State Owned Doesn’t Mean Socialist

Pedro Campos

Cuban workers. Photo: Bill Hackwell

HAVANA TIMES, April 27 — Recently in Granma, the newspaper of the Communist Party of Cuba, an article appeared about the economic efficiency of “socialist government enterprises” in the armed forces (4/16/10).

In the spirit of helping to clarify certain concepts, I have attempted to provide a few, more precise details here.

Apparently the comrades who wrote about the Military Agricultural Union “socialist government enterprise,” based themselves on the identification of state and socialist property by virtue of the fact that this property belongs to the Cuban state; they assume that all state property is, de jure, socialist.   However, what gives a property its social character —be it socialist or capitalist— is the form of its operation and the appropriation of its output, not its legal form.

This confusion was introduced in socialist theory by those who mistook estatización (state ownership) for socialization.  They thought that for property to be socialized, it was sufficient to place it under state ownership and then hold the state sacred above the rest of society.

The social character of a company is one thing and the legal structure of its ownership is something else.  The social character of property is determined by the form in which it is put to use, by the way in which work is organized, the mode of production (based on slave, serf, wage or freely associated labor) and the way in which the surplus obtained is distributed.  This is independent of the property’s legal structure, which can be state-owned, collective or privately owned.  This said, the natural tendency is for the content (the social character) of property to determine its legal form (structure), not the other way around.

Certainly, a government enterprise that exploits wage labor can be efficient.  There are many examples of this throughout the entire world capitalist, even in the USA, England and Japan.

However, though the legal form of such property is state-owned, those companies are not socialist.  They are capitalist because they respond to the capitalist logic of obtaining profits through wage labor, which in this case is appropriated by the state.  As a corollary, when that state seeks the “wellbeing” of the workers, with fairer distribution, this is what characterizes social democracy.

So what if the state is in the hands of the workers?” the statists might ask.

The same thing would happen as what has occurred in every “worker’s state”: the workers would continue being paid a wage (which would not be determined by the level of production), they would have no ownership or usufruct relationship with the means of production, and they would not participate in the distribution of profits.

Social workers. Photo: Bill Hackwell

On behalf of socialism, all those tasks would be overseen by a bureaucratic stratum, which in the long run —as has always occurred— winds up as the bureau-bourgeoisie (“the accidental class,” as described by Russian academics) who appropriate the means of production and the surpluses, and plunge the working class into deeper misery.

That “working class,” harnessed to their new capitalists (the bureaucrats), would not bring new production relations with them, since these laborers still would not have understood their need to liquidate themselves as a working class and become a new class of freely associated workers…of cultured cooperativists, the new class that bears the new production relations.

The government enterprise that exploits wage labor, seeks profits and concentrates the surplus in a few hands is in fact a state capitalist company given its content…given its social character.

Its juridical state form doesn’t matter.  This was what all the confusion was around concerning “state socialism,” which never transcended the limits of state monopoly capitalism.  This clearly occurred in Russia but also in Cuba.

Wage labor is what characterizes the form of capitalist exploitation, while freely-associated, cooperative or autogestionario (self-managed) work is the generic form of organizing socialist labor.

For the social character of a company to be described as socialist (it doesn’t matter if the property legally belongs to the state or the collective of workers) it must be managed through socialist methods – not capitalists ones; this is to say, with cooperative and self-managerial forms of work and management by freely associated workers who are directed and managed in a collective and democratic way by the workers themselves.

This would even include the election of management, which should be revolving, and the equal distribution of part of the profits (after paying taxes and other expenses due to the state and leaving another part for the extended reproduction of the company, emergency funds and other reserves.

Even under capitalism there are properties that are legally collective, but that in and of itself doesn’t make them socialist.  This is the case of the corporation, which legally belongs to its community of shareholders, a few or many of whom might work for that same company. However by organizing itself into a capitalist form of operation —that’s to say with wage labor, with hierarchical forms of management and control of the surplus by a group of owners who control most of the shares— it continues essentially as a capitalist company given its social character, even when it constitutes the first form of the decomposition of capital.

This is what they deceivingly refer to as “popular capitalism,” which capitalists sought to present as an alternative to cooperativist socialism.

Likewise, there exists property that is private by its legal form and socialist by its self-managerial social form of operation.  This is the case of many small family-owned businesses, which manage the company democratically, distribute the profits equally and do not exploit wage labor.

Socialist government enterprises would be those where the state maintains the ownership of the means of production in a legal form, but where the social form of its operation is carried out in a socialist, self-managerial and cooperative manner.  This would be the case of a type of company that is co-managed between the state and the workers.

By the same token, just as cooperatives are socialist firms in capitalist countries, it’s possible for there to exit in socialist countries reminiscences of capitalist companies (not in name, but because some day cooperative and self-management types of freely associated production relations will prevail), be they state, private or mixed ownership.

The interesting experience of Perfeccionamiento Empresarial (Managerial Improvement), originally conceived and applied in the Cuban armed forces (MINFAR), was a step forward in connection with the traditional statist wage-labor scheme, though still without breaking from it.

21 thoughts on “State Owned Doesn’t Mean Socialist

  • May 10, 2010 at 8:34 pm

    What…? Seems that a ‘me Tarzan you Jane’ writing can only come from a ‘me Tarzan you Jane’ reasoning.

    The Disney bit was hillarious.

    Greg: I agree with you. If we are to surpass capitalism, we must also surpass wage labour in itself, something 20th century ‘socialism’ kept intact, along with the employer-employee social relationship.

  • May 9, 2010 at 5:46 pm

    So as I was explaining Capitalism allows for such freedoms and we can decided.
    While in socialism WE can not decided. Only those at the top can decided everything for us.
    Treating us like little children.

  • May 9, 2010 at 5:44 pm

    I think for example if a part of society in a country wishes to do something like the mondragon project or like Linux they should!
    Interesting is to notice that both are born in Capitalist projects
    In a socialist country like Cuba because the regimes controls everything they will never let anything like these projects succeed !

  • May 9, 2010 at 5:41 pm

    as you know the linux project is voluntary. People that contribute do so because they have the knowledge and because they like to be part of it. It is very different than when people are force into something they do not believe themselves.
    As you may know that is the case of Cuba. Where people are impose the opinions and thoughts of those above.
    That is definetly wrong.

    The Mondragon project works because it in itself is not the whole system but it live inside a capitalist system and uses in general capitalist method.
    I was reading a while back about for example the method of Disney and they compare them to the plan economy of socialist countries.

  • May 3, 2010 at 6:59 pm

    I don’t know, there is a lot of confusion in this question. Including all the cooperative solutions. Those who propose co-operatives in their historic sense just haven’t studied how they broke down into workers’ capitalism under the Auto-Finance System of the USSR and especially in Yugoslavia. I think there is another way. Something like a state should “hold” the “ownership” but all stakeholders should govern… NOT JUST THE WORKERS! Because the the workers end up using the most profitable industries to corrupt the rest of the decision making apparatuses towards their interests just like in corporate capitalist states.
    Say-proportionate-to-stake and/or multi-stakeholder co-ops are a part of the solution. But not automatically the solution. Also Remuneration based on Effort and Sacrifice, so that the average productivity according to particular abilities and conditions are brought up, not just the most endowed workers rewarded. RES and balanced rotation of roles work well for…

  • April 30, 2010 at 8:01 am

    Julio, I think you should learn about the Mondragon cooperatives. They are consistently twice as productive & twice as profitable as similar capitalist-owned/operated enterprises, & we’re not talking small-time enterprise. The Mondragon Cooperative Complex does many billions of dollars in business each year. They employ over 100,000 people.

    If you’d like to see what employee cooperative ownership can do, you can go to “” and punch in “The Mondragon Experiment,” a 50-minute BBC film. Also, punch in “Democracy in the Workplace,” a 27-minute U.S. film.

    Sam, I recommend Mondragon a lot b/c the workers there have shown the socialist movement a workable economic mechanism for building socialism: the worker-owned industrial cooperative corporation. All that’s needed to make this the basis of workable socialism is private property and the market, plus partial, non-controlling ownership by the socialist state, i.e. modern cooperative socialism.

  • April 29, 2010 at 6:45 pm

    And Julio, if you’re still looking for ‘proof’ that human activity CAN be productive without being bound to the capitalist enterprise logic, just take a look at the GNU/Linux project, just imagine the whole open-source methodology – its work dynamics and relationship between the people involved – translated to other fields of economic activity.

  • April 29, 2010 at 6:37 pm

    ‘If you want blood, you’ve got it’.

    Try FASIMPAT, or Fabrica sin Patrones, a ceramic factory in Argentica collectively owned by its workers, and AFAIC it’s doing pretty well in “compete(ing) with a capitalist enterprise at the same level of performance”.

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