On Imperialism and World Economy

N.I. Bukharin

World Movement of Capital, and Change in the Economic Forms of International Connections

The international movement of capital may be looked upon from the point of view of the country that exports, or from the point of view of the country that imports capital.

The export of capital from a country presupposes an overproduction of capital in that country, an overaccumulation of capital. The overproduction would be absolute were the increment of capital to yield nothing from the capitalist point of view, namely, if capital, C, having increased to C+ΔC, were to yield as much profit as it would without the increment ΔC.1) For the export of capital, however, it is not necessary that overproduction should have reached that limit. "If capital is sent to foreign countries, it is not done because there is absolutely no employment to be had for it at home. It is done because it can be employed at a higher rate of profit in a foreign country."2) It is therefore easy to understand why we observe capital export almost throughout the history of the development of capitalism. However, it is only in the last decades that capital export has acquired an extraordinary significance, the like of which it never had before. The specific weight of this form of international economic intercourse has so increased, that to a certain degree we may even speak of a new type of economic interrelationship between countries.

Two sets of causes have been and are operating here. In the first place, the accumulation of capital proceeds with an unusually rapid tempo, due to large-scale capitalist production accompanied by incessant technical progress which makes gigantic strides and increases the productive power of labour, and to the unusual increase in the means of transportation and the perfection of means of circulation in general, which also hastens the turn-over of capital. The volumes of capital that seek employment have reached unheard of dimensions. On the other hand, the cartels and trusts, as the modern organisation of capital, tend to put certain limits to the employment of capital by fixing the volume of production. As to the non-trustified sections of industry, it becomes ever more unprofitable to invest capital in them. For monopoly organisations can overcome the tendency towards lowering the rate of profit by receiving monopoly superprofits at the expense of the non-trustified industries. Out of the surplus value created every year, one portion, that which has been created in the nontrustified branches of industry, is being transferred to the coowners of capitalist monopolies, whereas the share of the outsiders continually decreases. Thus the entire process drives capital beyond the frontiers of the country.

In the second place, high tariffs put tremendous obstacles in the way of commodities seeking to enter a foreign country. Mass production and mass overproduction make the growth of foreign trade necessary, but foreign trade meets with a barrier in the form of high tariffs. It is true that foreign trade keeps on developing, foreign sales grow, but this is taking place notwithstanding the difficulties and in spite of them. This does not mean, however, that the tariffs do not make themselves felt. Their influence is, first of all, expressed in the rate of profit. Tariff barriers, making the export of commodities very difficult, do not interfere in any way with the export of capital. Obviously, the higher the wave of duties, the larger, other conditions being equal, is the flight of capital from its home country.

The protection of industry [!] does not stimulate foreigners to establish a factory inside the tariff frontiers. Only when the foreign manufacturer and importer has lost part or all of his sales, does a moment arrive when he resorts to the establishment of factories in foreign countries-an undertaking always connected with great expense and risks. Prohibitive tariffs bringing about such consequences are contained in the McKinley and Dingley Bills of the U. S. (1890 and i897); in the Russian legislation of 1877, 1881, 1885, and 1891; also in the French laws of 1881 and 1892.3)

Tariff duties influence capital export also in another way. They themselves become an attraction for a capitalist. In so far as capital has been imported and begins to function in a "foreign" country as capital, it receives as much "protection" from the tariff as the capital of native businessmen.4) This in turn causes a tremendous increase in capital export.

Capital export, however, must not be taken per se, without any connection with other highly important economic and political phenomena accompanying it. Let us glance at a few of the most significant of those phenomena.

