Models of State-led Economic Transformation

The political discourse of the last several years has increasingly revolved around the question of whether capitalism is really operating in the interests of all. Many on both the Left and the Right are seeking for ways to move beyond capitalism, or at least to fix it so that it truly serves the common interest. In all of this discourse, inevitably the role of the state becomes a question of central concern. There are currently several models for the state’s involvement in the transition from capitalism circulating in the discourse, and it would be useful to consider a couple of these models in comparison. I would characterize these models as productive and distributive models. Practically speaking, these models are not mutually exclusive, but it is interesting to notice the different emphases placed on them by different agents of the political discourse.

The common social democratic model for transitioning out of capitalism revolves around the creation of a fairly comprehensive welfare state. Bernie Sanders’ platform, whose biggest plank is “Medicare for All,” is meant to imitate the social democratic – or “democratic socialist” – welfare states of the Nordic Countries. In Marxist terms (without claiming that social democracy = Marxism), these are structures in which surplus-value is captured by the state and redistributed through the welfare state, by a variety of mechanisms. E.g. Matt Bruenig has proposed the creation of a “social wealth fund” for the U.S., in imitation of the Norwegian example. Bruenig has also proposed the creation of a family welfare policy, again in imitation of the social democratic model of the Nordic states, particularly Finland.

Such policies are in themselves unobjectionable, but the question is whether such a model can amount to anything more than a welfare state plopped on top of a capitalist mode of production. At the very least, there is a question whether “democratic socialism” risks overlooking the centrality of the production question, by focusing overmuch on redistribution through the welfare state. From a Marxist point of view, it matters greatly whether one builds a welfare state in a country that is heavy in manufacturing, versus in a country that is heavy in finance. The U.S. is increasingly moving in the latter direction. If economic policy is supposed to affect the overall quality of life of a country’s citizens, it matters a great deal what kind of economic activity is taking place in a country’s businesses.

Matt Bruenig would, of course, rightly object to the insinuation that the Nordic countries amount to little more than “a welfare state plopped on top of a capitalist mode of production.” The state in these countries really does own a significant portion of their business enterprises, and so it is not entirely wrong to label them “socialist” or “state corporatist” rather than “capitalist,” insofar as they are owned by the state rather than any private entity. Why does this matter? It matters because it shows that the state is at least somewhat actively involved in directing the nation’s creation of wealth, rather than the mere redistribution of wealth through the welfare state, indifferently to how it is created.

It is my impression that, in the U.S., DSA types (“Democratic Socialists of America”) tend to focus rather much on imitating the welfare-state component of the Nordic democracies, while paying somewhat too little attention to the role of the Nordic governments in the creation of wealth. (To Matt Bruenig’s credit, his think-tank does include a proposal for a comprehensive “Green” industrial policy, that would fill out a lot of the details for a possible “Green New Deal.”)

I’ll add here a qualification: the mere fact that a state owns a large number of the country’s businesses does not guarantee the existence an overall state-led industrial policy, even if it demonstrates an admirable commitment on the part of the state to running businesses fairly. I am not learned enough about the Nordic situation in particular, but a state may very well claim the legal form of ownership over enterprises which are only minimally productive, or are productive in only very narrow sectors of the economy. There is a difference between a state that has large ownership shares in several companies, on the one hand, and a state that takes into its own hands the direction and regulation of an entire economy — e.g. South Korea under the dictatorship of Park Chung Hee in the 60s and 70s, or China today under Xi Jingping, or even the U.S. under Franklin D. Roosevelt, in response to the Great Depression. These were regimes in which the state took an active interest in determining which productive sectors were actually important for the well-being of its citizens, and assumed an energetic role in directing national resources towards creating a maximum national productive capacity — rather than leaving these things up to the operation of the free-market. It is worth noting that such statist industrial policies were certainly not incompatible with the creation of a strong welfare state. Roosevelt’s New Deal famously involved both types of measures.

In the U.S. today, most of the talk about a state-led revitalization of the industrial sector comes from the political Right, rather than the Left. I’ve written elsewhere about Sen. Marco Rubio’s contribution to this discussion. Rubio is arguably the most vocal politician on the subject. His reports on investment in the U.S. and on China’s recent advancements in manufacture indicate a trajectory towards state-led industrial planning of a scale which has not been seen in the U.S. since perhaps the New Deal — although Rubio generally appears to avoid strong statist rhetoric in public, probably in order to distinguish himself from the “socialist” competition on the Left, represented by folks like Bernie Sanders. But ironically, in many ways Rubio’s tendency towards state-led industrialization more closely resembles (though it is by no means identical to) the industrial economies of classical state-socialist regimes such as the U.S.S.R. and China than do the rather mild “social democratic” welfarist policies of Sanders. I don’t mean to imply, of course, that Rubio advocates for state-owned enterprises or socialism (he certainly doesn’t), but he does advocate for a much more rigorous coordination of the productive sectors by the government than anyone on the American Left has done thus far. This is a good thing — but it can be taken much further still.

It is, of course, an under-acknowledged truth that capitalism itself has always been driven by strong state-led industrialization and investment. The difference between capitalism and socialism is not merely a difference in levels of state involvement; contrary to what many capitalists and socialists might say, the state has always been the major driver of innovation and investment. This has been amply demonstrated, most famously and recently, by Mariana Mazzucato in her two books. Capitalism refers to a specific system where these investments redound to the profits of private interests, who hire labor for wages in order to actualize those profits through surplus-labor. Accelerationist readers of Marx and Sorel will know that the advance to a post-capitalist society requires this investment in the social productive capacity, an investment most effectively handled by the state. In the accelerationist reading, such massive investment can more effectively lead to that condition where surplus-labor as a source of value has itself been reduced to a minimum — perhaps even to the point of vanishing entirely. This of course does not mean that human labor disappears, but that it no longer takes the form of surplus-value. Capitalism, in this scenario, will have set the stage for its perfect self-destruction.

From this point of view, Rubio’s proposals, certainly not socialist or even explicitly corporatist in themselves (I will write more on the difference and ambiguities of “socialism” and “corporatism” later, especially as regards Georges Sorel’s “syndicalism”), are nonetheless highly favorable from a socialist/corporatist point of view, insofar as a comprehensive industrial policy would begin to achieve the goals expressed by accelerationism, in view of transitioning definitively beyond capitalism. See, for example, the Manifesto for an Accelerationist Politics, by Williams and Srnicek.

Ultimately, it seems to me that social democratic welfarism and redistribution is not incompatible with state-led industrialization, and that some combination of them is in fact ideal. In distributive terms, one might say that both pre-destribution and re-distribution are necessary. By an industrial policy which allocates resources — productive forces in particular — in the most efficient way possible, governments engage in pre-distributive measures, fostering productive entrepreneurship in as many sectors as possible or prudent. Welfare states serve to provide social safety networks for those whose employment is less stable or for those who are unable to work. Both models can serve a legitimate function in a regime which genuinely seeks the overall well-being of its citizens.

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