As in state capitalism, a bureaucratic collectivist state owns the means of production, while the surplus ("profit") is distributed among an elite party bureaucracy, rather than among the workers. Also, most importantly, it is the bureaucracy - not the workers or the people in general - who controls the economy and the state. Thus, the system is not truly capitalist, but it is not socialist either. It is a new form of class society which exploits workers, in Marxist theory, through new mechanisms. Most who hold this view believe that bureaucratic collectivism does not represent progress beyond capitalism - that is, that it is no closer to being a workers' state than a capitalist state would be, and is considerably less efficient. Some even believe that certain kinds of capitalism are more progressive than a bureaucratic collectivist society.
"Bureaucratic collectivism" was first used as a term to describe a theory originating in England, shortly before the First World War, about a possible future social organisation. After the war, the Russian Revolution and the rise of Stalin, Hugo Urbahns and Lucien Laurat both began to critique the nature of the Soviet state in a similar manner. Their theory was probably first named "bureaucratic collectivism" by Christian Rakovsky.
This theory was first taken up within Trotskyism by a small group in France around Yvan Craipeau. It was also taken up by Bruno Rizzi, who believed that the Soviet, German and Italian bureaucracies were progressive and celebrated "the class which has the courage to make itself master of the state". It was with Rizzi that Trotsky debated in the late 1930s. Trotsky held that the Soviet Union was a degenerated workers state and that if it did not undergo a new workers' political revolution, it could move towards a new form of society, such as bureaucratic collectivism. However, Trotsky doubted that a state of pure bureaucratic collectivism would ever be reached; he believed that, in the absence of a proletarian revolution to return the Soviet Union to socialism, a comprehensive counter-revolution would return the nation to capitalism instead.
Soon after the Workers Party in the USA (later the Independent Socialist League), led by Max Shachtman, split from the Fourth International, it adopted the theory of bureaucratic collectivism and developed it. As a result, it is often associated with Left Shachtmanism and the Third Camp. Its version had much in common with Craipeau's, as developed by James Burnham and Joseph Carter, but little with Rizzi's.
George Orwell's famous novel Nineteen Eighty-Four describes a fictional society of "Oligarchical Collectivism". Orwell was familiar with the works of James Burnham having reviewed Burnham's Managerial Revolution prior to writing Nineteen Eighty-Four.