In case of state or municipal loans, the creditor country receives more than interest on the sums advanced. The transaction is usually accompanied by a number of stipulations, in the first place that which imposes upon the borrowing country the duty to place orders with the creditor country (purchase of arms, ammunition, dreadnaughts, railroad equipment, etc.). and the duty to grant concessions for the construction of railways, tramways, telegraph and telephone lines, harbours, exploitation of mines, timberlands, etc. Such transactions are either included in the loan contract as one of its conditions, or they are an inevitable consequence of the entire "course of events." As an example we quote here a description of one of the concessions granted by the Persian government to the (Russian) Discount and Loan Bank of Persia for the construction of the railway line Julfa-Tabriz (1913):

The line gage is Russian. The time of concession is 75 years. The Persian government has the option of redeeming the railroad after the expiration of 35 years; in this case it pays back all the capital that has been spent plus 5 per cent interest, provided the concession has yielded so much. The concession grants the bank the right to exploit coal and oil deposits within 6o versts on either side of the railroad, and also to construct branch lines leading to the mines. The bank also obtains the preference right to construct the railway line Tabriz-Kazoin, and the exclusive right to construct a turnpike between the same points within eight years, also the right to exploit coal and oil deposits within 6o versts on either side of the road. After deducting from the profits of the railroad in favour of the concessionaire 7 per cent on all capital spent on its construction, the remaining net income is divided equally between the concessionaire and the Persian government. As to the oil and coal mines, the concessionaire pays to the Persian government 5 per cent of the net profits obtained from them. All the concessionaire's enterprises are free of taxes and other duties for all times.5)

Among the "measures" intended to restrict foreign capital we find the right of the governmental power to prohibit the quotation of foreign loans and securities in general. Thus by a special law dated February 6, 1880, the French Ministry of Finance was empowered to prohibit the traffic in foreign securities, also to refuse foreign loans to be quoted in the French stock exchanges (in 1909 the French government refused to grant a loan to Argentina because in 1908 the latter had placed an order with Krupp and not with Schneider in Creuzot; in 1909, the same government refused to grant a loan to Bulgaria for lack of sufficient guarantees-the loan was secured by an Austro-German bank syndicate; for four decades German securities were not allowed to be quoted in France; in September, 1910, a loan was refused to Hungary; a loan was granted Serbia under the condition of placing orders with Schneider; after the Revolution, the Russian Government ordered cruisers to be constructed in France in return for loans, etc.).6)

Aside from orders and concessions, definite advantages in regard to trade treaties may be secured together with the loan contract. (See, for instance, the RussoFrench trade treaty of September 16-29, 1905, which was prolonged to 1917; the treaty of December 2, 1908, between Sweden and France; the treaty of 1908 between Sweden and Denmark; the tariff treaty of August 19, 1911, between France and Japan; compare also the refusal of France to allow the shares of the United States Steel Corporation to be quoted on the Paris exchange in retaliation for duties imposed on wine, silk, and automobiles by the Payne Tariff of America in 1909.7)

When capital is exported by private persons or by industrial and banking companies, this again increases the export of commodities from the motherland, for the enterprises thus created abroad represent a certain demand by themselves, and besides, they widen by their very activities the market that is mostly dependent upon them. One must bear in mind that "foreign" enterprises are, as we have seen in the first section, financed by the largest banks or bank trusts and are possessed of a, colossal economic power.8) Here is one example. Onethird of the land in the German colony of Cameroon is private property, but a very considerable part of this land belongs to two companies only: the South Cameroon Company holds 7,700,000 hectares, the Southwestern Cameroon Company, 8,800,000 hectares, an area six times the size of the kingdom of Saxony (1,500,000 hectares) and larger than Bavaria (7,600,000 hectares).9) Wherever the capitalists do not possess territory, they possess other forms of financial power. In constructing the Bagdad railroad, the Deutsche Bank not only uses German material in Turkey, but it also creates a whole network of market relations, making it easy for German goods to penetrate Turkey. Thus capital export creates favourable conditions also for the industry of its home country.

