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On Imperialism and World EconomyN.I. Bukharin
Part 2 - World Economy and the Process of Nationalization of Capital
The Inner Structure of "National Economics" and the Tariff Policy1. "NATIONAL ECONOMIES" AS INTERSECTIONS OF WORLD ECONOMIC RELATIONS. 2. GROWTH OF MONOPOLY ORGANISATIONS. CARTELS AND TRUSTS. 3. VERTICAL CONCENTRATION. COMBINED ENTERPRISES. 4. ROLE OF THE BANKS. TRANSFORMATION OF CAPITAL INTO FINANCE CAPITAL. 5. BANKS AND VERTICAL CONCENTRATION. 6. STATE AND COMMUNAL ENTERPRISES. 7. THE SYSTEM AS A WHOLE. 8. THE TARIFF POLICY OF FINANCE CAPITAL, AND CAPITALIST EXPANSION.
World economy, as we have seen above, represents a complex network of economic connections of the most diverse nature; the basis of this are production relations on a world scale. Economic connections uniting a great number of individual economies are found to become more numerous and more frequent as we proceed, within the framework of world economy, to analyse "national" economies, i.e., economic connections existing within the boundaries of individual states. There is nothing mysterious about this; we must not attribute that fact to an alleged creative role of the "state principle" that is supposed to create from within itself special forms of national economic existence; neither is there a predestined harmony between society and state. The matter has a much simpler explanation. The fact is that the very foundation of modern states as definite political entities was caused by economic needs and requirements. The state grew on the economic foundation; it was only an expression of economic connections; state ties appeared only as an expression of economic ties. Like all living forms, "national economy" was, and is, engaged in a continuous process of internal regeneration; molecular movements going on parallel with the growth of productive forces, were continually changing the position of individual "national" economic bodies in their relation to each other, i.e., they influenced the interrelations of the individual parts of the growing world economy. Our time produces highly significant relations.
The destruction, from top to bottom, of old, conservative, economic forms that was begun with the initial stages of capitalism, has triumphed all along the line. At the same time, however, this "organic" elimination of weak competitors inside the framework of "national economies" (the ruin of artisanship, the disappearance of intermediary forms, the growth of large‑scale production, etc.) is now being superseded by the "critical" period of a sharpening struggle among stupendous opponents on the world market. The causes of this phenomenon must be sought first of all in the internal changes that have taken place in the structure of "national capitalisms," causing a revolution in their mutual relations.
Those changes appear, first of all, as the formation and the unusually rapid spread of capitalist monopoly organisations: cartels, syndicates, trusts, bank syndicates.1)We have seen above how strong this process is in the international sphere. It is immeasurably greater within the framework of "national economies." As we shall see below, the "national" carteling of industry serves as one of the most potent factors making for the national interdependence of capital.
The process of the formation of capitalist monopolies is, logically and historically, a continuation of the process of concentration and centralisation of capital. Just as the free competition of artisans, arising over the bones of feudal monopoly, led to the accumulation of the means of productions in the hands of the class of capitalists as their monopoly possession, so free competition inside of the class of capitalists is being more and more limited by restrictions and by the formation of giant economies monopolising the entire "national" market. Such giant economies must by no means be considered "abnormal" or "artificial" phenomena springing up in consequence of state aid like tariffs, freight rates, premiums, subsidies, or governmental orders, etc. True, all these "causes" have materially accelerated the process of monopolisation, but they have never been, and are not, its prime condition. What is really a conditio sine qua nonis a certain degree of concentration of production. This is why, generally speaking, monopoly organisations are the strongest where productive forces are most developed. A particularly important part was played in this respect by joint stock companies, a form that has immensely facilitated the investment of capital in production and has created enterprises of hitherto unknown dimensions. It is therefore most natural that leadership in the cartel movement belongs to the two countries that have forged ahead with feverish rapidity to the first places in the world market, namely, the United States and Germany.
The United States represents a classic example of modern economic development, and it is here that the most centralised form of monopoly organisations, the "trusts," have become deeply rooted. The following table gives a clear idea of the tremendous economic power of the trusts‑of the largest trusts in particular‑as well as of their growth.
According to Moody, the growth of trusts between 1904 and 1908 is expressed in the figures in the table below.1904 1908
Groups of trusts No. of companies Value of Stocks and Bonds No. of companies Value of Stocks and BondsSeven Largest Industrial Trusts 1,524 2,662,752,100 1,638 2,708,438,754Smaller Industrial Trusts 3,426 4,055,039,433 5,038 8,243,175,000Trusts in process of Reorganisation 282 528,551,000 .... ....Total 5,232 7,246,342,533 6,676 10,951,613,754
Concession Enterprises 1,336 3,735,456,071 2,599 7,789,393,600Groups of largest Railroads 1,040 9,397,363,907 745 12,931,154,010Total 7,608 20,379,162,511 10,020 31,672,161,354 2)
According to Poor's Manual of Corporations and Poor's Manual of Railroads for 1910 the total equals 333 billion dollars.3) By 1910 the share of the trusts in "'national" production was already very large. They produced 50 per cent of the textiles, 54 per cent of the glassware, 60 per cent of the cotton and printed goods, 62 per gent of the foodstuffs, 72 per cent of the alcoholic beverages, 77 per cent of the metal products (exclusive of iron and steel), 81 per cent of the chemicals, 84 per cent of the iron and steel.4) Since then their share in the national production has grown considerably, for the process of concentration and centralisation of capital in the United States proceeds with magic rapidity.Only a few students of the most recent development of the finance organisation of large‑scale production and its commercial branches can have an idea of the gigantic concentration, and of its power over combined and differentiated large‑scale enterprises, which often include productive forces reaching beyond the boundaries of an individual national economy.
Within the framework of the present study it is impossible even to enumerate the chief trusts operating in the various countries. Let it be noted only that at the head of all of them are the two most colossal trusts, the Standard Oil Company and the United States Steel Corporation, respectively representing the two financial groups of Rockefeller and Morgan.
