State capitalism

Many people still associate socialism and especially Marx's version of socialism with the brutal Stalinist regime in the Soviet Union.

Tony Cliff's book State Capitalism in Russia has enabled us to explain why the horrific crimes committed by the Stalinist regime had nothing to do with socialism. Instead Cliff argued that Russia under Stalin's rule became a particular form of capitalist society, state capitalism, locked into competition with its rivals in the West.

Anyone turning to the economics sections of the "high-brow" press recently could be forgiven for thinking they had turned to the film reviews section by mistake. Talk of zombies has been everywhere - but it isn't the latest film from director George Romero they have been discussing. Instead it's "zombie banks", "zombie firms" and even "zombie households" that are the focus of much attention.

Tories often say that they don't like the state. They say it's a drag on the economy, dampening the risk-taking creativity of the private sector.

By the time of the 1949 revolution China had been dominated for over a hundred years by foreign powers. Its economic development had been held back and its corrupt political systems propped up. Not surprisingly, then, the twin objectives of national independence and modernisation (meaning industrialisation) were central to the ideas of the layer of frustrated middle class intellectuals who monopolised political thinking from the end of the 19th century.

When I joined the Socialist Review Group, the precursor of the Socialist Workers Party, back in 1961, our opponents on the left called us the "state caps" - short for "state capitalists". This was not because we were in favour of state capitalism (although rumour had it that one of our members had joined for that reason). It was because we rejected the notion that the USSR, China and the Eastern European states were in some way socialist or workers' states.

British tourists are commonplace in the former Soviet bloc today. Cheap flights take you to Prague or Budapest. You can spend a weekend in the Baltic states or even make it to Moscow and St Petersburg. The beer is cheap. For stag nights and last minute flings the prostitutes are numerous and cheap. It is easy to combine a visit to some of the finest sights with some of the worst. And many do. Out of sight, out of mind.

In Western Europe migrants from these countries are common. We meet them every day working in bars and hotels, on the farms and in the factories. Supermarkets in

As 1989 began, the one-party states that littered Eastern Europe seemed impregnable, as by and large they had done for the previous four and half decades. Yet by the end of the year, one after another, they had been swept away or were rapidly heading that way. By Christmas Day 1989, when the Romanian dictator Nicolae Ceausescu was tried and executed followed a dramatic uprising (all beamed across the world on television), everything had changed utterly.

The reason for this is not some grand theory. It is pragmatic. The crisis is showing that states not only need to set the rules for capitalism to work but must also be major players. For socialists this creates a dilemma. If the choice is between bankruptcy and state support we obviously call for state support and nationalisation. No firm should go under, no job be lost because of the lunacy of the system. But we need more than this. And we should be under no illusion that the state is a socialist force.

When Alistair Darling, the chancellor, put £37 billion into three British banks, effectively part-nationalising them, in mid-October in the hope of stabilising the banking system, it capped a remarkable few weeks. Here were New Labour, champions of the free market and the City of London, doing something Old Labour had never dared. This happened just days after the return of that arch-neoliberal Peter Mandelson to the cabinet and was all done with the backing of the party of Margaret Thatcher.