Financial Capital, Imperialism and War-Banks as organizational centers of industry.

Banks as organizational centers of industry.

From Alexandr Koh, Financial Capital 1927

The largest accumulations of money capital in capitalist companies are formed in banks. Banks in the capitalist system are, literally, reservoirs of free money capital.

This is where all the money capital of modern company is poured, regardless of whether it is credit capital for its intended purpose or whether it is temporarily released from production.

From here all the capitalists who are in need of money draw the capital they need.

The entire free public money capital passes through the hands of the banks, which they distribute among the individual capitalists.

Just pointing to this fact is enough to understand that in a modern company where the dominant form of enterprise is the joint-stock company, banks should play an exceptional role.

The money flowing into the bank does not go to its permanent use. All deposits are made for a very specific period. By these terms, the bank is bound hand and foot in the matter of using the capital at its disposal.

He cannot invest them in organizing an industrial or commercial enterprise, because that would mean fixing the capital entrusted to him for a long time in business and depriving himself of the opportunity to pay off his obligations on time. Prior to the widespread distribution of the network of joint-stock companies, the only field of activity of banking capital is, therefore, credit.

At the same time, it is important to note that the main attention of banks is directed to short-term credit (under working capital) and trade credit, which do not require long-term capital investment.

The process of mobilizing capital, the process of wide development and expansion of joint-stock companies, creates a new favorite field of activity for banks.

The purchase of shares proves for banks in many way are more profitable operation than purely credit operations.

1) The capital spent on the purchase of shares is invested into action without a time limit.

At any time, at its first request, the bank can sell the shares and receive the money necessary to pay off creditors.

2) Due to the fact that the bank always has significant amounts of money at its disposal, it has the ability to buy a significant number of shares and dominate a number of joint-stock companies, thereby securing for itself a large credit market.

3) A large accumulation of money capital in the bank's cash desks makes it possible not only to buy up shares of already existing joint-stock companies, but also to organize new ones. Banks take over the issuance of shares and thereby ensure the receipt of both dividends and founders' profits.

4) Having a large number of shares, banks are able to regulate their prices on the stock exchange and, thanks to this, stock exchange speculation without any risk.

Thus, the bank's income is replenished with still high stock exchange profit. As a result of the listed advantages of joint-stock business over credit, banks are investing an increasing part of their capital in industry.

(Statistics)

If banks used to be exclusively credit institutions. However, now, as a result of the mobilization of capital, they are increasingly overgrown with industrial enterprises that depend on them and are subordinate to them, they are becoming more and more organizing centers of industry, and more and more are turning into commanding nodes of impersonal social capital.

The great interest of banks in the joint-stock business pushes them to master the entire "ladder of subordination" of mobilized capital. The large accumulation of money-capital in their hands helps them to realize this striving for dominance over corporatized industry.

At the present time, every bank of any size dominates a number of joint-stock companies, keeps dozens of joint-stock enterprises belonging to the most diverse branches of production, dependent on it.

The power of the bank extends simultaneously to the railway company and to the editorial office of an influential newspaper, to a mining enterprise and to an advertising establishment. In all enterprises that are financially subordinate to it, the bank promotes “its own people” to senior positions.

Thus, he strengthens his connection with the joint-stock companies subordinate to him, through the so-called "private (or personal) union."

“The six largest Berlin banks were represented through their directors in 344 industrial companies and through their board members in another 407, in total in 751 companies .. In 289 companies, they had either two members of the supervisory boards or seats of their chairmen.

Among these commercial and industrial companies, we find the most diverse branches of industry: insurance business, communications, restaurants, theaters, the art industry, etc. On the other hand, on the supervisory boards of the same six banks was (in 1910 .) 51 major industrialists, including the director of the Krupp firm, the giant steamship company Hapag (Hamburg-Amerika), etc., each of the six banks from 1895 to many hundreds of industrial companies, namely from 281 to 419.

“According to the latest data book of 1909, there are 12,000 directors and members of councils in the management bodies of industrial companies in Germany, but 2,917 seats, 197 persons occupy the councils.

The record was broken by r Karl Fürstenberg of the Berliner Handelsgesellschaft with 44 mandates; Evgeny Dutman from Dresdener Bank occupies 35 seats. In general, of the various professions represented in the composition of the councils, the banking profession is most strongly represented, and therefore the greatest part-time job falls to its lot.

The same is true in the States of North America. The famous banking firm of Morgan in 1906 was represented in 109 enterprises. Among these enterprises there were 5 banks, 50 railways, 3 shipping companies, 8 trusted companies, 8 insurance companies, 40 industrial enterprises, etc.

One can judge what a huge role participation in joint-stock companies plays in the operations of German banks, if only by the fact that Deutsche Bank receives 10% of its entire profit from participation in industry, Darmstiidter Bank - 15-1 / 2% and “Berliner Handelsgesellschaft" -18%.