The movement of big capital in Germany proceeds along identical lines. By 1905 there were, according to official statistics, 385 cartels in the most diverse branches of production The well‑known theoretician and leader of the cartel movement in Germany, Dr. Tschierschky, estimates the number of cartels in Germany as between 550 and 600. The greatest among them are: the Rhine‑Westphalian Coal Syndicate (Rheinisch‑Westfälisches Kohlensyndikat) and the Steel Syndicate (Stahlwerksverband). According to Raffalovich, the former produced in 1909, in the Dortsmund region, 85 million tons of coal, whereas the production of all the "outsiders" amounted to 4,200,000 tons only (4.9 per cent). By January, 1913, the production of syndicate coal amounted to 92.6 per cent of the total production in the Ruhr region and 54 per cent of the total national production. By that time the steel syndicate had increased its production to 43‑44 per cent of the national production. The sugar refining trust, embracing 47 enterprises, produces a very large share of the total output (70 per cent of the sugar consumed in the country, and 80 per cent of the sugar exported abroad). The electric trust (an Interessengemeinschaft between two trusts: the Siemens‑Schuckert and the A‑E‑G) control 40 per cent of all the power produced.
The monopoly organisations in other countries are less formidable, but taken in absolute numbers, without comparison with the United States or Germany, the syndication process is considerable everywhere.
France numbers a considerable array of syndicates in the metallurgic, sugar, glass, paper, naphtha, chemical, textile, coal, etc., industries. Of particular importance are Le Comptoir de Longway which produces almost all the cast iron manufactured in France; the sugar syndicate, which dominates the market almost completely; the Société Gén6érale des glaces de St. Gobain, which also occupies an almost absolute monopoly situation, etc; a series of agricultural syndicates, close to which are the agricultural societies, must also be noted, as well as the large combinations in the transportation industry, namely, the three steamship companies (Compagnie Générale Transatlantique, Compagnie des Messageries Maritimes, and Compagnie des Chargeurs Réunis), which embrace 41.25 per cent of the entire merchant marine of France.
In England, where, despite the great concentration of inindustry, the monopoly movement for a long while remained very weak due to a number of reasons, the trustification of industry ("amalgamations," "associations," and "investment trusts") has made tremendous strides in the very last few years. Old peculiarities begin to recede, to become a thing of the past, both as regards the labour movement in England and as regards the traditional English free trade policy (as we shall see below, free competition, which is only another name for free trade, is being relegated more and more to the background in the realm of economic foreign policy). Only ignorance can at present refer to England as a representative of an entirely different economic type. Here are a few cases that may serve as an example: the Association of Portland Cement Manufacturers, producing 89 per cent of the national output; the steel trusts; the alcohol trusts; the wallpaper trusts producing 98 per cent of all the wallpaper and other decorative materials; the cable trusts (the Cablemakers' Association, producing about 90 per cent of the national output); the salt trust (Salt Union, about 90 per cent); the Fine Cotton Spinners' and Doublers' Trust (practically controlling the entire production of England); the dyers' and bleachers' trust (Bleachers' Association and Dyers' Association, about 90 per cent); the Imperial Tobacco Company (about one‑half of the national production), etc.In Austria we find among the large cartels: the coal syndicate of Bohemia (with 90 per cent of all the production of Austria); the brick syndicate with a yearly output amounting to 400 million crowns (the production of outsiders amounting only to 40 million crowns); the iron syndicate; the naphtha syndicate (in Galicia, with 40 per cent of the national output); the sugar, glass, paper, textiles, and other syndicates.
Even in such a backward country as Russia, with such a paucity of capital, the number of higher type syndicates and trusts, according to Mr. Goldstein, exceeds 100. There are, besides, a number of local agreements of a less developed type. Let us note the largest. In the coal industry the Produgol Trust (producing 60 per cent of the coal dug in the Don area); 19 syndicates in the iron industry, among which the most prominent are Prodameta (iron implements trusts, controlling SS‑93 per cent of national production), the Krovlia (sheet iron trust, with 60 per cent of the national output), and Prodvagon (railroad car trust, embracing 14 out of the 16 car construction plants); in the oil industry almost the entire production is concentrated in the hands of four companies, mutually interlocked; noteworthy are also the copper syndicate (90 per cent), the sugar syndicate (100 per cent), the textile manufacturers' agreements, the tobacco trust (57‑58 per cent), the match syndicate, etc.
The syndicates show a high degree of development in Belgium; but even such young countries as Japan have also entered the road of building capitalist monopolies. The old production forms of capitalism have thus undergone a radical change. According to F. Laur's figures out of 500 billion francs invested in the industrial enterprises of all the countries of the world, as 255 billions, i.e., almost one‑half, aye invested in production organised in cartels and trusts. (This capital is distributed in the various countries as follows: United States, 200 billion francs; Germany, 50 billion francs; France, 30 billion francs; Austria‑Hungary, 25 billion francs, etc.‑all these figures being estimated below the actual ones). This indicates a complete transformation of the old interrelation of forces inside every country, which could not fail to entail radical changes in the interrelation of the countries themselves.
The process, however, is not limited to individual branches of production. There is going on a continuous process of binding together the various branches of production, a process of transforming them into one single organisation. This expresses itself, first of all, in the form of combined enterprises, i.e., enterprises combining the production of raw materials and manufactured goods, the production of manufactured goods with that of unfinished products, etc., which process can and does absorb the most diverse branches of production, since under the prevailing division of labour in our times every branch depends upon the other to a larger or lesser degree, directly or indirectly. For instance, when a trust produces outside of its main product also a by‑product, it shows a tendency to monopolise this latter branch of production, which in turn serves as a stimulus to monopolising the production of goods used as substitutes for the by‑product; then comes the tendency to monopolise the production of raw materials used for the production of the substitute, and so on and so forth. Thus combinations are created which, at first glance, seem astounding, like iron and cement, oil and glucose, etc. This vertical concentration and centralisation of production, in contradistinction to the horizontal centralisation which is going on within one branch of production, signifies, on the one hand, a diminution of the social division of labour, since it combines in one enterprise the labour that was previously divided among several enterprises; on the other hand, it stimulates the division of labour inside of the new production unit. The entire process, taken on a social scale, tends to turn the entire "national" economy into a single combined enterprise with an organisation connection between all the branches of production. The same process is going on with great rapidity in another way: banking capital penetrates industry, and capital turns into finance capital.We have seen in the preceding chapters what tremendous significance is attached to participation in and financing of industrial enterprises. The latter is one of the functions of modern banks.An increasingly large section of industrial capital does not belong to the industrialists who apply it. The right to manipulate the capital is obtained by them only through the bank which, in relaiton to them, appears as the owner of that capital. On the other hand, the bank is compelled to place an ever growing part of its capital in industry. In this way the bank becomes to an ever increasing degree an industrial capitalist. Bank capital, i.e., capital in money form, which has thus been in reality transformed into industrial capital, I call finance capital.
