revolutionary reflections | Notes on Capital and the State: part 2


Pavel Filonov’s Formula of Spring. Image: Sveta Bogomolova/Flickr

In part one of Revolutionary Reflections’ serialisation of Colin Barker’s 1978 essay, Barker scrutinised the framework for understanding the position of the state in capitalist society inherited from the writings of Marx and Engels. He observed that in the work of many theorists in the Marxist tradition “a rigid conceptual distinction is maintained between ‘state’ and ‘capital’”.

In this second part Barker took up his counter-thesis that “the state can itself be a ‘capitalist’, in the sense that the state institutions can directly become the ‘conscious bearer’ of the capital-relation, that the state can have as its direct object of activity the social process of capital production and reproduction within a national sphere”.

The culmination of this discussion is his analysis of ‘national capital’. Whilst one of his reference points, Soviet Russia, has disappeared, there is much of contemporary relevance in this discussion. Both splits within the British capitalist class and their political representatives over Brexit and Shadow Chancellor John McDonnell’s alternate economic strategy can be viewed through the prism of Barker’s deliberations. At a global level his analysis throws light on how we should view debates within a failing neoliberalism between ‘free trade’ and neo-protectionist policies.

The piece opens with a discussion of Marx’s distinction between ‘productive’ and ‘unproductive’ labour, which has direct relevance to contemporary discussions of social reproduction theory, and debates on the left around decommodification.

This document was written as a contribution to a debate within the International Socialists/SWP in which Barker’s main discussants were the late Chris Harman and Mike Kidron, and it is the latter’s analysis of state enterprises that Barker takes aim at in his reiteration of Marx’s use of the terms ‘productive’ and ‘unproductive’ labour. 

The third part will appear in a fortnight.


The editors of Revolutionary Reflections mourn the loss of Colin Barker, who died this week. In honour of his memory we dedicate this piece to him, his family and the generations of revolutionaries he had personally inspired. Für Ewigkeit.


Theories of productive and unproductive labour

Marx’s position on the question of the distinction between ‘productive’ and ‘unproductive’ labour was relatively unambiguous. The productive worker was, for Marx, the worker who, through his labour, directly produced use-values for capital which embodied surplus-value. The worker producing use-values as commodities for capital produced surplus-value. The use-value element in the production of a commodity included not only its ‘making’ but also its physical transportation to the consumer or purchaser, for the labour of transportation of the commodity was itself part of the commodity’s social production process.

Other labour, whether employed by capital or the state, or not employed at all, was unproductive. Thus, labour employed in the circulation of capital (that is, in the transformation of value from the commodity-form to the money-form and vice-versa), and in the transposition of the ownership of value from one possessor to another was unproductive. For this labour produced no additional surplus-value, even though it assisted capitals in their realisation of surplus-value as profit, interest, rent (and, in the case of the state, tax). Therefore, labour employed in the sphere of ‘simple commodity production’, in which no surplus-value is produced, is also unproductive. The labour of the worker and their family, labour which is concerned with the reproduction of labour-power, while entirely necessary, does not in itself produce surplus-value, and is thus unproductive. Also unproductive, for the same reasons, is the labour of state workers in the welfare and education spheres, since surplus-value is not produced there. In short, the ‘necessity’ of labour is anything but equivalent to its ‘productiveness’. Only that labour is productive which is expended as a result of the exchange of labour-power for variable capital,1 i.e. that labour which is directly engaged in the production of surplus-value under the command of ‘productive’ capital.

Marx’s criterion of productiveness of labour is clearly nothing to do with any judgement, moral or otherwise, about the usefulness or necessity of a particular form of labour. And the emphasis in his account of productive labour falls quite clearly on the production activity itself, on the capitalist labour process as a process of surplus-value production and its place in the total system of capitalist reproduction. Marx’s concern is not with the form in which commodities, once produced, are consumed. Thus, Marx’s treatment of the question of productive and unproductive labour is distinguished from the essentially ethical account of the question given by writers such as Paul Baran and Paul Sweezy, and from the ‘consumptionist’ approach of, for example, Mike Kidron.2

Baran’s approach is to treat ‘productive labour’ as the form of labour which would still be found in a ‘rationally ordered society’, while ‘unproductive labour’ is that labour concerned with producing goods and services the demand for which is attributable to the specific conditions and social relationships of capitalism. Such an approach risks running into mere moralism, and is unhelpful in defining the specific character of productive and unproductive labour in capitalism itself. The criterion of ‘productiveness’ is an essentially normative one, through which the analyst decides – in what must of necessity be a rather ad hoc manner – which activities, goods and services will be required in a ‘rationally ordered society’. It fails to specify the criterion of ‘productiveness’ within the capitalist mode of production, and thus lacks the historical specificity of Marx’s concepts.

The consumption-led approach to the productiveness of labour

Kidron’s treatment – which appears to have been critically discussed only by Harman3 – has some affinities with a position initially elaborated by Paul Bullock and David Yaffe, but since abandoned by them. Kidron correctly suggests that the standpoint from which we must judge the productive or unproductive character of some form of labour is that of the system as a whole. There is no quarrel with this abstract beginning. Were we to attempt to characterise the ‘productive’ or ‘unproductive’ character of labour from the standpoint of an individual capital, or from the standpoint of the family, etc., we should first have to determine where the labour we were concerned with stood in relation to the movement of value in the whole system. Labour involved in the sphere of circulation, for example (in banking, insurance, mercantile activities, etc.) is not productive, any more than labour engaged in the collection of rent or taxes is productive. Only the whole movement of capital gives us a standpoint, for the general determination of the boundaries of productive and unproductive labour.

It is, however, one thing to agree with Kidron in the abstract that the starting point for discussion of this question must be the totality of capitalist relations; it is another thing to accept his actual criteria. For, in Kidron’s account, only that labour is productive which produces ‘surplus used or usable for the expansion of capital’, a formulation involving a breach with Marx’s own (and better) formulation. The difference is immediately apparent in terminology: where Marx insists on the production of surplus-value as the criterion of productive labour, Kidron’s criterion is the production of surplus.

For Kidron, productive labour is labour which produces certain kinds of use-value outputs, and his real criterion of the productiveness of labour is not the labour itself, but the uses to which its output is put by its consumers. Thus, on the one hand, he excludes from the sphere of productive labour all labour performed in ‘luxury’ or ‘waste’ industries – unlike Marx. On the other hand, he includes within the sphere of productive labour the work of doctors, social workers, teachers, homemakers, etc. – if those they service are themselves ‘productive’. What Kidron does is to run together the concept of ‘unproductive labour’ with that of ‘waste production’, the concept of ‘exchange value’ with that of ‘use value’ and the concept of ‘production’ with that of ‘consumption’. Thus, he arrives at the following curious result: food is produced productively if consumed by productive workers, is produced unproductively if consumed by bank clerks or arms workers. A worker is productive or unproductive according to who consumes his output and how it is consumed. Thus, consumption determines the productiveness or unproductiveness of labour.

Surplus-value as the key to productiveness

The alternative position, which is closer to that of Marx (not that this in itself makes it more correct, but it has the additional merit of greater coherence), treats the question strictly as one concerning the production of surplus-value, without regard to the form of its (later) consumption. In this view, some of Kidron’s ‘productive’ activities are clearly unproductive, e.g. housework, education, health, etc. The characterisation of these activities as unproductive involves no implication that they are unnecessary. They form part of capital’s ‘general conditions of production’, while not being in and of themselves productive of surplus-value. The worker who washes her face and eats toast in the morning before going to the factory engages in necessary labour; she does not thereby produce surplus-value4, but merely reproduces her labour-power, ready for exploitation. Similarly, if her partner produces a meal for her, they carry out labour which – from the standpoint of the development of social relations within capitalism – is necessary labour, but does not thereby produce one jot of surplus-value. Surplus-value is only produced, labour is only productive, under the direct dominance of capital (including the dominance of a state where the state is capital).

