© Resistance Books 1999
Published by Resistance Books, 23 Abercrombie St, Chippendale 2008, Australia
This online edition published 2003.
The term "imperialism" came into common usage in England in the 1890s as a development of the older term "empire" by the advocates of a major effort to extend the British Empire in opposition to the policy of concentrating on national economic development, the supporters of which the advocates of imperialism dismissed as "Little Englanders". The term was rapidly taken into other languages to describe the contest between rival European states to secure colonies and spheres of influence in Africa and Asia, a contest that dominated international politics from the mid-1880s to 1914, and caused this period to be named the "age of imperialism".
The first systematic critique of imperialism was made by the English bourgeois social-reformist economist John Atkinson Hobson (1858-1940) in his 1902 book Imperialism: A Study, which, as Lenin observes at the beginning of his own book on the subject, "gives a very good and comprehensive description of the principal specific economic and political features of imperialism" (see below, p. 33).
Lenin had long been familiar with Hobson's book. Indeed, in a letter written from Geneva to his mother in St. Petersburg on August 29, 1904, Lenin stated that he had just "received Hobson's book on imperialism and have begun translating it" into Russian.(1)
In a number of his writings between 1895 and 1913, Lenin had noted some of the characteristics of the imperialist epoch, for example: the concentration of production and the growth of monopolistic trusts and cartels, the growing importance of the export of capital compared with the export of commodities, the internationalisation of capitalist economic relations, the struggle between the rival European powers to partition the world market, the parasitism and decay of capitalism, and the creation throughcapitalism's socialisation of production of the material conditions for the transition to socialism.
However, it was not until the outbreak of the World War I in August 1914 that Lenin felt the need to make a comprehensive and systematic Marxist analysis of the nature of the imperialist stage of capitalism, i.e., to go beyond the analysis made by Hobson in 1902 and by the Austrian Marxist economist Rudolf Hilferding in his 1910 book Finance Capital. The latter work, Lenin stated in his Imperialism: The Highest Stage of Capitalism, "gives a very valuable theoretical analysis of `the latest phase of capitalist development', as the subtitle runs" (see below, p. 33)(2).
Given his comments on both Hobson's and Hilferding's works, why then did Lenin feel the need to produce his own analysis of imperialism? Lenin himself provides the answer in his 1920 preface to the French and German editions of his book. The "main purpose of the book", Lenin explained, was "to present, on the basis of the summarised returns of irrefutable bourgeois statistics, and the admissions of bourgeois scholars of all countries, a composite picture of the world capitalist system in its international relationships at the beginning of the 20th century — on the eve of the first world imperialist war". In doing this, Lenin had three objectives in mind:
1. To prove that "the war of 1914-18 was imperialist (this is, an annexationist, predatory war of plunder) on the part of both sides" and thus to refute the arguments of the leaders of the Second International, above all those of its leading theorist, Karl Kautsky, that each side in the war was merely fighting for "national defence" and therefore there was nothing opportunist or class-collaborationist in these leaders supporting the war efforts of the governments of their own countries.
2. To counter the theoretical arguments of Kautsky about the nature of imperialism and to demonstrate that he was "obscuring the profundity of the contradictions of imperialism and the inevitable revolutionary crisis to which it gives rise".
Kautsky did this, firstly, by arguing that it was wrong to "identify with imperialism all the phenomena of present-day capitalism — cartels, protection, the domination of the financiers, and colonial policy". That is, according to Kautsky, imperialism was not a "phase" of capitalist economic development but a "special policy" of capital, which "consists in the striving of every industrial capitalist nation to bring under its control or to annex ever bigger areas of agrarian territory, irrespective of what nations inhabit them".(3) Secondly, proceeding from this view of imperialism, Kautsky argued that this "special policy" might be superseded after the world war by a new policy, that of "the extension of the policy of the cartels to foreign policy, the phase of ultraimperialism", i.e., the peaceful uniting of all the rival finance groups into a single,world-wide trust and the "abolition of imperialism through a holy alliance of the imperialists".(4) Lenin sought to counter this argument by demonstrating that imperialism was the highest and last stage of the development of capitalism.
3. To demonstrate that there was a causal connection between this new stage in the development of capitalism and the existence of a relatively stable opportunist, pro-imperialist, trend within the working-class movement of the "advanced" capitalist countries. As Lenin noted at the end of his 1920 preface:
Unless the economic roots of this phenomenon are understood and its political and social significance is appreciated, not a step can be taken toward the solution of the practical problems of the Communist movement and of the impending social revolution.
However, the "economic roots of this phenomenon" and its "political and social significance" were only outlined briefly in the book. They were taken up more thoroughly in the article "Imperialism and the Split in Socialism", printed here as an appendix. This was published in Sbornik Sotsial-Demokrata — the war-time theoretical supplement to Sotsial-Demokrata, central organ of the Russian Social-Democratic Labour Party (Bolsheviks) — in October 1916, a few months after Lenin had completed writing his book on imperialism. The book itself was written between January and June of 1916, though Lenin started research for it in mid-1915. However, it was not published until the middle of 1917.
The closing years of the 19th century and the opening years of the 20th had been marked by a succession of wars — between China and Japan in 1894, Spain and the USA in 1898, Britain and the Boer republic in South Africa in 1899, Japan and Russia in 1904, Italy and Turkey in 1911, the Balkan states and Turkey in 1912, and between the Balkan states themselves in 1913. This ascending wave of wars culminated in outbreak of the first world war in 1914.
The "Great War" of 1914-18 brought into stark view a significant quality that had marked, on a growing scale, the wars of the "age of imperialism" — the struggle between the "Great Powers" for hegemony of the world and the control of its economic resources, actual and potential. It constituted concrete evidence that, as Lenin put it in his 1920 preface to his Imperialism:
Capitalism has grown into a world system of colonial oppression and financial strangulation of the overwhelming majority of the people of the world by a handful of "advanced" countries. And this "booty" is shared between two or three powerful world plunderers armed to the teeth (America, Great Britain, Japan), who are drawing the whole world into their war over the division of their booty.
Imperialism was therefore not to be explained as merely a change in the foreign policies of the governments of the "advanced" countries, but as a change in the nature of capitalist relations of production. While cautioning that it was necessary not to forget "the conditional and relative value of all definitions in general, which can never embrace all the concatenations of a phenomenon in its full development", Lenin pointed out that if it were necessary to "give the briefest possible definition of imperialism we should have to say that imperialism is the monopoly stage of capitalism". Such a definition, he added, "would include what is most important, for, on the one hand, finance capital is the bank capital [i.e., the money capital] of a few big monopolist banks, merged with the capital of the monopolist associations of industrialists; and, on the other hand, the division of the world is the transition from a colonial policy which has extended without hindrance to territories unseized by any capitalist power, to a colonial policy of monopolist possession of the territory of the world, which has been completely divided up".
Lenin noted "five basic features" as the imperialist stage of capitalism:
(1) the concentration of production and capital has developed to such a high stage that it has created monopolies which play a decisive role in economic life; (2) the merging of bank capital with industrial capital, and the creation on the basis of this "finance capital", of a financial oligarchy; (3) the export of capital as distinguished from the export of commodities acquires exceptional importance; (4) the formation of international monopolist capitalist associations which share the world among themselves; and (5) the territorial division of the whole world among the biggest capitalist powers is completed.
Taken separately each of these phenomena shows a degree of becoming a difference in kind. But in their totality, they represent a transformation of quantity into quality — a qualitatively new stage in the development of capitalism. Taken as a whole, their central characteristic is the transformation of free competition into its opposite, into monopoly. This indicates that the distinguishing features of imperialism are not to be dismissed as superficial or temporary aberrations, accidentally modifying the "normal course" of capitalism. They indicate that the essential production relations of capitalism have developed all the potentialities latent within their primary antagonism (socialisation of the productive process and private appropriation of the results of this process), and that before any further development of the social relations of production is possible the antagonism itself must be eliminated. This can be seenmost clearly if we examine in succession each of the five basic features of imperialism distinguished by Lenin.
The concentration of capital and of production in the hands of fewer and fewer firms follows inevitably from the social conditions of capitalist production, among which the most general are (a) the social division of labour from which springs the differentiation of the various branches of production, and (b) private ownership of the means of production. Given these things and competition exists in its germinal form. Given the further development of (a) commodity production and (b) the appearance on the market of labour-power as a commodity, and the conditions exist for the development of competition into its capitalist form. Capitalist production bursts the bounds which constrained competition and made it an essential and a universal condition of production. Competition imposed upon each capitalist owner of means of production the need to cheapen the production of commodities. In other words, it made it imperative for each capitalist firm to produce on a higher scale, i.e., with larger masses of better organised and more thoroughly exploited workers equipped with more mechanised instruments of production. In short, capitalism both extended and intensified competition, and with it the elimination of the less well-equipped producers. The logical end of this elimination could be none other than one solitary ultimate victor.
Concretely, however, certain difficulties must be overcome before this end can be attained. The field of direct competition is divided into different branches of production and a number of different centres (local and national markets which only in their aggregation constitute a world market). Thus before a lone survivor could be reached on a world scale, lone survivors must first have been evolved in each of these branches of production and in each of these centres.
But the evolution of an absolute monopoly in any one branch of production (steel production, say) on a world scale cuts across and conflicts with the evolution of a monopolist control of any local or national market, or economy. Thus the tendency towards monopoly, the more sure and certain it becomes, cannot realise itself in a smooth, linear fashion but must proceed dialectically, i.e., by the creation and progressive surmounting of a whole series of violent antagonisms. Moreover, since the rate of development, owing to physical, historical and political conditions, as well as economic ones, cannot help but vary from time to time, from industry to industry, and from country to country, the force and complexity of these antagonisms and theirdialectical consequences cannot help but be multiplied beyond all reckoning. Hence, although the tendency towards monopoly must be recognised as an absolute law of capitalist production, it by no means gives grounds for the utopian reformist-socialist dream of a peaceful transition, through a regular process of "inevitable gradualness", from capitalist competition to a world monopoly (or a number of national monopolies) which could be peacefully "taken over" by the state "on behalf of the people".
If the process is viewed not in its abstract unity, but in its concrete and multiform totality, it will be seen that the tendency toward monopoly is one that can only realise itself approximately, and never absolutely, since in its concrete forms each detail tendency engenders a resistance to itself which can only be transcended by engendering resistance on a higher plane, and so on, progressively, until a crisis either of war or of social revolution (or of both) is precipitated.
In other words, while the tendency towards monopoly does in fact involve the negation of competition within a number of spheres of production and exchange of commodities, it produces at the same time over the whole field of capitalist economy, and still more over the whole field of bourgeois society, an intensification of competitive antagonisms, so that the (approximate) attainment of monopoly, instead of eliminating competition (and antagonism) from society, on the contrary, raises them progressively to a higher and more destructive scale. This is seen most clearly when it is borne in mind that competition is of many kinds. There is, for example, the general competition between those who buy and those who sell, as well as the competition of the sellers and buyers among themselves. The elimination of competition among the sellers, instead of eliminating competition among the buyers, only intensifies these latter forms of competition.
