Is Britain becoming ‘state capitalist’?
Policy developments since 2008 – and certainly 2020 – point to a more interventionist state. But Britain has long embodied state capitalism, just not the way we tend to think
In simple terms, state capitalism means that large parts of a national economy are publicly owned, but state-owned enterprises are still run for profit.
But state capitalism can mean much more – and perhaps less – than this.
In terms of ‘more’, it is important to recognise that the concept of state capitalism is about the powers and machinery of the state being used to support and advance processes of capital accumulation. Crucially, these processes would not happen – or at least would not happen as profitably – without the state’s role.
In terms of ‘less’, it is clear that large-scale public ownership is not necessary for the state to play this kind of role. The state may be primarily focused on supporting and advancing capital accumulation through macroeconomic, industrial, trade, competition, and welfare policies (among many others) without a significant degree of nationalisation.
New pillars of state capitalism in Britain
The argument that Britain is becoming state capitalist rests on three pillars, although these pillars together do not necessarily tell a consistent story.
First, British governments since the 2008 financial crisis have sought to strengthen conventional industrial policy interventions, by subsidising R&D in favoured sectors, and facilitating greater co-ordination between public and private actors. A ‘muscular’ version of industrial policy has indeed been a feature of state capitalist regimes around the world engaged in ‘catch up’ industrialisation.
Second, the COVID-19 crisis led to the state taking over large parts of the private sector – primarily by financing wages and providing cheap loans. As I argue in a forthcoming Cambridge Journal of Regions, Economy and Society paper (with Daniel Bailey, David Beel and Nick O’Donovan), these interventions represent almost the opposite of industrial policy: propping up failing enterprises with no attempt to improve their productive capacity.
(Of course, post-2008 industrial policy has hardly been focused on a radical transformation of the UK private sector.)
These interventions have been retracted, but their legacy remains. Policy responses to the ‘cost of living’ crisis – especially skyrocketing energy bills – indicate the state’s willingness to support people’s ability to consume, by any means other than enabling earnings to rise.
Third, we have witnessed the rise of ‘rentier capitalism’ (especially in the UK), in which ownership of relatively (or artificially) scarce assets – land, intellectual property, natural resources, digital platforms, etc. – allows for capital accumulation more efficiently than the production of good and services on/through/with these assets.
The argument here is that parts of the rentier class have now become quite dependent on the state for revenue, controlling firms which the state is largely required to procure from, or which individuals are required by the state to purchase from.
We could also point to the state’s role in inflating the housing market, ostensibly to support home-ownership, but further enriching property and land owners.
State capitalism: the good old days
The argument about rentierisation directs us to an essential point about state capitalism: its foundation in class relations. In a recent Economy and Space paper, James Silverwood and I define state capitalism as:
The use of state agency to (re)produce certain dominant modes of capital accumulation and social organization for the benefit of privileged interest and societal groups, taking place in conjunction with, or in subjugation of, economic agents in the private sector, and involving multi-scalar relations from the individual to the global.
State capitalism is not simply about the interaction of the state and capitalism in the abstract, it is about the co-constitution of political and economic forces which control both state institutions and the dominant forms of accumulation.
This definition leads us to the conclusion that Britain has long ‘qualified’ as a state capitalism regime. Eschewing the conventional focus on industrialisation, we argue that Britain has during two historical periods represented a form of ‘financial state capitalism’ (FSC).
This conceptualisation also requires us to also eschew the methodological nationalism of some understandings of state capitalism. State capitalism is not simply about protecting or promoting the national economy.
FSC 1.0 was 1821-1914. Macroeconomic policy was the main tool of state capitalism, with the establishment of sterling as a global reserve currency, underpinning the City’s global status and imperial management, its overwhelming objective. British landed aristocracy and financiers were the principal beneficiaries, and were barely distinguishable from the political elite.
In this period, British statecraft was characterised by the internalisation of external economic space – world financial markets and colonial territories.
FSC 2.0 was 1958-2016, and was instead characterised by the externalisation of internal economic space, as the British economy was reshaped to serve international capital, via the City, through a relaxation of corporate governance norms and reduction in employment protection and welfare provision.
Mass democratisation and the emergence of the Labour Party in the early twentieth century softened the direct links between elected political leaders and economic elites, but have also led to the insulation of the main tents of British economic policy – institutionally and ideologically – from democratic oversight, thereby preserving highly uneven access to political influence.
The state capitalism we’re in
Our ‘interregnum’ period, from the First World War to the late 1950s, actually embraced much of what might be understood conventionally as state capitalism (protectionism, industrial policy support for manufacturing, public ownership, etc.). But links between political and economic elites were weaker – and this is part of why these arrangements did not endure.
British state capitalism was always about embedding rentier power, not combatting it. It is of course useful for scholars to document the advance of rentierisation, but the rentier class is now more diffuse and internationalised than ever. It may have strengthened its hold over the Conservative Party, but not necessarily the state.
It may be that FSC 2.0 reasserts itself, especially if the immediate chaos of Brexit gives way eventually to a new alignment with the European single market. Or we may have reached the end of state capitalism in Britain, now that the economy has little but rentierism to offer, and there are no conquerable markets left.
Boris Johnson’s ‘Global Britain’ is of course a more optimistic account of Britain’s economic future, replacing Europe with new economic partners (centred on finance). In many ways it would represent an intensification of FSC 2.0’s internationalised model, but with elements of FSC 1.0 as the City positions itself as an imperial servant (albeit not British imperialism). FSC 1.5, if you will.
But Britain’s efforts to embrace various transnational elites – Russian oligarchs, Chinese state financiers, crpyto bros – keep crashing into, well, reality. The future could hardly be more bleak, but at least recognising the role of state capitalism in British economic history helps us to understand how we got to where we are.