Neoliberal state capitalism as the ‘real subsumption’ of public enterprise?

ABSTRACT

This commentary argues that the puzzle of neoliberal state capitalism can be fruitfully approached through Karl Marx’s categories of ‘formal’ and ‘real’ subsumption, as applied here to changes in public enterprise. Indicated through various Canadian examples, the redistributive activities once associated with state ownership have been whittled to financial and technical assistance for capital, enmeshed within imperatives of financialisation and privatisation. With narrower mandates and limited social objectives, public enterprises have been transformed through the real subsumption of neoliberal state capitalism. Enhanced theorisation can inform academic debate and might suggest trajectories of future political contestation.

KEYWORDS:

• neoliberalism
• public enterprise
• state capitalism
• state-owned enterprise
• subsumption

JEL:

• B14
• P16
• H13
• H82

1. INTRODUCTION

On 13 September 2023, the state-owned enterprise (SOE)¹ Canada Mortgage and Housing Corporation (CMHC) reported that the country needs an additional 3.5 million homes in the coming decade to address the serious shortage in housing supply not met by the private sector (CMHC, 2023). Rather than directly filling this social need itself, as it once did, the role of CMHC in Canadian capitalism has been restricted since the 1990s to mainly providing information and underwriting services for private real estate markets. Public enterprise generally, like the CMHC example suggests, has been thoroughly reconfigured over the neoliberal era.

And yet literatures ranging from critical economic geography (Alami et al., 2023; Dixon et al., 2023; Whiteside et al., 2022) to comparative political economy (Musacchio & Lazzarini, 2014) and the mainstream press (Bremmer, 2009), highlight the rise of ‘new state capitalism’ as greater state involvement in the economy as of late – from ownership to intervention and finance. Reconciling the endurance of neoliberalism with/in new and historical forms of state capitalism is a tall order for a short commentary; here I offer one way of understanding these dynamics through the fused concept of ‘neoliberal state capitalism’, indicated by the ‘real subsumption’ of SOEs now narrowly mandated to serve market needs at the expense of broader social concerns.

As a starting point, it is important to note that the relationship between state capitalism and neoliberal capitalism is, to some extent, a puzzle. Definitions vary but typically the neoliberal state is said to be one favouring privatisation, liberalisation and austerity (Aalbers, 2013; Harvey, 2005; Peck, 2010; Springer et al., 2016), whereas forms of new state capitalism are said to emerge through enhanced government ownership, the promotion of national champions and fiscal support for industry (Wright et al., 2022). Rather than interpreting these types of characterisations as antagonistic – as if new state capitalism represents a sharp break from the past – here I focus on the SOEs that straddle the divide.

It is evident that state ownership both preceded and persisted across the neoliberal period. State intervention, including the strategic use of public finance and ownership, dovetails with the market-oriented neoliberal state (Berry, 2022). The longevity of the SOE form is not synonymous with stasis; as the financialisation literature suggests, institutions of the state are thoroughly enmeshed in larger processes of restructuring (Deruytter & Bassens, 2021; Pike et al., 2019). Witnessed through changes to Canadian SOEs created generations ago in sectors such as finance and infrastructure, the implications of neoliberal state capitalism are akin to those described by Karl Marx as capitalist subsumption. The next two sections explain how neoliberal state capitalism unfolds as capitalist subsumption and SOE transformation.

2. SUBSUMPTION

One way of approaching the puzzle of neoliberal state capitalism is to view this dynamic through Marx’s categories of ‘formal’ and ‘real’ capitalist subsumption. In Marxian thought, the expansion of capitalist processes implicates new forms of political-economic organisation just as it crucially involves the transformation of existing socio-institutional arrangements. The term ‘subsumption’, sometimes translated as subordination or submission, encourages an analysis of reconfigured economic activity over time. Subsumption is both chronological and relational, an historical and an ever-present dynamic (Murray, 2004; Tomba, 2015). The social transformations involved are not merely technical, they are epochal (Murray, 2004).

For Marx, ‘subsumption’ indicates the nature of labour subordination to capital through different types of workplace controls, concepts developed mainly in ‘Results of the Direct Production Process’, draft chapter 6 for Capital, Vol. I. Secondary sources have used this concept to assess temporal change in areas such as capitalist employment relationships (Murray, 2004; Screpanti, 2017; Tomba, 2015), informal labour markets (Joyce, 2020), knowledge economies (Vercellone, 2007), and ontology (Rossi, 2012; Hardt & Negri, 2000). There are two principal forms of subsumption in Marxian analysis, formal and real, though others have been added (such as hybrid, ideal and pre-capitalist). With formal subsumption, the technical aspects of work might stay the same, but capital comes to own this work; with real subsumption, labour processes become actively intervened upon and rearranged for capitalist need, and thus totally transformed according to capitalist logics. While these concepts could be readily applied to shifts in employer–employee relations within particular SOEs, scholarship on neoliberal state capitalism could equally apply subsumption as metaphor for, or demarcation of, changes in state capitalist institutions within the neoliberal period more broadly.² Real subsumption emerges through neoliberal reforms that refocus SOEs by stripping them of broader social objectives and constraining their mandates, as demonstrated in the Canadian cases summarised below.

3. SOEs

It is worth reiterating that for capitalist economies, SOEs are entities of the capitalist state. Public enterprise within a capitalist system is not simply more or less capitalist by degrees of intensity, rather this institutional form takes on different features over time. In Canada, the corporate state form dates to the earliest period of settler capitalist development to make markets, fill gaps in domestic production and circulation, integrate distinct colonial economies, and shore up capitalist state regulatory activities beyond fledgling legislatures. Forms of public enterprise changed over the 20th century as a result of market failures such as bankruptcy and monopoly, for ideological reasons such as fulfilling Keynesian commitments to demand management, and where secretive operations were deemed strategic during wartime efforts (discussed by Whiteside, 2012, 2020, 2022).

Multiple ‘social objectives’ have always been a feature of Canadian public enterprise, such as assisting with social reproduction through fiscal redistribution and considerations for preferential treatment such as the location of operations, charging below-cost rates, providing uneconomic services, offering high-wage jobs, stabilising employment levels above market dictates, and promoting industrial and rural or regional development through the activities of SOEs. Public enterprise has thus always been ‘formally’ subsumed under the ambitions of the capitalist state, made especially evident through operations that bring small-scale petty bourgeois capitalist producers or communities on the fringes of capital accumulation into more robust national/global circuits of accumulation and enhanced exploitation in wage relationships. The social objectives attached to SOEs in earlier periods of capitalist development imparted benefits for capital even if the institutional aspects of their operations retained a public sector flair, such as being more directly connected to bureaucracy, public policy and elected officials.

With the neoliberal era, the SOEs that avoided privatisation were refocused through commercialisation that stripped away many of the social objectives listed above and reoriented activities toward those that largely support crisis-prone neoliberal financialised capitalism. A few case examples make this plain.

Created in 1946, the Canada Mortgage and Housing Corporation (CMHC), mentioned at the outset of this commentary, has seen its ambit change substantially over the years. Whereas it once provided war veterans with housing services in the 1940s and delivered urban low-income housing in the 1950s, by the 1990s its role had been trimmed to information services, commercial mortgage underwriting and selling bonds. During the 2008 Global Financial Crisis, CMHC took a more activist role through its Insured Mortgage Purchase Program that committed hundreds of billions of Canadian dollars in liquidity support for private mortgage lenders.

Export Development Canada (EDC) and Business Development Bank of Canada (BDC) were also called upon during the Global Financial Crisis to provide liquidity assistance as banking sector guarantees. Both EDC and BDC were originally founded in 1944 to assist with postwar economic transition. BDC, then named the Industrial Development Bank, played a key role in Canadian capitalist development by supplying cheap public credit for small industry such as lumber mills, machine shops, tire treading, textile factories, helicopter and bush plane companies, and flour mills (Clark, 1985). Today, BDC continues to supply venture capital and credit, now targeting young entrepreneurs, female-owned businesses and Indigenous peoples.

