Capitalism is typically associated with ownership of firms by private persons while socialism is typically associated with their ownership by the government. However, state owned enterprises (which is the official name) vs private enterprises has very little to do with the actual mode of social labor, production, and distribution.
Capitalism is typically associated with ownership of firms by private persons while socialism is typically associated with their ownership by the government. However, state owned enterprises (which is the official name) vs private enterprises has very little to do with the actual mode of social labor, production, and distribution. Further capitalism; as the existing world system and socialism; as the revolutionary alternative to it, have essentially nothing to do with whether enterprises are private, or state owned. The communist party controlled states that first came about in the 20th century bolstered the former conception of state owned vs private enterprise being integral to which mode of production; usually capitalism, or socialism, is present. In these societies the state under communist party rule created a "statified" economy, i.e. one where all enterprises were state owned. This was the kind of "socialism" these societies produced. In the west parties like that of the Labour Party in Britain saw "socialism" as the nationalization of *certain* industries while leaving private ownership largely in tact.
Further many people are convinced that nationalizing an industry makes it "public", or publicly controlled. Who owns firms in a given society is a question of the system of legal property relations. These relations are surface level. They dictate "who" will legally "own" certain things, not what relations people and the wider society will have to those things. If we are talking about the mode of social labor, production, and distribution, then we have to go beneath legal property relations. For example:
In societies where firms are generally privately owned "private property" is considered sacrosanct. For example the legal codes of both Britain and the United States protect the right of private property. Yet these societies have a certain number of state owned enterprises. How is this the case? In these societies, by law, for a firm to be nationalized, the state has to pay out the former owners of the firm. Thus nationalization does not violate private property since it can only happen once the former private owner has been fully compensated. Nationalized firms will even use their proceeds to pay the former private owner until a satisfactory amount has been paid out. This would contradict the idea that "nationalized" = "public".
Capitalism; as the existing world system, is a mode of production. This means that it is characterized by the fundamental relations between people and things. These relations are investment in production for a return on that investment. Once it is invested in production becomes "capital" that is used to turn a profit. State owned enterprises, contrary to the way in which they are assumed to negate capitalism, are actually quite common throughout the capitalist world. Many countries have nationalized postal services, for instance. A state owned enterprise is simply when the state is investing in production for return. These enterprises are mandated by the state to turn profits from state investment. Even if the state runs them at a loss they are still mandated to bring in revenue.
This was no different in the communist party ruled countries. The state owned enterprises and the wider statified economy were mandated by the state plan to bring in revenue (return on investment/profit). This is why these states had an obsession with catching up with the west in the world market. Immanuel Wallerstien calls this "socialist capital accumulation".1 As such both state owned firms and completely statified economies fail to negate capitalism, in fact, they have become tools of capitalism.
As a result of nationalization and statification amounting to tools of capitalist accumulation, they make little to no difference in the lives of workers. Capitalism is based on a class struggle where the capitalist class tries to extract as much surplus value from the working class as possible.2 This exploitation of labor is what generates the return, or profit, on investment in production. State owned firms simply substitute the private firm for the state itself as the exploiter. In capitalism the working class is created by the separation of the vast majority of people from control over the production process turning them into a dispossessed group. Workers can now only sell their ability to work to firms in exchange for wages (or salaries) in a world where the distribution of goods is through market exchange. The statified economy (ala the communist states) does not get rid of this class oppression. It simply makes the state the beneficiary of it. State bureaucrats replace share-holders of large companies as the capitalist class.
Socialism; as the revolutionary alternative to capitalism, is also a mode of production. The relation that people have to things and other people in socialism is that of common ownership of production and collective organization of society. In a socialist society class division and exploitation are abolished to create an egalitarian and democratic social order. Production is owned by all humans and the organization of social labor and societal affairs is done through democratic participation in assemblies and councils. There will in fact be no state owned enterprises in a socialist society because the state is the coercive mechanism that enforces and creates class division. With class society abolished the state has gone with it. The difference in people's lives is fundamental as each person has full control over the work they do, their means of subsistence, their community, and their world, in so far as it doesn't interfere with that of other people's.
There was no socialism in the communist states because the state and class society remained firmly in place. Instead of collective, social control over production, production was organized by and in the interest of high officials. Instead of collective, democratic participation in the organization of society, the state, as the coercive mechanism in the hands of the aforementioned high officials, enforced the power of the dominant class. The state, being a mechanism of class oppression, can not create socialism through the statification of the economy, as the experience of the communist states shows.
The statification of the economy in a capitalist society doesn't even get rid of capitalism. Even if every enterprise in your national economy is a state owned enterprise, the world system is still capitalism. This means that your state owned enterprises and your statified economy must now take on capitalist accumulation. In the communist states this kind of "state-capitalism" produced extremely bureaucratic, military, and dictatorial apparatuses, as is typically the outcome of direct state accumulation of capital. What determines capitalism vs socialism is the mode of production, distribution, and social labor, not formal legal property norms.
1. Surplus value is the product produced by workers which is then extracted by the capitalist firm and sold as a mass of commodities, it is by nature above the quantity of product needed to sustain the workers' survival.
2. Marx, Marxism-Leninism, and Socialist Experiences in the Modern World-System, I. Wallerstein
State-Capitalism: The Wages System Under New Management, Buick and Crump
Introduction To World Systems Analysis, I. Wallerstein