The tendency towards monopoly is concretised into a system with the emergence of a new category of capital, that of finance capital. This again gives an example of the transformation of quantity into quality. As a capitalist industrial enterprise (in steel production, for example) rises to a position of monopolistic dominance in its specific industry it finds itself, as trade fluctuates, at one time possessed of more money capital (realised profits) than it needs for the expansion of its business and, at another, faced with emergency needs for fresh money-capital. In the one phase it invests its surplus in bank capital; in the other it gives a share in its capital to the bank in exchange for a loan. A parallel process goes on with the banks, and the two complementary processes end with the merging of the capital of a monopolistic industrial firm and a monopolistic banking company to form a new type of monopolistic enterprise which transcends the limitations of industry and banking each in themselves,and carries the process of domination to a higher and a more comprehensive scale. With the formation of finance capital begins the process of bringing the economy of the country of its origin under the domination of a small group of financial oligarchs.
This process has another and even more far-reaching aspect. Insofar as monopoly is attained it makes possible (if only temporarily) the stabilisation of prices and the limitation of production to the estimated needs of the monopoly-controlled market. By doing this, relative excess of production is eliminated along with redundant managerial and sales staffs. As a result, the monopoly obtains an increased volume of profit in circumstances which preclude further investment of capital within its own sphere. Hence the export of capital takes on an ever-growing importance. The world becomes partitioned more and more, and in two distinct ways. Economically, the export of capital facilitates the development both of horizontal and of vertical monopolies, i.e., the bringing of a given industry under the control of an international monopoly, and the establishment of monopoly control of a series of industries which work up raw material from its point of natural origin to its final complete form. These processes intersect, collide, and also combine to give rise to higher forms of monopoly. Ultimately, both of them converge on the two extreme points of (a) control of the sources of origin of indispensable materials and (b) control of markets in which to dispose of finished products. Both thus add impetus to the partitioning of much of the Earth's territory into "spheres of influence" among the rival imperialist powers. And since this process of imperialist partitioning had been completed (approximately) by the end of the 19th century — and the economic forces impelling imperialist expansion still continued — it followed of necessity that there had to become manifest yet another transformation of "quantity into quality": the process of imperialist expansion brought the imperialist powers (the politico-military representatives of rival financial oligarchies) to the point at which further expansion could only be attained at each other's expense.
The history of monopoly capitalism is at the same time the history of the strengthening of the state power within each of the "advanced" capitalist countries and its use to further the interests of the finance capitalists of its own country on the world market. At the beginning of this process the spokespeople of the most advanced and most expansionist capitalist powers were often quite forthright about the use of state power to defend and promote these interests. Thus, in 1907, Woodrow Wilson, who was to become US president in 1912, declared: "Concessions obtained by financiers must be safeguarded by ministers of state, even if the sovereignty of unwilling nations be outraged in the process."(5) Wilson's secretary of state William Jennings Bryan was equally candid, telling a gathering of US financiers: "I can say, not merely in courtesy— but as a fact — my department is your department; the ambassadors, the ministers, and the consuls are all yours. It is their business to look after your interests and to guard your rights."(6)
By the beginning of the 20th century the penetrating power of finance capital had brought about a complete transformation of the relations between the "sovereign states" which made up what bourgeois journalists and bourgeois politicians loved to call the "community of nations". Whereas in diplomatic theory all sovereign states meet and do business as equals (i.e., equally "sovereign" within their territory). finance capital brings into being a differentiation of states into debtors and creditors. This inter-linking of states, the subordination of the great majority of states to the financial overlordship of a few financially rich powers, supplements the open territorial partition of the world. Its result was that by 1914 virtually every state in the world outside the few "Great Powers" (Britain, France, Germany, Japan, the USA and Russia) was a financial vassal of one or another of these "empires". And, since each of these "empires" was impelled by the need to "expand" still further, it could only expand at the expense of one or more of the others. Thus the cause of imperialism (and imperialist war) was shown to be the development of capitalism into a new and higher stage in which its antagonisms had reached a point that further development could only be expressed through veiled or open inter-imperialist war on the one hand, and in potential or actual revolutionary uprisings on the other.
Summing up this whole process, Lenin wrote in December 1915:
It is highly important to have in mind that this change was caused by nothing but the direct development, growth, continuation of the deep-seated and fundamental tendencies of capitalism and production of commodities in general. The growth of commodity exchange, the growth of large-scale production are fundamental tendencies observable for centuries throughout the whole world. At a certain stage in the development of exchange, at a certain stage in the growth of large-scale production, namely, at the stage that was reached approximately at the end of the nineteenth and the beginning of the twentieth centuries, commodity exchange had created such an internationalisation of economic relations, and such an internationalisation of capital, accompanied by such a vast increase in large-scale production, that free competition began to be replaced by monopoly. The prevailing types were no longer enterprises freely competing inside the country and through intercourse between countries, but monopoly alliances of entrepreneurs, trusts. The typical ruler of the world became finance capital, a power that is peculiarly mobile and flexible, peculiarly intertwined at home and internationally, peculiarly devoid of individuality and divorced from the immediate processes of production, peculiarly easy to concentrate, a power that has already made peculiarly large strides on the road to concentration, so that literally several hundred billionaires and millionaires hold in their hands the fate of the whole world.(7)
It may be objected that, while Lenin showed that imperialism was a new and higher stage of development of capitalism, he did not and could not show that this was the "highest" possible developmental stage of capitalism. The answer to that objection is that it proceeds from the assumption that the possibilities of development open to a given historically-conditioned social form of production are unlimited. The whole facts and processes analysed by Marx, and Lenin, show on the contrary that only a specifically limited and conditioned development of the productive forces is possible to each historically determined social form of production:
At a certain stage of their development, the material productive forces of society come in conflict with the existing relations of production, or — what is but a legal expression for the same thing — with the property relations within which they have been at work hitherto. From forms of development of the productive forces these relations turn into their fetters. Then begins an epoch of social revolution.(8)
Two outstanding phenomena indicated by Marx as characteristic of the culminating phase of capitalism are shown by Lenin to have developed in the monopoly finance stage. These were (1) parasitism and (2) the partial recognition of the social character of production. The formation of joint-stock companies involves, Marx observed:
1. Tremendous expansion in the scale of production, and enterprises which would be impossible for individual capitals. At the same time, enterprises that were previously government ones become social.
2. Capital, which is inherently based on a social mode of production and presupposes a social concentration of means of production and labour-power, now receives the form of social capital (capital of directly associated individuals) in contrast to private capital, its enterprises appear as social enterprises as opposed to private ones. This is the abolition of capital as private property within the confines of the capitalist mode of production itself.
3. Transformation of the actual functioning capitalist into a mere manager, in charge of other people's money, and of the capital owner into a mere owner, a mere money capitalist. Even if the dividends that they draw include both interest and profit of enterprise, i.e., the total profit (for the manager's salary is or should be simply the wage for a certain kind of skilled labour, its price is regulated in the labour market like that of any other labour), this total profit is still drawn in the form of interest, i.e., as a mere reward for capital ownership, which is now as completely separated from its function in the actual production process as this function, in the person of the manager, is from capital ownership. Profit thus appears (and no longer just the part of it, interest, that obtains its justification from the profit of the borrower) as simply the appropriation of other people's surplus labour, arising from the transformation of means of production into capital, i.e., their estrangement vis-a-vis the actual producer; from their opposition, as the property of another, vis-a-vis all individuals really active in production from the manager down to the lowest day-labourer. In joint-stock companies, the function is separated from capital ownership, so labour is also completely separated from ownership of the means of production and of surplus labour. The result of capitalist production in its highest development is a necessary point of transition towards the transformation of capital [as means of production — DL] back into the property of the producers, though no longer as the private property of individual producers, but rather as their property as associated producers, as directly social property. It is furthermore a point of transition towards the transformation of all functions formerly bound up with capital ownership in the reproduction process into simple functions of the associated producers, into social functions …
This is the abolition of the capitalist mode of production within the capitalist mode of production itself, and hence a self-abolishing contradiction, which presents itself prima facie as a mere point of transition to a new form of production. It presents itself as such a contradiction even in appearance. It gives rise to monopoly in certain spheres and hence provokes state intervention. It reproduces a new financial aristocracy, a new kind of parasite in the guise of company promoters, speculators and merely nominal directors; an entire system of swindling and cheating with respect to the promotion of companies, issues of shares and share dealings. It is private production unchecked by private ownership.(9)
In a supplementary note to the first edition of Volume 3 of Marx's Capital, Engels wrote in 1894 that "since 1865", when Marx wrote the above quoted comments, "a change has occurred that gives the stock exchange of today a significantly increased role, and a constantly growing one at that, which, as it develops further, has the tendency to concentrate the whole of production, industrial as well as agricultural, together with the whole of commerce — means of communication as well as the exchange function — in the hands of stock-exchange speculators, so that the stock exchange becomes the most pre-eminent representative of capitalist production as such". Engels explained that in 1865:
… the stock exchange was still a secondary element in the capitalist system … Now it is different … accumulation [of capital] has proceeded at an ever growing pace, and in such a way moreover that no industrial country … can the extension of production keep step with that of accumulation, or the accumulation of the individual capitalist be fully employed in the expansion of his own business … With this accumulation, there is also a growth in the number of rentiers, people who have tired of routine exertion in business and who simply want to amuse themselves or pursue only a light occupation as directors of companies.(10)
Lenin did not have to invent a new theory to arrive at the conclusion that monopoly finance capitalism was the highest stage of development of capitalism. He merely had to show that the features that Marx had described as characteristic of this stage — joint-stock companies; separation of capital ownership from managerial functions in the immediate process of production; monopolies; the emergence of a "financial aristocracy"; parasitism in the form of rentiers, of nominal company directors and stock-exchange swindlers — had become the dominant and typical form of capitalist business activity at the beginning of the 20th century. Lenin's description of the monopoly finance stage of capitalism as its highest stage — the stage which exhausts its possibilities of "evolutionary" as distinct from revolutionary development — was a faithful application of Marx's conception of "capitalist production in its highest development", i.e., that the complete socialisation of the labour process involved the complete separation of the productive function of capital from the ownership of capital, a separation which becomes obvious when, in its parasitic rentier form, profit presents itself "as simply the appropriation of other people's labour" as a result of the alienation of ownership of capital from all individuals actually involved in the labour process.
This alienation is involved in capitalist production from the beginning. It is the inner relation which constitutes the essence of the capitalist form of commodity production. When, therefore, from being the inner relation connecting individual workers and individual capitalists in the production process, it becomes outwardly expressed as a fully-developed social antagonism — as a social conflict between the actual producers, associated by the production process into a collective individuality on one side, and the exploiting non-producers, equally associated by their ownership into a collective individuality opposite to theirs — it is obvious that (a) no further development of capitalist relations of production is possible; (b) that the social antagonism has become the starting point for a transition to a new social form of the productive process; and (c) that this starting point has its material basis and itsgeneral form in the positive and negative poles of the social antagonism itself, i.e., in associated production by associated owners for the satisfaction of their individual and common needs.