The teacher in the state school, who teaches the worker’s child so that the child might later offer themselves for exploitation by a capitalist employer, does not thereby produce surplus-value. The teacher contributes, certainly, to the value of labour-power, but labour-power in itself is a commodity which embodies not a shred of surplus-value. The circuit within which labour-power is reproduced is not the circuit of capital (M – C – P… – C’ – M’), not the circuit of the self-expansion of value, but is a circuit of simple reproduction (M – C – P… – C – M). In this circuit, wages are spent purchasing the means to live, which are worked on in the act of consumption, thereby reproducing the commodity labour-power which is again offered in exchange for wages. The production of labour-power is not, in itself, an act which is productive of surplus-value for capital. Labour-power is produced and repaired by the individual worker, by the worker’s family, by various state agencies, more or less indifferently: labour-power is reproduced amongst the unemployed as well as among the employed, among the unproductive as well as the productive workers, etc. Of course, the wages spent by the worker are a sphere in which capital is interested, as a sphere for the possible realisation of money-profits. But the moment of realisation of surplus-value as profit is not the moment, logically or temporally, of its production.

The status of industries producing luxuries

If some of Kidron’s ‘productive’ activities are unproductive, it is also the case that some of his ‘unproductive’ activities are productive. The key issue here is that of the production of armaments or more generally of ‘luxuries’ (goods which in Marx’ schemes of reproduction in volume 2 of Capital appear as Department IIb, and are commonly referred to as Department III). Luxury industries are industries producing commodities whose use-value form does not re-appear in the circuit of capitalist reproduction as either means of production or means for the reproduction of labour-power. They are not raw materials or machinery or buildings purchased by capital for further productive activity, nor are they goods purchased by workers for their own consumption and for the reproduction of their labour-power. ‘Luxuries’ are consumed by the capitalist class itself, unproductively and once produced they do not re-enter the circuit of capital. The significance of ‘luxury’ production, specifically its general importance in the whole process of capitalist expanded reproduction in the form of nation-state armaments, is something whose significance has been fairly extensively discussed, by Kidron and others, in relation to the theory of the ‘permanent arms economy’ (which I shall come to in part three).

Kidron’s argument is that production in these spheres does not produce a ‘surplus used or usable for the expansion of capital’, and hence labour employed in this sphere is not productive. Here again he appears to confuse production and consumption. It is not, we should insist, the form in which surplus-value is consumed which defines labour producing it as productive or unproductive, nor is the basis of the distinction between the two kinds of labour to be found in the character of the use-values produced by the combination of labour and means of production in the capitalist labour-process. Luxury production is the production, under capitalist conditions, of commodities embodying surplus-value, and that surplus-value enters the common fund of surplus-value which is the collective property of the whole capitalist class. Certainly, in use-value terms it is a branch of production which produces goods which do not re-enter the circuit of capitalist production for purchase against either constant or variable capital in the next cycle of production. In that sense, it is certainly ‘waste’ production, a ‘robbery perpetrated upon accumulation’. But to assume, as Kidron does, that the labour is itself unproductive, namely unproductive of surplus-value, is to abandon the ground of Marx’s critique of the capitalist mode of production in favour of a conceptual scheme more aligned with the classical economist David Ricardo.

For one thing, the surplus-value produced in the luxury industries, which enters the collective property of the capitalist class, may well, as money-capital, be re-invested in a subsequent circuit of production as productive capital, as a combination of constant and variable capital.5 Profits made by luxury producers themselves may be re-invested in all manner of forms of production and consumption. Kidron provides no argument – as he could hardly do – for the assumption that workers in ‘luxury’ industries do not produce surplus-value, and that their employers do not realise profits.

Also, we must remember that the ‘use-value composition’ of the luxury industries is not stable. For the value of labour-power is itself not a fixed quantity determined by some biologically determined fixed subsistence level. It cannot be expressed in a fixed basket of use-values which workers must consume in order to reproduce their labour-power.6 Nor is the ‘basket’ something which simply grows over time in some kind of orderly progression. What is a ‘luxury’ at one time is, at another time, a necessity; further, there are goods which we might call ‘half-luxuries’ or which are as it were in transition from ‘luxury’ to ‘necessity’ status, and which enter into the composition of the value of labour-power differentially according to the specific concrete labour-power in question – skill differences, national differences, etc. are of importance here. Private cars, for example, are becoming necessities of working-class life. Electric light in the home, along with a domestic gas-supply, once a luxury, is now a necessity. Are we to argue that, over time, initially the workers in the industries producing these goods were unproductive and have now become partly productive? If we follow that logic, we should presumably determine some more or less arbitrary point at which workers in these industries are transformed from being unproductive to productive workers, when a ‘sufficient’ part of their output (10, 43, 74.568 per cent? 100 per cent?) enters into the normal consumption pattern of the working class. That would certainly be arbitrary, and very odd. How much more simple, coherent and consistent to treat workers producing luxuries as we treat all workers producing commodities under the dominion of capital, all workers producing surplus-value, as being productive workers. Then, separately, we can ask what becomes of the use-values they produce, by whom and for what purposes these use-values are consumed.

There is one point which perhaps requires emphasising, since it has been quite misunderstood, e.g. by Poulantzas. The purpose of the distinction between productive and unproductive labour is to enable consideration of the movement of value, its transformations, its self-expansion, within the capitalist mode of production. The distinction between productive and unproductive labour is not directly germane to a discussion of the limits of the working class. At the time Marx was writing, in the 19th century, the boundaries of productive and unproductive labour were, arguably, not dissimilar to the boundaries between the working class and the ‘middle class’ or the ‘petty bourgeoisie’.7 To be a productive worker, as Marx remarked, was a 19th century misfortune; equally, as Harry Braverman updates Marx for the 20th century, to be a worker is a misfortune. The computer operator in a petrochemical factory may be a productive worker, while the computer operator in a bank is not, and while the hospital porter is not. But the productive or unproductive character of their labours is not a basis for class division, nor does it provide any basis for discrimination within the working class considered as a political force, as a party in the class struggle. The productive or unproductive character of labour is, fundamentally, not a question of interest to the working class, but of interest to capital, for it is capital which is interested in the production of surplus-value. Indeed, a significant aspect of workers’ struggles is concerned with the expansion and maintenance of certain kinds of necessary but unproductive forms of labour. The criterion of distinction of the working class is fundamentally wage labour, not the uses to which labour-power is put by the capitalist class.

The state’s role in the reproduction of labour-power

There appear, in the light of what has already been said, to be two principal forms of unproductive wage labour within modern capitalism, one of the two forms having important inter-relations with the dominant form of unwaged unproductive labour, ‘housework’.8

The first of these forms is unproductive labour employed in the sphere of the circulation of value, where labour is employed to realise value for a particular capital or state or to protect it for one capital or state against the depredations of alternative consumers. Here we include workers in finance, insurance, credit, sales9, taxes, army, police, security-guards, judges, lawyers, prison officers, etc.

The second kind of unproductive labour is labour employed to reproduce labour-power, a commodity whose actual reproduction does not involve the production of surplus-value. Here must be included the activity of productive workers when they are not actually at work for capital (for their own consumption activities are, as Marx noted, also a production process through which they reproduce themselves), the work of home-makers, doctors, nurses, hospital porters, teachers and social workers, for example.10 The labour of these workers does not occur in the sphere of the circulation of surplus-value, but rather in the distinct sphere of the circuit of simple commodity production, the sphere of the reproduction of labour-power.

