Capitalist crisis, valorization, imperialism as theorized by Marx, Engels, Kautsky, and in particular Lenin – Hilferding
Contents
- The idea of Financial Capital
- Lenins characteristics of imperialism
- Marx on fictituous capital
- Kautsky, Hilferding and Lenin…
- … refuted by the real devellopment
- Turning to the issue of monopolies and competition
- Marx on competition
Hilferding and Lenin suffered from simplifications and distortions when they developed their notorious idea of financial capital. This article will confront this idea with Marx’s analysis of the development of the financial sphere and the movement of fictitious capital in times of prosperity and crisis, as well as their similarities and differences with the trends of the rate of profit and capitalist accumulation. We will understand the relations between banking, industrial and commercial capital without distortions and simplistic one-sidedness in the analysis.
The idea of Financial Capital
Both Hilferding and Lenin assumed that banking capital would control industrial capital, after inserting important segments of industrial capital into banking capital, constituting financial capital. According to Hilferding (quoted by Lenin):
“A steadily increasing proportion of capital in industry,” writes Hilferding, “ceases to belong to the industrialists who employ it. They obtain the use of it only through the medium of the banks which, in relation to them, represent the owners of the capital. On the other hand, the bank is forced to sink an increasing share of its funds in industry. Thus, to an ever greater degree the banker is being transformed into an industrial capitalist. This bank capital, i.e., capital in money form, which is thus actually transformed into industrial capital, I call ‘finance capital’.” “Finance capital is capital controlled by banks and employed by industrialists.” [1]
According to Lenin both industry and banks would merge, generating a financial monopoly oligarchy. He develops his theory on “Imperialism, the highest stage of capitalism”:
· “The new role of the banks and their merger with industrial capital leads to the formation of finance capital and the power of the oligarchy”
· “Finance capital, concentrated in a few hands and exercising a virtual monopoly, exacts enormous and ever-increasing profits from the floating of companies, issue of stock, state loans, etc., strengthens the domination of the financial oligarchy and levies tribute upon the whole of society for the benefit of monopolists.”.
· “During periods of industrial boom, the profits of finance capital are immense, but during periods of depression, small and unsound businesses go out of existence, and the big banks acquire ‘holdings‘ in them by buying them up for a mere song, or participate in profitable schemes for their ‘reconstruction’ and ‘reorganisation.’ In the ‘reconstruction’ of undertakings which have been running at a loss, ‘the share capital is written down, that is, profits are distributed on a smaller capital and continue to be calculated on this smaller basis. Or, if the income has fallen to zero, new capital is called in, which, combined with the old and less remunerative capital, will bring in an adequate return.’ ‘Incidentally,’ adds Hilferding, ‘all these reorganisations and reconstructions have a twofold significance for the banks: first, as profitable transactions; and secondly, as opportunities for securing control of the companies in difficulties’ (…)” [2]
· “The monopoly, once it is constituted and manages billions, penetrates in an absolutely unavoidable way in all aspects of social life, independently of the political regime and other “particularities”.
Lenins characteristics of imperialism
In his “Imperialism, the Highest Stage of Capitalism” Lenin gave definition of imperialism different than that of Luxemburg, Pannekoek and Gorter [3]:
· “… we must give a definition of imperialism that will include the following five of its basic features:(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” [4].”
· “Imperialism, which is capitalism at the stage of development in which monopolies and finance capital dominate, the export of capital has acquired great importance, began the division of the world by international groups and ended the division of the Earth among the most important capitalist countries.”
· “… the concentration of production, the monopolies that result from it, the fusion or intertwining of banks with industry: that is the emergence of “finance capital” and what this concept contains.” (Lenin. “Imperialism, the highest stage of capitalism”).
With Lenin, the modalities of relation between both capitalist expressions and their complex historical movement, become stereotyped in a simplism that pretends to explain the “new stage” of capitalism and the “new function of banking”. A stage that Lenin conceives as the final one, that of the definitive ruin of capital, mistakenly.
Capitalist accumulation generates enormous masses of capital in all its modalities and expressions. The difficulties of the capitalist valorization process are linked to the tendency to expand credit, with its correlate not only of productive investment but also of fictitious capitalization. It is the plethora of money capital. And this occurs in cycles of expansion and crisis, with the backdrop of the international market, competition in it and its consequences, with or without world wars in between, but always with militarism and limited wars, with the corresponding role of state capitalism. Such a plethora either favors and promotes capitalist development by anticipating profits that can be realized and productive reinvestment of money capital, or else it tears and exacerbates capitalist devaluation.