Thus by means of various forms of credit, by owning stocks and bonds, and by directly promoting enterprises, banking capital appears in the role of an organiser of industry. This organisation of the combined production of a whole country is the stronger, the greater; on the one hand, the concentration of industry, on the other, the concentration of banking. The latter has of late assumed colossal proportions. Here are a few examples. In Germany an actual monopoly of banking is in the hands of six banks: the Deutsche Bank, the Diskontogesellschaft, the Darmstädter Bank, the Dresdner Bank, the Berliner Handelsgesellschaft, and the Schaffhausenscher Bankverein; the capital of those banks amounted in 1910 to 1,122.6 million marks. The growth of the power of those banks may be seen from the growth of the number of their institutions inside of Germany (counting the main banks and their branches, deposit banks and currency exchange offices, also their "participation" in the German stock company banks): in 1895, 42; in 1896, 48; in 1900, So; in 1902, 127; in 1905, 194; in 1911, 450. Within 16 years the number of those institutions grew eleven times.In the United States there are only two banks of such importance: The National City Bank (the Rockefeller firm) and the National Bank of Commerce (the Morgan firm). Those two banks hold sway over countless industrial undertakings and banks, intertwined in all sorts of ways. "The size of the bank operations of the Rockefeller and Morgan groups may be approximately judged by the fact that, in 1908, the first group counted among its clients, and held reserves of, 3,350, and the latter of 2,757, national, state and other banks." No new trust can be founded without the aid of these banks, they being a "monopoly of monopoly making.)
Corresponding to this unique economic tie between the various production branches and the banks, is a special form of higher management of both. As a matter of fact, the representatives of the industrialists manage the banks, and vice versa. Jeidels is authority for the statement that, in 1903, the six above mentioned German banks held 751 seats in the supervising councils of the industrial stock companies. Conversely, there were (in December, 1910) 51 representatives of industry in the supervising councils of the banks.
As to America, the following fact is highly characteristic. From a list submitted to the Senate during the debate over the bill for the improvement of the banking business (La Follette's commission in 1908), it was evident that 89 persons held over 2,000 directors' posts in various industrial, transportation, and other companies, all of which companies were directly or indirectly controlled by Morgan and Rockefeller.
Mention must be made here also of the important part played by state and communal enterprises, which enter into the general system of "national economy." Among state enterprises we find, first of all, mining (in Germany, e.g., out of 309 coal mines with an output of 149 million tons, 27 mines with an output of 20.5 million tons belonged to the state in agog; the total value of state production amounted to 235 million marks; salt mines and others also belong to this category; the gross income from all state enterprises of Germany in 1910 amounted to 349 million marks, while the net income was 25 million marks); next to mining are state railroads (only in England, and only prior to the war, were the railroads exclusively in the hands of private owners); then the post office, the telegraph, etc., also forestry. Among communal enterprises of great economical importance are mainly the water system, the gas system, and the electric constructions, with all their ramifications. The powerful state banks also form part of this system. The interrelation between those "public" enterprises and the enterprises of a purely private character assumes various forms; the economic connections, in general, are numerous and variegated, and credit is not the least among them. Very close relations arise on the basis of the so‑called mixed system (gemischte Unternehmungen) where a certain enterprise is composed of both "public" and private elements (participation of large‑scale, usually monopolistic, firms)‑a phenomenon not infrequent in the realm of communal economy. The example of the German Empire Bank (Reichsbank) is of particular interest. This bank, whose part in the economic life of Germany is tremendous, appears so closely connected with "private economy" that there is an unsettled dispute going on as to whether it is a stock company or a state institution, whether it is subject to the laws governing private or public undertakings.
All parts of this considerably organised system, cartels, banks, state enterprises, are in the process of growing together; the process is becoming ever faster with the growth of capitalist concentration; the formation of cartels and combines creates forthwith a community of interest among the financing banks; on the other hand, banks are interested in checking competition between enterprises financed by them; similarly, every understanding between the banks helps to tie together the industrial groups; state enterprises also become ever more dependent upon large‑scale financial‑industrial formations, and vice versa. Thus various spheres of the concentration and organisation process stimulate each other, creating a very strong tendency towards transforming the entire national economy into one gigantic combined enterprise under the tutelage of the financial kings and the capitalist state, an enterprise which monopolises the national market and forms the prerequisite for organised production on a higher noncapitalist level.
It follows that world capitalism, the world system of production, assumes in our times the following aspect: a few consolidated, organised economic bodies ("the great civilised powers") on the one hand, and a periphery of undeveloped countries with a semi‑agrarian or agrarian system on the other. The organisation process (which, parenthetically speaking, is by no means the aim or the motive power of the capitalist gentlemen, as their ideologists assert, but is the objective result of their seeking to obtain a maximum of profit) tends to overstep the "national" boundaries. But it finds very substantial obstacles on this road. First, it is much easier to overcome competition on a "national" scale than on a world scale (international agreements usually arise on the basis of already existing "national" monopolies); second, the existing differences of economic structure and consequently of production‑costs make agreements disadvantageous for the advanced "national" groups; third, the ties of unity with the state and its boundaries are in themselves an ever growing monopoly which guarantees additional profits. Among the factors of the latter category, let us first of all turn our attention to the tariff policy.
The character of the tariff policy has undergone a total transformation. Old‑time customs duties aimed at defence; presentday customs duties aim at aggression; old‑time tariffs were secured for commodities whose production was so little developed at home that they could not stand competition on the world market; in our days "protection" is accorded to those branches of production which are most capable of withstanding competition.
Friedrich List, that apostle of protectionism, in his National System of Political Economy, dealt with educational customs duties, looking upon them as upon a temporary measure.
We shall speak here [he says] of tariff legislation only as a means to educate industry.... Protectionist measures can be justified only as a means of encouraging and protecting the home manufacturing power, and only among those nations which are...called to secure for themselves a position equal to that of the foremost agricultural, manufacturing, and trading nations, the great maritime and continental powers.
Nothing of the kind exists at present despite the assertions of some bourgeois scholars. Present‑day "high protectionism" is nothing but the economic policy of the cartels as formulated by the state; present‑day customs duties are cartel duties, i.e., they are a means in the hands of the cartels for obtaining additional profit, for it is quite obvious that if competition is eliminated or reduced to a minimum in the home market, the "producers" can raise the prices inside the home market, adding an increment equal to the tariff. This additional profit makes it possible to sell commodities on the world market below the cost of production, to practice dumping, which is the peculiar export policy of the cartels. This explains the apparently strange phenomenon that present‑day tariffs "protect" also export industries. Already Engels saw clearly the connection existing between the growth of cartels on the one hand and modern tariffs with their specific characteristics on the other.
The fact [he says] that the rapidly and enormously growing productive forces grow beyond the control of the laws of the capitalist mode of exchanging commodities, inside of which they are supposed to move, impresses itself nowadays more and more even on the minds of the capitalists. This is shown especially by two symptoms. First, by the new and general mania for a protective tariff, which differs from the old protectionism especially by the fact that now the articles which are capable of being exported are the best protected. In the second place, it is shown by the trusts of manufacturers of whole spheres of production.
It was in our time that a gigantic stride forward was made in this direction. Consolidated industry, led by the heavy industries, appears as the most ardent advocate of a high tariff system, for the higher the tariff the greater is the additional profit, the easier is it to conquer new markets, and the greater is the general volume of profits obtained. The limit is reached only when the demand shrinks to such an extent that the loss is no longer compensated by the high prices. Inside of these limitations, however, the tendency to higher tariffs is an undisputed fact.
When we now survey world economy as a whole, there appears before our eyes the following picture. Cartel tariffs and the dumping system practiced by the foremost countries provoke resistance on the part of the backward countries which raise their defencive tariffs; on the other hand the raising of tariffs by the backward countries serves as a further stimulus to raise the cartel duties that make dumping easier. Needless to say that the same action and counteraction take place both among the foremost countries in relation to each other and among backward countries in their mutual relations. This endless screw, perpetually applied by the growth of cartel organisations, has called forth the "tariff mania" of which Engels spoke, and which has grown even more pronounced in our days.
From the end of the seventies of the last century, there can be observed in all countries distinguished by modern development a turn from free trade to a tariff system. The latter, rapidly evolving from a system supposed to "educate" industry into a system safeguarding the cartels, finally becomes the high protectionism of our days.
In Germany this turn takes a definite form with the introduction of the tariff of 1879. Since then we see in Germany a continuous growth of tariff duties (compare, for instance, the tariff of 1902 with the later tariffs); in Austria‑Hungary, the turn dates back to 1878; the subsequent tariffs reveal a similar rising tendency (particularly the tariffs of 1882, 1887, 1906, etc.); in France, a decisive turn towards protectionism was taken by the general tariff of 1881 which raised the duties on industrial imports 24 per cent; mention must be made also of the high protectionist tariff of 1892 (with duties on manufactured goods amounting to 69 per cent ad valorem, and on agricultural goods, 25 per cent) and its "revision" in 1910. In Spain, the tariff of 1877 already contains high duties on industrial goods; particular attention is due the tariff of 1906 with its general increase of duties. In the United States, that classical country of trusts and of the modern tariff policy, the characteristic features of protectionism are most salient. An increase of import duties begins in 1883 in connection with the growth of trusts, and reaches 40 per cent of the value of the imported goods; in 1873‑74, the general duties were 38 per cent; in 1887, 47.11 per cent; in 1880 (the McKinley Bill) we have a further increase of the tariff (91 per cent on woolen goods, and even as much as 150 per cent ad valorem on fine grades of woolens, 40‑80 per cent on metals, etc.);there follow later the Dingley Bill (1897), and the Payne Tariff of 1909 which is one of the striking expressions of high protectionist tendencies. England, that citadel of free trade, is in a period of transition; there is an increasing number of ever sharper and more persistent voices demanding fair trade instead of free trade, i.e., the introduction of a protectionist system (see, for instance, the activities of Chamberlain, the Imperial Federation League, and the United Empire League, etc.). A partial realisation of these tendencies is the system of preference tariffs between the mother country and the colonies. Beginning with 1898, Canada exchanged tariff privileges with England; in 1900, and again in 1906, those tariffs were developed and "improved"; at present, the privileges amount to 10‑50 per cent compared with foreign countries. In 1903, the example of Canada was emulated by the South African colonies (6.25‑25 per cent); in 1903, and again in 1907, New Zealand followed suit; in 1907, the Union of Australian Colonies joined (5‑10 per cent). At the so‑called Imperial Conferences (i.e., conferences of representatives of the colonies and of the British Government) the note of protectionism becomes more clearly audible each time. "Only a second‑rate thinker can be in favour of free trade at the present time and still be optimistic in relation to England," quoth with limitless bourgeois conceit the well‑known economist, Aschli, thus expressing the sentiment of the English ruling classes.
It is well known that the war has brought out all tendencies in the sharpest form; the tariff policy has become a fact. We must also mention the unusually high tariffs prevailing in Russia.
The new policy [says Mr. Kurchinsky] has its origin in the tariff of 1877. 'Since then the country is passing to higher and higher tariffs. In 1877 an increase was effected by levying the duties in gold currency, which at once raised them 40 per cent. The subsequent years brought further increases in duties levied upon a great number of commodities, thus developing the protectionist principles more and more; in 189o all tariffs were raised 20 per cent. The movement culminates in the extremely protectionist tariff of 1891, in which the duties levied upon many commodities were increased 100‑300 per cent and even moreabove the duties of 1868" [italics ours. N.B.]. "The tariff now in effect was promulgated in 1903 and became effective February 16, 1906. According to this tariff, many duties were still further increased [italics ours. N.B.].
There is not the slightest doubt that we have before us a general tendency towards protecting the "national economies" by a high tariff wall. The fact that in individual cases there may be a lowering of the tariffs or mutual concessions stipulated in treaties, does not alter the general rule; all such facts are only exceptions, temporary halts, an armistice in the everlasting war. The general tendency is in no way disturbed by such facts, since the tendency is not a simple empirical fact, not an accidental phenomenon, not something irrelevant as regards modern relations; on the contrary, the very structure of modern capitalism gives birth to this form of economic policy; together with that structure it comes into being, and together with it it will fall.
The important economic part now played by tariffs brings about also the aggressive character of the policy of "modern capitalism." Indeed, it is due to the tariffs that monopoly organisations gather additional profit, to be utilised also as export premiums in the struggle for markets (dumping). This additional profit may grow, generally speaking, in two ways: first, through more intensive selling inside the limits of the existing state territory; second, through the growth of the latter. As regards the former, there is an obstacle here in the shape of market capacity; one cannot imagine that the big bourgeoisie would begin to increase the share of the working class, in order thus to drag itself out of the mire by the hair. Cunning businessmen that they are, they prefer to follow the other way, the way of enlarging economic territory. The greater the economic territory, other conditions being equal, the greater will be the additional profit, the easier it will be to pay export premiums and to practice dumping, the larger consequently will be the foreign sales, and the higher the rate of profit. Let us imagine that the volume of commodities prepared for export is unusually large compared with the volume that can be absorbed in the home market. Under such conditions it is impossible to compensate the losses sustained on the foreign market by the monopoly prices at home: dumping then proves senseless. On the other hand, where there is a "correct" ratio between internal sales and exports, a maximum of profits can be squeezed out. This is possible only when the internal market has a certain capacity, which, assuming demand to be equal, is determined by the size of the territory included within the tariff walls, i.e., the state boundaries. While in former times, in the era of free competition, it was sufficient simply to penetrate the foreign market with commodities, and such economic occupation satisfied the capitalists of the exporting country, in our era the interests of finance capital demand, first of all, an expansion of the home state territory, i.e., it dictates a policy of conquest, a pressure of military force, a line of "imperialist annexation." It is perfectly clear, however, that wherever the old liberal system of free trade has been preserved to a considerable degree in consequence of a special combination of historic conditions, and where on the other hand the state territory is sufficiently large, there we have, together with the policy of conquest, a tendency towards combining the disunited parts of the state organism, towards fusing the colonies with the metropolis, towards forming a vast single empire with a general tariff wall. Such is the policy of English imperialism. There is nothing behind the discussions about the creation of a middle European tariff alliance but the wish to create a vast economic territory as a monopoly system allowing more successful competition on the external market. In reality this is a product of the interests and the ideology of finance capitalism which, penetrating into all the pores of world economy, creates at the same time an unusually strong tendency towards secluding the national organisms, towards economic autarchy as a means of strengthening the monopoly situation of the respective capitalist groups. Thus, together with the internationalisation of economy and the internationalisation of capital, there is going on a process of "national" intertwining of capital, a process of "nationalising" capital, fraught with the greatest consequences.
This process of "nationalisation" of capital, i.e., the creation of homogeneous economic organisms included within state boundaries and sharply opposing each other, is also stimulated by changes taking place in the three large spheres of world economy: the sphere of markets for the sale of commodities, the sphere of markets for raw materials, and the sphere of capital investment. From these three points of view we must analyse the changes that are taking place in the conditions of the reproduction of world capital.World Sales Markets and Changed Sales Conditions
Every "national" capitalism has always manifested a tendency to expand, to widen the scope of its power, to overstep the boundaries of the nation, the state. This follows from the very structure of capitalist society.
The conditions of direct exploitation and those of the realisation of surplus value are not identical. They are separated logically as well as by time and space. The first are only limited by the productive power of society, the last by the proportional relations of the various lines of production and by the consuming power of society. This last named power is not determined either by the absolute productive power nor by the absolute consuming power, but by the consuming power based on the antagonistic conditions of distribution, which reduce the consumption of the great mass of the population to a variable minimum within more or less narrow limits. The consuming power is furthermore restricted by a tendency to accumulate, the greed for an expansion of capital and a production of surplus value on an enlarged scale. This is the law of capitalist production....The market must, therefore, be continually extended....This internal contradiction seeks to balance itself by an expansion of the outlying fields of production.
This law of mass production, which is at the same time the law of mass overproduction, must not be understood to mean that the overstepping of "national state boundaries" is something like an absolute necessity; this necessity is created in the process of profit formation, and the amount of the profit serves as the regulating principle of the whole movement. The amount of the profit depends upon the mass of commodities and the amount of profit accruing to one commodity unit, which amount is equal to the selling price minus production cost. If we use for the volume of commodities the letter V, for the price of a commodity unit the letter P, and for the cost of production per unit of commodity the letter C, we find that the sum total of the profit is expressed by the formula V (P-C). The smaller the production cost, the lager will be the profits per unit of commodity, and, assuming the sales market to be stationary or growing, the larger will be the volume of profit. The cost of production, however, is the lower, the greater the volume of commodities brought into the market. Improved methods of production, expansion of productive forces, and consequently increase in the volume of goods produced, are factors decreasing the cost of production. This explains the selling of commodities abroad at low prices. Even if such sales yield no profits at all, even if the commodities are sold at production cost, the volume of profit is still increased, since thus the cost of production is made lower. (We do not speak here of sales made at a loss for "strategic purposes," i.e., for a rapid conquest of the market and for the annihilation of the competitors.) In the general formula V(P-C), the volume of production costs will not be that amount which corresponds to the volume of goods designated as V, but a much smaller amount corresponding to the formula V+E, where E is understood to be the amount of exported commodities. It is in this way that the movement of profits compels commodities to overstep the boundaries of state. The very same regulating principle of capitalism-rate of profitacts in still another way. We have in mind the formation of super-profit under the conditions of commodity exchange between countries having different economic structures.
Even in the epoch of commercial capital this process of the formation of additional profit is perfectly clear.
So long as merchants' capital [says Marx] promotes the exchange of products between undeveloped societies, commercial profit does not only assume the shape of outbargaining and cheating, but also arises largely from these methods. Leaving aside the fact that it exploits the difference in the prices of production of the various countries...those modes of production bring it about that merchants' capital appropriates to itself the overwhelming portion of the surplus product, either in its capacity as a mediator between societies, which are as yet largely engaged in the production of usevalue for whose economic organisation the sale of that portion of its product which is transferred to the circulation, or any sale of products at their value, is of minor importance; or, because under those former modes of production the principal owners of the surplus product, with whom the merchant has to deal, are the slave owner, the feudal landlord, the state...and they represent the wealth and luxury.
In these conditions "outbargaining" and "cheating" were able to play such an important part because the process of exchange was irregular, because it was not the necessary process of "metabolism" in a society with a world wide division of labour; on the contrary, it was a more or less accidental phenomenon. However, additional profit is obtained also at a time when the international exchange of commodities already becomes a regularly recurring moment in the reproduction of world capital. Marx gave a complete explanation of the economic nature of this super-profit in the following statements:
Capitals invested in foreign trade are in a position to yield a higher rate of profit, because, in the first place, they come in competition with commodities produced in other countries with lesser facilities of production, so that an advanced country is enabled to sell its goods above their value even when it sells them cheaper than the competing countries. To the extent that the labour of the advanced countries is here exploited as labour of a higher specific weight, the rate of profit rises, because labour which has not been paid as being of a higher quality is sold as such. The same condition may obtain in the relations with a certain country, into which commodities are exported or from which commodities are imported. This country may offer more materialised labour in goods than it receives, and yet it may receive in return commodities cheaper than it could produce them. In the same way a manufacturer, who exploits a new invention before it has become general, undersells his competitors and yet sells his commodities above their individual values, that is to say, he exploits the specifically higher productive power of the labour employed by him as surplus value. By this means he secures a surplus profit [italics ours. - N.B.] ; on the other hand, capitals invested in colonies, etc., may yield a higher rate of profit for the simple reason that the rate of profit is higher there on account of the backward development, and for the added reason that slaves, coolies, etc., permit a better exploitation of labour. We see no reason why these higher rates of profit realised by capitals invested in certain lines and sent home by them should not enter as elements into the average rate of profit and tend to keep it to that extent.
Marx, proceeding from the theory of labour value, gives here an explanation of super-profits. From this point of view, additional profit has its source in the difference between the social value of the goods (understanding under "society" world capitalism as a united whole) and their individual value (understanding under "individual" the "national economy"). Furthermore, Marx foresaw and explained cases where a certain fixation of additional profit goes on, namely when a certain territory is dominated by monopoly organisations-cases that are particularly important in our times.
It is thus obvious that not the impossibility of doing business at home, but the race for higher rates of profit is the motive power of world capitalism. Even present-day "capitalist plethora" is no absolute limit. A lower rate of profit drives commodities and capital further and further from their "home." This process is going on simultaneously in various sections of world economy. The capitalists of various "national economies" clash here as competitors; and the more vigorous the expansion of the productive forces of world capitalism, the more intensive the growth of foreign trade, the sharper is the competitive struggle. During the last decades quantitative changes of such magnitude have taken place in this realm that the very quality of the phenomenon has assumed a new form.
Those changes proceed, so to speak, from two ends. On the one hand, the process of mass production is becoming extremely accelerated, i.e., the volume of commodities seeking for a foreign market is increasing-a phenomenon highly characteristic of recent times; on the other hand, the free market, i.e., that section of it which has not been seized by the "great power" monopolies, becomes ever narrower. Moved by the requirements of home capital, the great powers very quickly subjugated the free territories; beginning from 1870-1880 the process of "territorial acquisitions" went on at a feverish tempo. For our purposes it is sufficient to give a brief account of the results of the "colonial policy" which has become a veritable mania of all modern capitalist states.
England, a country with a vast state territory, has, after 1870, succeeded in annexing a whole series of new territories: Baluchistan, Burma, Cyprus, British North Borneo, Weihai-Wei, the territories adjoining Hongkong in Asia; it increased the Straits Settlements; it took Koweit under its protectorate (1899) ; it acquired the Sinai peninsula, etc.; it annexed some islands in Australia, also the southeastern part of New Guinea, the major portion of the Solomon Islands, and the Tonga Islands. In Africa, where competition and seizures were going on with particular intensity, England acquired Egypt, the Egyptian part of Sudan with Uganda, British East Africa, British Somali, Zanzibar, and Pemba; in Southern Africa, the two Boer republics, Rhodesia, British Central Africa; in Western Africa, outside of increasing the former colonies, it occupied Nigeria. Such were the "successes" of England.
France acted no less "successfully."
Beginning with 1870 [we read in a work of a French imperialist] we witness an actual colonial regeneration. The Third Republic placed Annam under its protectorate, it conquered Tongking, it annexed Laos, it extended a French protectorate over Tunis and the Comoro Islands [near Madagascar - N.B.], it occupied Madagascar, it increased its possessions in Sahara, Sudan, Guinea, the Ivory Coast, Dagomea, the Somali coast, out of all proportions [démésurement], and it founded a new France extending from the Atlantic Ocean and Congo to Lake Chad.
By the end of the nineteenth century the area of the French colonies was nineteen times the area of France proper.
German imperialism appeared later in the arena, but it made haste to regain lost time. The beginning of Germany's colonial policy dates back to 1884. It conquered Southwestern Africa, Cameroon, Togoland, East Africa, it "acquired" New Guinea and a number of islands (Emperor Wilhelm's Land, "The Bismarck Archipelago," the Caroline Islands, the Marianas, etc.); in 1897 it seized Kiaochow, it made ready to grab sections of Turkey and Asia Minor-all this "evolution" being accomplished with feverish haste.
As to the Russian colonial policy, we wish to remind the readers of the conquest of Central Asia, of the Russian policy in Manchuria and Mongolia, and lately in Persia, the latter being accomplished with the aid of England (Colonel Liakhov is its hero). The same policies are pursued also by countries in other hemispheres, the most important of which are the United States and Japan. In consequence of this "division" of free lands, and with them, to a large extent, of free markets, world competition among the "national" capitalist groups was bound to become exceedingly sharpened. The present distribution of territories and populations is illustrated by the following table:Patents Granted Colonies "Home" Totals1876 1914 1914 1914
Area Pop. Area Pop. Area Pop. Area Pop.Britain 22.5 251.9 33.4 393.5 .3 46.5 33.8 440.0Russia 17.0 15.9 17.4 33.2 5.4 136.2 22.8 169.4France .9 6.0 10.6 55.5 .5 39.6 11.1 95.1Germany .... .... 2.9 12.3 .5 64.9 3.4 77.2U.S.A. .... .... .3 9.7 9.4 97.0 9.7 106.7Japan .... .... .3 19.2 .4 53.0 .7 72.2
Total 40.4 273.8 65.0 523.4 16.5 437.2 81.5 960.6
Colonies of other powers (Belgium, Holland, etc.) 9.9 45.3Semi-colonial countries (Persia, China, Turkey) 14.5 361.2Other countries 28.0 289.9Total Area and Population of the World 133.9 1657.0
Thus between 1876 and 1914 the great powers acquired about 25 million square kilometers of colonial lands, in area twice the size of Europe. All the world is divided among the "economies" of the great nations. This explains why competition is becoming unbelievably sharp, why the pressure of capitalist expansion on the remaining free lands increases in the same ratio as the chances for a grandiose free for all among the large capitalist powers.
The tariffs only tend to increase such chances. The tariffs are barriers that stand in the way of the import of commodities; they can be overcome in one way only: through pressure, through the use of force. Tariff wars are sometimes practiced, as a preliminary, i.e., rates are increased in order to extort concessions. Such tariff wars, for instance, were waged by Austria-Hungary against Roumania (1886-1890), Serbia (1906-1911), Montenegro (1908-1911); by Germany against Russia (1893-1894), Spain (1894-1899), and Canada (1903-1910); by France against Italy (1888-1892) and Switzerland (1893-1895) , etc. The quicker the free markets are "distributed," the quicker are they included within the tariff walls; and the more ferocious competition becomes, the sharper are the tariff clashes between great powers. Tariff wars, however, are only partial sorties, they are only a sort of testing the ground. In the long run the conflict is solved by the interrelation of "real forces," i.e., by the force of arms. Thus the race for sales markets inevitably creates conflicts between the "national groups of capital." The enormous increase in the productive forces, coupled with the shrinking to a minimum of free markets in recent times; the tariff policy of the powers, connected as it is with the rule of finance capital, and the mounting difficulties for realising commodity values-all this creates a situation where the last word belongs to military technique.
The contradictions of capitalist development, as analysed by Marx, become apparent. The growth of productive forces clashes with the antagonistic form of distribution and with the disproportion between the various parts of capitalist production-hence capital expansion; on the other hand, socialised labour clashes with the organisation of capital as private business, which expresses itself in competition between national capitalisms. Equilibrium and a harmonious development of all parts of the social mechanism are lacking; in recent times more so than at any other; hence terrific crises and precipitous changes.World Market for Raw Materials, and Change in the Conditions of Purchasing Materials
We have seen in the last chapter how recent developments in capitalism, making it more and more difficult to realise commodity values, force the ruling classes of the various "national" groups to embrace the policy of expansion. The reproduction process of capital is not limited, however, to the phase of sale alone. In the reproduction formula M-C...P...C'-M' only the latter part expresses the realisation of the price of the product (C'-M'). As a rule, only the difficulties inherent in the process C'-M', i.e., in the process of sale, are stressed. The race for sales markets, and the industrial crises in particular, have induced the economists to analyse the difficulties met by capital when passing through the phase C'-M'. Difficulties, however, may arise also in the first phase, namely, when money is exchanged for means of production (M-C). It is a fact that the recent development of capitalist relations creates ever growing difficulties also in this sphere of the reproduction of social capital.
It is well known that the operation M-C consists of two parts: M-L and M-MP, where L signifies labour power and MP signifies means of production, so that in its developed form the formula reads M-C(L-MP). We have to examine each part of the formula separately.In so far as the growth of productive forces has called forth changes in the structure of society and in the interrelation of class forces, it has expressed itself, among other things, in the fact that social antagonisms become exceedingly sharp, that the organised forces of class opponents face each other squarely. The state of apparent equilibrium here implies an extraordinary pressure of social forces upon one another. The tendency towards lowering the rate of profit calls forth the tendency to intensify labour on the one hand, to seek for cheap hands and a long labour day on the other. The latter, too, is achieved in the sphere of colonial policy.
The other side of the issue, however, is of still greater importance.
We have in mind the disproportion between the development of industry and the development of agriculture as a source of raw material for the manufacturing industry. The latter requires greater and greater volumes of raw materials, namely wood (paper industry, building trades, cabinet making, railroad construction, etc.), animal products (hides, wool, bristles, horsehair, furs, bones, intestines, animal fats of all sorts, meat as material for the manufacturing of foods, etc.), raw materials for the textile industry (cotton, flax, hemp, etc.), finally such commodities as rubber, which plays a colossal part in all phases of industrial life, etc. The development of agriculture, however, does not keep pace with the impetuous development of industry, hence, as a fundamental fact, the high prices which have become an international phenomenon of prime importance, particularly in the recent period of capitalist development, when the industrial process has become so rapid that even the production of agriculture on the other side of the ocean could not keep pace any longer with the demand of the foremost capitalist countries for agricultural products, and the fall of world prices was followed by their rapid rise. The table below gives some idea as to the rise of prices of different commodities.Within one decade (1903-1913) the jute price rose 128 per cent, that of cotton 13 per cent, that of cow hides 55 per cent, of calf hides 25 per cent, of bacon 31 per cent
Price in Rubles per Pood
Years Raw Jute on London Market Raw Cotton Salted Hides Russian Calf Hides American Bacon HAMBURG MARKET
1903 1.77 9.12 6.11 19.62 6.62 1904 1.76 9.57 6.49 20.93 5.57 1905 2.42 7.72 6.93 28.64 5.79 1906 3.04 8.96 7.90 28.82 6.31 1907 2.51 9.87 7.96 27.90 7.07 1908 1.88 8.47 6.52 28.65 7.01 1909 1.83 9.46 7.22 25.38 8.97 1910 1.98 11.72 8.35 27.33 9.52 1911 2.62 10.51 8.40 26.54 7.04 1912 2.86 9.65 8.57 25.50 8.17 1913 3.93 10.35 9.47 24.60 8.66 3)
It is true that under all circumstances, and even in a socialised society, the development of the productive forces would tend towards the production of means of production. (We have seen that in capitalist society this process assumes the form of a higher organic composition of capital.) But under normal conditions this would not mean a disproportion in the distribution of the productive forces of society. On the contrary, the course of development would be smooth and harmonious, the "demand" for raw materials growing as rapidly as their "supply." What matters here is not the relative growth of industry in general, but the disproportion in the growth of its various parts. On the other hand, this course of development must not be looked upon as the expression of an "absolute" and "natural" law, which hampers the development of agricultural products in the manner pictured by Malthus and by his numerous avowed and secret followers. The main obstacle here lies in a special social category - the monopoly of land ownership.
The mere legal property in land [says Marx in his chapter on absolute ground-rent] does not create any ground-rent for the landlord. But it gives him the power to withdraw his land from exploitation until the economic conditions permit him to utilise it in such a way that it will yield him a surplus whenever the land is used either for agriculture proper or for other productive purposes, such as buildings, etc. He cannot increase or decrease the absolute quantity of its field of employment, but he can do so with its marketable quantity. For this reason, as Fourier has already remarked, a characteristic fact in all civilised countries is that a comparatively considerable portion of the land always remains uncultivated.
Private property in land is then the barrier which does not permit any new investment of capital upon hitherto uncultivated or unrented land without levying a tax, in other words, without demanding a rent, although the land to be taken under new cultivation may belong to a class which does not produce any differential rent, [i.e., rent obtained in consequence of the difference in the quality of the pieces of land, etc. - N.B.] and which, were it not for the intervention of private property in land, might have been cultivated at a small increase in the market price, so that the regulating market price would have netted to the cultivator of this worst soil nothing but his price of production [i.e., production cost plus average profit - N.B.]
The difference between agriculture and manufacturing is this, that while the rise of prices for the products of the manufacturing industry ordinarily entails a shrinking of the demand, so that the demand curve changes rapidly in accordance with the fluctuation of prices, the demand in the sphere of distribution of agricultural products remains comparatively more stable. (One must not forget that the production of raw materials for the manufacturing industry is in a great number of cases a by-product of the production of foodstuffs, such as the production of hides, of intestines, partly of wool, etc., being connected with the meat packing industry.) This is why competition plays a substantially smaller part in agriculture, notwithstanding the fact that monopoly organisations in the strict sense of the word are very little developed there. The laws of mass production, of an accelerated accumulation of capital, etc., apply to agriculture much less than to industry.
Thus to the disproportion between the branches of production of capitalist economy in general, as emanating from the anarchical economic structure of capitalism and continuing to exist despite the processes of cartelisation, trustification, etc., there is added the specific and ever growing disproportion between industry and agriculture. It is not surprising that this latter disproportion has become most pronounced in recent times. We have noted above the intensive growth of productive forces in the last decade. The trans-oceanic countries, in the first place the United States, have developed their own industry, and consequently their own demand for an ever growing amount of agricultural products. The same took place in other agrarian countries. In Austria-Hungary, for instance, the import of breadstuffs, etc., outgrew their export in a very short time. The general rise of the productive forces of world capitalism in the last decade has so shifted and changed the interrelation between industrial and agricultural production that here, too, quantitative changes have reached a point beyond which qualitative changes begin. This is why the epoch of dearth, of a general rise in the prices of agricultural products everywhere, is a phenomenon of the most recent phase of capitalism The rise in the prices of raw materials in turn reveals itself directly in the rate of profit, for, other conditions being equal, the rate of profit rises and falls in inverse ratio to the fluctuations in the prices of raw material. Hence a growing tendency on the part of the capitalists of the individual "national economies" to widen their markets for raw materials. The same process, however, which caused the sales markets to shrink immensely, affected in like manner the markets for raw materials, since the markets for raw materials have been, and are, mainly the same countries that serve as a "foreign" market for the sale of manufactured goods, i.e., the countries of a lower development, including the colonies. The interests of the capitalists of the various great powers clash here as strongly as in the competition in the sphere of sales. There is nothing surprising in this since the process of the reproduction of social capital presupposes the importance not only of those changes that may take place in the last phase of the circulation chain, M-C...P...C'-M', i.e., in the phase of sale, but also of those that may take place in the phase M-L, i.e., in the phase of purchasing means of production. A capitalist "producer" is not only a vendor but also a buyer. He is not a vendor and a buyer pure and simple, but a capitalist vendor and a capitalist buyer; the acts of buying and selling are included here in the formula of capital circulation. They are parts of that formula. Hence it is perfectly obvious that Franz Oppenheimer's theory concerning the "peaceful character" of the buyers' competition and the hostile relations between vendors is entirely artificial. He takes as a basis for his argument the thesis that the vendor ordinarily brings into the market only one commodity, and that his fate is connected with that commodity alone, i.e., with its price, whereas, says Oppenheimer, "the buyer is interested in a great variety of goods and their prices, and his interests depend comparatively little upon each one of those commodities since the price of one commodity may rise while the price of the other falls," etc. Oppenheimer fails to realise the most essential point, namely, that a present-day buyer is largely a capitalist buyer. Personal consumption is relegated to the rear compared with productive consumption on the basis of a widening reproduction. For production purposes, however, a mass purchase of a comparatively small number of commodities is required. As a rule, large masses of staple goods are being purchased, and one commodity often plays a highly important part. (Compare the importance of cotton for the textile industry.)
Thus there are no reasons why we should consider the struggle for raw material less acute, as Oppenheimer would wish us to do. The immense growth of competition in this field is a fact which takes on still greater significance due to the tendency of annexing territories containing deposits of coal, iron ore, copper ore, oil deposits, etc. Branches of industry that play an enormous rôle and that depend on natural conditions, are easily monopolised, and once they have fallen into the hands of certain "national" groups, they are lost for the others. Of course, this applies also to agricultural production in so far as there appears on the arena a consolidated "national" group which has at its disposal the means of "occupation." England's policy in Egypt, the transformation of all of Egypt into a gigantic cotton plantation furnishing raw material for the English textile industry, may serve as a striking illustration.
It follows that the recent phase of capitalism sharpens the conflicts also in this sphere. The faster the tempo of capitalist development, the stronger the process of industrialisation of the economic life and urbanisation of the country, the more disturbed is the equilibrium between industry and agriculture, the stronger is the competition between industrially developed countries for the possession of backward countries, the more unavoidable becomes an open conflict between them.
Here, too, capitalist expansion is a "way out" of contradictions that leads with impeccable logic to the decisive moment of imperialist policy - war.We have so far analysed the changes that have taken place within the conditions of the world circulation of commodities and which have extraordinarily sharpened the competition between "national" capitalisms, and consequently also their aggressive policy. However, the changes that characterise our epoch are not confined to these spheres alone. The development of the productive forces of world capitalism has brought to the fore other forms of international economic relations. We have in mind the international movement of capital values, which we shall presently analyse.