This was what Lenin meant when he described monopoly finance capitalism as "moribund", "decaying" capitalism — not, as is often assumed by his critics, that he was claiming it had become an absolute barrier to the revolutionising of the technical basis of production or to the quantitative expansion of productive forces. Rather, he argued that it had become a fetter, a constraint, on the fullest possible development of the productive forces, that it exhibited a tendency toward increasingly uneven development of the productive forces, and toward the stagnation of the growth of productive forces in the countries richest in capital:
… monopoly under capitalism can never completely, and for a very long period of time, eliminate competition in the world market (and this, by the by, is one of the reasons why the theory of ultra-imperialism is so absurd) … the possibility of reducing the cost of production and increasing profits by introducing technical improvements operates in the direction of change. But the tendency to stagnation and decay, which is characteristic of monopoly, continues to operate, and in some branches of industry, in some countries, for certain periods of time, it gains the upper hand …
It would be a mistake to believe that this tendency to decay precludes the rapid growth of capitalism. It does not. In the epoch of imperialism, certain branches of industry, certain strata of the bourgeoisie and certain countries betray, to a greater or lesser degree, now one and now another of these tendencies. On the whole, capitalism is growing more rapidly than before; but this growth is not only becoming more and more uneven in general, its unevenness also manifests itself, in particular, in the decay of the countries richest in capital (Britain).(11)
Insofar as he treated the monopoly finance stage of capitalism as its highest stage, and, therefore, as the stage of capitalism that had created the material basis for the transition to socialism, Lenin was merely reiterating and reinforcing the conclusions already drawn, in germinal form, by Marx.
Lenin's description of monopoly finance capitalism as "dying" capitalism, as capitalism "in transition to socialism", also did not mean that he believed that this meant capitalism would automatically give way to socialism — as the reformist- socialists, beginning with Eduard Bernstein in the 1890s, argued, completely misrepresenting Marx's concept of the "inevitable collapse" of capitalism.
The beginning of an epoch of social revolution meant for Marx that further development of the productive forces made it necessary to overthrow the existing social form of production and replace it with a new social form. But if such a social revolution was not actually carried out, this would not mean that the existing social form would persist forever. To the contrary, once it had developed "all the productive forces for which there is room in it", this social form would collapse ("perish")(12), leading to a regression in the social form of production, to "the common ruin of the contending classes" — unless there was a "revolutionary re-constitution of society at large"(13).
If analysing imperialism as the culmination of the development of capitalism involved the application of Marx's theory of the concentration of capital (and production), so the extension and deepening by Lenin of Marx's conception of an epoch of social revolution as an epoch of the decay and revolutionary overthrow of capitalism (as distinct from and opposed to opportunist-idealist theories of its gradual "evolution" into socialism) involved an extension and deepening of Marx and Engels' analysis of the impact of monopoly under capitalism on the working class and what this entailed for organising a proletarian revolution.
Marx and Engels had frequently derided the English working class for becoming "more and more bourgeois" in its outlook during the period of the second half of the 19th century. England's working class at that time was the largest and by far the most organised in the world. Marx and Engels had observed, at close quarters, the growing efforts of the English labour leaders to win "respectability" with the employers and bourgeois politicians. Engels took up this issue in detail in his 1892 preface to the English edition of The Condition of the Working Class in England. He began by noting that England had developed into an exceptional capitalist country between 1848 and the 1870s. It held vast colonial possessions and enjoyed a virtual monopoly of industrial production within the world market. The English capitalists reaped immense profits from this monopoly, which they used a part of to grant important economic, cultural and political concessions to the English working class in exchange for its expected loyalty to the international policies of the English industrialists, a loyalty that was mediated and obscured through the fostering of "national pride" and English national chauvinism.
Engels concluded that the condition of the English working class had generally improved during this period, but that the concessions were unevenly distributed and primarily accrued to a "small, privileged, `protected' minority [who] permanently benefited".(14) Even for the great bulk of workers, "There was temporary improvementBut this improvement always was reduced to the old level by the influx of the great body of the unemployed reserve, by the constant superseding of hands by new machinery, by the immigration of the agricultural population …"(15)
Who, then, constituted the "privileged" and "protected" minority that was able, by and large, to stay out of the "reserve army" of unemployed and to avoid the full brunt of the "normal" mechanisms of capitalist production that undermined gains by workers? Engels identified two sections of the English working class — the factory hands (primarily located in the textile mills and iron foundries of the north) and the members of the "great Trades Unions" (headquartered in London). This minority of workers, he wrote, "form an aristocracy among the working class; they have succeeded in enforcing for themselves a relatively comfortable position, and they accept it as final … They are model working men … and they are very nice people indeed nowadays to deal with, for any sensible capitalist in particular and the whole capitalist class in general".(16)
Politically, Engels observed that it was prudent policy for the English industrial capitalists to form alliances with the better situated and organised strata of the rapidly growing proletariat. Perhaps the most striking change was in the industrialists' attitude to the labour unions. "Trades Unions", Engels wrote, "hitherto considered inventions of the devil himself, were now petted and patronised as perfectly legitimate institutions, as useful means of spreading sound economical doctrines amongst the workers. Even strikes, than which nothing had been more notorious up to 1848, were now gradually found out to be occasionally very useful, especially when provoked by the masters themselves, at their own time".(17)
The defeat of the Chartist movement in 1848, followed by a long period of concessions, had the "natural" corrupting result that the politically active sections of the working class, located entirely in the unions, began supporting England's colonial policy and adopting liberal-bourgeois politics as their own. Further, within the working-class movement, the more protected workers upheld exclusionary policies, particularly aggravating the split between English- and Irish-born sections of the proletariat.
From Marx and Engels' descriptions and analysis of the rise in England of labour opportunism — the sacrificing of the long-term interests of the working class as a whole to gaining immediate advantages for a minority of workers — Lenin abstracted out the central theoretical point: the stubborn phenomenon of opportunism among English workers had an economic basis in the fact that the dominant world position of English capitalism had produced superprofits which allowed the English bourgeoisie to make significant economic, cultural and political concessions to the "upper strata"of the proletariat. These concessions, a complex set of phenomena including expansion of the social wage, and access to educational, cultural and political institutions, denied to the lower mass of the proletariat, served as a material basis for the creation of a thoroughly opportunist, class-collaborationist trend rooted in a large labour aristocracy of privileged and protected workers as well as the conspicuous rise of bourgeois-reformist illusions and national chauvinism among the politically active English workers.
Lenin, however, did not rest with extracting the essence of Marx and Engels' analysis of opportunism in the working-class movement in 19th century England. Rather he extended and deepened this analysis by applying it to the imperialist stage of capitalism. Essentially, he argued that the emergence of monopoly capitalism had produced in a handful of countries the extended, rather than temporary, basis for the extraction of superprofits by the dominant section of the ruling bourgeoisie, the financial oligarchy. On the other hand, to assure continued political stability bourgeois rule increasingly required that the sections of the working class that tended to spontaneously become politically active — the better educated, better organised workers — be ideologically tamed into a "loyal opposition". This would be accomplished through using part of the superprofits of monopoly finance capital to bribe these sections with economic, cultural and political concessions. This basic development, Lenin contended, would be a feature of the class structure (and impact accordingly on the dynamics of the class struggle) in every imperialist country.
The leaders of the opportunist trend within the working-class movement would therefore find a stable base for their conscious attempts to keep the class struggle within the bounds of bourgeois legality and bourgeois social-reformism. This form of "mature" opportunism — as distinct from the spontaneous reformism which can be expected in the initial stages of any worker's political development — would emerge on the very foundations of a developed trade-union consciousness and movement in imperialist countries (oftentimes replete with socialist rhetoric!), and would be a permanent feature of imperialism.
Consequently, the split between opportunist and revolutionary trends within the working class of the imperialist countries could not be expected to evaporate, leaving behind some mythical, homogeneous, revolutionary-inclined proletariat. Revolutionary strategy and tactics would therefore have to take this permanent split in the working class of the imperialist countries into account from the beginning. Lenin posed the issue bluntly in his October 1916 article "Imperialism and the Split in Socialism":
… unless a determined and relentless struggle is waged all along the line against [the opportunists'] parties — or groups, trends, etc., it is all the same — there can be no question of a struggle against imperialism, or for Marxism, or of a socialist labour movement.
Lenin did not confine himself, however, merely to general statements concerning the need to struggle against the opportunist trend within the working-class movement. He attempted to draw out the concrete historical trends that shape the contours of such a struggle and serve as the basis for the elaboration of revolutionary strategy and tactics in the "advanced" capitalist countries in the imperialist epoch.
In his October 1916 article "Imperialism and the Split in for Socialism", Lenin noted (and contrasted) two opposing, but connected, historical tendencies at work in the development of the spontaneous working-class movement. On the one hand, workers, particularly the better-situated workers, organise in economic combinations (trade unions) to fight their employers for better wages and conditions, and to force the bourgeois state to recognise their economic gains through labour legislation. The better-situated workers, precisely because they are better-situated, tend to be the politically active section of the working class, the section out of which spontaneously emerges the advanced workers who are consciously drawn toward revolutionary socialist politics.
On the other hand, the very success of the economic and political struggles for reforms by the better-situated workers compels the bourgeoisie to seek new forms of maintaining its control over the better-situated workers. Meanwhile, the existence of monopoly superprofits and the fact that the workers' combinations can inevitably represent only particular sections of the working class lay the basis for the bourgeoisie to manipulate this contradiction and use concessions to bribe the better-situated workers and thus to foster among them the idea that they can achieve continual improvements in their position simply through struggles for reforms. In this manner, the gains of the better-situated workers can be turned into their opposite, serving not to strengthen the working-class movement as a whole but to provide a basis to split and weaken the movement through the victory of opportunism among the better-situated workers, and thus limit the number of advanced, revolutionary-minded workers who emerge from their ranks.
Lenin attached central importance to this dialectic, targeting in particular those who one-sidely argued that workers' combinations into trade unions would inevitably lead to ever higher forms of struggle and consciousness, while downplaying theability of the bourgeoisie to utilise such combinations (among other factors) to forge a labour aristocracy on a profoundly opportunist basis.
Lenin argued that Marxist tactics required a sober view of the labour aristocracy, its hegemony in the mass organisations of the working-class movement, and the necessity to conduct a vigorous ideological struggle against the opportunist politics of the privileged strata within the working class by championing the interests of the lower, "unprotected", mass of the class. This understanding of the necessity to champion the interests of the non-aristocratic sections of the working class against the opportunist politics of the labour aristocracy did not mean that Lenin advocated that Marxists abandon political work among the better-situated workers. To the contrary, it was a call for Marxists to struggle against the opportunist politics of these workers. This struggle proceeds on two fronts: against the reactionary leaders of the labour aristocracy, against the "labour lieutenants of the capitalist class", whom it is necessary to expose and discredit as conscious agents of the bourgeoisie within the working-class movement, and to replace them with consciously revolutionary leaders; and to destroy the political influence of the labour aristocrats within the ranks of working-class movement, a portion of whom may be won away from opportunist politics in the course of the struggle.
Lenin's understanding of the material basis for the existence of a consolidated opportunist trend within the working-class movement provides a basic orientation for revolutionary Marxist politics in the imperialist countries. It is evident from Lenin's materialist analysis of this phenomenon that the strategic task of preparing the proletariat for socialist revolution in these countries is inconceivable without qualitatively weakening the political influence of the opportunist trend. However, consistent with the materialist method, Lenin's analysis reveals that this is not possible at all times, since the strength of opportunism is directly related to the strength of monopoly capitalism internationally and within any particular imperialist country.
Periods of relative imperialist prosperity will make the task of combating the political influence of opportunism within the working-class movement extremely difficult. However, revolutionary political work in these "slow" periods lays the basis for the quality of advances in periods when the objective conditions create possibilities to seriously contend with the opportunist trend.
Periods of economic and political crisis, which are inevitable, call for open and sharp struggle against opportunism, which becomes even more dangerous and virulent to the working-class movement when its material base is narrowed. The weakening of the material bribe of economic, cultural and political privileges to the better-situatedworkers in such periods increases the importance to the bourgeoisie of the ideological and political services of the opportunist "labour leaders". The loss of privileges or their threatened loss will not necessarily provoke a spontaneous abandonment of opportunism within the upper strata of the working class. On the contrary, it can fuel a powerful reaction within these sections to "blame" the workers in the lower strata or in other countries for the loss or threatened loss of these privileges. Nonetheless, the loss of the relative privileges created out of imperialist prosperity will steadily erode the social base for opportunism, thereby creating more favourable circumstances for workers to grasp the real role of the opportunist "labour leaders" and to better understand their own class interests.
Whether the full potential of the objective conditions will be realised or not depends on the political line, tactics and organisation of the revolutionary Marxists. This is precisely the significance of "Leninism", which opportunists of all hues never tire of dismissing as "voluntarism", completely inappropriate to the imperialist "democracies".
Finally, Lenin warned that Marxists should have no illusions about "quick results" in defeating the domination of the working-class movement in the imperialist countries by the opportunist trend, even in a period of deep social crisis. In these countries, he later wrote, "we see a far greater persistence of the opportunist leaders, of the upper crust of the working class, the labour aristocracy; they offer stronger resistance to the Communist movement. That is why we must be prepared to find it harder for the European and American workers' parties to get rid of this disease than was the case in our country".(18)
1 V.I. Lenin, Collected Works (Progress Publishers: Moscow 1977), Vol. 37, p. 365
2 Lenin listed the "shortcomings" of Hilferding's analysis of imperialism in his notebooks as "(1) Theoretical error concerning money. (2) Ignores (almost) the division of the world. (3) Ignores the relationship between finance capital and parasitism. (4) Ignores the relationship between imperialism and opportunism" (V.I. Lenin, Collected Works, Vol. 39, p. 202).
3 ibid., pp. 264-65
4 ibid., p. 266
5 Cited in W.A. Williams, The Tragedy of American Diplomacy (Delta: New York, 1962), p. 66.
6 ibid., pp. 78-79
7 V.I. Lenin, Introduction to N. Bukharin, Imperialism and World Economy (Merlin Press: London 1972), pp. 10-11. The chief weakness of Bukharin's analysis of imperialism was that it defined it as "the policy of conquest of finance capital" (ibid., p. 115).
8 K. Marx and F. Engels, Selected Works (Progress Publishers: Moscow 1977), Vol. 1, pp. 503-04
9 K. Marx, Capital, Vol. 3 (Penguin Books: Harmondsworth 1981), pp. 567-69
10 ibid., pp. 1045-46
11 See below, pp. 100, 120.
12 K. Marx and F. Engels, Selected Works, Vol. 1, p. 504
13 K. Marx and F. Engels, The Communist Manifesto and Its Relevance for Today (Resistance Books: Sydney, 1998), p. 46
14 K. Marx and F. Engels, Selected Works, Vol. 3, p. 450
15 ibid., p. 447
16 ibid., p. 448
17 ibid., p. 447
Preface to the Russian Edition
Preface to the French and German Editions
The pamphlet here presented to the reader was written in the spring of 1916, in Zurich. In the conditions in which I was obliged to work there I naturally suffered somewhat from a shortage of French and English literature and from a serious dearth of Russian literature. However, I made use of the principal English work on imperialism, the book by J. A. Hobson, with all the care that, in my opinion, that work deserves.
This pamphlet was written with an eye to the tsarist censorship. Hence, I was not only forced to confine myself strictly to an exclusively theoretical, specifically economic analysis of facts, but to formulate the few necessary observations on politics with extreme caution, by hints, in an allegorical language — in that accursed Aesopian language — to which tsarism compelled all revolutionaries to have recourse whenever they took up the pen to write a "legal" work.
It is painful, in these days of liberty, to reread the passages of the pamphlet, which have been distorted, cramped, compressed in an iron vice on account of the censor. That the period of imperialism is the eve of the socialist revolution; that social-chauvinism (socialism in words, chauvinism in deeds) is the utter betrayal of socialism, complete desertion to the side of the bourgeoisie, that this split in the working-class movement is bound up with the objective conditions of imperialism, etc. — on these matters I had to speak in a "slavish" tongue, and I must refer the reader who is interested in the subject to the articles I wrote abroad in 1914-17, a new edition of which is soon to appear. Special attention should be drawn to a passage on pages 119-20.* In order to show the reader, in a guise acceptable to the censors, how shamelessly untruthful the capitalists and the social-chauvinists who have deserted to their side (and whom Kautsky opposes so inconsistently) are on the question of annexations, in order to show how shamelessly they screen the annexations of their capitalists, I was forced to quote as an example — Japan! The careful reader will easily substitute Russia for Japan, and Finland, Poland, Courland, the Ukraine, Khiva, Bokhara, Estonia or other regions peopled by non-Great Russians, for Korea.
I trust that this pamphlet will help the reader to understand the fundamental economic question, that of the economic essence of imperialism, for unless this is studied, it will be impossible to understand and appraise modern war and modern politics.
Author
Petrograd April 26, 1917
As was indicated in the preface to the Russian edition, this pamphlet was written in 1916, with an eye to the tsarist censorship. I am unable to revise the whole text at the present time, nor, perhaps, would this be advisable, since the main purpose of the book was, and remains, to present, on the basis of the summarised returns of irrefutable bourgeois statistics, and the admissions of bourgeois scholars of all countries, a composite picture of the world capitalist system in its international relationships at the beginning of the 20th century — on the eve of the first world imperialist war.
To a certain extent it will even be useful for many Communists in advanced capitalist countries to convince themselves by the example of this pamphlet, legal from the standpoint of the tsarist censor, of the possibility and necessity, of making use of even the slight remnants of legality which still remain at the disposal of the Communists, say, in contemporary America or France, after the recent almost wholesale arrests of Communists, in order to explain the utter falsity of social-pacifist views and hopes for "world democracy." The most essential of what should be added to this censored pamphlet I shall try to present in this preface.
It is proved in the pamphlet that the war of 1914-18 was imperialist (that is, an annexationist, predatory, war of plunder) on the part of both sides; it was a war for the division of the world, for the partition and repartition of colonies, and spheres of influence of finance capital, etc.
Proof of what was the true social, or rather, the true class character of the war is naturally to be found, not in the diplomatic history of the war, but in an analysis of the objective position of the ruling classes in all the belligerent countries. In order to depict this objective position one must not take examples or isolated data (in view of the extreme complexity of the phenomena of social life it is always possible to select any number of examples or separate data to prove any proposition), but all the data on the basis of economic life in all the belligerent countries and the whole world.
It is precisely irrefutable summarised data of this kind that I quoted in describing the partition of the world in 1876 and 1914 (in Chapter VI) and the division of the world's railways in 1890 and 1913 (in Chapter VII). Railways are a summation of the basic capitalist industries, coal, iron and steel; a summation and the most striking index of the development of world trade and bourgeois-democratic civilisation. How the railways are linked up with large-scale industry, with monopolies, syndicates, cartels, trusts, banks and the financial oligarchy is shown in the preceding chapters of the book. The uneven distribution of the railways, their uneven development — sums up, as it were, modern monopolist capitalism on a world-wide scale. And this summary proves that imperialist wars are absolutely inevitable under such an economic system, as long as private property in the means of production exists.
The building of railways seems to be a simple, natural, democratic, cultural and civilising enterprise; that is what it is in the opinion of bourgeois professors, who are paid to depict capitalist slavery in bright colours, and in the opinion of petty-bourgeois philistines. But as a matter of fact the capitalist threads, which in thousands of different intercrossings bind these enterprises with private property in the means of production in general, have converted this railway construction into an instrument for oppressing a thousand million people (in the colonies and semi-colonies), that is, more than half the population of the globe that inhabit the dependent countries, as well as the wage-slaves of capital in the "civilised" countries.
Private property based on the labour of the small proprietor, free competition, democracy, all the catchwords with which the capitalists and their press deceive the workers and the peasants — are things of the distant past. Capitalism has grown into a world system of colonial oppression and of the financial strangulation of the overwhelming majority of the population of the world by a handful of "advanced" countries. And this "booty" is shared between two or three powerful world plunderers armed to the teeth (America, Great Britain, Japan), are drawing the whole world into their war over the sharing of their booty.
The Treaty of Brest-Litovsk1 dictated by monarchist Germany, and the subsequent much more brutal and despicable Treaty of Versailles2 dictated by the "democratic" republics of America and France and also by "free" Britain, have rendered a most useful service to humanity by exposing both imperialism's hired coolies of the pen and petty-bourgeois reactionaries who, although they call themselves pacifists and socialists, who sang praises to "Wilsonism,"3 and insisted that peace and reforms were possible under imperialism.
The tens of millions of dead and maimed left by the war — a war to decide whether the British or German group of financial plunderers is to receive the most booty — and those two "peace treaties," are with unprecedented rapidity opening the eyes of the millions and tens of millions of people who are downtrodden, oppressed, deceived and duped by the bourgeoisie. Thus, out of the universal ruin caused by the war a world-wide revolutionary crisis is arising which, however prolonged and arduous its stages may be, cannot end otherwise than in a proletarian revolution and in its victory.
The Basle Manifesto of the Second International, which in 1912 gave an appraisal of the very war that broke out in 1914 and not of war in general (there are different kinds of wars, including revolutionary wars) — this Manifesto is now a monument exposing to the full the shameful bankruptcy and treachery of the heroes of the Second International.
That is why I reproduce this Manifesto as a supplement to the present edition, and again and again I urge the reader to note that the heroes of the Second International are as assiduously avoiding the passages of this Manifesto which speak precisely, clearly and definitely of the connection between that impending war and the proletarian revolution, as a thief avoids the scene of his crimes.
Special attention has been devoted in this pamphlet to a criticism of Kautskyism, the international ideological trend represented in all countries of the world by the "most prominent theoreticians", the leaders of the Second International (Otto Bauer and Co. in Austria, Ramsay MacDonald and others in Britain, Albert Thomas in France, etc., etc.) and a multitude of socialists, reformists, pacifists, bourgeois-democrats and parsons.
This ideological trend is, on the one hand, a product of the disintegration and decay of the Second International, and, on the other hand, the inevitable fruit of the ideology of the petty bourgeoisie, whose entire way of life holds them captive to bourgeois and democratic prejudices.
The views held by Kautsky and his like are a complete renunciation of those same revolutionary principles of Marxism that writer has championed for decades, especially, by the way, in his struggle against socialist opportunism (of Bernstein, Millerand, Hyndman, Gompers, etc.).4 It is not a mere accident, therefore, that Kautsky's followers all over the world have now united in practical politics with the extreme opportunists (through the Second, or Yellow International) and with the bourgeois governments (through bourgeois coalition governments in which socialists take part).
The growing world proletarian revolutionary movement in general, and the communist movement in particular, cannot dispense with an analysis and exposure of the theoretical errors of Kautskyism. The more so since pacifism and "democracy" in general, which lay no claim to Marxism whatever, but which, like Kautsky and Co., are obscuring the profundity of the contradictions of imperialism and the inevitable revolutionary crisis to which it gives rise, are still very widespread all over the world. To combat these tendencies is the bounden duty of the party of the proletariat, which must win away from the bourgeoisie the small proprietors who are duped by them, and the millions of working people who enjoy more or less petty-bourgeois conditions of life.
A few words must be said about Chapter VIII "Parasitism and Decay of Capitalism". As already pointed out in the text, Hilferding, ex-"Marxist", and now a comrade-in-arms of Kautsky and one of the chief exponents of bourgeois, reformist policy in the Independent Social-Democratic Party of Germany,5 has taken a step backward on this question compared with the frankly pacifist and reformist Englishman, Hobson. The international split of the entire working-class movement is now quite evident (the Second and the Third Internationals). The fact that armed struggle and civil war is now raging between the two trends is also evident — the support given to Kolchak and Denikin6 in Russia by the Mensheviks7 and Socialist-Revolutionaries8 against the Bolsheviks; the fight the Scheidemanns and Noskes9 have conducted in conjunction with the bourgeoisie against the Spartacists10 in Germany; the same thing in Finland, Poland, Hungary, etc. What is the economic basis of this world-historic phenomenon?
It is precisely the parasitism and decay of capitalism, characteristic of its highest historical stage of development, i.e., imperialism. As this pamphlet shows, capitalism has now singled out a handful (less than one-tenth of the inhabitants of the globe; less than one-fifth at a most "generous" and liberal calculation) of exceptionally rich and powerful states which plunder the whole world simply by "clipping coupons". Capital exports yield an income of eight to 10 billion francs per annum, at pre-war prices and according to pre-war bourgeois statistics. Now, of course, they yield much more.
Obviously, out of such enormous superprofits (since they are obtained over and above the profits which capitalists squeeze out of the workers of their "own" country) it is possible to bribe the labour leaders and the upper stratum of the labour aristocracy. And that is just what the capitalists of the "advanced" countries are doing; they are bribing them in a thousand different ways, direct and indirect, overt and covert.
This stratum of workers-turned-bourgeois, or the labour aristocracy, who are quite philistine in their mode of life, in the size of their earnings and in their entire outlook, is the principal prop of the Second International, and, in our days, the principal social (not military) prop of the bourgeoisie. For they are the real agents of the bourgeoisie in the working-class movement, the labour lieutenants of the capitalist class, real vehicles of reformism and chauvinism. In the civil war between the proletariat and the bourgeoisie they inevitably, and in no small numbers, take the side of the bourgeoisie, the "Versaillais" against the "Communards".11
Unless the economic roots of this phenomenon are understood and its political and social significance is appreciated, not a step can be taken toward the solution of the practical problems of the communist movement and of the impending social revolution.
Imperialism is the eve of the social revolution of the proletariat. This has been confirmed since 1917 on a world-wide scale.
N. Lenin
July 6, 1920
1 The Treaty of Brest-Litovsk was signed in the Belorussian town of Brest-Litovsk (Brest) on March 3, 1918 by representatives of Soviet Russia on the one side and those of Imperial Germany, the Austro-Hungarian Empire, Bulgaria and Turkey on the other. It brought an end to Russia's participation in the first world war.
2 The Treaty of Versailles concluded World War I (1914-18) and was signed on June 28, 1919 by representatives of the Allied Powers (Britain, France, Italy, Japan and the USA), on the one hand, and Germany, on the other. The treaty imposed harsh reparation conditions upon Germany.
3 Wilsonism refers to the policies of Woodrow Wilson, president of the United States from 1913 to 1921, in particular, his camouflaging of US imperialist objectives in entering World War I with demagogic rhetoric about "democracy" and "the self-determination of nations".
4 Eduard Bernstein (1850-1929) was a leading figure in the German Social-Democratic Party (SPD) who, from the late 1890s on, advocated a reformist "revision" of Marxism. Alexander Millerand (1859-1943) was a French socialist parliamentarian who in 1899 became a minister in the French bourgeois government. Henry Hyndman (1842-1921) was the founder of the British Social-Democratic Federation in 1881 and of the British Socialist Party in 1911. He led a pro-war split from the SP in 1916, called the National Socialist Party. Samuel Gompers (1850-1924) was the president of the craft-union-based American Federation of Labor from 1886 to 1924, an outspoken supporter of class-collaboration and US imperialist foreign policy.
5 The Independent Social-Democratic Party of Germany (USPD) was formed in April 1917 as a pacifist breakaway from the pro-war SPD. Among its leaders were Eduard Bernstein and Karl Kautsky. At its founding it had 120,000 members. It participated in the bourgeois-republican provisional government headed by SPD leader Freidrich Ebert in November-December 1918. It attained a maximum membership of 750,000 by November 1919. In 1920 the USPD majority fused with the Communist Party of Germany (KPD), while the minority retained the party name until rejoining the SPD in 1922.
6 Kolchak and Denikin were former tsarist military officers who commanded counterrevolutionary White armies during the 1918-20 Russian Civil War. Admiral A.V. Kolchak (1873-1920) headed the White armies in Siberia. General A.I. Denekin (1872-1947) comanded the White armies in southern Russia.
7 The Mensheviks originated as an opportunist minority faction of the Russian Social-Democratic Labour Party at its 2nd congress in 1903. In 1912 the Bolshevik faction led by Lenin expelled the Mensheviks from the RSDLP. They supported and participated in the bourgeois Provisional Government in 1917. During the civil war that followed the Bolshevik-led overthrow of the Provisional Government by the soviets (councils) of workers', soldiers' and peasants' deputies in November 1917, one wing of the Mensheviks supported the counterrevolutionary White armies.
8 The Socialist-Revolutionaries originated as a party in 1901-02 in opposition to the Marxist RSDLP. They espoused a petty-bourgeois democratic program of "land socialisation" (abolition of herediary landlordism and division of the landlord estates among the peasant masses) as the basis of an agrarian-based "socialism". During 1917 their leaders supported and participated in the Provisional Government. Toward the end of 1917 the SR Party split into pro- and anti-Bolshevik wings. The Left SRs supported the October Revolution and participated in the Soviet government until July 1918 when they organised an attempted coup against the Bolsheviks. During the Russian Civil War both wings of the SRs aligned themselves with the monarchist-led White armies against the Soviet workers' and peasants' republic.
9 Philipp Scheidemann (1865-1939) and Gustav Noske (1868-1946) were leading members of the Social-Democratic Party of Germany (SPD), and ministers in the SPD-led provisional government that suppressed the revolutionary workers' movement in Germany in 1918-19.
10 The Spartacists originated as a revolutionary current in the German Social-Democratic Party (SPD) during World War I, opposing the SPD leadership's pro-war position. Spartacus was the name of the newsletter issued by the Internationale Group set up in January 1916. On November 11, 1918 the group constituted itself as an independent organisation, the Spartacus League, operating as public faction within the Independent Social-Democratic Party of Germany (USPD). On January 1, 1919 the Berlin-based Spartacus League fused with other revolutionary groups in Germany to form the Communist Party (KPD). In January 1919 the best known leaders of the Spartacists, Rosa Luxemburg and Karl Liebkneckt, were arrested and murdered by the SPD-led provisional government.
11 The Versaillais were the supporters of the bourgeois-republican government set up in Versailles after the popular overthrow of bourgeois rule in Paris in March 1870 and the establishment of the revolutionary Paris Commune. The "Communards" were the supporters of the revolutionary democracy established in Paris from March 18 to May 22, 1870. Following its military victory over the Commune, the Versaillais army massacred between 20,000 and 30,000 Communards.
I. Concentration of Production and Monopolies
III. Finance Capital and the Financial Oligarchy
V. Division of the World Among Capitalist Associations
VI. Division of the World Among the Great Powers
VII. Imperialism, as a Special Stage of Capitalism
VIII. Parasitism and Decay of Capitalism
IX. The Critique of Imperialism
X. The Place of Imperialism in History
Lenin's notes to `Imperialism'
During the last fifteen to twenty years, especially since the Spanish-American War (1898), and the Anglo-Boer War (1899-1902), the economic and also the political literature of the two hemispheres has more and more often adopted the term "imperialism" in order to describe the present era. In 1902, a book by the English economist J. A. Hobson, Imperialism, was published in London and New York. This author, whose point of view is that of bourgeois social-reformism and pacifism which, in essence, is identical with the present point of view of the ex-Marxist, Karl Kautsky, gives a very good and comprehensive description of the principal specific economic and political features of imperialism. In 1910, there appeared in Vienna the work of the Austrian Marxist, Rudolf Hilferding, Finance Capital (Russian edition: Moscow, 1912). In spite of the mistake the author makes on the theory of money, and in spite of a certain inclination on his part to reconcile Marxism with opportunism, this work gives a very valuable theoretical analysis of "the latest phase of capitalist development," as the subtitle runs. Indeed, what has been said of imperialism during the last few years, especially in an enormous number of magazine and newspaper articles, and also in the resolutions, for example, of the Chemnitz and Basle congresses which took place in the autumn of 1912, has scarcely gone beyond the ideas expounded, or, more exactly, summed up by the two writers mentioned above …
Later on, I shall try to show briefly, and as simply as possible, the connection and relationships between the principal economic features of imperialism. I shall not be able to deal with the non-economic aspects of the question, however much they deserve to be dealt with. References to literature and other notes which, perhaps, would not interest all readers, are to be found at the end of this pamphlet.
The enormous growth of industry and the remarkably rapid concentration of production in ever-larger enterprises are one of the most characteristic features of capitalism. Modern production censuses give most complete and most exact data on this process.
In Germany, for example, out of every 1000 industrial enterprises, large enterprises, i.e., those employing more than 50 workers, numbered three in 1882, six in 1895 and nine in 1907; and out of every 100 workers employed, this group of enterprises employed 22, 30 and 37, respectively. Concentration of production, however, is much more intense than the concentration of workers, since labour in the large enterprises is much more productive. This is shown by the figures on steam engines and electric motors. If we take what in Germany is called industry in the broad sense of the term, that is, including commerce, transport, etc., we get the following picture. Large-scale enterprises, 30,588 out of a total of 3,265,623, that is to say, 0.9%. These enterprises employ 5,700,000 workers out of a total of 14,400,000, i.e., 39.4%; they use 6,600,000 steam horsepower out of a total of 8,800,000, i.e., 75.3%, and 1,200,000 kilowatts of electricity out of a total of 1,500,000, i.e., 77.2%.
Less than one-hundredth of the total number of enterprises utilise more than three-fourths of the total amount of steam and electric power! Two million nine hundred and seventy thousand small enterprises (employing up to five workers), constituting 91% of the total, utilise only 7% of the total steam and electric power! Tens of thousands of huge enterprises are everything; millions of small ones are nothing.
In 1907, there were in Germany 586 establishments employing one thousand and more workers, nearly one-tenth (1,380,000) of the total number of workers employed in industry, and they consumed almost one-third (32%) of the total steam and electric power.[1] As we shall see, money capital and the banks make this superiority of a handful of the largest enterprises still more overwhelming, in the most literal sense of the word, i.e., millions of small, medium and even some big "proprietors" are in fact in complete subjection to some hundreds of millionaire financiers.
In another advanced country of modern capitalism, the United States of America, the growth of the concentration of production is still greater. Here statistics single out industry in the narrow sense of the word and classify enterprises according to the value of their annual output. In 1904 large-scale enterprises with an output valued at one million dollars and over numbered 1900 (out of 216,180, i.e., 0.9%). These employed 1,400,000 workers (out of 5,500,000, i.e., 25.6%) and the value of their output amounted to $5,600 million (out of $14,800 million, i.e., 38%). Five years later, in 1909, the corresponding figures were: 3060 enterprises (out of 268,491, i.e., 1.1%) employing two million workers (out of 6,600,000, i.e., 30.5%) with an output valued at $9 million (out of $20,700 million, i.e., 43.8%).[2]
Almost half the total production of all the enterprises of the country was carried on by one-hundredth part of these enterprises! These 3000 giant enterprises embrace 25 branches of industry. From this it can be seen that, at a certain stage of its development, concentration itself, as it were, leads straight to monopoly; for a score or so of giant enterprises can easily arrive at an agreement, and on the other hand, the hindrance to competition, the tendency towards monopoly, arises from the huge size of the enterprises. This transformation of competition into monopoly is one of the most important — if not the most important — phenomena of modern capitalist economy, and we must deal with it in greater detail. But first we must clear up one possible misunderstanding.
American statistics speak of 3000 giant enterprises in 250 branches of industry, as if there were only a dozen enterprises of the largest scale for each branch of industry.
But this is not the case. Not in every branch of industry are there large-scale enterprises; and moreover, a very important feature of capitalism in its highest stage of development is so-called combination of production, that is to say, the grouping in a single enterprise of different branches of industry, which either represent the consecutive stages in the processing of raw materials (for example, the smelting of iron ore into pig-iron, the conversion of pig-iron into steel, and then, perhaps, the manufacture of steel goods) — or are auxiliary to one another (for example, the utilisation of scrap, or of by-products, the manufacture of packing materials, etc.).
"Combination", writes Hilferding, "levels out the fluctuations of trade and therefore assures to the combined enterprises a more stable rate of profit. Secondly, combination has the effect of eliminating trade. Thirdly, it has the effect of rendering possible technical improvements, and, consequently, the acquisition of superprofits over and above those obtained by the `pure' (i.e., non-combined) enterprises. Fourthly, it strengthens the position of the combined enterprises relative to the `pure' enterprises, strengthens them in the competitive struggle in periods of serious depression, when the fall in prices of raw materials does not keep pace with the fall in prices of manufactured goods."[3]
The German bourgeois economist, Heymann, who has written a book especially on "mixed", that is, combined, enterprises in the German iron industry, says: "Pure enterprises perish, they are crushed between the high price of raw material and the low price of the finished product." Thus we get the following picture:
"There remain, on the one hand, the big coal companies, producing millions of tons yearly, strongly organised in their coal syndicate, and on the other, the big steel plants, closely allied to the coal mines, having their own steel syndicate. These giant enterprises, producing 400,000 tons of steel per annum, with a tremendous output of ore and coal and producing finished steel goods, employing 10,000 workers quartered in company houses, and sometimes owning their own railways and ports, are the typical representatives of the German iron and steel industry. And concentration goes on further and further. Individual enterprises are becoming larger and larger. An ever-increasing number of enterprises in one, or in several different industries, join together in giant enterprises, backed up and directed by half a dozen big Berlin banks. In relation to the German mining industry, the truth of the teachings of Karl Marx on concentration is definitely proved; true, this applies to a country where industry is protected by tariffs and freight rates. The German mining industry is ripe for expropriation.[4]
Such is the conclusion which a bourgeois economist, who, by way of exception is conscientious, had to arrive at. It must be noted that he seems to place Germany in a special category because her industries are protected by high tariffs. But this circumstance which only accelerates concentration and the formation of monopolist manufacturers' associations, cartels, syndicates, etc. It is extremely important to note that in free-trade Britain, concentration also leads to monopoly, although somewhat later and perhaps in another form. Professor Hermann Levy, in his special work of research entitled Monopolies, Cartels and Trusts, based on data on British economic development, writes as follows:
In Great Britain it is the size of the enterprise and its high technical level which harbour a monopolist tendency. This, for one thing, is due to the great investment of capital per enterprise, which gives rise to increasing demands for new capital for the new enterprises and thereby renders their launching more difficult. Moreover (and this seems to us to be the more important point) every new enterprise that wants to keep pace with the gigantic enterprises that have been formed by concentration would here produce such an enormous quantity of surplus goods that it could dispose of them only by being able to sell them profitably as a result of an enormous increase in demand; otherwise, this surplus would force prices down to a level that would be unprofitable both for the new enterprise and for the monopoly combines.
Britain differs from other countries where protective tariffs facilitate the formation of cartels in that monopolist manufacturers' associations, cartels and trusts arise in the majority of cases only when the number of the chief competing enterprises has been reduced to "a couple of dozen or so."
Here the influence of concentration on the formation of large industrial monopolies in a whole sphere of industry stands out with crystal clarity.[5]
Half a century ago, when Marx was writing Capital, free competition appeared to the overwhelming majority of economists to be a "natural law". Official science tried, by a conspiracy of silence, to kill the works of Marx, who by a theoretical and historical analysis of capitalism had proved that free competition gives rise to the concentration of production, which, in turn, at a certain stage of development, leads to monopoly. Today, monopoly has become a fact. Economists are writing mountains of books in which they describe the diverse manifestations of monopoly, and continue to declare in chorus that "Marxism is refuted". But facts are stubborn things, as the English proverb says, and they have to be reckoned with, whether we like it or not. The facts show that differences between capitalist countries, e.g., in the matter of protection or free trade, only give rise to insignificant variations in the form of monopolies or in the moment of their appearance; and that the rise of monopolies, as the result of the concentration of production, is a general and fundamental law of the present stage of development of capitalism.
For Europe, the time when the new capitalism definitely superseded the old can be established with fair precision: it was the beginning of the 20th century. In one of the latest compilations on the history of the "formation of monopolies", we read:
Isolated examples of capitalist monopoly could be cited from the period preceding 1860; in these could be discerned the embryo of the forms that are so common today; but all this undoubtedly represents the prehistory of the cartels. The real beginning of modern monopoly goes back, at the earliest, to the sixties. The first important period of development of monopoly commenced with the international industrial depression of the seventies and lasted until the beginning of the nineties … If we examine the question on a European scale, we will find that the development of free competition reached its apex in the sixties and seventies. Then it was that Britain completed the construction of her old-style capitalist organisation. In Germany, this organisation had entered into a fierce struggle with handicraft and domestic industry, and had begun to create for itself its own forms of existence …
The great revolution, commenced with the crash of 1873, or rather, the depression which followed it and which, with hardly discernible interruptions in the early eighties, and the unusually violent, but short-lived boom round about 1889, marks twenty-two years of European economic history … During the short boom of 1889-90, the system of cartels was widely resorted to in order to take advantage of favorable business conditions. An ill-considered policy drove prices up still more rapidly and still higher than would have been the case if there had been no cartels, and nearly all these cartels perished ingloriously in the smash. Another five-year period of bad trade and low prices followed, but a new spirit reigned in industry; the depression was no longer regarded as something to be taken for granted: it was regarded as nothing more than a pause before another boom.
The cartel movement entered its second epoch: instead of being a transitory phenomenon, the cartels have become one of the foundations of economic life. They are winning one field of industry after another, primarily, the raw materials industry. At the beginning of the nineties the cartel system had already acquired — in the organisation of the coke syndicate on the model of which the coal syndicate was later formed — a cartel technique which has hardly been improved. For the first time the great boom at the close of the nineteenth century and the crisis of 1900-03 occurred entirely — in the mining and iron industries at least — under the aegis of the cartels. And while at that time it appeared to be something novel, now the general public takes it for granted that large spheres of economic life have been, as a general rule, removed from the realm of free competition.[6]
Thus, the principal stages in the history of monopolies are the following: (1) 1860-70, the highest stage, the apex of development of free competition; monopoly is in the barely discernible, embryonic stage. (2) After the crisis of 1873, a lengthy period of development of cartels; but they are still the exception. They are not yet durable. They are still a transitory phenomenon. (3) The boom at the end of the 19th century and the crisis of 1900-03. Cartels become one of the foundations of the whole of economic life. Capitalism has been transformed into imperialism.
Cartels come to an agreement on the terms of sale, dates of payment, etc. They divide the markets among themselves. They fix the quantity of goods to be produced. They fix prices. They divide the profits among the various enterprises, etc.
The number of cartels in Germany was estimated at about 250 in 1896 and at 385 in 1905, with about 12,000 firms participating.[7] But it is generally recognised that these figures are underestimations. From the statistics of German industry for 1907 we quoted above, it is evident that even these 12,000 very big enterprises probably consume more than half the steam and electric power used in the country. In the United States of America, the number of trusts in 1900 was estimated at 185 and in 1907, 250. American statistics divide all industrial enterprises into those belonging to individuals, to private firms or to corporations. The latter in 1904 comprised 23.6%, and in 1909, 25.9%, i.e., more than one-fourth of the total industrial enterprises in the country. These employed in 1904, 70.6%, and in 1909 75.6%, i.e., more than three-fourths of the total wage earners. Their output at these two dates was valued at $10,900 million and $16,300 million, i.e., to 73.7% and 79.0% of the total, respectively.
At times cartels and trusts concentrate in their hands seven- or eight-tenths of the total output of a given branch of industry. The Rhine-Westphalian Coal Syndicate, at its foundation in 1893, concentrated 86.7% of the total coal output of the area, and in 1910 it already concentrated 95.4%.[8] The monopoly so created assures enormous profits, and leads to the formation of technical productive units of formidable magnitude. The famous Standard Oil Company in the United States was founded in 1900:
It has an authorised capital of $150 million. It issued $100 million common and $106 million preferred stock. From 1900 to 1907 the following dividends were paid on the latter: 48, 48, 45, 44, 36, 40, 40, 40% in the respective years, i.e., in all, $367 million. From 1882 to 1907, out of total net profits amounting to $889 million, $606 million were distributed in dividends, and the rest went to reserve capital[9] … In 1907 the various works of the United States Steel Corporation employed no less than 210,180 people. The largest enterprise in the German mining industry, the Gelsenkirchener Bergwerksgesellschaft in 1908 had a staff of 46,048 workers and office employees.[10]
In 1902, the United States Steel Corporation already produced 9 million tons of steel.[11] Its output constituted in 1901, 66.3%, and in 1908, 56.1% of the total output of steel in the United States.[12] The output of ore was 43.9% and 46.3%, respectively.
The report of the American Government Commission on Trusts states:
Their superiority over competitors is due to the magnitude of its enterprises and their excellent technical equipment. Since its inception, the Tobacco Trust has devoted all its efforts to the universal substitution of mechanical for manual labour. With this end in view it bought up all patents that have anything to do with the manufacture of tobacco and has spent enormous sums for this purpose. Many of these patents at first proved to be of no use, and had to be modified by the engineers employed by the trust. At the end of 1906, two subsidiary companies were formed solely to acquire patents. With the same object in view, the trust has built its own foundries, machine shops and repair shops. One of these establishments, that in Brooklyn, employs on the average 300 workers; here experiments are carried out on inventions concerning the manufacture of cigarettes, cheroots, snuff, tinfoil for packing, boxes, etc. Here, also, inventions are perfected.[13]
Other trusts also employ so-called developing engineers whose business it is to devise new methods of production and to test technical improvements. The United States Steel Corporation grants big bonuses to its workers and engineers for all inventions that raise technical efficiency, or reduce cost of production.[14]
In German large-scale industry, e.g., in the chemical industry, which has developed so enormously during these last few decades, the promotion of technical improvement is organised in the same way. By 1908 the process of concentration of production had already given rise to two main "groups" which, in their way, were also in the nature of monopolies. At first these groups constituted "dual alliances" of two pairs of big factories, each having a capital of from 20-21 million marks — on the one hand, the former Meister Factory in Höchst and the Casella Factory in Frankfurt am Main; and on the other hand, the aniline and soda factory at Ludwigshafen and the former Bayer factory at Elberfeld. Then, in 1905, one of these groups, and in 1908 the other group, each concluded an agreement with yet another big factory. The result was the formation of two "triple alliances," each with a capital of from 40-50 million marks. And these "alliances" have already begun to "approach" each other, to reach "an understanding" about prices, etc.[15]
Competition becomes transformed into monopoly. The result is immense progress in the socialisation of production. In particular, the process of technical invention and improvement becomes socialised.
This is something quite different from the old free competition between manufacturers, scattered and out of touch with one another, and producing for an unknown market. Concentration has reached the point at which it is possible to make an approximate estimate of all sources of raw materials (for example, the iron ore deposits) of a country and even, as we shall see, of several countries, or of the whole world. Not only are such estimates made, but these sources are captured by gigantic monopolist associations. An approximate estimate of the capacity of markets is also made, and the associations "divide" them up amongst themselves by agreement. Skilled labour is monopolised, the best engineers are engaged; the means of transport are captured — railways in America, shipping companies in Europe and America. Capitalism in its imperialist stage leads directly to the most comprehensive socialisation of production; it, so to speak, drags the capitalists, against their will and consciousness, into some sort of a new social order, a transitional one from complete free competition to complete socialisation.
Production becomes social, but appropriation remains private. The social means of production remain the private property of a few. The general framework of formally recognised free competition remains, and the yoke of a few monopolists on the rest of the population becomes a hundred times heavier, more burdensome and intolerable.
The German economist, Kestner, has written a book especially devoted to "the struggle between the cartels and outsiders", i.e., the capitalists outside the cartels. He entitled his work Compulsory Organisation, although, in order to present capitalism in its true light, he should, of course, have written about compulsory submission to monopolist associations. It is instructive to glance at least at the list of the methods the monopolist associations resort to in the present-day, the latest, the civilised struggle for "organisation": 1) stopping supplies of raw materials (…"one of the most important methods of compelling adherence to the cartel"); 2) stopping the supply of labour by means of "alliances" (i.e., of agreements between the capitalists and the trade unions by which the latter permit their members to work only in cartelised enterprises); 3) stopping deliveries; 4) closing trade outlets; 5) agreements with the buyers, by which the latter undertake to trade only with the cartels; 6) systematic price cutting (to ruin "outside" firms, i.e., those which refuse to submit to the monopolists. Millions are spent in order to sell goods for a certain time below their cost price; there were instances when the price of petrol was thus reduced from 40 to 22 marks, i.e., almost by half!); 7) stopping credits; 8) boycott.
Here we no longer have competition between small and large, technically developed and backward enterprises. We see here the monopolists throttling those who do not submit to them, to their yoke, to their dictation. This is how this process is reflected in the mind of a bourgeois economist:
"Even in the purely economic sphere", writes Kestner, "a certain change is taking place from commercial activity in the old sense of the word towards organisational- speculative activity. The greatest success no longer goes to the merchant whose technical and commercial experience enables him best of all to estimate the needs of the buyer and who is able to discover and, so to speak, `awaken' a latent demand; it goes to the speculative genius" (?!) "who knows how to estimate, or even only to sense in advance the organisational development and the possibilities of certain connections between individual enterprises and the banks …"
Translated into ordinary human language this means that the development of capitalism has arrived at a stage when, although commodity production still "reigns" and continues to be regarded as the basis of economic life, it has in reality been undermined and the bulk of the profits go to the "geniuses" of financial manipulation. At the basis of these manipulations and swindles lies socialised production; but the immense progress of mankind which achieved this socialisation, goes to benefit … the speculators. We shall see later how "on these grounds" reactionary, petty-bourgeois critics of capitalist imperialism dream of going back to "free", "peaceful", and "honest" competition.
"The prolonged raising of prices which results from the formation of cartels", says Kestner, "has hitherto been observed only in respect of the most important means of production, particularly coal, iron and potassium, but never in respect of manufactured goods. Similarly, the increase in profits resulting from this raising of prices has been limited only to the industries which produce means of production. To this observation we must add that the industries which process raw materials (and not semi-manufactures) not only secure advantages from the cartel formation in the shape of high profits, to the detriment of the finished goods industry, but have also secured a dominating position over the latter, which did not exist under free competition."[16]
The words which I have italicised reveal the essence of the case which the bourgeois economists admit so reluctantly and so rarely, and which the present-day defenders of opportunism, led by Kautsky, so zealously try to evade and brush aside. Domination, and violence that is associated with it, such are the relationships that are typical of the "latest phase of capitalist development"; this is what inevitably had to result, and has resulted, from the formation of all-powerful economic monopolies.
I shall give one more example of the methods employed by the cartels. Where it is possible to capture all or the chief sources of raw materials, the rise of cartels and formation of monopolies is particularly easy. It would be wrong, however, to assume that monopolies do not arise in other industries in which it is impossible to corner the sources of raw materials. The cement industry, for instance, can find its raw materials everywhere. Yet in Germany this industry too is strongly cartelised. The cement manufacturers have formed regional syndicates: South German, Rhine-Westphalian, etc. The prices fixed are monopoly prices: 230 to 280 marks a car-load, when the cost price is 180 marks! The enterprises pay a dividend of from 12% to 16% — and it must not be forgotten that the "geniuses" of modern speculation know how to pocket big profits besides what they draw in dividends. In order to prevent competition in such a profitable industry, the monopolists even resort to various stratagems: they spread false rumours about the bad situation in their industry; anonymous warnings are published in the newspapers, like the following: "Capitalists, don't invest your capital in the cement industry!"; lastly, they buy up "outsiders" (those outside the syndicates) and pay them "compensation" of 60,000, 80,000 and even 150,000 marks.[17] Monopoly hews a path for itself everywhere without scruple as to the means, from paying a "modest" sum to buy off competitors to the American device of employing dynamite against them.
The statement that cartels can abolish crises is a fable spread by bourgeois economists who at all costs desire to place capitalism in a favourable light. On the contrary, the monopoly created in certain branches of industry, increases and intensifies the anarchy inherent in capitalist production as a whole. The disparity between the development of agriculture and that of industry, which is characteristic of capitalism in general, is increased. The privileged position of the most highly cartelised, so-called heavy industry, especially coal and iron, causes "a still greater lack of coordination" in other branches of industry — as Jeidels, the author of one of the best works on "the relationship of the German big banks to industry", admits.[18]
"The more developed an economic system is", writes Liefmann, an unblushing apologist of capitalism, "the more it resorts to risky enterprises, or enterprises in other countries, to those which need a great deal of time to develop, or finally, to those which are only of local importance".[19] The increased risk is connected in the long run with the prodigious increase of capital, which, as it were, overflows the brim, flows abroad, etc. At the same time the extremely rapid rate of technical progress gives rise to increasing elements of disparity between the various spheres of national economy, to anarchy and crises. Liefmann is obliged to admit that: "In all probability mankind will see further important technical revolutions in the near future which will also affect the organisation of the economic system" … electricity and aviation … "As a general rule, in such periods of radical economic change, speculation develops on a large scale."[20]
Crises of every kind — economic crises most frequently, but not only these — in their turn increase very considerably the tendency towards concentration and towards monopoly. In this connection, the following reflections of Jeidels on the significance of the crisis of 1900, which, as we have already seen, marked the turning point in the history of modern monopoly, are exceedingly instructive:
Side by side with the gigantic plants in the basic industries, the crisis of 1900 still found many plants organised on lines that today would be considered obsolete, the "pure" (non-combined) plants, which were brought into being at the height of the industrial boom. The fall in prices and the falling off in demand put these "pure" enterprises in a precarious position, which did not affect the gigantic combined enterprises at all or only affected them for a very short time. As a consequence of this the crisis of 1900 resulted in a far greater concentration of industry than the crisis of 1873: the latter crisis also produced a sort of selection of the best-equipped enterprises, but owing to the level of technical development at that time, this selection could not place the firms which successfully emerged from the crisis in a position of monopoly. Such a durable monopoly exists to a high degree in the gigantic enterprises in the modern iron and steel and electrical industries owing to their very complicated technique, far-reaching organisation and magnitude of capital, and, to a lesser degree, in the engineering industry, certain branches of the metallurgical industry, transport, etc.[21]
Monopoly! This is the last word in the "latest phase of capitalist development." But we shall only have a very insufficient, incomplete, and poor notion of the real power and the significance of modern monopolies if we do not take into consideration the part played by the banks.
The principal and primary function of banks is to serve as middlemen in the making of payments. In so doing they transform inactive money capital into active, that is, into capital yielding a profit; they collect all kinds of money revenues and place them at the disposal of the capitalist class.
As banking develops and becomes concentrated in a small number of establishments, the banks grow from modest middlemen into powerful monopolies having at their command almost the whole of the money capital of all the capitalists and small businessmen and also the larger part of the means of production and sources of raw materials in any one country and in a number of countries. This transformation of numerous modest middlemen into a handful of monopolists is one of the fundamental processes in the growth of capitalism into capitalist imperialism; for this reason we must first of all examine the concentration of banking.
In 1907-08, the combined deposits of the German joint stock banks, each having a capital of more than a million marks, amounted to 7 billion marks; in 1912-13, these deposits already amounted to 9800 million marks, i.e., an increase of 40% in five years; and of the 2800 million increase, 2750 million was divided amongst 57 banks, each having a capital of more than 10 million marks. The distribution of the deposits between big and small banks was as follows:[22]
| In 9 big Berlin banks | In the other 48 banks with a capital of more than 10 million marks | In 115 banks with a capital of 1-10 million marks | In small banks (with a capital of less than 1 million marks) | |
|---|---|---|---|---|
| 1907-08 | 47 | 32.5 | 16.5 | 4 |
| 1912-13 | 49 | 36 | 12 | 3 |
The small banks are being squeezed out by the big banks, of which only nine concentrate in their hands almost half the total deposits. But we have left out of account many important details, for instance, the transformation of numerous small banks into actual branches of the big banks, etc. Of this I shall speak later on.
At the end of 1913, Schulze-Gaevernitz estimated the deposits in the nine big Berlin banks at 5100 million marks, out of a total of about 10 billion marks. Taking into account not only the deposits, but the total bank capital, this author wrote:
At the end of 1909, the nine big Berlin banks, together with their affiliated banks, controlled 11,300 million marks, that is, about 83% of the total German bank capital. The Deutsche Bank, which together with its affiliated banks controls nearly 3000 million marks, represents, parallel to the Prussian State Railway Administration, the biggest and also the most decentralised accumulation of capital in the Old World.[23]
I have emphasised the reference to the "affiliated" banks because it is one of the most important distinguishing features of modern capitalist concentration. The big enterprises and the banks in particular, not only completely absorb the small ones, but also "annex" them, subordinate them, bring them into their "own" group or "concern" (to use the technical term) by acquiring "holdings" in their capital, by purchasing or exchanging shares, by a system of credits, etc., etc. Professor Liefmann has written a voluminous "work" of about 500 pages describing modern "holding and finance companies",[24] unfortunately adding very dubious "theoretical" reflections to what is frequently undigested raw material. To what results this "holding" system leads in respect of concentration is best illustrated in the book written on the big German banks by Riesser, himself a banker. But before examining his data, let us quote a concrete example of the "holding" system.
The Deutsche Bank "group" is one of the biggest, if not the biggest, of the big banking groups. In order to trace the main threads which connect all the banks in this group, a distinction must be made between "holdings" of the first, second and third degree, or what amounts to the same thing, between dependence (of the lesser banks on the Deutsche Bank) in the first, second and third degree. We then obtain the following picture:[25]
| Direct or 1st degree dependence | 2nd degree dependence | 3rd degree dependence | |
|---|---|---|---|
| Permanently | in 17 other banks | 9 of the 17 have holdings in 34 other banks | 4 of the 9 have holdings in 7 other banks |
| For an indefinite period | in 5 other banks | - | - |
| Occasionally | in 8 other banks | 5 of the 8 have holdings in 14 other banks | 2 of the 5 have holdings in 2 other banks |
| Totals | in 30 other banks | 14 of the 30 have holdings in 48 other banks | 6 of the 14 have holdings in 9 other banks |
Included in the eight banks "occasionally" dependent on the Deutsche Bank in the "first degree", "occasionally", are three foreign banks: one Austrian (the Wiener Bankverein) and two Russian (the Siberian Commercial Bank and the Russian Bank for Foreign Trade). Altogether, the Deutsche Bank group comprises, directly and indirectly, partially and totally, 87 banks; and the total capital — its own and that of others which it controls — is estimated at between two and three billion marks.
It is obvious that a bank which stands at the head of such a group, and which enters into agreement with half a dozen other banks only slightly smaller than itself for the purpose of conducting exceptionally big and profitable financial operations like floating state loans, has already outgrown the part of "middleman" and has become a association of a handful of monopolists.
The rapidity with which the concentration of banking proceeded in Germany at the turn of the 20th century is shown by the following data which we quote in an abbreviated form from Riesser:
| Branches in Germany | Deposit banks and exchange offices | Constant holdings in German joint-stock banks | Total establishments | |
|---|---|---|---|---|
| 1895 | 16 | 14 | 1 | 42 |
| 1900 | 21 | 40 | 8 | 80 |
| 1911 | 104 | 276 | 63 | 450 |
We see the rapid expansion of a close network of channels which cover the whole country, centralising all capital and all revenues, transforming thousands and thousands of scattered economic enterprises into a single national capitalist, and then into a world capitalist economy. The "decentralisation" that Schulze-Gaevernitz, as an exponent of present-day bourgeois political economy, speaks of in the passage previously quoted, really means the subordination to a single centre of an increasing number of formerly relatively "independent", or rather, strictly local economic units. In reality it is centralisation, the enhancement of the role, importance and power of monopolist giants.
In the older capitalist countries this "banking network" is still more close. In Great Britain and Ireland, in 1910, there were in all 7151 branches of banks. Four big banks had more than 400 branches each (from 447 to 689); four had more than 200 branches each, and eleven more than 100 each.
In France, three very big banks, Crédit Lyonnais, the Comptoir National and the Société Générale, extended their operations and their network of branches in the following manner.[26]
| Number of branches and offices | Capital (in million francs) | ||||
|---|---|---|---|---|---|
| In the provinces | In Paris | Total | Own capital | Deposits used as capital | |
| 1870 | 47 | 17 | 64 | 200 | 427 |
| 1890 | 192 | 66 | 258 | 265 | 1245 |
| 1909 | 1033 | 196 | 1229 | 887 | 4363 |
In order to show the "connections" of a big modern bank, Riesser gives the following figures of the number of letters dispatched and received by the Disconto-Gesellschaft, one of the biggest banks in Germany and in the world (its capital in 1914 amounted to 300 million marks):
| Letters received | Letters dispatched | |
|---|---|---|
| 1852 | 6,135 | 6,292 |
| 1870 | 85,800 | 87,513 |
| 1900 | 533,102 | 626,043 |
The number of accounts of the big Paris bank, the Crédit Lyonnais, increased from 28,535 in 1875 to 633,539 in 1912.[27]
These simple figures show perhaps better than lengthy disquisitions how the concentration of capital and the growth of bank turnover are radically changing the significance of the banks. Scattered capitalists are transformed into a single collective capitalist. When carrying the current accounts of a few capitalists, a bank, as it were, transacts a purely technical and exclusively auxiliary operation. When, however, this operation grows to enormous dimensions we find that a handful of monopolists subordinate to their will all the operations, both commercial and industrial, of the whole of capitalist society; for they are enabled — by means of their banking connections, their current accounts and other financial operations — first, to ascertain exactly the financial position of the various capitalists, then to control them, to influence them by restricting or enlarging, facilitating or hindering credits, and finally to entirely determine their fate, determine their income, deprive them of capital, or permit them to increase their capital rapidly and to enormous dimensions, etc.
We have just mentioned the 300 million marks capital of the Disconto-Gesellschaft of Berlin. This increase of the capital of the bank was one of the incidents in the struggle for hegemony between two of the biggest Berlin banks — the Deutsche Bank and the Disconto. In 1870, the first was still a novice and had a capital of only 15 million marks, while the second had a capital of 30 million marks. In 1908, the first had a capital of 200 million, while the second had 170 million. In 1914 the first increased its capital to 250 million and the second, by merging with another first-class big bank, the Schaaffhausenscher Bankverein, increased its capital to 300 million. And of course, this struggle for hegemony went hand in hand with the more and more frequent conclusion of "agreements" of an increasingly durable character between the two banks. The following are the conclusions that this development of banking forces upon banking specialists who regard economic questions from a standpoint which does not in the least exceed the bounds of the most moderate and cautious bourgeois reformism.
Commenting on the increase of the capital of the Disconto-Gesellschaft to 300 million marks, the German review, Die Bank, wrote:
Other banks will follow this same path and in time the 300 men, who today govern Germany economically, will gradually be reduced to 50, 25 or still fewer. It cannot be expected that this latest move towards concentration will be confined to banking. The close relations that exist between individual banks naturally lead to the bringing together of the industrial syndicates which these banks favour … One fine morning we shall wake up in surprise to see nothing but trusts before our eyes, and to find ourselves faced with the necessity of substituting state monopolies for private monopolies. However, we have nothing to reproach ourselves with, except that we have allowed things to follow their own course, slightly accelerated by the manipulation of stocks.[28]
This is an example of the impotence of bourgeois journalism which differs from bourgeois science only in that the latter is less sincere and strives to obscure the essence of the matter, to hide the forest behind the trees. To be "surprised" at the results of concentration, to "reproach" the government of capitalist Germany, or capitalist "society" ("ourselves"), to fear that the introduction of stocks and shares might "accelerate" concentration in the same way as the German "cartel" specialist Tschierschky fears the American trusts and "prefers" the German cartels on the grounds that they "may not, like the trusts, excessively accelerate technical and economic progress"[29] — is not this impotence?
But facts remain facts. There are no trusts in Germany; there are "only" cartels — but Germany is governed by not more than 300 magnates of capital, and the number of these is constantly diminishing. At all events, banks greatly intensify and accelerate the process of concentration of capital and the formation of monopolies in all capitalist countries, notwithstanding all the differences in their banking laws.
The banking system "possesses indeed the form of universal book-keeping and the distribution of means of production on a social scale, but solely the form," wrote Marx in Capital half a century ago (Russ. trans. Vol. III, part II, p. 144). The figures we have quoted on the growth of bank capital, on the increase in the number of the branches and offices of the biggest banks, the increase in the number of their accounts, etc., present a concrete picture of this "universal book-keeping" of the whole capitalist class; and not only of the capitalists, for the banks collect, even though temporarily, all kinds of money revenues — of small businessmen, office clerks, and of a tiny upper stratum of the working class. "Universal distribution of means of production" — that, from the formal aspect, is what grows out of the modern banks, which numbering some three to six of the biggest in France, and six to eight in Germany, control millions and millions. In substance, however, the distribution of means of production is not at all "universal", but private, i.e., it conforms to the interests of big capital, and primarily, of huge, monopoly capital, which operates under conditions in which the masses live in want, in which the whole development of agriculture hopelessly lags behind the development of industry, while within industry itself the "heavy industries" exact tribute from all other branches of industry.
In the matter of socialising capitalist economy the savings banks and post offices are beginning to compete with the banks; they are more "decentralised", i.e., their influence extends to a greater number of localities, to more remote places, to wider sections of the population. Here is the data collected by an American commission on the comparative growth of deposits in banks and savings banks:[30]
| Britain | France | Germany | |||||
|---|---|---|---|---|---|---|---|
| Banks | Savings banks | Banks | Savings banks | Banks | Credit societies | Savings banks | |
| 1880 | 8.4 | 1.6 | ? | 0.9 | 0.5 | 0.4 | 2.6 |
| 1888 | 12.4 | 2.0 | 1.5 | 2.1 | 1.1 | 0.4 | 4.5 |
| 1908 | 23.2 | 4.2 | 3.7 | 4.2 | 7.1 | 2.2 | 13.9 |
As they pay interest at the rate of 4% and 4.25% on deposits, the savings banks must seek "profitable" investments for their capital, they must deal in bills, mortgages, etc. The boundaries between the banks and the savings banks "become more and more obliterated". The Chambers of Commerce of Bochum and Erfurt, for example, demand that savings banks be "prohibited" from engaging in "purely" banking business, such as discounting bills; they demand the limitation of the "banking" operations of the post office.[31] The banking m