capitalism, state

DEFINITION: “Capitalism” is a social and economic system which permits free market exchanges and the unlimited accumulation of wealth (“capital”) by economic actors.

State capitalism is a form of capitalism in which the state owns some, but not all, of the means of production, while still allowing a degree of free market exchange and wealth accumulation by individual economic actors.

The term is sometimes extended to forms of capitalism in which the state does not own, but exerts decisive political control over large corporations. Here, the concept of “state capitalism” shades into that of “crony capitalism.”

For more on capitalism in general, see the entry “capitalism.”

ETYMOLOGY: For the etymology of the word “capitalism,” see the Glossary entry “capitalism.”

The word “state” derives, via Middle English and Old French, from the classical Latin past participle, status, of the verb sto, stāre, meaning “to stand.”

USAGE: Few countries in the modern world have, or have ever had, purely capitalist—that is, free market—economies.

Rather—since the collapse of most communist countries—the economies of the majority of countries in the industrially developed world consist of a mixture of privately owned and state-owned enterprises.

Such arrangements are examples of what is often referred to as the “mixed economy.”

Sometimes, state capitalism is described as being a form of “socialism.”

This is incorrect. Properly speaking, “socialism” aims at the state ownership of all means of production. In this regard, it is no different from “communism.”

Where socialists may differ from communists is in their tactics for taking power. By and large, socialists are more willing to use the standard processes of democracy to compete against other parties (“bourgeois” parties, in the socialist jargon). But that is a political, not an economic, issue.

In East Asia, state capitalism sometimes takes a special form, shading into “crony capitalism,” in which corporate conglomerates are run by individual families. Such entities are sometimes known by the Korean term “chaebol,” though similar arrangements exist in Japan and elsewhere in East Asia.

There is another form of state or crony capitalism known as “corporatism,” in which large corporations take orders directly from the state, even though their ownership technically remains in private hands. The German National Socialist state and the Italian Fascist state during the mid-twentieth century were both of this type.

In recent decades, a new form of crony capitalism has arisen—especially, in the US and Western Europe—in which giant corporations work hand-in-glove with particular political parties, whether in control of the government or in opposition, to advance their mutual interests.

In a sense, such arrangements are the opposite of corporatism, in that the corporations may possess greater political power than the state itself.

This is especially true of the immensely powerful, global, information-technology and social media companies, which have come to exercise a near-total control over the public dissemination of information in the Western world.