Marx on fictituous capital
In relation to fictitious capital Marx points out:
· “The same applies to fictitious capital, to interest-bearing securities, insofar as they themselves circulate on the stock exchange as money capital. With the increase of interest (…) -due to the scarcity of credit in crisis- (…) the price of these securities decreases. (…) finally, the price of shares also decreases. (…) This fictitious money capital is enormously diminished in the crisis, and so is the capacity of its owners to obtain money in exchange for it in the market. (…) the decrease in the nominal price of these securities and shares has nothing to do with the capital they represent”. (“The Capital”. Volume III)
Speculation takes on diversified expressions and the total amount of finance is enormous with respect to that generated in capitalist production. But the relationship in this whole process between industrial and banking capital and the financial networks in which “capital as money, loan or interest-bearing capital” (Marx) is inserted is not simple, nor does it manifest itself everywhere in the same way and with the same intensity. It is notorious that the role of the dollar and US capital constitutes an enormous incentive in such a process. And this cannot be isolated from international trade and investment and speculative flows, the role of central banks and the movement of interest and exchange rates on a global scale. The so-called financial capital depends on the rate of accumulation and its mass but does not determine it as an operational head. For Marx:
· “the rate of interest prevailing in the market and constantly fluctuating is, at each moment a given magnitude, just like the commercial price of commodities, since all the capital susceptible of being lent is constantly confronted in the money market, as a global mass, to the capital in functions, being therefore the relation between the supply of lendable capital, on the one hand, and the demand for this kind of capital the other, which decides in each case the level of interest in the market. “The variations of interest will undoubtedly be found in inverse proportion to those of the part of the profit retained by productive capital (…) the low level of interest corresponds to periods of prosperity or extraordinary profits and the maximum rate of interest, until it reaches a usurious level, occurs in periods of crisis because it is when it is necessary to borrow money, whatever it costs, to pay”. (“Capital”. Volume III).
The movement of interest, an essential element therefore, not determined in an area totally autonomized and oligarchically dominated by “financial capital”. The imprint and expressions of the law of value and the tensions between supply and demand are not annulled. There are movements, flows, tensions and contradictions between “capital susceptible of being lent” and “capital in function”.
Capitalist overproduction and overaccumulation, the fruit of the growth of the productivity of labor in capitalist value relations, comes to interfere with the rate of growth, slowing its ascent, eroding it, keeping it weak or making it regress, as has been and can be repeatedly verified. The dissociation between real accumulation, according to Marx (“Capital” book I and book III), and the one produced in the sphere of money and loan capital is patent. The historical thickness of fictitious capital is patent, but the real development of productive capital is not fictitious. The problem lies in the difficulties for the realization of huge and enormous masses of profits, in the capitalist overproduction. The tendencies in the so-called financial capital are not new, but its relationship with industrial and commercial capital does not fit with the theory of financial capital that comes from Hilferding and Lenin. The reciprocal linkages and determinations are neither simple nor do they manifest themselves in all conditions in the same way, as shown by Marx on this subject:
· “If industrial capital cannot directly extend its process of reproduction, a part of its money-capital is eliminated as surplus to the cycle of reproduction and becomes money-capital susceptible of being lent”. (Marx, Karl. “Capital: Critique of Political Economy”, III).
· “… in the general crisis of overproduction, the contradiction is not between the different kinds of productive capital, but between industrial capital and capital that can be lent; between capital as it is directly introduced into the process of production, and capital as it presents itself as money, autonomously (relatively) and apart from that process.” (Marx, Grundrisse)
· “Consequently, the more developed capital is already, the more surplus labor it has created, the more formidably it will have to develop its productive force in order to valorize itself in the smallest proportion, that is to say, to add surplus value, because its barrier is always the proportion between the fraction of the day – which is expressed in necessary labor – and the entire day’s work. It can only move within this limit. The smaller the fraction corresponding to necessary labor, the greater the surplus labor, the less can any increase of productive force perceptibly reduce necessary labor […]. The self-valorization of capital becomes more difficult to the extent that it is already more valorized” (Grundrisse . I, p. 283-284 in the Spanish edition).
· Fall of the rate of profit and accelerated accumulation, “are only different expressions of the same process insofar as both express the development of the productive force”. (id) The progressive tendency of the rate of profit to fall constitutes “an expression, peculiar to the capitalist mode of production, of the progressive development of the social productive force of labor” (id). The growing difficulty of valorization of capital is ultimately expressed in an effective fall of the rate of profit, in a decrease or a halt of accumulation, in “overproduction, speculation, crises and superfluous capital, in addition to the superfluous population”. (id) “The overproduction of capital and not of individual commodities-since this overproduction of capital always involves overproduction of commodities-is nothing else but overaccumulation of capital.” (Marx,”Capital.”)
Kautsky, Hilferding and Lenin…
Kaustky wrote:
· “The crisis of 1873 occurred, which was not followed by such a rapid economic reaction as at other times. The crisis lasted so long and was so cruel that the end of capitalism seemed near. But when it was overcome, in the early nineties, it was replaced by a long era of prosperity. But it arose from a new form of capitalism. Cartels had replaced free competition, and in the place of the conquest of markets by free trade, the policy of protectionism and colonial conquests had been enthroned.”
· “Long was the struggle between the critics and the defenders of Marx’s doctrine. It was not yet over when the long era of prosperity came to an end. We had other crises (1901, 1907), there was again unemployment and we witnessed again the other phenomena whose correlation Marx had shown in his Capital. Neither the cartels, nor the high tariffs, nor the colonial policy counteracted the economic laws discovered by Marx. And these laws continue, and how much the world war has accentuated the most irritating effects of capitalist economy.” (The Erfurt Program). https://inter-rev.foroactivo.com/t4222-sobre-el-programa-socialdemocrata-de-erfurt-textos-de-karl-kautsky-y-de-f-engels
· “something desirable, has become inevitable (…) As things stand at present, civilization cannot last, we must advance towards socialism or we will fall into barbarism (…) The history of mankind is not determined by ideas but by economic development which progresses irresistibly in obedience to precise underlying laws and not to any wish or fantasy”.[5]
Lenin asserted, wrongly:
· “Capitalism, once a factor of progress, has become reactionary; it has developed the productive forces to such an extent that humanity has nothing left but to pass over to socialism or suffer for years, even tens of years, the armed struggle of the “great” powers to artificially maintain capitalism with the help of colonies, monopolies, privileges and national oppressions of all kinds (Lenin, The Principles of Socialism and the War of 1914-1918)
· “The present war is an imperialist war… The epoch of capitalist imperialism is the epoch of a capitalism which has already reached and passed its period of maturity, which is entering its ruin, ripe to make way for socialism. The period from 1789 to 1871 was the epoch of progressive capitalism: its task was to overthrow feudalism, absolutism, liberation from the foreign yoke” (Lenin, “Opportunism and the Bankruptcy of the Second International”, January 1916).
