Capitalist production is based on social labour, in contrast as Engels points out to previous forms of producing like handicraft where the artisan individually (for the most part) produced and appropriated the articles of their labour, for personal consumption, or if there was an excess/a surplus (not to be confused with surplus created in capitalist production through exploitation which the workers don't at all decide what to do with) of whatever articles produced, for exchange, the articles then taking on the form of commodities (see also vol. 1 ch. 13 of capital). The means of production, with this social labour, are no longer handricraft means of production for individual artisans, but now the social productive forces. Many workers or the "collective worker" create the social product, but these social products from social labour are appropriated, not by society, but by the capitalist, not for their personal consumption, but for exchange on the market, almost exclusively now (a capitalist is not primarily interested in consuming what "they" produce but with what can be obtained from the sale: luxury items and more elements of production for the expansion of their enterprise i.e. capital accumulation).
I understand all that (I believe), and that also living labour becomes less important in the production process with the perfecting of these productive forces (they're displaced by technology or fixed capital), as well as the anarchy of production containing the seeds of crises.
But I'm not sure I understand these parts if anyone wants to clarify (excuse the long quotes):
This rebellion of the productive forces, as they grow more and more powerful, against their quality as capital, this stronger and stronger command that their social character shall be recognized, forces the capitalist class itself to treat them more and more as social productive forces, so far as this is possible under capitalist conditions. The period of industrial high pressure, with its unbounded inflation of credit, not less than the crash itself, by the collapse of great capitalist establishments, tends to bring about that form of the socialization of great masses of the means of production which we meet with in the different kinds of joint-stock companies. Many of these means of production and of distribution are, from the outset, so colossal that, like the railways, they exclude all other forms of capitalistic expansion. At a further stage of evolution, this form also becomes insufficient. The producers on a large scale in a particular branch of an industry in a particular country unite in a "Trust", a union for the purpose of regulating production. They determine the total amount to be produced, parcel it out among themselves, and thus enforce the selling price fixed beforehand. But trusts of this kind, as soon as business becomes bad, are generally liable to break up, and on this very account compel a yet greater concentration of association. The whole of a particular industry is turned into one gigantic joint-stock company; internal competition gives place to the internal monopoly of this one company. This has happened in 1890 with the English alkali production, which is now, after the fusion of 48 large works, in the hands of one company, conducted upon a single plan, and with a capital of 6,000,000 pounds.
In the trusts, freedom of competition changes into its very opposite — into monopoly; and the production without any definite plan of capitalistic society capitulates to the production upon a definite plan of the invading socialistic society. Certainly, this is so far still to the benefit and advantage of the capitalists. But, in this case, the exploitation is so palpable, that it must break down. No nation will put up with production conducted by trusts, with so barefaced an exploitation of the community by a small band of dividend-mongers.
In any case, with trusts or without, the official representative of capitalist society — the state — will ultimately have to undertake the direction of production. This necessity for conversion into State property is felt first in the great institutions for intercourse and communication — the post office, the telegraphs, the railways.
But, the transformation — either into joint-stock companies and trusts, or into State-ownership — does not do away with the capitalistic nature of the productive forces. In the joint-stock companies and trusts, this is obvious. And the modern State, again, is only the organization that bourgeois society takes on in order to support the external conditions of the capitalist mode of production against the encroachments as well of the workers as of individual capitalists. The modern state, no matter what its form, is essentially a capitalist machine — the state of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over of productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers — proletarians. The capitalist relation is not done away with. It is, rather, brought to a head. But, brought to a head, it topples over. State-ownership of the productive forces is not the solution of the conflict, but concealed within it are the technical conditions that form the elements of that solution.
This solution can only consist in the practical recognition of the social nature of the modern forces of production, and therefore in the harmonizing with the socialized character of the means of production. And this can only come about by society openly and directly taking possession of the productive forces which have outgrown all control, except that of society as a whole. The social character of the means of production and of the products today reacts against the producers, periodically disrupts all production and exchange, acts only like a law of Nature working blindly, forcibly, destructively. But, with the taking over by society of the productive forces, the social character of the means of production and of the products will be utilized by the producers with a perfect understanding of its nature, and instead of being a source of disturbance and periodical collapse, will become the most powerful lever of production itself.
Whilst the capitalist mode of production more and more completely transforms the great majority of the population into proletarians, it creates the power which, under penalty of its own destruction, is forced to accomplish this revolution. Whilst it forces on more and more of the transformation of the vast means of production, already socialized, into State property, it shows itself the way to accomplishing this revolution. The proletariat seizes political power and turns the means of production into State property.
But, in doing this, it abolishes itself as proletariat, abolishes all class distinction and class antagonisms, abolishes also the State as State. [...]
So is Engels saying that there is a trend with capitalist development and the perfecting of social productive forces for the direction of capitalist production to first be taken by individual capitalists, then trusts and joint-stock companies, and then the state (is this what Engels is referring to when he calls for turning means of production into state property?), before finally society as a whole appropriate their social product and direct production according to a definite plan?