Between January and June 1916, the exiled leader of the Russian Bolshevik Party, Vladimir Ilyich Lenin, wrote a popular pamphlet entitled Imperialism: the highest stage of capitalism.
Written for an audience of working-class activists, its purpose was to explain the character of contemporary capitalism and the imperialist war which had begun in 1914.
Lenin made no claim to originality. His aim was to summarise and popularise the work of leading theoreticians of the global system like the British liberal John Hobson in Imperialism (1902), the Austrian Marxist Rudolf Hilferding in Finance Capital (1910), the Polish-German Marxist Rosa Luxemburg in The Accumulation of Capital (1913), and the Russian Marxist Nikolai Bukharin in Imperialism and World Economy (1915).
These studies attempted to understand what historian Eric Hobsbawm has defined as ‘the Age of Empire’ (1875-1914). They amounted to a radical updating of Marx’s theory of capitalism. Faced with first the ominous militarisation of Europe, then its consummation in the First World War, these thinkers developed new theories to explain the extraordinary violence of the system.
The rapid pace of economic growth and the colossal scale of industrial investment had transformed the character of capitalism.
In Marx’s day, the system had been dominated by small and medium-sized firms competing mainly within national and colonial markets. But as Marx himself had observed in Capital, the trend was towards ‘concentration and centralisation of capital’.
Capital accumulation is competitive, and because larger corporations can achieve greater economies of scale, they tend to drive smaller rivals out of business. Production becomes concentrated in large factories, and ownership centralised in large corporations.
Crisis accelerates these processes: by intensifying competitive pressure, it bankrupts weaker firms and allows the stronger to buy up assets at fire-sale prices and expand market-share. Developing centres of capital accumulation enjoy a particular advantage, because they can adopt the latest technologies when they set up new industries.
The Long Depression of 1873-1896 (see MHW 61) had this effect. Much of late 19th century capitalism came to be dominated, within each sector, by a few giant firms. At the same time, economic power shifted from Britain, with its old established industries, to Germany and the USA, whose output had overtaken that of Britain by the turn of the century.
Lenin provided a succinct definition of imperialism in terms of five characteristics:
Just as Marx had done in his analysis of capitalism in the mid 19th century, Lenin and his co-thinkers identified the key trends by focusing on the most advanced parts of the system. Their analysis mapped the path for global capitalism as a whole – but it was Germany and the USA that showed the way.
The sheer size of the corporate giants of the early 20th century was decisive: it meant they were big enough to control the national economy and dominate the state. Major firms in each sector formed themselves into cartels or trusts, dividing the market between them, and fixing output, prices, and profits.
Just two firms, Siemens and AEG, controlled virtually the whole of the German electricals industry. Two groups, each of three firms, controlled the chemicals industry. One study estimated that some 12,000 leading German firms were organised into 385 cartels by 1905.
‘Cartels become one of the foundations of the whole of economic life,’ observed Lenin. ‘Competition becomes transformed into monopoly.’
Because access to credit was a vital precondition of large-scale investment, finance capital rose in tandem with monopoly capital. The total deposits held by large German banks increased by 40% in the five years between 1907-1908 and 1912-1913.
And finance capital, like industrial capital, was increasingly centralised. By the end of 1913, the nine biggest Berlin banks, together with their affiliates, controlled about 83% of all German bank capital. The biggest of all, the Deutsche Bank, controlled 23%.
Industry and banks became interdependent. ‘A steadily increasing proportion of capital in industry,’ wrote Hilferding, ‘ceases to belong to the industrialists who employ it. They obtain the use of it only through the medium of the banks, which, in relation to them, represent the owners of the capital. On the other hand, the bank is forced to sink an increasing share of its funds in industry.’
Thus, by means of various forms of credit – by extending loans and by purchasing stocks and bonds – the banks became the owners and organisers of industry. ‘Finance capital,’ concluded Hilferding, ‘is capital controlled by banks and employed by industrialists.’
The power of the industrial cartels and banking syndicates transformed the role of the state. Only in Britain (and only prior to the First World War) did the state play almost no direct role in capital accumulation. In Germany, by contrast, the only corporate body whose capitalisation could match that of the (private) Deutsche Bank was the (publicly owned) Prussian State Railway Administration.
Railway investment (itself a strategic necessity) combined with arms expenditure to make the state the single biggest customer for the output of heavy industry. German government spending on army and navy increased ten-fold between 1870 and 1914. State arms-contracts were almost entirely responsible for the four-fold expansion of the Krupp works at Essen in the 40 years before the First World War.
As well as direct investment and state contracts, the government also provided protection against foreign competition. Until 1879, European trade had been relatively free, but in that year, Germany introduced tariffs – essentially taxes on imports designed to raise the price of foreign goods on the home market – and thereafter the practice spread across Europe, with the rates steadily ratcheting up in ‘beggar thy neighbour’ manner.
By the early 20th century, the development of world capitalism had become highly contradictory. On the one hand, there was globalisation: rapid economic growth, the dominance of giant firms, a restless search for new markets, ever-expanding international trade. On the other, there was economic nationalism, as industrial cartels, banking syndicates, and military states fused into opposing national-capitalist blocs.
It was Germany, as the most dynamic of these blocs, that experienced the contradiction in its most acute form.
As the mass of German capital seeking markets continued to expand, it pushed beyond the limits of the existing national territory. But it then ran into barriers: protective tariffs, closed colonial markets, competition from foreign capitalists.
Here was the deepest root of the First World War. Finance capitalism – the growth of giant monopolies and the fusing of industrial, bank, and state capital – had created a dangerous world of competing nationalisms.
‘When competition has finally reached its highest stage,’ explained Bukharin, ‘when it has become competition between state capitalist trusts, then the use of state power, and the possibilities connected with it, begin to play a very large part … The more strained the situation in the world sphere of struggle – and our epoch is characterised by the greatest intensity of competition between ‘national’ groups of finance capital – the oftener an appeal is made to the mailed fist of state power.’
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