For his part, Hilferding theorized that monopolies “are in a position to completely suppress crises, since they can regulate production and adapt supply to demand at all times.” (“Finance Capital”)
In “The ABC of Communism” (Point 16. Anarchy of production, concurrence, crisis) Bukharin writes:
· “In the same proportion as the great factories increase, the artisans and peasants perish. In a word, in a relatively small space, in the great centers, enormous popular masses, of which the industrial proletariat forms the great majority, are gathered together in a relatively small space. In such conditions, the struggle which is spreading must inevitably end in the victory of the working class. Sooner or later the supreme clash between bourgeois and proletarian will take place; the bourgeoisie will be expropriated, and the proletariat will destroy the capitalist State and establish a new communist social order. Capitalism, then, leads in the course of its development, inevitably, to the communist revolution of the proletariat”.
Lenin interprets as follows:
· “The necessity for the export of capital is due to the fact that in some countries capitalism has ‘matured’ excessively and (in the conditions created by the insufficient development of agriculture and by the misery of the masses) does not have a ground for the lucrative placement of capital.” (“Imperialism, Higher Stage of Capitalism”)
· Lenin did not speak of the subordination of industrial capital to banking capital but of the fusion of the two, which he calls finance capital. He affirms:
· “Parallel to this is established, so to speak, a personal link between the banks and the largest industrial and commercial enterprises, the merger of the one and the other through the acquisition of shares, through the entry of bank directors on the boards of directors of industrial and commercial enterprises, and vice versa.”
· “The result is, on the one hand, an ever-increasing merger – or, in N. I. Bukharin T’s apt expression, the assembling of banking and industrial capital – and, on the other hand, the transformation of banks into institutions with a truly “universal character.”
· “The old capitalism’s time has passed. The new one represents a transitory stage towards something different. It makes no sense to seek ‘firm principles or concrete ends’ with the aim of ‘reconciling’ monopoly with free competition.”
· “… the 20th century marks the turning point between the old capitalism and the new one, between the domination of capital in general and the domination of finance capital.”
· “Concentration of production, monopolies arising therefrom, merger or assembly of banks with industry; such is the history of the rise of finance capital and what this concept represents.”
· “… capitalist monopoly inevitably engenders a tendency to stagnation and decadence. Insofar as monopolistic prices are fixed, even if only momentarily, the factors which stimulate technical progress and, consequently, any further progress disappear to a certain extent, thus arising, moreover, the economic possibility of deliberately retarding technical progress.” (“Imperialism, the Highest Stage of Capitalism.”)
Lenin stated, and he did so in a unilateral and biased manner: “Competition becomes monopoly” (id). He gave as evident something that was not. It should be noted that on many occasions at that time by monopoly they meant “oligopoly: (from the ancient Greek ὀλίγος (olígos) “few” πωλεῖν (poleín) “to sell”) is a form of market in which a market or industry is dominated by a small number of large sellers (oligopolies). Oligopolies can result from various forms of collusion that reduce competition and lead to higher prices for consumers.” (https://es.wikipedia.org/wiki/Oligopolio)
In contradiction with the reality of capitalism and with Marx’s own classical theory, Lenin asserted that
· “certain fundamental features began to change towards their opposites.” “Capitalism became imperialist capitalism only at a definite and fairly advanced stage of its own development, when certain fundamental features began to change into its opposites, when the features of the epoch of transition from capitalism to a more advanced social and economic system had taken shape and had revealed themselves in all spheres.” (id)
Thus, according to Lenin:
· “Monopolistic strangulation”, agreements, price and labor manipulations become determinant, so that “mercantile production is already broken”. Profits are the product of “financial machinations” and “swindles”, “a relationship of domination and violence takes precedence”.
· “In other words, the old capitalism, the capitalism of free competition, with its indispensable regulator, the stock market, is passing into history.”
· “In the case of Europe, it is possible to fix quite precisely the moment when the new capitalism definitively replaced the old one: the beginning of the 20th century.”
· “This no longer has anything to do with the old free competition of scattered employers, who knew nothing about each other and who produced for an unknown market.”
· “We are no longer faced with a competitive struggle between large and small enterprises, between technically backward and technically advanced enterprises, but with the strangulation by the monopolists of all those who do not submit to the monopoly, to its yoke, to its arbitrariness.”
· “Translated into common parlance, this means that the development of capitalism has reached such a point that, although mercantile production still “reigns” as before and is considered the basis of the whole economy, in reality it has been undermined and the bulk of the profits go to the “geniuses” of financial intrigues.” (id)
· “The replacement of the old capitalism, where free competition prevailed, by the new one, where monopoly reigns, is expressed, among other things, by the diminishing importance of the stock exchange. “For some time now,” says Die Bank, “the stock exchange has ceased to be the indispensable intermediary of circulation that it once was, when the banks could not yet place the bulk of issues with their customers.
· “Every bank is a stock exchange’. This modern aphorism is all the more true the larger the bank and the greater the concentration of the banking business.”
