This results into permanent dependence of the countries-recipients of investments.
In profit: Multinational companies can get enormous profits from the countries-recipients of investments.

Thus, State Capitalism under capitalism has both a great number of positive aspects and a lot of hard problems which the capitalism itself is not able to solve.
The brightest sample of monopolistic State Capitalism is present in 7 the most developed capitalist countries – England, USA, France, Germany, Italy, Canada and Japan dominating almost all the world economy.

State Capitalism is In Developing Countries

Due to national liberation movement, former colonial countries won national independence. Some countries entered the way to socialism under the rule of Communist Parties, others follow a capitalist or non-capitalist orientation. In spite of different political orientation, they have a common denominator – this is permanent aspiration to get off from imperialistic dependence, to defend independence of their country. It is an important term for mutual cooperation of these countries in economic, social and cultural spheres for the sake of stable existence and development.
There appeared a new economic phenomenon in the economics of these countries: State Capitalism in developing countries where power does not belong to the working class. In fact, State Capitalism of this type is existing in many forms: joint venture with foreign capital, special economic zone, export-processing zone, zone of high-tech industrial investments, joint stock associations with share package controlled by the State, etc. Of those forms the most important is creation State enterprises. They are enterprises owned and managed by the national State.
There are existing thousands and thousands of State enterprises in many different forms mostly grouped in two basic ones:

First form –

The enterprises of the State capitalist ownership are being created via nationalization of enterprises owned by foreign capital and via building new enterprises from the State budget.

Second form –

The State acquires the controlling interest (controlling share package) in a stock association or creates a joint venture with a foreign company to set up direct control over a separate private enterprise.

In 1950-60-s, when colonial countries were getting rid of colonialism and taking the power and economic property from the hands of foreign capitalist colonialists, nationalization was the most widely used.
As foreign capitalist companies brought their capitals to colonies mainly for to plunder natural resources and exploitate a cheap labour force, so the most of the recently nationalized enterprises are operating in raw materials extraction sector.
National states consider these enterprises to be important elements of their economies, to be in state’s direct possesion in the form of state enterprise.
Since 70-s, the newly independent national states started building new state enterprises, mainly in processing and engineering industry, infrastructure and services, that, in the sectors considered as strategic and key ones, this is to guarantee their real economic independence and basing on their own force. As a result, at present, in the developing countries the state sector of economy occupies an important place not only in extractive industry but also in other sectors of industry and services.
Before the 60-s, almost all state enterprises in developing countries were of small and medium size, however there are many big ones, too.
According to the real estate size criterion: 3 biggest companies of Brazil, 9 biggest companies of Indonesia and 2 from 3 biggest companies of Mexico are the state ones. From point of commodity turnover: in South Korea 12 from 16 biggest companies belong to the state. Some companies of developing countries became transnational, for example, Iranian oil company, mining company CVRD and oil company Petrobas in Brazil. According to data from «Forchun» magazine (USA), in 1978, of 500 biggest world companies without USA 34 ones are state enterprises of developing countries. [37]
The creation of State economy in developing countries is an objective demand in macroeconomic management. The United Nations’ 1985 Report on the world social situation mentions that state enterprises have been created almost in all the countries of the world [36]. This fact testifies that State enterprises are the general phenomenon in the modern world economy; the macroeconomic management requires the growing role of the State in economics. The scale and the level of state enterprises’ activity in different countries differ depending on each country’s conditions. State enterprises in developing countries are a form of the state capitalism, this is its progressive historical role.
Developing countries are building State sector of their economics as they consider it as the most effective instrument for industrialization, modernization and impruvemnet of political and economic independence. In his report at the conference on private sector development (Singapore, December, 1987), Doctor Sedzhi Nayya, director of Academy of natural systems of the “East-West” Center (Honolulu, Hawaii), underlined that «after the second world war, political independence aquired by many countries urged them to aspire an economic independence. A speed-up industrialization of economy was considered as a key to development, a centralized planification and centralized possession of the key sectors was considered as the fastest and the most effective way to independence in politics and economics» [38,4].
The development of the State sector of economy can create a ponderable source of accumulation, here, in the State sector, it is possible to quickly apply scientific, technique and technological achievements, while the private sector is not yet capable to do it, in the backwardness situation.
In social and political spheres, the State sector of economy can help developing countries to solve the problems of employment, state sovereignty defence, profit redistribution, development regulation of sectors, regions and different population strata, to support collaboration and mutual help for the sake of common interests of the country, to limit the concentration of power in the hands of a small group of people.
There are different estimations about the role of the State economy, however, we see here another model of State Capitalism of new type, as the state here is neither a state of workers and peasants nor of monopolistic capitalists, but it is a national bourgeois state. This type of state capital plays an active role in technical development and reformation of economic structure, in industrialization, modernization of the country, in strengthening of economic independence from foreign monopolies, in maintaining the state sovereignty.
In developing countries, along with the State enterprises there is also applied the State Capitalism analog to the developed capitalist countries, when state administration combines with the market system.
For example, the developing countries who applied the State Capitalism simultaneously in two above mentioned forms are South Korea, Indonesia, Malaysia, Singapore and others.


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