State capitalism

This post is meant as a bonus for our regular readers and for the sake of historiography – to provide insight in the evolution of the ideas behind the movement represented by this site.

During my early teens I evolved from a communist into a vocal advocate of state capitalism.

Originally state capitalism was coined by discontented Marxists in order to denounce the Soviet Union as not a real socialist country but as actually a capitalist one. However, in my opinion state capitalism was a positive thing, and I developed my own version of state capitalism. Below I will present my brand of SC as I endorsed at age 17.

First, all land was to be owned by the state but could be leased by private parties. This would secure a flow of revenue for the state. Additionally there would be a flat income tax of 25 percent, this income tax would be without deductions.

The more important feature was the following. In my version of state capitalism the state would play the role of an active investor. The government should borrow money by issuing bonds, and this money would be used to start new businesses. And by the time these businesses were profitable, the government would (partially) privatize these business by going public.

In the plans I had at the time, typically about 75 percent of the shares would be sold, whilst the government would hold the remainder. The purpose of such IPO was two-fold: first, to repay the loans by the state and secondly, to make a profit which could be used for further investments.

The shares the government did not sell during the IPO, were to be put in a sovereign wealth fund. The dividends from these shares would be used for paying welfare benefits, pensions, funding education and healthcare.

In my opinion the policy of the state as venture capitalist had several benefits. First it would create jobs for the citizens of the state, and it would help to develop the nation’s economy.

Unlike in the Soviet Union, private initiative would not be banned. On the contrary it should be encouraged by the state, as state-owned businesses could only prosper if there would be healthy competition from the private sector.

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7 thoughts on “State capitalism”

  1. Great idea, but fraught with potential problems. While I agree government should shoulder the greater part of investments in new tech, being the sole investor opens too many doors to cronyism. Ideally, we’d have something like the company Y Combinator. In and out very quickly, some hits, many misses, everything kept afresh.

    1. >> being the sole investor opens too many doors to cronyism.

      Yes, indeed. Hence my remark regarding the encouragement of private initiative in a state capitalist economy.

      >>Ideally, we’d have something like the company Y Combinator. In and out very quickly, some hits, many misses, everything kept afresh.

      I like that concept.

    1. Corruption starts at the top, i.e. the government, and subsequently infects the rest of the body, the populace. As Chinese philosopher Laozi argued a king should rule by giving the right example. After all why should the common people obey the law, as the very lawgivers ignore the law?

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