Capital export unusually sharpens the relations between the great powers. Already the struggle for opportunities to invest capital, i.e., the struggle for concessions, etc., is always reinforced by military pressure. A government or a "country" subjected to the manipulations of the financiers of the great powers ordinarily yields to that party which appears to be the strongest militarily. When some pacifists (particularly their English brand) try to influence the ruling classes by logical reasons, when they try to persuade them to disarm on the ground that commodities are supposed to find a market independently of the number of dreadnaughts, they will be cruelly disappointed. For the "peaceful" policies that were pursued before the war, and will be pursued after it, were always and everywhere reinforced by the threats of military power. To use a correct expression of the Englishman Brailsford, "the continuous war of steel and gold never ceases for a minute even in peace time." More graphically is this atmosphere of obdurate competition described by an eminent theoretician of German imperialism, Sartorius:

The growing industrialisation of the world is a fact to be reckoned with by every policy of world economy [jede Weltwirtschaftspolitik]. ...It is given to nobody to stop the course of development, and if a state would prohibit its subjects from establishing enterprises in other countries, this would only bring advantages to the businessmen of a third state. It is therefore best of all to have your finger in the pie in due time [die Hand rechtzeitig im Spiele haben].... The economic world does not stand still. One change precipitates another. There is always an opportunity for a strong nation to mix in. Here, too, the slogan "Carpe diem" is to be applied.10)

If the pressure of military power yields concessions and various privileges, the further functioning of capital abroad also demands specific "protection." Formerly the centre of gravity lay in commodity export, whereby the exporters risked only their goods, i.e., their circulating capital. Now the situation is totally different. What we have in a "foreign" country are large sums of money, particularly of fixed capital, invested in gigantic constructions: railroads stretching over thousands of miles, very costly electric plants, large plantations, etc., etc. The capitalists of the exporting country are materially interested in "guarding" their wealth. They are therefore ready to go the limit in order that they may retain the freedom of further accumulation.11)

Where the exploited country is weak also militarily, "peaceful penetration" of capital very quickly turns into "peaceful occupation" or division, or else it entails an armed struggle between countries competing for capital investment spheres. The fate of Turkey in the light of Franco-German competition is very typical in this respect. We wish to quote, in illustration, the writings of one French and one German imperialist published long before the war. "The Turkish Empire has been overrun by German hordes" (hordes germaniques) "of traders and salesmen," says the Frenchman.

Thus the network of German banks gradually spreads over the entire Ottoman Empire, supporting industry, seizing transport facilities, competing with foreign financial institutions...in brief, those banks, with powerful political support [italics ours - N.B.] strive financially to establish German influence over the entire Levant.12)

Thus a French bourgeois expresses indignation over the "German hordes." But a German bourgeois is indignant in the very same way:

The French are systematically striving to make Turkey their slave debtor; up to the present they have advanced her two billion two hundred million francs. Of this sum, one-half billion was invested in railroads alone, France having constructed more railroads than any other nation. The most important Turkish harbours, like Constantinople, Salonika, Smyrna, Beirut, are in French hands. The lighthouses along the Turkish coast are in French hands. Last but not least, the most important bank of Turkey, the Ottoman Bank, operates in Constantinople entirely under French influence. Who then can escape the political consequences of such a powerful pressure of capital! French diplomacy very intensively utilises its privileged position in Turkey, particularly in recent times!13)

Obviously, capital export in its present volume and importance is caused by the peculiarities of economic development in recent years. Looked upon from the point of view of the spreading of the organisational forms of modern capital, capitalexport is nothing but a seizure and a monopolisation of new spheres of capital investment by the monopoly enterprises of a great nation or-taking the process as a whole-by the organised "national" industry, by "national" finance capital. Capital export is the most convenient method for the economic policy of finance groups; it subjugates new territories with the greatest ease. This is why the sharpening of competition between various states is most salient here. The internationalisation of economic life here, too, makes it necessary to settle controversial questions by fire and sword.

Notes

1) Capital, Vol. III, p. 295.

2) Ibid., p. 300.

3) Sartorius von Waltershausen, l.c., p. 179.

4) Ibid., p. 180.

5) M. P. Pavlovich: The Great Railway and Maritime Lines of the Future, St. Petersburg, 1913, p. 143.

6) S. Schilder, l.c., p. 343 ff.

7) Ibid., p. 353

8) Pavlovich cites a number of examples of how the banks act in the realm of railway construction; they actually allow entire countries to be swallowed by capitalist sharks.

9) Compare with a highly curious book entitled, Deutsche Colonialpolitik, 2nd, part, Staatsstreich doer Reformen. The author hides under the pseudonym Ein Ausland-Deutscher, Zurich, 1905, p. 1318.

10) Sartorius von Waltershausen, l.c., pp. 190-191.

11) "Capital is said by a Quarterly Reviewer to fly turbulence and strife, and to be timid, which is very true; but this is very incompletely stating the question. Capital eschews no profit, or very small profit, just as nature was formerly said to abhor a vacuum. With adequate profit, capital is very bold. A certain 10 per cent will ensure its employment anywhere; 20 per cent certain will produce eagerness; 50 per cent, positive audacity; zoo per cent will make it ready to trample on all human law; 300 per cent, and there is not a crime at which it will scruple, nor a risk it will not run, even to the chance of its owner being hanged." P. J. Dunning, quoted by Marx, Capital, Vol. I, note to p. 843.

12) Dubief: "Le chemin de fer de Bagdad," in Revue économique internationale, 1912, Vol. 2, p. 7 ff.

13) Deutsche Kolonialreform, pp. 1396-7397. One must not forget that the book was written in 1905. Since then the interrelation of forces, and the map of the world, haw undergone material change.
N.I. Bukharin: World Economy and the "National" State

From the point of view of the ruling circles of society, frictions and conflicts between "national" groups of the bourgeoisie, inevitably arising inside of present-day society, lead in their further development to war as the only solution of the problem. We have seen that those frictions and conflicts are caused by the changes that have taken place in the conditions of reproducing world capital. Capitalist society, built on a number of antagonistic elements, can maintain a relative equilibrium only at the price of painful crises; the adaptation of the various parts of the social organism to each other and to the whole can be achieved only with a colossal waste of energy, under tremendous "faux frais" of this adaptation, which flow from the character of capitalist society as such, i.e., from a definite historical formulation of the development in general.

We have laid bare three fundamental motives for the conquest policies of modern capitalist states: increased competition in the sales markets, in the markets of raw materials, and for the spheres of capital investment. This is what the modern development of capitalism and its transformation into finance capitalism has brought about.

Those three roots of the policy of finance capitalism, however, represent in substance only three facets of the same phenomenon, namely of the conflict between the growth of productive forces on the one hand, and the "national" limits of the production organisation on the other.

Indeed, overproduction of manufactured goods is at the same time underproduction of agricultural products. Underproduction of agricultural products is in this case important for us in so far as the demand on the part of industry is excessively large, i.e., in so far as there are large volumes of manufactured goods which cannot be exchanged for agricultural products; in so far as the ratio between those two branches of production has been (and is more and more) disturbed. This is why growing industry seeks for an agrarian "economic supplement" which, within the framework of capitalism, particularly its monopoly form, i.e., finance capital, inevitably expresses itself in the form of subjugating agrarian countries by force of arms.

We have just discussed the exchange of commodities. Capital export, however, does not represent an isolated phenomenon, either. Capital export, as we have seen, is due to a certain overproduction of capital. Overproduction of capital, however, is nothing but another formulation for overproduction of commodities:

Overproduction of capital [says Marx] never signifies anything else but overproduction of means of production-means of production and necessities of life-which may serve as capital, that is, serve for the exploitation of labour at a given degree of exploitation. ...Capital consists of commodities, and therefore the overproduction of capital implies an overproduction of commodities.1)

Conversely, when the overproduction of capital decreases, there is also a decrease in the overproduction of commodities. This is why capital export, in decreasing overproduction of capital, . aids also in decreasing the overproduction of commodities. (Let us note parenthetically that if, for instance, iron beams are exported into another country to be sold there, we have commodity export pure and simple; if, however, the beam-producing firm establishes an enterprise in another country and exports its commodities to equip the enterprise, we have capital export; obviously, the criterion is whether the transactions of purchase and sale take place or not.)