The Canada Pension Plan (CPP) was created in 1965. In its initial form, it invested Canadians’ pooled savings almost exclusively in government bonds, which were in turn used to finance local public works. In 1997, CPP took a more financialised approach, seeking to maximise returns by making global equity investments in privatised infrastructure.

The Canada Lands Company (CLC) dates to 1956 when it was created to handle public land development, leases, permits and title transfers for other government departments. In 1995, CLC was mandated to redevelop public land for market sale. CLC today operates as a rent collector and property developer, privatiser, commercialiser, and financialiser of public land (Whiteside, 2017a).

In 2015, the Canada Infrastructure Bank (CIB) was initially proposed as a way of providing lower cost public financing for much needed social projects such as affordable housing. By 2017, these ambitions were reversed: CIB would now engage private finance by investing in revenue-generating infrastructure and public–private partnerships in target areas such as transit, clean energy and First Nations’ projects (Whiteside, 2017b). The operations of CIB were modified once more in 2022 to invest in private sector-led projects, using public funds to de-risk private investments.

4. CONCLUSIONS

Neoliberal state capitalism has transformed Canadian SOEs. No longer aiming to meet broader needs such as providing below cost services and social supports, public enterprise has been reoriented through the near-exclusive aim of enhancing capital accumulation. Like the ‘real’ subsumption of labour processes, the real subsumption wrought by neoliberal state capitalism involved active transformation and rearrangement such that most commercialised SOEs today more narrowly serve capitalist need, such as stabilising economic crises and advancing privatisation, thus transforming public enterprise according to market logics. While it might not be a perfect analogy with labour market subsumption, neoliberal state capitalism has meant the reconfiguration of corporate aspects of the capitalist state in ways equally epochal (or deleterious) for service recipients and the social wage, regional inequalities and community beneficiaries, and for the ability of at least notionally quasi-democratic or publicly accountable institutions to bridge the election cycle in delivering long-run solutions to vexing social problems such as inflation, climate change and housing.

In a memo prepared for the 1937 Royal Commission on Dominion–Provincial Relations, J. A. Corry wrote, ‘The state is the only organisation which can command the required capital and integrate co-operative effort on a large scale. Hence it is called upon to assume leadership in important and urgent development’ (quoted in Bladen, 1951, p. 286). Corry is making a contrast here between the supposed laissez-faire of 19th-century England and Canada’s ‘collectivist’ experience as a ‘new’ country at the time. But now, a century later, Canadian state intervention evidently persists. State capitalism brings public enterprise into the service of the capitalist state, but it does so in varied ways. The concept of ‘subsumption’ offers one way of understanding these transformations and can guide future research on the socio-political implications of renewed public ownership associated with the new state capitalism of today.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the author.

Additional information

Funding

This work was supported by the Social Sciences and Humanities Research Council [grant number 435-2021-0046].

Notes

1 The terms ‘state-owned enterprise’ and ‘public enterprise’ will be used interchangeably here in reference to government-owned commercial entities organised through formal articles of incorporation under the Canada Business Corporations Act or Acts of Parliament, an approach consistent with Organisation for Economic Co-operation and Development (OECD) (2015, p. 14) guidance that suggests, ‘any corporate entity recognised by national law as an enterprise, and in which the state exercises ownership, should be considered as an SOE’. For a broader discussion of public ownership, see Cumbers (2012) and McDonald (2016).

2 The movement from formal to real subsumption can be found in other areas of relevance to neoliberal state capitalism as well. With financialised public infrastructure (Ashton et al., 2012; O'Neill, 2013), for example, where financialisation organises a shift from debt-funded public works projects (formal subsumption) to private equity holders making decisions about the design and operation of public infrastructure (real subsumption), the logics and needs of finance come to intimately determine process and outcome just like the real subsumption of labour over time.