In comparative economic systems — to some extent a dying field — a distinction is often drawn between state capitalism and state socialism. Both are capitalistic at heart, but under each system the government owns industries such as railroads and the post office.
State socialists run these enterprises to maximize social good, e.g. the post office might be forced to deliver to unprofitable areas if the social good from doing so is large enough. Thus, profit maximization is not necessarily the main goal of state socialist governments.
State capitalists would operate these enterprises to maximize profit. A railroad would only go to areas where it is profitable, social considerations are off the table.
It seems to me that at least some aspects of the debate between Democrats and Republicans on how to run the government is really a debate over how the government should operate the enterprises it has control over (e.g. public goods). Should the government maximize profit, including outsourcing to the private sector whenever it might save a penny, or should social goals play a large role in how these entities are operated?
But this is, admittedly, a pretty unfamiliar area for me so I’m mostly fishing for comments and hoping to learn something from all of you …
This post originally appeared at Economist’s View and is posted with permission.
7 Responses to “State Socialism Versus State Capitalism”
donna • February 17th, 2012 at 12:26 pm
hmmm professor because you fishing for comment ..i unrestand you. very good
just comment what system follow chine? ..and how you are sure..my ideology can help in comment./// i don't have no ideology and this can help you too?
Edmundo • February 17th, 2012 at 12:27 pm
You don't need state capitalism – capitalism can and should take care of itself in the free market; it should not interfere with:
State socialism – needed wherever the needs of society run counter to individual self interest. Obvious examples are national defense, public health, communications and universal standards of capability.
This last carries the argument for social support of education and fitness for work.
The state is also the best agent to discharge other social responsibilities where self interest implies a conflict of interest. So maintaining standards of honesty and decency are the province of the state, as is the provision of a secure means of saving for retirement.
goldmundo • February 18th, 2012 at 9:43 am
Como dijo Mao.el gato no importa si es blanco o negro sino que cace ratones.El Estado debe controlar a todas las corporaciones: empresarias.sindicales,iglesias,militar, etc. y significa tener la vision equitativa final sobre los intereses que persiguen cada una de ellas.
Sirousse Tabriztchi • February 18th, 2012 at 2:59 pm
The sythesis of state capitalism and socialism has been an ongoing two steps:
1. Set up state capitalism: privatize and help the too big to fail.
2. Set up state socialist supervisory organizations to watch the too big to trust.
EdDolan • February 19th, 2012 at 10:31 am
Fishing for ideas? As a long-time prof. of comparative economics systems, here's how I would define the variations of socialism and capitalism for my students:
Free market capitalism: Private ownership, owners seek profits for themselves by producing goods that are more attractive to their customers in terms of price or quality than those of their competitors. Examples: Taggart Transcontinental, Ford (partially, at least by comparison with GM)
State capitalism: Private ownership, owners seek profit for themselves by enlisting the power of the state to generate demand for goods, exclude competitors or subsidize losses. Examples: Gasprom, Krupp (Nazi era), GM, Bank of America
State socialism: State ownership, state seeks profits, privileges, and other rents for members of the elites that control the state. Examples: USSR, N. Korea
True socialism: Small groups create enterprises under cooperative or mutual ownership for the common good of group members. Works best when embedded in a larger free market capitalist system that provides necessary infrastructure and legal institutions. Examples: Mobile slaughter unit operated by local farmers in my community
gzuckier • February 21st, 2012 at 9:04 pm
Well, look at health care. It seems obvious that a large sector of the population seems to have lost track of the concept that the purpose of health care is to keep people healthy and alive, not to cut costs and provide a profit for investors.
Paulier • March 3rd, 2012 at 11:40 am
How about thinking in terms of market failures? These exist, you know: monopoly, information asymmetries, public goods, commons. State socialism lets capitalism have sway where it will, but in areas where there are market failures, the state steps in an effort to bridge them. (Note the "effort" here: sometimes it screws up). Think Scandinavians. State capitalism doesn't care: the market is the market, and the state is as good a player in it (yes, for profit) as anyone. Let markets fail – that's where you really get the profits!