But even aside from simply "relieving the congestion" by exporting capital in commodity form, there is also a further connection between capital export and the decrease in the overproduction of commodities. Otto Bauer has very well formulated this connection.

Thus [he says] the exploitation of economically backward countries by the capitalists of a European country has two series of consequences: directly, it creates new spheres of investment for capital in the colonial country, and at the same time more selling opportunities for the industry of the dominating power; indirectly, it creates new spheres for the application of capital also inside of the dominating country, and increases the sale of the products of all its industries.2)

If we thus consider the problem in its entirety, and take thereby the objective point of view, i.e., the point of view of the adaptation of modern society to its conditions of existence, we find that there is here a growing discord between the basis of social economy which has become world-wide and the peculiar class structure of society, a structure where the ruling class (the bourgeoisie) itself is split into "national" groups with contradictory economic interests, groups which, being opposed to the world proletariat, are competing among themselves for the division of the surplus value created on a world scale. Production is of a social nature; international division of labour turns the private "national" economies into parts of a gigantic all-embracing labour process, which extends over almost the whole of humanity. Acquisition, however, assumes the character of "national" (state) acquisition where the beneficiaries are huge state companies of the bourgeoisie of finance capital. The development of productive forces moves within the narrow limits of state boundaries while it has already outgrown those limits. Under such conditions there inevitably arises a conflict, which, given the existence of capitalism, is settled through extending the state frontiers in bloody struggles, a settlement which holds the prospect of new and more grandiose conflicts.

The social representatives of this contradiction are the various groups of the bourgeoisie organised in the state, with their conflicting interests. The development of world capitalism leads, on the one hand, to an internationalisation of the economic life and, on the other, to the leveling of economic differences,-and to an infinitely greater degree, the same process of economic development intensifies the tendency to "nationalise" capitalist interests, to form narrow "national" groups armed to the teeth and ready to hurl themselves at one another any moment. It is impossible to describe the fundamental aims of present day politics better than was done by R. Hilferding. "The policy of finance capital," he says, "pursues a threefold aim: first, the creation of the largest possible economic territory which, secondly, must be protected against foreign competition by tariff walls, and thus, thirdly, must become an area of exploitation for the national monopoly companies."3) The increase in the economic territory opens agrarian regions to the national cartels and, consequently, markets for raw materials, increasing the sales markets and the sphere of capital investment; the tariff policy makes it possible to suppress foreign competition, to obtain surplus profit, and to put into operation the battering ram of dumping; the "system" as a whole facilitates the increase of the rate of profit for the monopoly organisations. This policy of finance capital is imperialism.

Such a policy implies violent methods, for the expansion of the state territory means war. The reverse, however, is not true; not every war or every increase in the state territory implies an imperialist policy. The determining factor is whether the war expresses the policy of finance capital, the latter term being taken in accordance with the above definition. Here, as everywhere, we find some intermediary forms, whose existence, however, by no means vitiates the main definition. This is why attempts like those made by the well-known Italian economist and sociologist, Achille Loria, are fundamentally incorrect. Loria, namely, has attempted to construct two conceptions of imperialism which, he alleges, contain "entirely heterogeneous relations" (des rélations tout à fait hétérogènes). Loria distinguishes4) between "economic" imperialism (l'impérialisme économique, ökonomischer Imperialismus) and "commercial" or "trade" imperialism (l'impérialisme commercial, Handelsimperialismus). The object of the former, he says, are tropical countries, the object of the latter are countries whose conditions make them suitable also for European colonization; the method of the former is armed force, the method of the latter, peaceful treaties (des accords pacifiques); the former has no shadings or grades, in the latter they range from the maximum of full assimilation or a single tariff to incomplete forms, like preference tariffs between the colonies and the mother countries, etc.