· “If before, in the 1970s, the Stock Exchange, with its youthful excesses [a “delicate” allusion to the stock market crash of 1873, the Gründerzeit scandals, S etc.], opened the era of Germany’s industrialization, at the present time the banks and industry ‘can manage on their own.'” (id)
… refuted by the real devellopment
· Obviously, capitalism has not developed in that way, and in particular monopolistic and oligopolistic action itself cannot be understood with such a distorted simplism. When Lenin concludes: “Opportunism cannot now triumph completely in the labor movement of a country for decades, as it triumphed in Britain in the second half of the 19th century”
· We see that obviously such a prediction fails. Lenin goes on to argue that monopoly generates chronic poverty among the masses of workers and peasants, which restricts markets and pushes to chronic stagnation in the advanced countries. “Therefore, there is a chronic surplus of capital” (p. 431).
· This chronic surplus comes to be the denomination of the chronic overproduction of capital of which social democracy and Kautsky spoke, and neither fits nor is coherent with capitalist characteristics and conditions. It is part of a decadentist ideological vision, in which the moments of evident overproduction of capital are considered permanent, and ways of limiting and sterilizing, of devaluing such overproduction of capital are excluded, in order to relaunch the production and circulation of capital with adequate rates and conditions of profit, restructuring in favor of capital the relation necessary labor – overwork, variable capital and surplus value… which was proper to Marx’s critical conception. In the discussion on the reformulation of the Program of the Bolshevik Communist Party, Lenin argued that imperialism then was a superstructure of capitalism, since in a series of branches “the old capitalism … has grown into imperialism”, but underneath that superstructure “there still exists the enormous subsoil of old capitalism”. This type of differentiation between old and new capitalism is mistaken and leads to confusion as we have been able to verify repeatedly afterwards. Lenin incurs in various contradictions and nuances: “the characteristic of all countries is that capitalism is still developing in many places. This is true for the whole of Asia, for all countries marching towards bourgeois democracy, as it is for a whole series of regions of Russia” (id).
It states the following:
· “Every day, as one of the tendencies of imperialism, the formation of ‘rentier States’, of usurious States, whose bourgeoisie lives more and more at the expense of the export of capital and the ‘clipping of coupons’, is manifesting itself more and more prominently. It would be a mistake to believe that this tendency to decomposition rules out the rapid growth of capitalism. No; certain industrial branches, certain sectors of the bourgeoisie, certain countries, manifest in the epoch of imperialism, with greater or lesser intensity, either one or the other of these tendencies. As a whole, capitalism grows with incomparably greater rapidity than before, but this growth is not only increasingly unequal, but the inequality also manifests itself, in a particular way, in the decomposition of the countries with the strongest capital (England).” (id)
That is to say that according to Lenin there is on the one hand “rapid growth of capitalism” which has been obvious, but also “tendency to decomposition”, which has not been evidenced. Tendency that would be proved “in a particular way, in the decomposition of the countries with the strongest capital (England)”, which has not been corroborated either. Lenin maintained:
· “In order to reflect this objective situation (of the ruling classes in all the belligerent powers) it is not necessary to take single examples and data (given the extreme complexity of the phenomena of social life, one can always find as many examples or single data as one wishes, capable of confirming any thesis – in this case numerous quotations – but it is obligatory to take the whole of the data on the foundations of the economic life of all the belligerent powers and of the whole world”. (Lenin. “Imperialism”, Complete Works in Spanish Volume 22, p. 200).
Let’s do the test:
· “World production in the 100 years of the 20th century could have multiplied almost eighteenfold according to the detailed calculations of Angus Maddison, one of the leading specialists in this type of statistics and author of several books published by the OECD on these subjects. Adding four million inhabitants to the Earth in the last century is, of course, a worrying figure in terms of habitability and possible environmental degradation but, compared to economic growth, it shows a significant improvement in the production of goods and services that, as a global average, each person has and that, approximately, has multiplied by six. Of course, this greater economic well-being does not mean that it is equivalent to an improvement in the quality of life, and even less so that it has been distributed equitably, but it is a fact to be taken into account. The reality is that in the last century the inequalities between countries have not been corrected, far from it, but there have been important changes in their relative economic weight”. (Pulido, Antonio. “Economía en el siglo XX.” http://www.antoniopulido.es/documentos/con120618.pdf. Universidad Autónoma de Madrid.)
