Chomsky deliberately ignores historical context and Lenin's own writings to make that argument.
Again and again, people have repeated the tautology "Lenin called it state capitalism, therefore it was state capitalism." And claimed that Lenin was not actually Lenin, but was in fact Blanqui, and that the USSR was totalitarianism, and hence equivalent to Nazi Germany. This is ridiculous, but what else can you expect from a radical liberal like Chomsky, who argues that Imperial Germany was more "socialist" than post-1917 Russia. Most irritating at all, he argues that critics who disagree are actually complicit with Western propaganda and as such are betraying themselves and the movement; that kind of arrogance has no truck with the nuances of history.
If you look at Lenin's writings, particularly this speech: marxists.org/archive/lenin/works/1918/apr/29.htm
You can see the context in which Lenin used the term state capitalism. This is in early 1918, when Chomsky said that all trace of socialism was being extinguished. It would have been more plausible to claim that by 1921, but I digress.
>What is state capitalism under Soviet power? To achieve state capitalism at the present time means putting into effect the accounting and control that the capitalist classes carried out. We see a sample of state capitalism in Germany. We know that Germany has proved superior to us. But if you reflect even slightly on what it would mean if the foundations of such state capitalism were established in Russia, Soviet Russia, everyone who is not out of his senses and has not stuffed his head with fragments of book learning, would have to say that state capitalism would be our salvation.
The first thing to note is that there is no discussion of state capitalism as a mode of production – Lenin was adamant, against left criticism, that what was being built was socialism. Second, as Trotsky argued,
>Socialism is a keeping of accounts. Under the conditions of the New Economic Policy only the forms of our account keeping are different from those which we endeavoured to employ during the period of Military [i.e. War] Communism, and which will receive their final form with the development of socialism.
marxists.org/archive/trotsky/1925/11/towards.htm
There is no contradiction here. The construction of socialism requires the accounting and control mechanisms that had already been carried out in more, comparatively, highly developed capitalist nations like Germany. To build socialism was, in large part, to build an integrated economy. This is the historical context Chomsky ignores, as he ignores Lenin's point of view, and for a definite political purpose: he equates, like all liberals do, Lenin with the eventual reign of Stalinism in the USSR, and as such Lenin a petty version of Stalin who was diligently laying the bricks for an inevitable totalitarian dictatorship. Nothing could be further from the truth.
Lenin was aggressively recruiting from former Czarist experts:
>The only socialism we can imagine is one based on all the lessons learned through large-scale capitalist culture. Socialism without postal and telegraph services, without machines is the emptiest of phrases. But it is impossible to sweep aside the bourgeois atmosphere and bourgeois habits all at once; it needs the kind of organisation on which all modern science and technology are based.
This was state capitalism. It should be no controversy to state that socialism is only possible through capitalism. The problem the Bolsheviks faced was they had capitalism, but it was a decrepit, war-torn, petty bourgeois capitalism. They could not dispense with what bourgeois expertise existed when they had nothing to replace it. There was a dearth of contemporary information technology and as such poor accounting and control. The only thing holding the USSR together was the party and Trotsky's military discipline, which Chomsky much despises; ironically, because the revolution was made possible in large part by soldiers' soviets cooperating with workers' soviets.