This is Loria's theory. It is quite obvious that it is made out of whole cloth. Both the "commercial" and the "economic" imperialism are in substance the expression of the same tendencies, as we have seen above. A closed ring of tariff duties, and the raising of the latter, may not result in an armed conflict immediately; they will, however, bring about such a conflict later. It is thus obvious that we cannot contrast "peaceful treaties" with "armed forces." (Peaceful treaties between England and its colonies mean a straining of the relations between England and other countries.) Neither can we assert that "economic" imperialism is merely of a "tropical" nature. The best proof is the fate of Belgium, Galicia, and the probable fate of South America, China, Turkey, and Persia.

To sum up: the development of the productive forces of world capitalism has made gigantic strides in the last decades. The upper hand in the competitive struggle has everywhere been gained by large-scale production; it has consolidated the "magnates of capital" into an ironclad organisation, which has taken possession of the entire economic life. State power has become the domain of a financial oligarchy; the latter manages production which is tied up by the banks into one knot. This process of the organisation of production has proceeded from below; it has fortified itself within the framework of modern states, which have become an exact expression of the interests of finance capital. Every one of the capitalistically advanced "national economies" has turned into some kind of a "national" trust. This process of the organisation of the economically advanced sections of world economy, on the other hand, has been accompanied by an extraordinary sharpening of their mutual competition. The overproduction of commodities, which is connected with the growth of large enterprises; the export policy of the cartels, and the narrowing of the sales markets in connection with the colonial and tariff policy of the capitalist powers; the growing disproportion between tremendously developed industry and backward agriculture; the gigantic growth of capital export and the economic subjugation of entire regions by "national" banking combines all this has thrown into the sharpest possible relief the clash of interests between the "national" groups of capital. Those groups find their final argument in the force and power of the state organisation, first of all in its army and navy. A mighty state military power is the last trump in the struggle of the powers. The fighting force in the world market thus depends upon the power and consolidation of the "nation," upon its financial and military resources. A self-sufficient national state, and an economic unit limitlessly expending its great power until it becomes a world kingdom - a world-wide empire - such is the ideal built up by finance capital.

With a steady and clear eye does it [finance capital] view the Babylonian confusion of peoples, and above all of them it sees its own nation. The latter is real; it lives in a powerful state, which keeps on increasing its power and grandeur, and which devotes all its forces to making them greater. In this way, the interests of the individual are subjugated to the interests of the whole-a condition without which no social ideology can live; a nation and a state that are hostile to the people are tied into one whole, and the national idea, as a motive power, is subjugated to politics. The class conflicts have disappeared; they have been annihilated, absorbed as they are in serving the interests of the whole. In place of the dangerous class struggle, fraught for the owners with unknown consequences, there appear the general actions of the nation which is united by one aim-the striving for national grandeur.5)

Thus the interests of finance capital acquire a grandiose ideological formulation; every effort is made to inculcate it into the mass of workers, for, as a German imperialist has correctly remarked from his point of view: "We must gain power not only over the legs of the soldiers, but also over their minds and hearts."6)

Notes

1) Capital, Vol. III, pp. 300-301.

2) Otto Bauer: Die Nationalitätenfrage and die Sozialdemokratie, Vienna, 1907, p. 464.

3) Rudolf Hilferding: Finanzkapital, p. 412.

4) Achille Loria, "Les deux notions de l'impérialisme," in Revue économique internationale, 1907, Vol. 3, p. 459 ff.

5) Rudolf Hilferding, l.c. pp. 428-429

6) Die deutsche Finanz-Reform der Zukunft part III of the book Staatsstreich oder Reformers by Ein Ausland-Deutscher, Zurich, 1907, p. 203.