IMPERIALISM, THE HIGHEST STAGE OF CAPITALISM [1]

A Popular Outline

PREFACE

The pamphlet here presented to the reader was written in the spring of 1916, in Zurich. In the conditions in which I was obliged to work there I naturally suffered somewhat from a shortage of French and English literature and from a serious dearth of Russian literature. However, I made use of the principal English work on imperialism, the book by J. A. Hobson, with all the care that, in my opinion, that work deserves.

This pamphlet was written with an eye to the tsarist censorship. Hence, I was not only forced to confine myself strictly to an exclusively theoretical, particularly economic analysis of facts, but to formulate the few necessary observations on politics with extreme caution, by hints, in an allegorical language--in that accursed Aesopian language--to which tsarism compelled all revolutionaries to have recourse whenever they took up their pens to write a "legal" work.

It is painful, in these days of liberty, to reread these passages of the pamphlet, which have been distorted, cramped, compressed in an iron vise on account of the censor. About the fact that imperialism is the eve of the socialist revolution; that social-chauvinism (Socialism in words, chauvinism in deeds) is the utter betrayal of Socialism, complete desertion to the side of the bourgeoisie, that this split in the working-class movement is bound up with the objective conditions of imperialism, etc., I had to speak in a "slavish" tongue, and I must refer the reader who is interested in the subject to the articles I wrote abroad in 1914-17, a new edition of which is soon to appear. Special attention should be drawn to a passage on pages 119-20.[2] In order to show the reader, in a guise acceptable to the censors, how shamelessly the capitalists and the social-chauvinists who have deserted to their side (and whom Kautsky opposes with so much inconsistency) lie on the question of annexations, in order to show how shamelessly they screen the annexations of their capitalists, I was forced to quote as an example--Japan! The careful reader will easily substitute Russia for Japan, and Finland, Poland, Courland, the Ukraine, Khiva, Bokhara, Estonia or other regions peopled by non-Great Russians, for Korea.

I trust that this pamphlet will help the reader to understand the fundamental economic question, viz., the question of the economic essence of imperialism, for unless this is studied, it will be impossible to understand and appraise modern war and modern politics.

Author

Petrograd
April 26, 1917

PREFACE TO THE FRENCH AND GERMAN EDITIONS [3]

I

As was indicated in the preface to the Russian edition, this pamphlet was written in 1916, with an eye to the tsarist censorship. I am unable to revise the whole text at the present time, nor, perhaps, would this be advisable, since the main purpose of the book was and remains: to present, on the basis of the summarized returns of irrefutable bourgeois statistics, and the admissions of bourgeois scholars of all countries, a composite picture of the world capitalist system in its international relationships at the beginning of the twentieth century--on the eve of the first world imperialist war.

To a certain extent it will even be useful for many Communists in advanced capitalist countries to convince themselves by the example of this pamphlet, legal from the standpoint of the tsarist censor, of the possibility--and necessity--of making use of even the slight remnants of legality which still remain at the disposal of the Communists, say, in contemporary America or France, after the recent almost wholesale arrests of Communists, in order to explain the utter falsity of social-pacifist views and hopes for "world democracy." The most essential of what should be added to this censored pamphlet I shall try to present in this preface.

II

It is proved in the pamphlet that the war of 1914-18 was imperialistic (that is, an annexationist, predatory, plunderous war) on the part of both sides; it was a war for the division of the world, for the partition and repartition of colonies, "spheres of influence" of finance capital, etc.

Proof of what was the true social, or rather, the true class character of the war is naturally to be found, not in the diplomatic history of the war, but in an analysis of the objective position of the ruling classes in all the belligerent countries. In order to depict this objective position one must not take examples or isolated data (in view of the extreme complexity of the phenomena of social life it is always possible to select any number of examples or separate data to prove any proposition), but the whole of the data concerning the basis of economic life in all the belligerent countries and the whole world.

It is precisely irrefutable summarized data of this kind that I quoted in describing the partition of the world in 1876 and 1914 (in Chapter VI) and the distribution of the railways all over the world in 1890 and 1913 (in Chapter VII). Railways are a summation of the basic capitalist industries: coal, iron and steel; a summation and the most striking indices of the development of world trade and bourgeois-democratic civilization. How the railways are linked up with large-scale industry, with monopolies, syndicates, cartels, trusts, banks and the financial oligarchy is shown in the preceding chapters of the book. The uneven distribution of the railways, their uneven development--sums up, as it were, modern monopolist capitalism on a world-wide scale. And this summary proves that imperialist wars are absolutely inevitable under such an economic system, as long as private property in the means of production exists.

The building of railways seems to be a simple, natural, democratic, cultural and civilizing enterprise; that is what it is in the opinion of bourgeois professors, who are paid to depict capitalist slavery in bright colors, and in the opinion of petty-bourgeois Philistines. But as a matter of fact the capitalist threads, which in thousands of different intercrossings bind these enterprises with private property in means of production in general, have converted this railway construction into an instrument for oppressing a thousand million people (in the colonies and semicolonies), that is, more than half the population of the globe inhabiting the dependent countries, as well as the wage slaves of capital in the "civilized" countries.

Private property based on the labor of the small proprietor, free competition, democracy, all the catchwords with which the capitalists and their press deceive the workers and the peasants--are things of the distant past. Capitalism has grown into a world system of colonial oppression and of the financial strangulation of the overwhelming majority of the population of the world by a handful of "advanced" countries. And this "booty" is shared between two or three powerful world marauders armed to the teeth (America, Great Britain, Japan), who involve the whole world in their war over the sharing of their booty.

III

The Brest-Litovsk Peace Treaty dictated by monarchist Germany, and the subsequent much more brutal and despicable Versailles Treaty dictated by the "democratic" republics of America and France and also by "free" England, have rendered a most useful service to humanity by exposing both the hired coolies of the pen of imperialism and the petty-bourgeois reactionaries, although they call themselves pacifists and Socialists, who sang praises to "Wilsonism," and who insisted that peace and reforms were possible under imperialism.

The tens of millions of dead and maimed left by the war--a war to decide whether the British or German group of financial marauders is to receive the most booty--and those two "peace treaties," are with unprecedented rapidity opening the eyes of the millions and tens of millions of people who are downtrodden, oppressed, deceived and duped by the bourgeoisie. Thus, out of the universal ruin caused by the war a world-wide revolutionary crisis is arising which, however prolonged and arduous its stages may be, cannot end otherwise than in a proletarian revolution and in its victory.

The Basle Manifesto of the Second International, which in 1912 gave an appraisal of the very war that broke out in 1914 and not of war in general (there are different kinds of wars, including revolutionary wars), this Manifesto is now a monument exposing the utter shameful bankruptcy and treachery of the heroes of the Second International.

That is why I reproduce this Manifesto as a supplement to the present edition,[4] and again and again I urge the reader to note that the heroes of the Second International are as assiduously avoiding the passages of this Manifesto which speak precisely, clearly and definitely of the connection between that impending war and the proletarian revolution, as a thief avoids the place where he has committed a theft.

IV

Special attention has been devoted in this pamphlet to a criticism of "Kautskyism," the international ideological trend represented in all countries of the world by the "most prominent theoreticians" and leaders of the Second International (Otto Bauer and Co. in Austria, Ramsay MacDonald and others in England, Albert Thomas in France, etc., etc.) and a multitude of Socialists, reformists, pacifists, bourgeois-democrats and parsons.

This ideological trend is, on the one hand, a product of the disintegration and decay of the Second International, and, on the other hand, the inevitable fruit of the ideology of the petty bourgeoisie, who, by the whole of their conditions of life, are held captive to bourgeois and democratic prejudices.

The views held by Kautsky and his like are a complete renunciation of the very revolutionary principles of Marxism which that writer has championed for decades, especially, by the way, in his struggle against socialist opportunism (of Bernstein, Millerand, Hyndman, Gompers, etc.). It is not a mere accident, therefore, that the "Kautskyans" all over the world have now united in practical politics with the extreme opportunists (through the Second, or the Yellow International) and with the bourgeois governments (through bourgeois coalition governments in which Socialists take part).

The growing world proletarian revolutionary movement in general, and the Communist movement in particular, cannot dispense with an analysis and exposure of the theoretical errors of "Kautskyism." The more so since pacifism and "democracy" in general, which lay no claim to Marxism whatever, but which, like Kautsky and Co., are obscuring the profundity of the contradictions of imperialism and the inevitable revolutionary crisis to which it gives rise, are still very widespread all over the world. To combat these tendencies is the bounden duty of the Party of the proletariat, which must win away from the bourgeoisie the small proprietors who are duped by them, and the millions of toilers who have been placed under more or less petty-bourgeois conditions of life.

V

A few words must be said about Chapter VIII entitled: "The Parasitism and Decay of Capitalism." As already pointed out in the text, Hilferding, ex-"Marxist," and now a comrade-in-arms of Kautsky and one of the chief exponents of bourgeois, reformist policy in the Independent Social-Democratic Party of Germany,[5] has taken a step backward on this question compared with the frankly pacifist and reformist Englishman, Hobson. The international split of the whole working-class movement is now quite evident (the Second and the Third Internationals). The fact that armed struggle and civil war is now raging between the two trends is also evident: the support given to Kolchak and Denikin in Russia by the Mensheviks and "Socialist-Revolutionaries" against the Bolsheviks; the fight the Scheidemanns, Noskes and Co. have conducted in conjunction with the bourgeoisie against the Spartacists [6] in Germany; the same thing in Finland, Poland, Hungary, etc. What is the economic basis of this world-historic phenomenon?

Precisely the parasitism and decay of capitalism which are characteristic of its highest historical stage of development, i.e., imperialism. As is proved in this pamphlet, capitalism has now singled out a handful (less than one-tenth of the inhabitants of the globe; less than one-fifth at a most "generous" and liberal calculation) of exceptionally rich and powerful states which plunder the whole world simply by "clipping coupons." Capital exports yield an income of eight to ten billion francs per annum, at prewar prices and according to prewar bourgeois statistics. Now, of course, they yield much more.

Obviously, out of such enormous superprofits (since they are obtained over and above the profits which capitalists squeeze out of the workers of their "own" country) it is possible to bribe the labor leaders and the upper stratum of the labor aristocracy. And the capitalists of the "advanced" countries are bribing them; they bribe them in a thousand different ways, direct and indirect, overt and covert.

This stratum of bourgeoisified workers, or the "labor aristocracy," who are quite philistine in their mode of life, in the size of their earnings and in their entire outlook, is the principal prop of the Second International, and, in our days, the principal social (not military) prop of the bourgeoisie. For they are the real agents of the bourgeoisie in the working-class movement, the labor lieutenants of the capitalist class, real channels of reformism and chauvinism. In the civil war between the proletariat and the bourgeoisie they inevitably, and in no small numbers, take the side of the bourgeoisie, the "Versaillese" against the "Communards."

Unless the economic roots of this phenomenon are understood and its political and social significance is appreciated, not a step can be taken toward the solution of the practical problems of the Communist movement and of the impending social revolution.

Imperialism is the eve of the social revolution of the proletariat. This has been confirmed since 1917 on a worldwide scale.

July 6, 1920

N. Lenin

DURING the last fifteen to twenty years, especially since the Spanish-American War (1898), and the Anglo-Boer War (1899-1902), the economic and also the political literature of the two hemispheres has more and more often adopted the term "imperialism" in order to describe the present era. In 1902, a book by the English economist J. A. Hobson, Imperialism, was published in London and New York. This author, whose point of view is that of bourgeois social reformism and pacifism which, in essence, is identical with the present point of view of the ex-Marxist, K. Kautsky, gives a very good and comprehensive description of the principal specific economic and political features of imperialism. In 1910, there appeared in Vienna the work of the Austrian Marxist, Rudolf Hilferding, Finance Capital (Russian edition: Moscow, 1912). In spite of the mistake the author commits on the theory of money, and in spite of a certain inclination on his part to reconcile Marxism with opportunism, this work gives a very valuable theoretical analysis of "the latest phase of capitalist development," the subtitle of the book. Indeed, what has been said of imperialism during the last few years, especially in an enormous number of magazine and newspaper articles, and also in the resolutions, for example, of the Chemnitz and Basle congresses which took place in the autumn of 1912, has scarcely gone beyond the ideas expounded, or, more exactly, summed up by the two writers mentioned above....

Later on, we shall try to show briefly, and as simply as possible, the connection and relationships between the principal economic features of imperialism. We shall not be able to deal with non-economic aspects of the question, however much they deserve to be dealt with. We have put references to literature and other notes which, perhaps, would not interest all readers, at the end of this pamphlet.[7]

I. CONCENTRATION OF PRODUCTION AND MONOPOLIES

The enormous growth of industry and the remarkably rapid process of concentration of production in ever-larger enterprises are one of the most characteristic features of capitalism. Modern censuses of production give most complete and most exact data on this process.

In Germany, for example, out of every 1,000 industrial enterprises, large enterprises, i.e., those employing more than 50 workers, numbered three in 1882, six in 1895 and nine in 1907; and out of every 100 workers employed, this group of enterprises employed 22, 30 and 37, respectively. Concentration of production, however, is much more intense than the concentration of workers, since labor in the large enterprises is much more productive. This is shown by the figures on steam engines and electric motors. If we take what in Germany is called industry in the broad sense of the term, that is, including commerce, transport, etc., we get the following picture. Large-scale enterprises 30,588 out of a total of 3,265,623, that is to say, 0.9 per cent. These enterprises employ 5,700,000 workers out of a total of 14,400,000, i.e., 39.4 per cent; they use 6,600,000 steam horsepower out of a total of 8,800,000, i.e., 75.3 per cent, and 1,200,000 kilowatts of electricity out of a total of 1,500,000, i.e., 77.2 per cent.

Less than one-hundredth of the total enterprises utilize more than three-fourths of the total steam and electric power! Two million nine hundred and seventy thousand small enterprises (employing up to five workers), constituting 91 per cent of the total, utilize only 7 per cent of the total steam and electric power! Tens of thousands of huge enterprises are everything; millions of small ones are nothing.

In 1907, there were in Germany 586 establishments employing one thousand and more workers, nearly one-tenth (1,380,000) of the total number of workers employed in industry, and they utilized almost one-third (32 per cent) of the total steam and electric power.* [Figures taken from Annalen des Deutschen Reichs, 1911, Zahn.] As we shall see, money capital and the banks make this superiority of a handful of the largest enterprises still more overwhelming, in the most literal sense of the word, i.e., millions of small, medium and even some big "masters" are in fact in complete subjection to some hundreds of millionaire financiers.

In another advanced country of modern capitalism, the United States of America, the growth of the concentration of production is still greater. Here statistics single out industry in the narrow sense of the word and group enterprises according to the value of their annual output. In 1904 large-scale enterprises with an output of one million dollars and over numbered 1,900 (out of 216,180, i.e., 0.9 per cent). These employed 1,400,000 workers (out of 5,500,000, i.e., 25.6 per cent) and their output amounted to $5,600,000,000 (out of $14,800,000,000, i.e., 38 per cent). Five years later, in 1909, the corresponding figures were: 3,060 enterprises (out of 268,491, i.e., 1.1 per cent) employing 2,000,000 workers (out of 6,600,000, i.e., 30.5 per cent) with an output of $9,000,000 (out of $20,700,000,000, i.e., 43.8 per cent).* [Statistical Abstract of the United States, 1912, p. 202.]

Almost half the total production of all the enterprises of the country was carried on by one-hundredth part of these enterprises! These 3,000 giant enterprises embrace 25 branches of industry. From this it can be seen that, at a certain stage of its development, concentration itself, as it were, leads right up to monopoly; for a score or so of giant enterprises can easily arrive at an agreement, while on the other hand, the hindrance to competition, the tendency towards monopoly, arises from the very dimensions of the enterprises. This transformation of competition into monopoly is one of the most important--if not the most important--phenomena of modern capitalist economy, and we must deal with it in greater detail. But first we must clear up one possible misunderstanding.

American statistics say: 3,000 giant enterprises in 250 branches of industry, as if there were only a dozen enterprises of the largest scale for each branch of industry.

But this is not the case. Not in every branch of industry; are there large-scale enterprises; and moreover, a very important feature of capitalism in its highest stage of development is so-called combination of production, that is to say, the grouping in a single enterprise of different branches of industry, which either represent the consecutive stages in the processing of raw materials (for example, the smelting of iron ore into pig iron, the conversion of pig iron into steel, and then, perhaps, the manufacture of steel goods)-- or are auxiliary to one another (for example, the utilization of scrap, or of by-products, the manufacture of packing materials, etc.).

"Combination," writes Hilferding, "levels out the fluctuations of trade and therefore assures to the combined enterprises a more stable rate of profit. Secondly, combination has the effect of eliminating trade. Thirdly, it has the effect of rendering possible technical improvements, and, consequently, the acquisition of superprofits over and above those obtained by the 'pure' (i.e., non-combined) enterprises. Fourthly, it strengthens the position of the combined enterprises compared with that of 'pure' enterprises, strengthens them in the competitive struggle in periods of serious depression, when the fall in prices of raw materials does not keep pace with the fall in prices of manufactured goods."*[Finance Capital, Russ. ed., pp. 286-87.]

The German bourgeois economist, Heymann, who has written a book especially on "mixed," that is, combined, enterprises in the German iron industry, says: "Pure enterprises perish, they are crushed between the high price of raw material and the low price of the finished product." Thus we get the following picture: "There remain, on the one hand, the big coal companies, producing millions of tons yearly, strongly organized in their coal syndicate, and on the other, the big steel plants, closely allied to the coal mines, having their own steel syndicate. These giant enterprises, producing 400,000 tons of steel per annum, with a tremendous output of ore and coal and producing finished steel goods, employing 10,000 workers quartered in company houses, and sometimes owning their own railways and ports, are the typical representatives of the German iron and steel industry. And concentration goes on further and further. Individual enterprises are becoming larger and larger. An ever-increasing number of enterprises in one, or in several different industries, join together in giant enterprises, backed up and directed by half a dozen big Berlin banks. In relation to the German mining industry, the truth of the teachings of Karl Marx on concentration is definitely proved, true, this applies to a country where industry is protected by tariffs and freight rates. The German mining industry is ripe for expropriation."*[Hans Gideon Heymann, Die gernischten Werke im deutschen Grosseisengewerbe (Combined Plants in the German Big Iron Industry--Tr.), Stuttgart, 1904, (SS. 256, 278).]

Such is the conclusion which a conscientious bourgeois economist, and such are the exception, had to arrive at. It must be noted that he seems to place Germany in a special category because her industries are protected by high tariffs. But this circumstance could only accelerate concentration and the formation of monopolist manufacturers' combines, cartels, syndicates, etc. It is extremely important to note that in free-trade England, concentration also leads to monopoly, although somewhat later and perhaps in another form. Professor Hermann Levy, in his special work of research entitled Monopolies, Cartels and Trusts, based on data on British economic development, writes as follows:

"In Great Britain it is the size of the enterprise and its high technical level which harbor a monopolist tendency. This, for one thing, is due to the great investment of capital per enterprise, which gives rise to increasing demands for new capital for the new enterprises and thereby renders their launching more difficult. Moreover (and this seems to us to be the more important point) every new enterprise that wants to keep pace with the gigantic enterprises that have been formed by concentration would here produce such an enormous quantity of surplus goods that it could dispose of them only by being able to sell them profitably as a result of an enormous increase in demand; otherwise, this surplus would force prices down to a level that would be unprofitable both for the new enterprise and for the monopoly combines." In England--unlike other countries where protective tariffs facilitate the formation of cartels--monopolist alliances of entrepreneurs, cartels and trusts arise in the majority of cases only when the number of the chief competing enterprises is reduced to "a couple of dozen or so." "Here the influence of the concentration movement on the formation of large industrial monopolies in a whole sphere of industry stands out with crystal clarity."*[Hermann Levy, Monopole, Kartelle und Trusts, Jena, 1909, SS. 286,290, 298.]

Half a century ago, when Marx was writing Capital, free competition appeared to the overwhelming majority of economists to be a "natural law." Official science tried, by a conspiracy of silence, to kill the works of Marx, who by a theoretical and historical analysis of capitalism proved that free competition gives rise to the concentration of production, which, in turn, at a certain stage of development, leads to monopoly. Today, monopoly has become a fact. The economists are writing mountains of books in which they describe the diverse manifestations of monopoly, and continue to declare in chorus that "Marxism is refuted." But facts are stubborn things, as the English proverb says, and they have to be reckoned with, whether we like it or not. The facts show that differences between capitalist countries, e.g., in the matter of protection or free trade, only give rise to insignificant variations in the form of monopolies or in the moment of their appearance; and that the rise of monopolies, as the result of the concentration of production, is a general and fundamental law of the present stage of development of capitalism.

For Europe, the time when the new capitalism definitely superseded the old can be established with fair precision: it was the beginning of the twentieth century. In one of the latest compilations on the history of the "formation of monopolies," we read:

"Isolated examples of capitalist monopoly could be cited from the period preceding 1860; in these could be discerned the embryo of the forms that are so common today; but all this undoubtedly represents the prehistory of the cartels. The real beginning of modern monopoly goes back, at the earliest, to the 'sixties. The first important period of development of monopoly commenced with the international industrial depression of the 'seventies and lasted until the beginning of the 'nineties." "If we examine the question on a European scale, we will find that the development of free competition reached its apex in the 'sixties and 'seventies. Then it was that England completed the construction of its old-style capitalist organization. In Germany, this organization had entered into a fierce struggle with handicraft and domestic industry, and had begun to create for itself its own forms of existence."

"The great revolution commenced with the crash of 1873, or rather, the depression which followed it and which, with hardly discernible interruptions in the early 'eighties, and the unusually violent, but short-lived boom about 1889, marks twenty-two years of European economic history." "During the short boom of 1889-90, the system of cartels was widely resorted to in order to take advantage of the favorable business conditions. An ill-considered policy drove prices up still more rapidly and still higher than would have been the case if there were no cartels, and nearly all these cartels perished ingloriously in the smash. Another five-year period of bad trade and low prices followed, but a new spirit reigned in industry; the depression was no longer regarded as something to be taken for granted: it was regarded as nothing more than a pause before another boom.

"The cartel movement entered its second epoch: instead of being a transitory phenomenon, the cartels became one of the foundations of economic life. They are winning one held of industry after another, primarily, the raw materials industry. At the beginning of the 'nineties the cartel system had already acquired--in the organization of the coke syndicate on the model of which the coal syndicate was later formed--a cartel technique which could hardly be improved. For the first time the great boom at the close of the nineteenth century and the crisis of 1900-03 occurred entirely--in the mining and iron industries at least--under the aegis of the cartels. And while at that time it appeared to be something novel, now the general public takes it for granted that large spheres of economic life have been, as a general rule, removed from the realm of free competition."* [Th. Vogelstein, Die finanzielle Organisation der kapitalistischen Industrie und die Monopolbildungen (Financial Organization of the Capitalist Industry and the Formation of Monopolies--Tr.J in Grundriss der Sozialökonomik (Outline of Social Economics--Tr.), VI Abt., Tübingen, 1914. Cf., also by the same author: Organisationsformen der Eisenindustrie und Textilindustrie in England und Amerika (The Organizational Forms of the Iron and Textile Industry of England and America--Tr.), Bd. I, Lpz., 1910.]