· “In the second half of the 20th century we have witnessed a formidable expansion of international trade flows. World exports increased from $61 billion in 1950 to $315 billion in 1970 and $3.5 trillion in 1990. In this period, the growth of world trade was significantly greater than the growth of world output, although the gap narrowed after the early 1970s. Consequently, an increasing share of world production entered world trade. The share of world exports in world Gross Domestic Product (GDP) rose from 6 percent in 1950 to 12 percent in 1973 and 16 percent in 1992. For industrialized countries, that share rose from 12 percent in 1973 to 17 percent in 1992. This is not new for the world economy. The period from 1870 to 1913 saw a similar expansion of international trade flows. For the 16 major industrialized countries, now in the OECD, the share of exports in GDP increased from 18.2 percent in 1900 to 21.2 percent in 1913. – The story is much the same for international investment flows. The volume of foreign direct investment in the world economy increased from $68 billion in 1960 to $502 billion in 1980 and $1.9 trillion in 1992. Foreign direct investment flows into the world economy increased from less than $5 billion in 1960 to $52 billion in 1980 and $171 billion in 1992. Consequently, total foreign direct investment in the world as a share of world output increased from 4.4 percent in 1960 to 4.8 percent in 1980 and 8.4 percent in 1992. Over the same period, world foreign direct investment flows as a percentage of world gross fixed capital formation increased from 1.1 percent in 1960 to 2 percent in 1980 and 3.7 percent in 1992. In the industrialized countries, this share increased from 2.3 percent during the period 1981-1985 to 4.4 percent in the period 1986-1990, but fell to 2.9 percent in 1992. In developing countries, however, it increased slightly from 2.4 percent during the period 1981-1985 to 2.7 percent during the period 1986-1990, but jumped to 7.8 percent in 1992. Any comparison with the period 1870-1913 would be incomplete because we do not have similar data. An estimate by the United Nations suggests that total foreign direct investment in the world economy as a proportion of world output was 9 percent in 1913. The total mass of long-term world foreign investment reached $44 billion in 1914, of which $14 billion about one-third was foreign direct investment. – Over almost twenty years, between 1989 and 2008, the world economy grew steadily and at a remarkable rate of 3.2% per year on average. In terms of Gross Domestic Product, annual world output grew by more than 80% between 1989 and 2008. Since the mid-1990s, the growth rate exceeded 3% almost every year, and between 2004 and 2007 it approached 5% per year. This long period of widespread growth came to an end with the current economic crisis, which, hitting the advanced countries hardest, led to a global recession in 2009. The intensity of capital accumulation has been a common feature of most of the world’s economies over the last quarter century. The process of generalized accumulation has led to very notable increases in the capital endowments of different territories, especially in the last growth cycle, prior to the global economic crisis.“ (http://www.fbbva.es/TLFU/tlfu/esp/areas/econosoc/publicaciones/cuadernos/fichacuaderno/inmundial.dex.jsp?codigo=581)
Lenin and similar advocates of the decadentist ideology are not corroborated.
Turning to the issue
of monopolies and competition
Rudolf Hilferding, author of “Finance Capital”, a work that notoriously inspired Lenin, argued that the irruption and dominance of monopolies called into question Marx’s law of value and the schemes of transformation of values into prices on the basis of such a Marxist approach:
· “When monopolistic associations eliminate competition, they eliminate with it the only means by which they can realize an objective law of prices. Price ceases to be an objectively determined magnitude; it becomes a problem of calculation for those who voluntarily and consciously determine it; instead of a result, it becomes an assumption; instead of something necessary and independent of the will and consciousness of the participants, it becomes an arbitrary and casual thing. The realization of the Marxist theory of concentration, the monopolistic association, thus seems to become the elimination of the Marxist theory of value.”
This, also obviously, has not happened, and Marx’s approach is still valid, but not that of Hilferding, Lenin and those who follow them. In particular, they also show themselves incapable of understanding the very competition between monopolistic and oligopolistic entities, which Marx had explained in its essential determinations.
We read Lenin, quoting Hilferding:
· “Hilferding devotes the third part of his book to the question of “Finance Capital and the Limitation of Free Competition”, but already from the introduction he makes a clear statement: (…) ‘The following pages are the attempt to scientifically understand the economic manifestations of the most recent evolution of capitalism (….) the characteristic of ‘modern’ capitalism is constituted by those processes of concentration which manifest themselves, on the one hand, in the ‘abolition of free competition’ through the formation of cartels and trusts, and, on the other, in an ever closer relationship between banking and industrial capital. This relationship, precisely, is the cause of capital, as will be discussed later, taking the form of finance capital, which constitutes its most abstract and supreme manifestation’ (Hilferding, 1910, p. 3).”
Lenins main argument, for the idea of the “novel” situation of his time in relation to that of Marx, is the same as that of such disparate authors as Engels and Bernstein notably, and later Lenin or Sweezy: the simple “Tempora mutantur!” [Times change] which he quotes on p. 241. Hilferding thus begins the long tradition which until today distinguishes between a nineteenth-century capitalism, supposedly “of free competition”, and a new capitalism of the twentieth century, “dominated by monopolies”. In chapter 14 – “Capitalist monopolies and the Banks: Transformation of capital into finance capital” [6]– he takes for granted what he should have tried to demonstrate and not only affirms that “finance capital develops with the rise of the joint-stock company”, but also that “it reaches its apogee with the monopolization of industry”, which is nothing but Engels’ idea already consolidated by the time that has elapsed since Marx’s death.
Hilferding makes a particular interpretation (Ch. IX) of the relations between industrial and banking capital – later criticized by Lenin and Sweezyx – and ends the chapter saying that “the Hegelian could speak of the negation of the negation”, since “banking capital was the negation of usurious capital and is negated in its turn by finance capital” (ibid., p. 249). But it is in chapter XV (“The price determination of capitalist monopolies. Historical tendency of finance capital”) where the essentials are contained, beginning by distinguishing two stages: that of the “partial unions” – in which “these unions have the tendency to act in such a way as to lower prices” -, and then that of the “monopolistic unions, cartels and trusts”, whose objective is “the increase of the rate of profit”, an objective they achieve “in the first place, by raising prices, when they are in a position to eliminate competition” (p. 250):
· “When monopolistic associations eliminate competition, they eliminate with it the only means by which they can realize an objective law of prices. Price ceases to be an objectively determined magnitude; it becomes a problem of calculation for those who voluntarily and consciously determine it; instead of a result it becomes an assumption; instead of something objective it becomes something subjective; instead of something unnecessary and independent of the will and consciousness of the participants it becomes an arbitrary and casual thing.” (p. 251).
