This article discusses the problem of the directive capacity of the socialist state, defined as the ability to identify opportunities available within both the domestic and international political economy and to develop and implement policies. The focus is not on how the directive capacity of the socialist state is actually used by the elites but on the identification of basic mechanisms shaping it. The following questions are addressed: What is the relationship between politics and economics in state socialism, and how does it determine directive capacity? What are the underlying structures that shape the socialist state/economy interaction? What mechanisms have developed within the framework of state socialism that compensate for lack of pressures toward higher efficiency? What are the system's limitations and what strategies are available to increase the directive capacity?
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