From the viewpoint of capital, the expansion of the welfare state – other things being equal – represents an expansion of the value of labour-power. It does in fact seem reasonable to treat the state provision of education, hospital and medical services, public library provision, etc. as part of the ‘social wage’, in the sense that the welfare state represents a highly developed, state-organised ‘truck’ or ‘company store’ system, through which a part of the cost of reproduction of labour-power is not left to the working class to spend directly through the wage-form, but is spent for the working class by the state in their interest, or rather, as the state perceives their interests in conjunction with its view of the interests of national capital reproduction. The use-values which make up the workers’ ‘basket of necessities’, which constitute the means of reproduction of labour-power, are not all subsumed under the wage-form. The state does not permit the working class to determine the entire pattern of its own consumption and reproduction: parents are required, for instance, to send their children to state-recognised schools. The state is, through the welfare state, a ‘national paternalist’, backed by extensive powers of sanction, which enforces a certain pattern of consumption on its domestic working class.

In Capital volume III, Marx showed that the relation between the individual productive worker and his individual employer is in reality a relation between the worker and the entire capitalist class. The worker who produces surplus-value under the direction of his immediate employer turns out in reality to be producing surplus-value which enters into the collective property of the whole class of capitalists, and which is shared out amongst the capitalists by a process of internal competitive struggle through which (a) values are transformed into prices, (b) a general rate of profit is formed, (c) the claims of finance and landed capitals are met, and (d) – a matter not much discussed by Marx – the tax claims of the nation-state are met. What appears to be the relation between the individual worker and his individual boss turns out to be a relation between the working class and capital as a whole.11 Similarly, to the extent that the state enforces taxation and uses the money thus collected to provide all manner of social services, the whole working class is forced to contribute to the costs of its own total reproduction, to the costs of maintaining and reproducing the reserve army of labour, the children, the old, the sick, etc., and to the cost of reproduction of the unproductive labour-power which contributes to the maintenance and reproduction of labour-power. On examination, the seeming individualised relation between the individual worker and the individual employer, between the individual worker-citizen and the state, turns out to be part of a collective, class relation.

There are limits set to the possibilities of the complete statification of the reproduction of labour-power. The welfare states, whose development has on the one hand undoubtedly been the product of workers’ struggles over a number of generations, cannot be viewed simply as a set of concessions wrung out of capital and its state by the labour movement, and cannot be seen simply as a ‘positive gain’. Not only because, as the cuts in welfare in the present crisis reveal, the ruling class are not willing to maintain the same level of concessions, but also because the forms of the welfare state are impregnated with the principles of the capitalist state, are shaped by the very process of class struggle through which they have been expanded. Workers, not surprisingly, do not view the welfare state as ‘theirs’. Rather, the relation of worker with the agencies of the welfare state is one dominated by the bureaucratic relation of the state to its subjects, by the removal of control of welfare state institutions from popular control, by the scrupulous suspicion that pervades the dealings of welfare agencies with their ‘clients’ (whether in schools, hospitals, claims for benefits, etc.). The welfare state is a highly alien sphere, whose very architecture declares its drab, alienated character, its miserable and limited pursuit of the ‘common interest’. Marxist historians are just beginning to write accounts of the welfare state’s various branches which take proper account of the tendencies to bureaucratic centralisation which have marked their development and extension. Certainly, from well before the New Poor Law, workers feared dependence on the state for the reproduction of their labour-powers, and for all too comprehensible reasons. A part of workers’ struggle under capitalism has thus always been a defence of the family form of reproduction – as Marxist Feminists have just begun to demonstrate.12

All forms of expansion of unproductive labour represent deductions from potential total surplus-value available for re-capitalisation in the ‘productive’ sector. On the other hand, the very existence of modern capitalism’s unproductive sector also depends on the production of sufficient surplus-value to maintain it, and its growth – if growth there has been – has depended on the expansion of the mass of the total surplus-value produced.13

The state as capital: productive labour in the state sector

It would be a mistake to treat all forms of state production as unproductive labour, merely because of the fact of state ownership of the relevant means of production. The state can be a capitalist, and a productive capitalist. The obvious case is the nationalised industry sector in Western capitalism, within which wage-labour is combined with use-values embodying state-owned means of production to produce use-values embodying both necessary and surplus labour, embodying surplus-value. At the same time, the state is a capitalist of a particular sort, whose character as capitalist is disguised by the state form.

It is sometimes objected that the state cannot be a capitalist, and in particular that the nationalised industries cannot be capitalist enterprises, because of the low or even negative rates of profit which they earn. This objection, however, confuses the surface appearance with the underlying real relations. In order to comprehend the place of the nationalised industries in the total process of reproduction of national capital, it is necessary to remind ourselves of the outline of Marx’s argument concerning value and prices, and concerning the formation of an average rate of profit.

In Marx’s account, the individual values of commodities do not coincide with their average prices, even though prices cannot be comprehended without reference to the value-form of analysis. If there were coincidence between values and prices, there would be no real possibility of the technical development, of the advance of the productive forces, which has precisely characterised capitalist history. For it is a crucial assumption in Marx’s account of the capitalist production process that only living labour can add new value to commodities. Machinery, land, raw materials, etc. add nothing by way of new value in the process of production; their value is, rather, transmitted through the labour process from one use-value to another, without change. Thus, other things being equal (for example, the rate of exploitation) the more labourers are employed by a given capital, the more surplus-value is produced. Furthermore, other things being equal, the lower the organic composition of a given capital, the higher the rate of profit in value terms. But the implications of that assumption are, clearly, that the masses of surplus-value produced in various branches of industry are not equal, and – in relation to the total outlay of capital – the rate of profit in purely value terms will vary quite considerably from industry to industry.14 The more ‘labour-intensive’ industry will tend to produce more surplus-value per unit of capital invested than will the more ‘capital-intensive’ industry. On this assumption, and if that were all there were to the story, capital would never flow into the less profitable and more capital-intensive branches of industry, and capitalism would be marked by permanent technical stagnation. Such a theoretical conclusion does not, obviously, match the actual history of the capitalist mode of production, whose chief historical merit in Marx’s eyes was precisely its massive development of the productive forces.

A systematic deviation between values and prices is thus a necessity for capitalist production as a whole. Marx’s argument, crudely, is that all the surplus-value produced in all the various branches of production enters a common fund which is the collective property of the whole capitalist class. This fact of common property in surplus-value is what gives the capitalist class as a whole a collective interest in the rate of exploitation of the working class in the whole productive sector of capitalism. The distribution of that collective fund of value amongst the various capitalists is determined by competition between the capitalists. And, broadly speaking, the outcome of that competitive struggle amongst the capitalists is that each capital gets back a proportion of total surplus-value in the form of profit, its proportional share being determined not by its contribution to the collective fund but by the total size of its capital outlay. Thus, the more ‘labour-intensive’ industry produces surplus-value a part of which is transferred through the competitive process within the sphere of circulation to the more ‘capital-intensive’ branch of industry; thus, the worker in an industry with a low average organic composition of capital actually labours to produce profits for capitalists in industries with high organic compositions of capital. Through this competitive process, an average rate of profit is formed across the whole of the capitalist production process.

Nor is this the end of the story, for total surplus-value is distributed not only among the capitalists whose production processes contribute surplus-value to the collective fund, but also among other capitalists whose claim to a share rests on the possession of capital in other forms: finance capital, landed capital. Thus surplus-value is divided not simply into various shares of profit, but also into interest and rent, which represent the claims of ‘non-productive’ capitals. Though Marx has much less to say about this, it is also clear that it is at this point, when the collective fund is being distributed, that the state also steps in with its particular claims which it takes out in the form of taxes. Just as the landlord can press a claim to a share of total surplus-value on the grounds of their monopolisation of land, so the state’s monopoly of force permits its claims to be met as well. The various costs of the state are thus met out of this collective fund of surplus-value.15

The profitability and productivity of state-owned industry

However, to the extent that the state owns productive capital, as with nationalised industries, it contributes to the collective value-fund as well as deducting from it. At the same time, its monopolistic position – founded finally in its ability to use force, to collect taxes – permits the state to organise the pricing of its products in such a way that it appears that they are simply unproductive, simply ‘loss-makers’. The state’s ability to tax gives it the power to obtain constant and variable capital by other means than through the price-mechanism.

The implication of the price-mechanism is, of course, that those who actually use (consume) a particular commodity provide the capital producing that commodity with the money that can be reconverted into further constant and variable capital in production. Non-users make no contribution. The state, on the other hand, is able to enforce payment for its outputs on non-users, or (merely a variation on the same theme) to enforce payments for its output which are disproportionate to their use. And commonly we find nation-states relying ultimately on their monopoly of force, altering the domestic price structure, and altering the flows of surplus-value. Thus, state railways commonly make ‘losses’, in that their monetary revenues from passenger and freight services do not match their monetary outlays, but this does not imply that they therefore cease to operate. (Though, in the hands of private capital, which generally lacks the ability to tax, they would cease to operate, as they would fail to attract further capital.) What happens, of course, is that the capital required for the maintenance of the railways, and for their ‘modernisation’, is provided by the state, through its peculiar powers.16 The implication is that those who directly use the railways are not the only providers of their money-capital requirements.

In Britain, certainly, it is notable that with the possible exception of the Inland Waterways Board the nationalised industries have invested massively in the development of the productive forces under their command, and despite their ‘low profitability’. Clearly, the financial resources to enable all the modernisation investment that has been undertaken in the electricity supply industry, in gas, in the railways, the coal-mines, has not been secured by the price-mechanism alone. In addition to the revenues raised by these industries through direct sales of their products, they have also depended on the state’s ability to provide them with investment capital in other ways: through the writing off of losses, through loan-capital, through tax-raised monies, through various kinds of financial subsidy, etc. All this money raised by the state, by whatever means, and used for these investment purposes must surely be viewed as a portion of total surplus-value extracted from capital’s collective fund and redistributed through the state’s coercive ability to define, and enforce, a ‘common interest’ for ‘national capital’.

On the whole, within Western capitalist countries, the nationalised industry form is used by nation-states in situations where, for whatever reason, (a) the rate of return obtainable by a particular branch of production or capital is insufficient to guarantee the continued investment of private capital (where the only means of ‘making a profit’ is via the price mechanism) and (b) where, for whatever reasons, the state judges that the continued provision of the use values produced in that branch of production or capital is in the ‘national interest’. The state, with its particular powers, takes over the financing of capital in that sector, and to a greater or lesser extent shifts the locus of realisation of value away from immediate purchasers of the use values produced onto the whole national capital or some other parts of it.

Nationalisation of this or that capital cannot be said to be in the interests nor against the interests of capital – either of ‘capital-in-general’ or of whatever is defined as ‘national capital’. Some individual capitals benefit from nationalisations, others lose out; some receive new money capital in the form of compensation (if this is paid), some do not; some benefit, in that the state effectively forces other capitals to meet part of the costs of their material inputs, some subsidise more than they are subsidised; some benefit from the maintenance in the nationalised industry of a market for their own output, others do not; some meet the maintained nationalised sector as a competitor, some meet it as an alternative vendor seeking their custom.

It should also be clear that formal, legal nationalisation is by no means the only process to which this kind of analysis is appropriate. To the degree that a nation-state subsidises any capital, it also interferes in the price-formation process, and thus interferes in the movement whereby value is distributed between alternative competing realisation possibilities. What seems to have been a marked tendency towards greater state intervention in investment, pricing, etc. means that the various nation-states have become increasingly prominent actors in the determination of the flows of value within national capitalist markets.

In the case of a national economy like that of the Soviet Union, the internal market plays only a very small part in the determination of prices. In such a case, the formation of prices is removed a good distance from the processes discussed by Marx in his account of the transformation of values into prices, and the need for a developed account of the tax-form becomes especially apparent. If the Soviet Union, where effectively all means of production17 are in the hands of the state, represents the extreme point of development within a national economy, there are clearly significant shifts in this direction also manifest within Western capitalist countries.

In Western capitalism, the nationalised industries, together with the ‘semi-nationalised’ sector of state-subsidised industries, are to be regarded as a sector of productive labour. In this they are to be distinguished from the rest of the state sector, which is a sphere of unproductive labour. That is, the nationalised industries not only consume value produced elsewhere, but also add to the collective fund of capital their own contribution of surplus-value. But they represent, generally, a sector of capitalist production which – for a variety of historical reasons – has proved incapable of realising sufficient surplus-value to engage in the investment or modernisation deemed necessary by the state in the ‘national interest’. The prospective rate of profit which might be earned on their assets has not been sufficient to induce their private (or municipal) capitalist owners to invest in their future to the degree deemed necessary by national government. It is not possible to treat these industries as ‘infrastructural’ or simply as part of the ‘general conditions of production’, for they are too diverse to be thus neatly categorised. Even if we can slot industries like gas, coal, electricity, rail, the Post Office and steel into this kind of neat categorisation, examples like Rolls Royce aeroplane engines, or British Leyland (or indeed Volkswagen or Renault) just do not fit so easily into such an over-tidy framework.

Two important general observations, of course, need to be made. They are interrelated. The first is that however much state intervention may affect the pattern of domestic national prices, and however much it may affect the distribution of value between competing realisation possibilities, the law of value still operates overall. A change in the distribution of value from one possible destination to another does not, in itself, add one iota of additional value to total capital. The general level of the rate of profit is not altered by its redistribution. Any inherent tendencies within capital in general, such as the tendency for the rate of profit to fall, are in no way overcome.18 The fact that this or that nation-state becomes directly or indirectly involved in the actual process of surplus-value production, or alters the distribution of value within its sphere, does not alter one whit the general laws of motion of capital, which continue to operate ‘behind the backs’ of the producers, including state producers.

The external relations of states

State interventions in the distribution of surplus-value, of the kind involved in nationalisation and subsidisation, do represent a form of capitalist ‘socialisation’ of production. As socialisation, of course, it is inherently limited by its capitalist form, and by its national character. Such socialisation is carried out, not in the interests of ‘production’ in general, nor even in the interests of ‘capital in general’, but rather with a view to benefiting those parts of total capital which operate within the national orbit of the state. The costs of running these industries, insofar as they are not covered by receipts from direct sales, are borne by the rest of the national capitalist class, and appear as deductions from their (potential) revenue.