No wonder, then, that he is aware of how far he has taken his bet against Marx’s theory of value, to the point that “the realization of the Marxist theory of concentration, the monopolistic association, thus seems to become the elimination of the Marxist theory of value” (ibidem xi). In fact, it is not only that it “seems” to be so, but he himself explains how “cartel prices” are now fixed:
· “Therefore, the cartel price has to be theoretically equal to the price of production [no doubt referring to the average cost of production] plus the average rate of profit. Which, in turn, has changed. It is different for the large, cartelized industry and for the small industry sectors (…) However, this same price determination is only provisional, like the cartel itself isolated or partial. Cartelization means a change in the average rate of profit. The rate of profit rises in cartelized industries and falls in non-cartelized industries. This diversity leads to combination and more cartelization (…) The cartel price will increase on the output price of the cartelized industries by the amount by which its output price has fallen in the non-cartelized ones. As long as there are joint-stock companies in the non-cartelized industries, the price cannot fall below pc + i, cost plus interest, because then no capital investment would be possible. Therefore, the increase of the cartel price finds its limit in the possibility of the reduction of the rate of profit in the non-cartelized industries” (Hilferding, 1910, p. 254).
What Hilferding advocates is that the cartel price will be as high as the monopolies can set it within a double limit: “The price increase must, in the first place, leave the non-cartelized industries a rate of profit which will enable them to continue production. But, secondly, it cannot excessively reduce consumption” (ibid., p. 256). Thus, the tendency towards the formation of the overall cartel goes through several steps. First, this hinders the development of the competitive (non-cartelized) sector and at the same time “sharpens competition” within it and “with it, the tendency to concentration, until these industries are finally suitable for the cartel or are in a position to be annexed to an already cartelized industry” (ibid.). Then, the “expansion of production” is carried out by means of a “perfected technique” which does not favor consumers because it does not serve to lower prices (unlike in Marx’s analysis), but “prices would remain the same, production costs would have fallen, and profit increased” (p. 257). Therefore, we have “very large, extraordinary profits” and at the same time “a retardation of capital investment” – because in the cartelized sector production is “limited”, while in the other sector the reduction of the rate of profit “frightens investors” – and, finally, “this contradiction demands its solution, and it finds it in the export of capital” (ibid., pp. 257-8). (All Hilfering quotes from Guerrero, Diego. “Competition and monopoly in globalized capitalism” https://marxismocritico.files.wordpress.com/2011/11/competencia_y_monopolio_en_el_capitalismo_globalizado.pdf . February 2007).
Numerous theorizations on monopoly capitalism, Stalinist, post-Stalinist and of the so-called “New Left”, as well as anti-imperialist national-popular, draw from such Leninist sources and from antecedents ranging from Ricardo to Hilferding.
Marx on competition
For Marx
· “… competition is nothing other than the internal nature of capital, its essential determination, which presents itself and realizes itself as the reciprocal action of the various capitals among themselves, the internal tendency as external necessity. Capital exists and can only exist as many capitals; consequently, its self-determination presents itself as their reciprocal action upon each other.” (Grundrisse).
Marx devoted a chapter of the third volume of “Capital”, volume X, to the “Levelling of the general rate of profit by competition. Market prices and market values. Profitplus.”
The law of value is essential to his approach, and Marx states:
· “What competition accomplishes, at least in one sphere, is the establishment of a uniform market value and market price out of the various individual values of commodities. But only the competition of capitals in the various spheres fixes the price of production, which levels the rates of profit between the different spheres. For the latter a higher development of the capitalist mode of production is required than for the former.”
· “Consequently, if in absolutely no given case do supply and demand agree, their inequalities follow one another in such a way that the result of the deviation in one direction is to cause a deviation in the opposite direction that, if the whole is considered over a longer or shorter period, supply and demand permanently coincide, but only as an average of the elapsed movement, and only as a constant movement of their contradiction. In this way, the market prices that diverge from the market values, considered according to their average number, level out to become market values, by cancelling out the deviations of the latter as differences in more or less. And this average number is by no means of merely theoretical importance, but of practical importance for capital, the investment of which is calculated according to the oscillations and compensations in a more or less determinate lapse of time. Thus, the relation between supply and demand only explains, on the one hand, the divergences of market prices from market values, and on the other the tendency to the cancellation of this divergence, i.e. to the cancellation of the effect of the relation between supply and demand. (The exceptions of commodities having prices without having value are not to be considered here).”
· “… for a commodity to be sold at its market value, i.e. in relation to the socially necessary labor contained in it, the overall quantity of social labor employed for the overall mass of that type of commodity must correspond to the quantity of social needs, i.e. to the solvent social needs. Competition, the oscillations of market prices corresponding to the oscillations of the relation between supply and demand, constantly try to reduce to that measure the overall quantity of labor employed for each type of commodity.”
· “The sector which for the time being is the weakest in competition is at the same time that in which the individual acts independently of the mass of his competitors, and often in direct opposition to them, whereby precisely the dependence of one on the other becomes perceptible, while the strongest sector always confronts the opposing side more or less as a coherent unit. If for this particular class of commodity, the demand is greater than the supply, one buyer will offer more than the other within certain limits, thus making the commodity more expensive for all above the market value, while on the other side the sellers jointly try to sell at a high market price. If, on the other hand, the supply is greater than the demand, one will begin to dispose of the commodity at a lower price, and the others will have to follow him, while the buyers will act together to bring the market price as far below the market value as possible. The common side is of interest to everyone only to the extent that he gains more by being united with it than against it. And the communion ceases as soon as that side becomes, as such, the weaker, and in which each individual tries to sneak as best he can by his own resources. Moreover, if anyone produces more cheaply and can further debase the price, appropriate a larger volume of the market by selling below the current market price or market value, he does so, and thus begins the action which gradually compels the others to introduce the cheaper mode of production, which reduces to a new lesser extent the socially necessary labor. When one side has supremacy, all those who belong to it win; everything happens as if they had to impose a common monopoly. If one side is the weaker, each one will be able to seek, for his own part, the way to be the strongest, (for example, the one who works with lower production costs), or at least to get off as well as possible, and in this case he does not give a damn about his neighbor, although his own action affects not only himself, but also all his confreres.”
· “The constant leveling of the constant inequalities is verified with so much greater rapidity,
1) the more mobile capital is, that is to say, the easier it is to transfer it from one sphere and from one place to another;
2) the more rapidly labor power can be transferred from one sphere to another and from one local point of production to another.
Point 1) supposes total freedom of trade within society and the elimination of all monopolies except the natural one, i.e. that which arises from the capitalist mode of production itself. It also presupposes the development of the credit system, which concentrates the inorganic mass of social capital available to individual capitalists, and finally, the subordination of the various spheres of production to the capitalists. The latter is already understood in the assumption, when we took for granted that it is a question of the transformation of values into prices of production for all the spheres of production exploited in a capitalist manner; but this very leveling runs up against great obstacles, when numerous and massive spheres of production that are not exploited in the capitalist manner (for example agriculture exploited by small peasants) are interpolated between the capitalist enterprises and are concatenated with them. Finally, a high density of population. Point 2) presupposes the repeal of all laws preventing workers from moving from one sphere of production to another or from one local seat of production to another. The indifference of the worker with respect to the content of his work. The greatest possible reduction of labor in all spheres of production to simple labor. Disappearance of all professional prejudices among the workers. Finally, and principally, submission of the worker to the capitalist mode of production. Further developments on this point belong to the specialized investigation of competition.”
· “It followed from our development that the market value (and all that has been said in this respect applies, with the necessary limitations, to the price of production) includes a surplus profit of those who produce under the best conditions in each particular sphere of production. Except in cases of crisis and overproduction, this applies to all market prices, however much they may diverge from market values or market prices of production. For the market price includes the fact that the same price is paid for commodities of the same kind, even if these have been produced under very different individual conditions, so that they may have very different cost prices. (We are not speaking here of surplus profits, which are the result of monopolies in the usual sense, artificial or natural). But in addition, a surplus profit can also arise when certain spheres of production are in a position to avoid the transformation of their market values into prices of production, and consequently the reduction of their profits to the average profit. In the section on land rent, we shall have to consider the further configuration of these two forms of surplus-profit.” (Marx, Karl. “Capital”. T III. Ch. X)
· “Devalorization constitutes an element of the valorization process, which is already implicit in the fact that the product of the process in its direct form is not value but must again enter into circulation in order to be realized as such …. In the process of production itself its valorization only appeared totally dependent on its relation as objectified labor to living labor. … But now, as a product, as a commodity, it presents itself as dependent on circulation.” (“Grundrisse”, notebook IV, 1858).
· “We have hitherto seen how, through the process of valorization capital.
1) has retained its value through exchange with living labor;
2) it has increased, creating surplus-value. As a result of this unity of the process of production and the process of valorization, the product of the process now appears, that is to say, capital itself emerges, as a product, from the process of which it was supposed to be the product; as a product which is value; or value itself appears as a product…. This value as such is money, and in order to be put as money it must first be realized (realisieren) in exchange as such” … “We arrive at the third aspect of the process, in which capital as such is placed.
3) Observing attentively the process of valorization of capital presents itself at the same time as its process of devalorization” … “A general and sudden growth of the productive forces would devalue relatively all existing values, objectified by labor at a lower stage of the productive forces, and would consequently annihilate existing capital, as well as existing labor capacity” …. “If this process fails, and the possibility (Möglichkeit) of such failure is given in each case by the simple separation (Trennung), [of each stage], the capitalist’s money will have been transformed into a worthless commodity (wertloses)” (id). … That is, in the process of capital (from money to commodity and the return to money) there are many moments where “failure” is possible.”
· “Whether this [devalorization] happens or not, in any case devalorization constitutes a moment in the process of valorization…. If through the process of production capital is reproduced as value and new value, at the same time it is put as non-value (Nichtwert), as something that is not valorized as long as it does not enter into exchange [since] the new value can only be realized in sale”
· “A separate problem is that of how, in production founded on capital, these contradictions are assumptively (aufgehoben) and constantly eliminated, but also constantly reproduced…. The important thing is, for the time being [methodically], to prove the existence of such contradictions. All the contradictions of circulation revive in a new form” … “the production of a constantly enlarged sphere of circulation The tendency to create the world market is given directly in the very idea of capital. Every limit is presented to it as a barrier to be overcome”
· “The whole controversy as to whether overproduction is possible and necessary from the point of view of capital, revolves around whether the process of valorization of capital in production directly puts its valorization into circulation, or whether its valorization put into the process of production is its real valorization” … “There is overproduction or, what is the same, production [when] it [is] not transformable into money, not transformable into value, production that is not confirmed in circulation” … “capital has the essential tendency to generate excessively surplus labor, surplusproductivity, surplus consumption (Surplusarbeit, Surplusproduktivität Surpluskonsum)” … “always destroys the already established equilibrium of a “proportionate production” (which equals supply to demand). That is to say, by the ever-renewed violence of putting more surplus value is “competition that internal tendency of capital [which] presents itself as coercion to which it is subjected by the capital of others” … “it is the inner nature of capital, its essential determination … [to] continually set up and eliminate proportionate production” … “hence the exploration of the whole of nature, to discover new useful properties of things; universal exchange of the products of all climates and foreign countries; new artificial elaborations of natural objects to give them new values of use hence the development to the utmost of the natural sciences; likewise the discovery, creation, and satisfaction of new needs arising from society itself; the cultivation of all the properties of social man … Creation of new branches of production, that is to say, of qualitatively new leisure … as labor endowed with new use value … as support of this system, science as well as all physical and spiritual properties … are presented … Capital thus creates bourgeois society … For the first time nature becomes purely an object for man, a purely useful thing, it ceases to be recognized as a power for itself … Capital, in accordance with this tendency of his, also passes over national barriers and its prejudices … It operates destructively against all this; it is constantly revolutionary.”…. “Capital only puts necessary labor to the extent that and only as surplus labor and insofar as surplus labor is realizable as surplus-value … It places surplus labor as the condition of necessary labor, and surplus-value as the limit of objectified labor.” … “Relative surplus-value grows in a much smaller proportion than productive force, and precisely this proportion decreases all the more, the greater has been the previous increase of productive force. But the mass of the products grows in an analogous proportion … [and with it] the difficulties of realizing the labor-time contained in them increase, since the demand for consumption increases”….. “capital has a tendency to increase the productive forces inordinately, it limits, it makes unilateral the main productive force, the human being himself” (id)
· “[Capital] leads continually, on the one hand, to its own devaluation; on the other, to restrain the productive forces and labor objectified in values” (id) Thus, for example, in the case of overproduction, “the sudden recall of all those necessary elements of production founded on capital, [is] consequently the general devalorization as a consequence of forgetting them. With this is posed at the same time to capital the task of recommencing its attempt from a higher level of development of the productive forces, [i.e.] with an ever-greater collapse as capital”
· “In a crisis – in a general depreciation of prices – to a certain extent there occurs, at the same time, a general devaluation or annihilation of capital … The annihilation of value and capital which takes place in a crisis coincides with – or is equivalent to – a general growth of the productive forces, which does not take place through a real increase in the productive force of labor (it is not necessary here to analyze to what extent this increase occurs as a consequence of the crises), but through the decrease in the effective value of raw materials, machines, labor capacity…. The other aspect of the crisis is resolved in a real decrease of production, of living labor, in order to restore the correct relation between necessary labor and surplus labor, on which everything is ultimately based” (id)
· “The struggle of competition is waged through the cheapening of commodities. The cheapness of these depends, ceteris paribus, on the productivity of labor, but this, at the same time, on the scale of production.” (“Capital”, volume III)
For this reason, in capitalism the price war plays a central role. In search of extraordinary surplus value, the capitalists introduce technological change, in order to increase productivity.
· “The increase of social capital is carried out through the increase of many individual capitals. Assuming that all other circumstances remain unchanged, the individual capitals – and with them the concentration of the means of production – grow in the proportion in which they constitute aliquots of the overall social capital. At the same time, from the original capitals branches are detached which function as new autonomous capitals (…) with the accumulation of capital the number of capitalists grows to a greater or lesser extent”. (“Capital”, volume III)
As for the formation of the general rate of profit:
· “In general, in all capitalist production the general law imposes itself as the dominant tendency only in a very intricate and approximate manner and, as an average of perpetual oscillations that can never be immobilized” (id)
All this we have been able to verify.
Source
Based on excerpts from the book: “Teorías del derrumbe del capitlismo . Ilusiones de derrumbe y derrumbe de ilusiones”. Anibal & materia https://edicionesinterrev.wordpress.com/2020/07/15/teorias-del-derrumbe-del-capitalismo-ilusiones-de-derrumbe-y-derrumbe-de-ilusiones-anibal-materia/
Notes
[1] Lenin, Imperialism, the Highest Stage of Capitalism, Ch. III https://www.marxists.org/archive/lenin/works/1916/imp-hsc/ch03.htm
[2] Lenin, Imperialism, the Highest Stage of Capitalism, Ch. III
[3] See for Lenins political reasons and implications: “The inter-imperialist war in Ukraine. From Luxemburg, Pannekoek, Gorter and Lenin to “Council-Communism’.” (1-5-2022) https://leftdis.wordpress.com/2022/05/01/the-inter-imperialist-war-in-ukraine
[4] Lenin, Ibidem, Ch. VII https://www.marxists.org/archive/lenin/works/1916/imp-hsc/ch07.htm
[5] Collected in: “Dónde nos encontramos en la historia del capitalismo. Hacia la decadencia del capitalismo, pero aún no en ella”. (page 25)
https://edicionesinterrev.wordpress.com/2018/09/11/231/. More in “Sobre el programa socialdemócrata de Erfurt. Textos de Karl Kautsky y de F. Engels” https://inter-rev.foroactivo.com/t4222-sobre-el-programa-socialdemocrata-de-erfurt-textos-de-karl-kautsky-y-de-f-engels
[6] English version, probably Ch. II, Banks and their new role
Left wing communism 
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