Banking Concerns (Merged Business Groups).

The banks themselves, which need huge capitals for their foundation, in turn, are built on joint-stock principles, they themselves represent joint-stock companies. This allows the most powerful banks to subjugate smaller banks with all credit, industrial and other enterprises associated with them. It often happens that a bank that controls a significant number of enterprises itself falls under the influence of a larger bank and finds itself in the position of a "subsidiary" or even "grandchild" enterprise.

On the eve of the war, the firm "I. I. Morgan and Co. itself controlled enterprises with a capital of 22½ billion dollars, which at that time amounted to 1/3 of the national property of the States. Closely connected with the firm were 18 other enterprises, together with which it subordinated to its influence a capital of 40 billion in the most diverse branches of the national economy, including 15.8 billion in industrial enterprises, 17.3 billion in railways, 4 billion in banks and other financial enterprises, 1-1/2 billion in mining and oil enterprises. The gigantic steel trust of the United States, the famous "United Stats Steel Corporation" with its 300,000 workers and employees, is Morgan's enterprise.

In the United States, 89 individuals hold over 2,000 directorships in various industrial, transportation, and other companies, with Morgan and Rockefeller directly or indirectly controlling almost all of these enterprises. Among the banks within the sphere of influence of the Morgan group are the two largest French banks (Credit Lyonnaise and Union Parisien), as well as the large English bank Schroeder.

Most recently (at the end of 1924), the Morgan Group, together with the Schroeder Bank, through the International Corporation for the Financing of Continental Industry organized by them, acquired 1.3 shares of the reorganized Deutsche Bank the business of this bank will go well, to acquire an additional number of its shares. Deutsche Bank thus became almost entirely a "subsidiary" of Morgan. However, Deutsche Bank itself is an organization that has not only subsidiaries, but even grandchildren and great-granddaughter companies.

Before the war, Deutsche Bank was a permanent participant in 17 other · banks, which were thus its "subsidiaries". These 17 "subsidiary" banks, in turn, participated in 34 "grandchildren" banks, and "grandchildren" banks have 7 "great grandchildren". In addition, the German Bank participated "for an unknown time" and "FROM time to time" in 13 banks, of which 5, in turn, participated in 14 banks, and 2 of these 14 dominate in 2 more .

In total, the sphere of influence of the German Bank included 87 banks, among which there were large foreign firms (for example, Vienna Banking Union, Siberian Trade Bank, Russian Bank for Foreign Trade, Accounting Bank, Petersburg International Bank "and many others).

Each of the banks included in the group, of course, controls a huge number of industrial and commercial, transport, insurance companies and, thus, the dominance of the "Deutsche Bank" over a number of banks provides it with the opportunity to manage not only enterprises directly related to it, but also by all enterprises subordinate to its "subsidiaries", "great-grandchildren" and "great-grandchildren" banks.

All enterprises dependent on the same bank form a banking group. A banking group can be depicted using the following diagram (see page 43).

The banking concern includes not only joint-stock companies, but also individual enterprises. There are enough funds in the hands of the banks to subdue them.

Every capitalist needs money from time to time. He receives this money from the bank. If it is more or less easy to get a short-term loan from a bank (a loan against working capital), then a loan against fixed capital is much more difficult. Giving money for a long time, the bank always. runs the risk of losing them if the position of the enterprise is shaken during this time.

Therefore, the bank, issuing a loan for fixed capital, sets the debtor a number of conditions. The debtor must allow permanent control over his enterprise. The debtor is obliged not to resort to the help of other banks and henceforth to be credited only in the bank that gave him the loan. The debtor undertakes to comply with the directives of the bank in the field of trade policy and coordinate its actions with the actions of enterprises subordinate to the bank, etc.

Credit is a powerful tool with which the bank brings individual industrial enterprises into subjection.

Thus, not only joint-stock companies, but also individual enterprises become dependent on banks.

At the present time it is difficult to find even a tiny little shop that, in one way or another, directly or indirectly, would not depend on this or that bank and would not obey its directives in its trading activities.

Concentration of Banks.

Along with the change in the scope of banks, the nature of competition between them also changes. In the past, banks only clashed with each other in the area ofcredit. Now, however, when banking capital is strongly interested in the affairs of industry, when the profits of each bank depend on the state of affairs of the enterprises associated with it, every collision of two industrial enterprises leads to a collision of banks interested in their affairs.

Banks have now turned from only credit institutions into credit, industrial, and commercial institutions at the same time, and, accordingly, the struggle between banking concerns is carried out simultaneously in all areas of capital investment. In all places where capital is invested, in which the bank is "interested", it can be hit equally hard. The bank suffers both if it is deprived of credit links and if the enterprises associated with it go bankrupt. For each bank, the front of the struggle expands, lengthens. Now, for a successful struggle, the bank needs to have exceptionally large capitals, for it must itself defend itself against the pressing enemy and support its “offspring” (“subsidiaries” and “grandchildren” enterprises) with capital and expand its influence, capturing more and more new enterprises.

Therefore, the last decades have been marked by a rapid increase in concentration in the field of banking.

The situation is somewhat different in Germany. Here, one can speak of a reduction in the absolute number of banks only as applied to Berlin. In Berlin in 1895 there were 16 banks, in 1900 - 18, and in 1912 - only 9. In the provinces, the number of banks, under the influence of the feverish industrial development of Germany, even grew. However, this does not mean, of course, that there was no concentration of bank capital. The size of the average bank increased.

(stats)

The process of concentration of bank capital in Russia was carried out in a similar way.

Of the several dozen banks that exist in each country, not all reach the same size. The bulk of banking capital is concentrated in a few of the largest banks, which thus dominate both the credit market and all branches of the national economy.

The rest of the banks play a secondary role, are on the way to death and, in most cases, are completely dependent on one or another large bank.

In 1914, the capital of 47 Russian banks amounted to 584.9 million rubles; 62.3% of all this capital - 364.5 million. rubles were in the hands of 1 7 St. Petersburg banks.

The same picture in Germany. In 1912 the capital of all credit banks in Germany amounted to 2.963 million marks. More than "3/5 of this capital (1.250 million marks) belonged to the 9 largest banks (Berlinsl (them), while the share of the remaining 147 banks accounted for less than 3/5.

The capital of each of the 9 largest banks reached, on average, 139 million. marks, while the average capital of each of the rest did not even reach 12 million. stamps; The 9 largest banks play almost the same role in the economic life of the country as the 147 others. This is worth thinking about. The picture becomes even more striking if we remember that of the 147 banks mentioned, a good half are nothing more than "subsidiaries" of the largest banks. That this estimated figure is not exaggerated is proved by the fact that already in 1911 6 of these banks "permanently participated" in 63 German banks, and the sphere of influence of Deutsche Bank alone included 87 large and small banks.

(Stats )

France is dominated by only 4 major banks. “Their position is so predominant that they determine the functions of all other banks, presenting them with a field for the full application of labor only where, due to their internal structure, they could not take an active part. They cover the whole country with their network of branch offices, through which they are able to absorb a significant, if not most, part of the free money capital.

Merging industrial capital with credit.

Things should not be conceived in such a way that, to the extent that industrial enterprises are subordinated to banks, industrial capital is subordinated to credit capital.

This is precisely the essence of modern (financial) capitalism, that banks act here, not only as representatives of credit capital, but as representatives of both credit and industrial capital at the same time. The following illustration will make the statement more understandable:

“In the late 1860s and early 1870s, the Standard Oil Company began operations, at first with a capital of $1 million, which by 1892 had increased to millions of dollars. Thanks to huge profits, in the hands of leaders; The aforementioned company accumulated a large cash capital, which already in 1886 exceeded 17 million dollars.

Rockefeller and his associates chose National City Bank as their main base. The choice was successful. Not being particularly large, this bank gained fame for itself

Rockefeller and his associates chose National City Bank as their main base. The choice was successful. Not being particularly large, this bank gained fame for its cautious, non-speculative policy, and enjoyed the full confidence of the public ... The merger was beneficial to both parties.

Banking capital greatly increased the cash of the Standart Oil Company, which it needed to develop the business and various financial transactions.

The bank, with the help of millions of capitals of the Standard Oil Company, was able to expand its activities to a grand scale ... The bank annexed a number of other banks. The combined capitals and deposits of all these banks reach $700 million.

It is not surprising that the bank becomes the main monetary center of the country and takes part in all more or less large transactions, whether it is the financing of industrial and other companies, the sale of various securities, and the like.

We see that Rockefeller acts simultaneously as head of both credit and industrial capital.

If he subjugates this or that industrial enterprise through the mediation of his bank, this, of course, will in no way indicate the subordination of industrial capital to credit capital, but will undoubtedly be a case of the subordination of small capital, regardless of the sphere of their application, to large capital, which is a synthesis of industrial and credit capital - stock or finance capital. Rockefeller is no exception, of course.

Another major financial king of the United States - Morgan is at the same time the head of one of the largest banks in the world - the National Bank of Commerce and a group of banks adjacent to it, which had a total capital of more than 600 million before the war. dollars. At the same time, Morgan is the head of the largest "Steel Trust" (United States Steel Corporation) and one of the largest railway kings (225 railways-4-7.206 miles of track).

What kind of capital does Morgan represent - industrial or credit? Both taken together, merged together, represent finance capital. The subordination of one-third of the entire economy of the United States to the Morgan Bank is, therefore, not the subordination of industrial capital to credit capital, but the subordination of small industrial and credit capital to big finance capital.