For we need to remind ourselves of the merely national character of the state. There is an apparent tendency in Marxist theorising about the state, and about phenomena like capitalist imperialism, to treat the external relations of states as factors to be added on to analysis as a mere after-thought. Put another way, there is a tendency to treat the world market as a sum of a set of national economies, rather than treating the world market as the analytical starting point for a discussion of the nation-state.19 The world market, intended to be the subject of Marx’s last planned volume of Capital, is not something as it were extrinsic to capital, but is rather implied in the very concept of capital itself:

“… just as capital has the tendency on the one side to create ever more surplus labour, so it has the complementary tendency to create more points of exchange; i.e., here, seen from the standpoint of absolute surplus-value or surplus labour, to summon up more surplus labour as complement to itself; i.e., at bottom, to propagate production based on capital, or the mode of production corresponding to it. The tendency to create the world market is directly given in the concept of capital itself. Every limit appears as a barrier to be overcome.” (Marx, Grundrisse, Penguin, p. 407-8)

The formation of capital from the beginning, as the basis of the capitalist mode of production, implied and was contained in a developing world market, within which nation-states were formed and differentiated. The formation of a world market (whose geographical reach need not – as Immanuel Wallerstein recently pointed out20 – initially be genuinely global in scope) implies that the processes discussed above, through which values are transformed into prices through the competitive interaction of capitals, occur not merely on a national but on a world market level. Not only that, but it is through the world market that ‘socially necessary labour time’ is determined for any particular commodity: i.e., it is through the world market, and the competition of capitals therein, that the production process of this or that capital is declared or not declared ‘necessary’. It is simply astonishing how easily this elementary and important idea is forgotten or not grasped, both by bourgeois and Marxist theorists.21 Through the movement of value within the whole world economy, limits are set to the possibilities of nation-state interventions in capitalist production and realisation. This elementary notion is forgotten by those, including most of the Keynesian tradition, for whom ‘full employment’ or any other desirable condition of the national economy can be simply provided if the state pursues the ‘correct’ policies. In practice, no nation-state can have the degree of leverage required to produce the desired result in its own segment. Properly, analysis of the world economy should be the starting point for the analysis of the nation-state.

The revenue of nationalised industries

Rather generally, we can suggest that the formation of substantial state capitals in all the countries of Western capitalism represents a particular kind of response to the tendency for the rate of profit to fall. That tendency itself is felt anything but evenly across the whole of capitalist production. Where the tendency appears in the shape of a crisis in the fortunes of this or that branch of national production and the state steps to the rescue, the effects of state intervention are not so much in the direction of a reduction in the tendency of the rate of profit, not so much of an offset to the tendency, but rather a method of displacing its manifestations.

Whatever the precise means the state uses to raise the revenues required by ‘its’ sector, it tends to shift the burden of maintaining its industries from the immediate users of the industry’s products and onto the shoulders of all those capitals within its tax-reach. Each specific method used by nation-states to rake in surplus-value from the collective fund of capital will have its own specific effects on other capitals. Thus, rather cautiously:

  • If the revenue of nationalised industries is raised directly, through prices, the users of their products will pay for the capital investment in the industries concerned. There will be positive and negative benefits in this for various capitals, depending on their degree of use of the nationalised industries’ outputs.

  • If the revenues are raised by taxation, the effects will be felt by capitals and by labour, depending on the form in which taxes are levied. Either the tendency will be to lower the rate of profit in the national market (if taxes are levied on capital), or the general value of labour-power will be lowered (if taxes are levied on wages), or there will be some combination of the two.

  • If revenues are raised by borrowing in financial markets, the state will – to the degree that it borrows – tend to reduce the mass of total credit available for other capitalist purposes. The effect may be to raise the general level of interest, thus contributing to inflation and to the difficulties of other capitals (and to the difficulties of the working class).22

  • If the revenues are raised by the state through some means or another of printing additional money, i.e. through depreciating the national currency, the effects will be generally inflationary, and will tend to have negative effects on the exchange rates of the national currency and thus on the balance of payments.

The general effect of nation-state ‘propping up’ of industries that cannot realise sufficient surplus-value to finance their necessary capital investments must be to reduce the general rate of profit across the national capital. To the degree that capital invested in these sectors is spent on labour-saving modernisation, indeed, the effect will tend to be more marked. For while the rate of exploitation in these industries will tend to rise, the rate of profit there will tend to fall still further, with the effect therefore of further pulling down the national rate of profit. The usual ‘offsets’ will of course also apply, however, in that (a) to the degree that the output of these industries enters into the determination of the value of labour-power, the rate of exploitation elsewhere can be raised; and (b) to the degree that higher productivity in the nationalised sector reduces the cost of constant capital inputs to the rest of capital, the organic composition of capital will be held down. Both movements – towards lowering and towards raising the rate of profit – which are contradictory in their general effects will tend to be felt. In this, of course, there is nothing peculiar about nationalised capitals by comparison with private capitals.

In general, capitalists in the private sector have an interest in the rate of exploitation in each others’ industries, given that they all share in the total surplus-value produced. So too in their relations with the nationalised industries: their interest is clearly in the maximisation of surplus-value production in state industry, in the ‘efficiency’ of these industries as fields of exploitation of labour. All other things being equal, the higher the rate of exploitation in state industry, the greater the amount of surplus-value available for the capitalist class as a whole, for distribution by whatever means (e.g. by falling prices for these industries’ outputs, or reduced levels of taxation on capital, etc.). If the nationalised industries are ‘socialised’ capital, in the sense that the state runs them as capitalist enterprises for its ‘national capital’ as a bloc, the form of the labour-process within them, and the pressures on them to maximise the rate of exploitation, will be exactly the same as in the private sector.

The discussion of state industries in by Rosemary Crompton and Jon Gubbay in their Economy and Class Structure (Macmillan, 1977), a book produced broadly within our own traditions of analysis, distinguishes between ‘capitals’ and ‘quasi-capitals’, with nationalised industries tending to fall into the latter category. A ‘quasi-capital’ is an enterprise that “does not appropriate surplus value but seeks surplus product as if it were surplus value” (Crompton and Gubbay, p. 102).

While there is much of value in their book, I do not find this way of distinguishing between kinds of capital very fruitful. It seems to rest on a confusion between ‘value’ and ‘price’. They write:

“… insofar as state enterprises are subsidised, cartelised and coordinated, their prices are determined to that extent by central authority rather than by the market; since each enterprise’s products are not pure commodities, surplus labour is not appropriated entirely as surplus value.” (ibid, p. 109-110)

It seems appropriate to suggest that the final part of this sentence could be re-stated, in much clearer terms, as follows: “surplus labour is not appropriated entirely through the normal workings of the price system.” No capitalist appropriates surplus-value ‘entirely as surplus-value’, outside the immediate process of production; the money which capitalists appropriate as profits is a mediated form of surplus-value, gained after and through the competitive process of realisation of value. The production and the realisation of surplus-value, as Marx remarked, are processes separated both logically and spatially, and they need to kept separate if we are to comprehend the particular place occupied by state-subsidised industries.

That doubt raised about Crompton and Gubbay’s book, it is also clear from a first reading that it is an important and path-breaking work in that it seeks to demonstrate the relevance of Marxist categories of analysis in a field where bourgeois analytical frameworks (especially those derived from Max Weber) have long held sway. It deserves careful and critical reading, as a very good basis for further theoretical development.

‘National capital’

State interventions in national production, whether in the form of the direct nationalisation of the means of production, or various indirect ‘semi-nationalisations’ such as state-subsidisation, tariff protection for certain commodities, legally instituted limits on rights to transfer capital, etc., imply the formation of ‘national capital’. How far can we take this notion of ‘national capital’?

If we look at individual companies, it is apparent that the practical pursuit of profit, the sine qua non of capital, the valorisation of value, is a highly uncertain activity. That, in order to survive, a capital must expand itself goes without saying, but how it shall achieve its own self-expansion is quite another question. Many of the activities to which companies devote resources are not even capable of being quantified in their effects, even after the event, let alone in advance of investment in them. Should the company devote resources to running its own research and development section? The ‘return’ on R&D is notably difficult to assess. Should it engage in extensive (and expensive) advertising of its products? Should it seek to motivate its employees to produce more surplus-value by building a sports pavilion or a new canteen? Will the introduction of computer-controlled machine tools actually have the effect of cutting overall costs, and in what sort of time-span? Will this merger, or takeover, or this closure, improve profitability? Each strategy for the company will have its relative advantages and disadvantages, each (perhaps) its proponents and opponents among management.

