The term "state capitalism" is also used by some in reference to a private capitalist economy controlled by a state, often meaning a privately owned economy that is subject to statist economic planning. This term was often used to describe the controlled economies of the Great Powers in the First World War. State capitalism has also come to refer to an economic system where the means of production are owned privately, but the state has considerable control over the allocation of credit and investment as in the case of France during the period of dirigisme after the Second World War. State capitalism may be used (sometimes interchangeably with state monopoly capitalism) to describe a system where the state intervenes in the economy to protect and advance the interests of large-scale businesses.
Libertarian socialist Noam Chomsky applies the term "state capitalism" to economies such as that of the United States, where large enterprises that are deemed "too big to fail" receive publicly funded government bailouts that mitigate the firms' assumption of risk and undermine market laws and where the state largely funds private production at public expense, but private owners reap the profits. This practice is often claimed to be in contrast with the ideals of both socialism and laissez-faire capitalism.
There are various theories and critiques of state capitalism, some of which existed before the 1917 October Revolution. The common themes among them identify that the workers do not meaningfully control the means of production and detect that commodity relations and production for profit still occur within state capitalism. In 1918, Vladimir Lenin notably described the economy of the Russian Empire as state capitalism. In Socialism: Utopian and Scientific (1880), Friedrich Engels argued that state ownership does not do away with capitalism by itself, but rather would be the final stage of capitalism, consisting of ownership and management of large-scale production and communication by the bourgeois state. He argued that the tools for ending capitalism are found in state capitalism.
The term was first used by Wilhelm Liebknecht in 1896 who said: "Nobody has combated State Socialism more than we German Socialists; nobody has shown more distinctively than I, that State Socialism is really State capitalism".
It has been suggested that the concept of state capitalism can be traced back to Mikhail Bakunin's critique during the First International of the potential for state exploitation under Marxist-inspired socialism, or to Jan Waclav Machajski's argument in The Intellectual Worker (1905) that socialism was a movement of the intelligentsia as a class, resulting in a new type of society he termed state capitalism. For anarchists, state socialism is equivalent to state capitalism, hence oppressive and merely a shift from private capitalists to the state being the sole employer and capitalist.
During World War I, using Vladimir Lenin's idea that Czarism was taking a "Prussian path" to capitalism, the Bolshevik Nikolai Bukharin identified a new stage in the development of capitalism in which all sectors of national production and all important social institutions had become managed by the state—he termed this new stage "state capitalism".
After the October Revolution, Lenin used the term positively. In spring 1918, during a brief period of economic liberalism prior to the introduction of war communism and again during the New Economic Policy (NEP) of 1921, Lenin justified the introduction of state capitalism controlled politically by the dictatorship of the proletariat to further central control and develop the productive forces: