I think crushing the view that capitalism is what the state of nature looks like in human flesh is central to Marx's project. The 'state of nature' involved the idea that the economy is something we have to put up with, rather like the weather. Rakesh elegantly makes that point in his earlier e-mail.
However, the need for the separation of the state from civil society within early capitalism seems to me to be how Marx suggests the elimination of the earlier structures of personal dependence took place. That left room for the social, class, exploitation that characterises capitalism.
A key issue for all of us is that the whole tradition of European Social Democracy assumed the state to be a kind of neutral cop presiding over the true realm of capitalist life, civil society. We end up with the view that we can knock out the state leadership and replace it by a team that will use the state machine in a radically different way, a socialist way. Left wing newspapers usually describe the cop, the state, as not being neutral in the class war because of corruption in some form or other. This neatly avoids there being a situational logic within the great game in which states know their own interests and pursue them. As we know, capitalism isn't just the result of ill motivated people (the wrong politicians) or the economic weather.
I think that SD view to be incompatible with the Marx of the Critique of the Gotha Programme & the Critique of Hegel's Philosophy of Right. The separation of the direct producer from the means of production lies at the heart of alienated labour, private property and the capitalist class. In those texts, it seems to me that the state is characterised as a private institution which has its own agenda in the same way that a corporation has its own agenda - i.e. it is just one part of the social life which is fractured. I think Chattopadhyay's categorisation of two senses of private property is spot on. These are the absolute separation of the working class from the means of life (the prerequisite) upon which grows the legal institution of capitalist private property (the capitalist legal form of private ownership.) [http://www.amazon.com/Marxian-Concept-Capital-Soviet-Experience/dp/02759453 08] This implies that the ending of the private ownership of companies is just a reshuffling of the tills within capitalist society.
I'm not sure I even understand what we need to reverse this separation, i.e. to end capitalism. What is our political project in the world as it now is, except as a saying no to the institutions of capital?
1. The Ontological Primacy of Social Labor Activity
Social labor time must be distributed to allow for the use of the otherwise inactive factors of production (land, means of production, draught animals) and the reproduction of society thereby. Any economics which effaces the ontological primacy of social productive labor is fetishistic. As therefore is all talk of the qualitative equality of all the factors of production or the putative production of commodities by commodities.
2. The Implications of Reification
2.a. People relate to each other only through commodities
2.b. The social labor time which is to be distributed to an activity must manifest itself (from 1)and can only manifest itself in the expression of one commodity in another commodity (from 2a).
2.c. This mode of expression distorts within strict limits the value of a commodity (chaotic price movements still gravitate around values, and the double divergence of profit from counterfactually imputed surplus value embodied in an individual commodity and the cost price of the used up means of production from their value creates only a small divergence between the price and value of a commodity). But this distortion, though strictly limited as empirically confirmed, is the most important reason that the price form appears as a hieroglyphic, yet price must remain a function of value (this simply follows from 1, 2a and 2b).
3. The Nature of Surplus Value Moreover, the redistribution of value effected by the distorting price form does not affect the conclusion that the only source of new value in the system as a whole is the exploitation of labor, i.e. the 'labor fund' which the capitalist class apportions to the working class for its reproduction is less than the new value the defacto enslaved workers have created and the capitalist class 'rightfully' appropriated.
4. Capital as living contradiction Competitive production works at cross purposes: it strives to lower unit values yet it does just that by raising the organic composition of capital and thereby depressing the general profit rate and putting out the flames of expanded reproduction.
5. The transience of value
Once the nature of value is understood, all belief in the necessity of the bourgeois mode of production vanishes.