Within individual companies, a complex political process will determine the actual pattern of decision-making, the competitive strategy of the concern. The strategy chosen may or may not succeed, depending on (a) the strategies of other rival concerns and (b) the overall movement of capital and the way this shapes the demand for the concern’s products, the costs of it supplies, the combativity of its employees, etc.

The framework of understanding provided for us by Marx’s critique of political economy can help us to understand the ‘form-determinations’ that set limits to the possible strategies of companies, but understanding the form that social relations take does not, in and of itself, tell us the precise content of those relations, or the precise ways in which the ‘bearers’ of these social relations actually interpret them. The form of capitalist social relations forces the individual capitalists to pursue the ‘interest’ of the expansion of their capitals, but that in no sense implies that they must succeed in that pursuit, even in relatively favourable circumstances.

The point of these rather abbreviated remarks is to consider the meaning of a nation-state’s decision to nationalise or otherwise ‘aid’ a segment of industry. What we may say happens in such a situation is that a nation-state places itself in the position of the ‘directors’ of a ‘national capital’, and tries to decide what policies will best serve the ‘interests’ of that ‘national capital’. I place ‘national capital’ in quotation marks, since part of the process of decision-making involves deciding what the practical limits of ‘national capital’ actually are. A nation-state is defined, in part, by its possession of a monopoly of force over a particular segment of geographical territory, for it is as tied to land as was any feudal serf or lord. The various means of production which exist within and outside the territorial limits of the nation-state can, under various circumstances, and depending on government perceptions, be counted as part of capital or counted out of such a conception, Thus, for example, the plant and other facilities which legally belong to companies with their headquarters in other countries may, for certain purposes, be counted as ‘national capital’, and for other purposes they may be counted as ‘foreign’, ‘alien’.23 Similarly, the overseas holdings of the state’s own legal subjects may or may not be counted as part of ‘national capital’. In whatever way the nation-state perceives the shape of its ‘national capital’ for the immediate purpose, it must form its conception of ‘national capital’ in opposition to or in separation from the rest of capital, as against other ‘national capitals’. In a sense, what the nation-state asks is, does ‘British industry’ require a massive injection of new money-capital into its steel, coal, railway or nylon stocking production?24 Will those who currently direct that production themselves provide or raise the necessary investment capital? What are the consequences for ‘British industry’ of a major injection of new investment by the state into that sector or, on the other hand, of allowing that sector of ‘national’ production to run down? Should tariffs be erected to protect this or that branch production from overseas competition, and with what results for the rest of ‘national capital’?

Whatever the actual decision, it will have significant consequences for the rest of ‘British industry’, and of course for other ‘non-British’ capitals. State-provided capital investment must come from somewhere, out of the total collective fund of surplus-value available for all purposes within capitalism. The geographically limited tax-base of the nation-state means, in practice, that such investment resources must come from that part of total surplus-value that lies within the reach of the particular nation-state.25 All other things being equal, state direction of investment resources into a particular sector will tend to diminish the national rate of profit, and tend to diminish the mass of surplus-value available for reinvestment elsewhere. On the other hand, a decision not to provide capital for a particular industry will involve certain costs as well. The relative cost of production of the commodity produced by that particular sector may tend to rise. Or demand for that commodity may have to be met from other sources, including imports. The failure of investment in that sector may have serious consequences for other capitals who depend on it to provide them with a market for their products. And so on and so forth. Out of a complex set of pros and cons, the state is forced to decide a policy (deciding to do nothing is of course itself a state policy for national industry.)26

The determination of forms

It is clear, from the history of the relations between the state and capital both in Britain and elsewhere since at least the First World War that, with important forward and reverse movements, states have become increasingly ‘interventionist’ vis-à-vis their ‘national capitals’. ‘National capitals’ have become less and less notional, in the sense that large agglomerations of capital are being and have been formed around the nation states of Western capitalism, these ‘state capitals’ consisting above all of the formally nationalised industries (the actual legal property of the nation-state) and these industries whose continued existence depends on a degree of state subsidisation. The states have carried out forms of ‘vertical integration’ of a variety of sectors of production, collecting them together into statified ‘conglomerates’ with more or less integrated internal structures.

Very generally, we can see the growth of these state capitals as a manifestation of the contradiction between use-value and exchange-value which Marx detected within the form of the commodity itself. Capital, arising out of the money-form achieving independence as ‘self-valorising value’, is from its very form quite unconcerned as to the use-value aspect of production, indifferent to the production of necessities, even of its own material necessities.27 At this level of generality, we can see the formation by nation-states of their own capitals as in part state responses to the form of social relations over which states preside: a form of social relations in which the ‘use-value’ aspect of production enforces its importance on the participants in the shape of crises of disproportionality, crises in the rate of profit in particular sectors, etc. On the whole, state interventions in production occur as responses to crisis of one kind or another, and in this general sense are determined by the underlying form of capitalist social relations, in which the most important single mode of social regulation is via the blind laws of motion of the system, through the enforced reintegration of production and consumption, through crisis.

If ‘form determination’ posits the necessity and inevitability of crisis, it does not in any sense enable us to determine how crisis will manifest itself, nor how the participants in capitalist production will respond, what policies they will pursue, what forms of opposition they will meet with from within their own class or from opposing classes, nor what the outcome of the crisis will be. To understand those matters, the analysis of the movement of capital-in-general is totally insufficient. Rather, within the framework of a general awareness of the forms of capitalist social relations, we have to look for the concrete, historically specific determinants of actions. To construe Marx’s categories as adequate for the reconstruction of the actual, concrete course of historical development is to turn Marx’s theory into what the theorists of the Second International believed it to be: a mere mechanical system of concepts corresponding to a mechanically ordered universe of social life. It is to turn Marxism into passive reflection on the more or less ‘inevitable’ course of capitalist development; it is to abandon the need for political and ideological struggle; and it is to abandon the critical dialectical conception of the relation between ‘necessity’ and ‘freedom’ and in favour of a monistic historical process in which there is no longer of any point of insisting that people make their own history.

The form of immediate resolution of any capitalist crisis is not given in advance. It is rather, determined by the concrete course of the class struggle, a struggle in which not only do workers and capitalists fight to realise their ‘interests’, but so also, within the capitalist class itself, the proponents of different strategies for capital, various political forces and ‘interests’ in and out of the state system also contend with each other. Crisis implies a process of restructuring of the concrete relations between capitals and between classes, and thus also of the internal relations of classes and their organisations, their ideologies, etc. Faced with a crisis in profitability in this or that sector of production, nationalisation or state-subsidisation is only one possible response. Ruling class and state strategies are formed in the context of a whole series of considerations, as we have seen. Coherence of policy formation is not by any means to be expected in these circumstances; rather, ad hoc adjustments and decisions, reflecting capital’s essential anarchic planlessness, are all too apparent.28 Mike Kidron put the point well:

“It is difficult not to conclude that the state’s growth in size and economic effect has not been a direct result of pressure from either business or labour. While organised labour has, on balance, favoured state involvement and capital opposed it, nothing suggests that either attitude has had much effect on the actual course of events since the war. On the contrary, the state’s growth has been in a series of disjointed steps that bear every sign of not representing a coherent attitude working itself out in institutional form, but rather a series of ad hoc responses to short-term problems which could not be dealt with in any other way. Since the problems were shared by more or less all Western capitalist countries and their institutional arrangements were similar at the outset, it is not surprising that they adopted similar approaches and went through a similar course.” (Michael Kidron, Western Capitalism Since The War, Penguin, 1970, p. 24.)

Though even this is capable of being read too ‘economistically’ in two senses: first, in that it underplays the degree of ‘uneven development’ as between nation-states – witness the lower level of formal nationalisation etc. in the US economy, especially in the 1950s and 1960s; second, in that it leaves unexamined the ways in which ‘ad hoc responses to short-term problems’ could be dealt with in other ways – i.e., it leaves out the class struggle.

How should ‘national capital’ be organised? There is a permanent debate and struggle among capital’s ideologists as to the appropriateness of  ‘market forces’ and ‘planning’, over the desirable level of stratification for ‘national capital’, etc.29 That debate is paralleled within management theory in a general controversy over the desirability of centralised control and decision-making as against local managerial initiative and departmentalism within the individual capitalist enterprise. It is also mirrored in the post-Stalin debates in Eastern Europe over the degree to which ‘market forces’ should be permitted freedom of movement and development, given the effects of bureaucratically centralised ‘planning’ on waste, stagnation, etc.30 The issue in the debates is, which form of internal organisation of capital will prove most effective in terms of capital’s external necessity of responding to competitive anarchy in the world system? Certainly, the debate is not about capitalism versus socialism, but about forms of capitalist organisation and strategy, in which the various schools of thought emphasise particular aspects of the contradictory character of capital, without perceiving the totality. The actual effect of the ideologists on state policy-making is obscure; probably, they appear effective to the degree that their propositions represent actual class forces at particular conjunctures.

The problems of analysis arising from the growth of the state sector in 20th century capitalism are considerable. If, on the one hand, we reject that argument which suggests that the whole of the state sector is a sphere of ‘unproductive’ labour in the sense that it is a sphere of activity financed purely from revenue and which contributes nothing to surplus-value directly, we also have to beware of the opposite trap of treating modern capitalism as a more or less fully formed system of state capitals. In such a view, as presented in an essay by Kidron for example, the world economy is seen as fundamentally a system made up of an aggregation of ‘Soviet Russias’, with only the added complication that the boundaries of the integrated state capitals do not coincide with the territorial boundaries of states. For Kidron, if such a system is not yet fully formed, this is the tendency of development.

Such an approach, I suggest, involves treating the capitalist nation-state as a rather less contradictory phenomenon than in fact it is. In a sense, Kidron makes the same mistake that Claudia von Braunmühl identifies as the mistake underlying a variety of accounts of imperialism: they treat the world market as a sum of national markets, a sum of nation-states, rather than beginning with the totality and treating each national segment and each nation-state within it as a particular field within the whole. Seen in this light, each national economy appears as a particular combination, a complex unity of capitals with different structures, different boundaries, different tendencies to read its own ‘interests’, different markets, different sources for its material inputs, etc. And within world capitalism, at least two general tendencies are identifiable, and not merely the one suggested by Kidron. These are exactly the tendencies that Bukharin identified in general terms in his much neglected work, Imperialism and World Economy (1915): on the one hand, tendencies to the nationalisation of production and exchange, on the other hand, tendencies to their internationalisation. Both tendencies are very apparent within contemporary capitalism, and in important ways they contradict and reinforce each other. One field in which the contradictory character of these tendencies manifests itself very sharply is within each nation-state: hence precisely the importance, when using terms like ‘national capital’ and ‘national interest’, of maintaining permanent quotation marks.

‘National capital’ comprises a very contradictory bundle of capitals. It includes domestically based capitals which are chiefly concerned with the domestic markets for both ‘capital’ and ‘consumer’ goods. They may be private or nationalised. It also includes capitals based and run from overseas, which are oriented towards the domestic market and towards overseas markets. It also includes domestically based capitals which are oriented towards export markets: again, both ‘private’ and ‘state’ capitals are involved – for example British Steel, British Shipbuilders, Rolls Royce, British Leyland. Among these, some capitals are concerned chiefly with the export of commodities, others with the export of capital, both ‘productive’ capital and various kinds of rentier and ‘finance’ capital. Nor are the sources of capital borrowing limited to the domestic market, but include massive foreign borrowings, including borrowings from the growing ‘Euromoney’ markets. In the nature of the situation, the process of nation-state policy formation and strategy must be a response to a whole variety of demands and pressures from capitals, many of them necessarily in contradiction with each other.31

The state’s relation to the contradictory demands and movements of capital in the world market, and in its domestic economy as it relates to the world market as a part, is mediated most directly through the more or less accidental aggregate manner in which the interrelations between capital ‘within’ and ‘outside’ its territorial boundaries are experienced: through the national balance of payments, and through the varying relation between the state-guaranteed national currency and world money, i.e. between the exchange-value of its national money and other national currencies and gold.

So, the capitalist nation-state is – even without our taking account of the struggle of capital with the working class over the accumulation and exploitation process – anything but a permanently structured bloc of interests. Rather, the state is a field of intra-capitalist conflict, through which at best only temporary and shifting determinations and enforcements of the ‘national interest’ are achieved. Each state policy to assist capital provokes complaints from capital: currently the British government subsidies to British shipbuilders are provoking a storm of complaint from British shipping interests about money being handed to their Polish and Indian rivals; if they don’t make much public noise about it, General Motors, Ford and Chrysler can hardly be delighted by the British Leyland rescue; ‘anti-dumping’ measures directed against overseas competition provoke unease in the boardrooms of British ‘dumpers’; ‘free trade’ measures evoke powerful responses from capitals unable to compete effectively with more powerful overseas competitors, while ‘protection’ threatens the interests of export-oriented capitals who fear retaliatory moves by other states which may inhibit their own internationalisation of production/markets. In practice, the unity of the nation-state, the coherence of its policy formation, the definiteness of its structure and its limits, are anything but givens. The state is anything but a firm still centre in a howling world; rather, it is part of the howling.

It seems to me that Chris Harman’s rebuttal of Mike Kidron’s argument is more accurate than Kidron’s one-dimensional formulation, because it catches the contradictory character of the process of state-capital formation much more precisely:

“National capital is not homogeneous. It is made up of discrete, although interlinked parts, each with its own relations to external capital. Indeed, the merger of the national state with capital can, in extreme cases, amount to little more than the merger of the state with one section of capital (complete with its own external links) as opposed to others – or even the internal disintegration of the national state into different agencies, each tied in with a different sector of national and foreign capital.”32


1 Strictly, variable capital is not synonymous with wages, which are also paid to unproductive labour.

2 See, e.g., Paul Baran, Political Economy of Growth, Penguin, p. 197, and Michael Kidron, ‘Waste: the US 1970’ in Capitalism and Theory, Pluto, 1975.

3 Chris Harman, ‘Marxist economics and the world today’, IS 76,March 1975.

4 Marx of course assumed, quite consistently, that a teacher working for a private capitalist in a ‘teaching factory’ established with a view to making a profit was a productive worker. The criterion by which the teacher is declared productive is clearly nothing to do with the use-values being produced (except insofar as there are consumers willing to pay for that use-value): it is the fact that these activities are carried out under the direct dominion of capital, and that surplus-value can be produced that is important. Like a performer in a capitalistically run circus or theatre, the ‘performance’ is a commodity. Whether it adds anything to the value of labour-power is quite immaterial to its ‘productiveness’.
In this connection, it’s worth noting that the ‘productive’ character of labour has nothing to do with the ‘tangible’ character of the production activity or its output; intangible ‘services’ as well as tangible ‘things’ can be produced as commodities, and under capitalistic conditions. Two writers who seem very muddled on this are Ernest Mandel (Late Capitalism, NLB 1975, ch. 12) and Nicos Poulantzas (Classes in Contemporary Capitalism, NLB, 1975, esp Pt III).

5 Money-capital expanded in the ‘luxury trades’ in the 18th century was of not inconsiderable importance in the British industrial revolution.

6 Though ruling class thinkers have tried to work out such a minimum. See the fascinating material in J. C. Kincaid, Poverty and Inequality in Britain, Penguin, 1973, ch. 3.

7 C.f. the account given by Harry Braverman, Labor and Monopoly Capital, Monthly Review Press, 1974, ch. 19; and, for illustration, the description of the 19th century office worker provided by David Lockwood, The Blackcoated Worker, Allen & Unwin, 1958, ch. 1.

8 Those who are the ‘conscious bearers’ of capital, the capitalist class and their functionaries, are of course also unproductive.

9 Insofar as sales workers put goods on the shelves for consumers, i.e. physically transport commodities to users, they are productive transport workers, of course. Labour-force statistics, which lump together both productive and unproductive labour in the activity of ‘distribution’ are – like most official statistics – of no use in Marxist analysis.

10 Among social workers perhaps some fine discriminations might be made…

11 A similar point has been made about the rent paid to local councils by council tenants: on examination, it turns out that the majority of the rent passes to the banks as interest on loan-capital, so that the tenant really pays rent to the banks.

12 See, e.g., the work of Ann Foreman, Jane Humphries, Eli Zaretaky, cited in note 13. This kind of argument, which takes note of working-class reasons for the defence of the family form, and which is essentially a historically based argument (conducted within the framework of an understanding of the ‘form determinations’ of capitalist reproduction), is probably more important and significant than the kind of ‘form analysis’ of the impossibility of the abolition of the family provided by e.g. Sue Himmelweit and Simon Mohun, ‘Domestic labour and capital’ Cambridge Journal of Economics, 1.4, 1977. Apart from anything else, at various periods in various places within the capitalist system, familial reproduction of labour-power has not existed. C.f. the Stalinist labour-camps, the situation of ‘guest workers’ in West Germany, the condition of many of the slaves in the capitalist slavery system of the USA, etc. Let alone orphanages, state-broken ‘problem’ families, etc.

13 Though I can’t demonstrate this, it may well be that the general increase in the rate of exploitation, and thus the production of an increased mass of surplus-value, has produced a situation in which a larger proportion of total labour-time available in capitalist society is now devoted to unproductive labour. It might even be possible, using assumptions quite different from Kidron’s, to use his kind of input-output analysis to compare a number of historical periods in this respect. To examine this question, we should have to make estimates of the labour of women formerly restricted to domestic labour, and now directly employed by capital and the state, as well as comparisons of the distribution of the employed labour force. Whether such an exercise would be worthwhile is another question.

14 Though the range of variation may tend to diminish: c.f. Michael Kidron, ‘Marx’s Theory of Value’ in Capitalism and Theory, op.cit.

15 If, as suggested above, a part of the value of labour-power is given in the shape of collectively produced state goods and services (the so-called ‘social wage’), this can be seen either as paid out by capital in the form of variable capital and then collected from workers through taxes (the form in which it appears on the surface of capitalism), or as part of the state’s deductions from capital’s collective funds. Given that the state provides its means of reproduction of labour-power to productive and unproductive workers alike, and that strictly variable capital is only the proportion of total capital laid out on the wages of productive workers, it is probably better to treat the funding of all state services as derived from this state ‘intervention’ in the processes of value distribution and realisation. However, we read it, the effect is in any case the same: other things being equal, a rise in the ‘social wage’ implies a reduction in the average rate of profit.

16 The fact that the state’s raising of capital for this kind of purpose is mediated through state borrowing from financial institutions, and through the payment of interest on a massive scale by states to financial institutions, is not especially germane at this point. It is, of course, of considerable significance for the pattern of movement of total social capital, in ways that are touched on briefly in part three of this series.

17 Outside, that is, the still significant petty-commodity production sector of private agriculture and the not yet very significant ‘joint enterprises’ like Togliattigrad. The importance of graft also needs to be considered here.

18 Indeed, most commonly they are pushed forward by state interventions, for these interventions tend, generally, towards the encouragement of investment in production processes with a high organic composition of capital, in which the branch rate of surplus-value is lower than average.

19 On the general point, c.f. Claudia von Braunmuhl, ‘On the analysis of the bourgeois nation state within the world market context’ in J. Holloway and S. Picciotto, eds, State and capital: a Marxist debate, Edward Arnold, 1978.

20 Immanuel Wallerstein, The Modern World System, Academic Press, 1974.

21 For an example of a bourgeois theorist who ‘forgets’ the world economy, this amnesia enabling an account of the US economy as ‘planned’, see J. K. Galbraith, The New Industrial State, 1967. In Marxism, the amnesiac tendency appears in the form of amazingly reactionary and absurd accounts of Russia, China, Cuba and other amnesiac heavens-on-earth.

22 State action of this kind – though not only for nationalised productive industries – has been a substantial factor, for most of this century if not longer, in promoting a substantial enlargement of credit-capital and thereby a long run tendency to general inflation. The evidence seems to suggest that tendencies to general inflation have existed much longer than is immediately apparent from the cyclical movements of the world economy. Some commentators suggest that the inflationary tendency goes back at least to the last decades of the 19th century. C.f. Mandel, Late Capitalism, and Bullock and Yaffe in Revolutionary Communist 3.4. Bullock and Yaffe’s account of the inflationary effect of the general expansion in credit is of particular interest.

23 In rhetoric at least, Gaullism in France treated American multinationals’ investments in France as ‘alien’ capital. Neither Tory nor Labour administrations in Britain have tended to do this so far: c.f. Michael Hodges, Multinational Corporations and National Government, Saxon House, 1974.

24 Let it not be thought that stockings are a frivolous example. Bear Brand Stockings of Liverpool were held up for a period in the 1970s by state elastic, and only after a review in the Department of Trade and Industry were they allowed to slide down when the subsidies were not renewed.

25 A matter determined, inter alia, by the relative strength of ‘national capital’ in the world market. The very strength of the US economy in the 1950s and 1960s enabled it, for a long period, to force other countries to pay for its balance of payments deficits and to cover its dwindling gold reserves through the permanent export of dollars.

26 The pros and cons, of course, include assessments of the likely response of other nation-states to any policy. ‘Protectionism’ and ‘subsidisation’ may provoke counter-responses of a similar kind, with consequent shifts in the direction of growing national autarchy, and a restriction of international trade of more or less general scope.

27 Capital’s carelessness about material necessity is beautifully described by Marx in the chapter on ‘the working day’ in Capital, Vol. I, where he shows how, by its lengthening of the working day, capital in the first half of the 19th century threatened to destroy the very basis of its own existence, living labour. What else at bottom, too, is the famous ‘ecological crisis’ but a manifestation of the same destructive tendency of capital?

28 The last Tory government, under Heath, is but a case in point. Initially committed to cutting state aid to industry and to de-nationalisation, the Tories did a complete turn-about while in office, nationalising Rolls-Royce and rescuing UCS. They ended up spending 50 per cent more per year in ‘aid’ to industry than Labour had done before them. C.f. J. Bruce Gardyne, Whatever happened to the quiet revolution?, Charles Knight, 1974.

29 For this debate within the Tory Party up to 1964, see Nigel Harris, Competition and the Corporate Society, University Paperback, 1973.

30 C.f. Chris Harman’s interesting remarks on the tendency towards breakup within Eastern European planning in International Socialism 100, p. 10.

31 These two tendencies, the cheapening of the value of labour-power and the cheapening of the elements of constant capital, are theoretically among the most important ‘counteracting tendencies’ on the famous tendency of the rate of profit to fall. They are – especially the latter – the ones which have proved most troublesome to Marxists seeking to defend this ‘most important law’ against its critics.

32 Chris Harman, ‘Better a valid insight than a wrong theory’, International Socialism 100, p. 10.


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