Thus, the principal stages in the history of monopolies are the following: 1) 1860-70, the highest stage, the apex of development of free competition; monopoly is in the barely discernible, embryonic stage. 2) After the crisis of 1873, a lengthy period of development of cartels; but they are still the exception. They are not yet durable. They are still a transitory phenomenon. 3) The boom at the end of the nineteenth century and the crisis of 1900-03. Cartels become one of the foundations of the whole of economic life. Capitalism has been transformed into imperialism.

Cartels come to an agreement on the conditions of sale, terms of payment, etc. They divide the markets among themselves. They fix the quantity of goods to be produced. They fix prices. They divide the profits among the various enterprises, etc.

The number of cartels in Germany was estimated at about 250 in 1896 and at 385 in 1905, with about 12,000 firms participating.* [Dr. Riesser, Die deutschen Grossbanken und ihre Konzentration im Zusammenhange mit der Entwicklung der Gesamtwirtschaft in Deutschland (The German Big Banks and Their Concentration in Connection with the Development of the General Economy in Germany--Tr.), 4. Aufl., 1912, S. 149; Robert Liefmann, Kartelle und Trusts und die Weiterbildung der volkswirtschaftlichen Organisation (Cartels and Trusts and the Further Development of Economic Organization--Tr.), 2. Aufl., 1910, S. 25] But it is generally recognized that these figures are underestimations. From the statistics of German industry for 1907 we quoted above, it is evident that even these 12,000 very big enterprises concentrate certainly more than half the steam and electric power used in the country. In the United States of America, the number of trusts in 1900 was 185 and in 1907, 250. American statistics divide all industrial enterprises into those belonging to individuals, to private firms or to corporations. The latter in 1904 comprised 23.6 per cent, and in 1909, 25.9 per cent, i.e., more than one-fourth of the total industrial enterprises in the country. These employed in 1904, 70.6 per cent, and in 1909 75.6 per cent, i.e., more than three-fourths of the total wage earners. Their output amounted at these two dates to $10,900,000,000 and to $16,300,000,000, i.e., to 73.7 per cent and 79.0 per cent of the total, respectively.

Not infrequently cartels and trusts concentrate in their hands seven- or eight-tenths of the total output of a given branch of industry. The Rhine-Westphalian Coal Syndicate, at its foundation in 1893, concentrated 86.7 per cent of the total coal output of the area, and in 1910 it already concentrated 95.4 per cent.** [Dr. Fritz Kestner, Der Organisationstwang. Eine Untersuchung über die Kampfe zwischen Kartellen und Aussenseitern (Compulsory Organization An Investigation of the Struggle Between Cartels and Outsiders --Tr.), Berlin, 1912, p. 11.] The monopoly so created assures enormous profits, and leads to the formation of technical productive units of formidable magnitude. The famous Standard Oil Company in the United States was founded in 1900: "It has an authorized capital of $150,000,000. It issued $100,000,000 common and $106,000,000 preferred stock. From 1900 to 1907 the following dividends were paid on the latter: 48, 48, 45, 44, 36, 40, 40, 40 per cent in the respective years, i.e., in all, $367,000,000. From 1882 to 1907, out of total net profits amounting to $889,000,000, $606,000,000 were distributed in dividends, and the rest went to reserve capital."* [R. Liefmann, Beteiligungs- und Finanzierungsgesellschaften. Bine Studze über den modernen Kapitalismus und das Eflektenwesen (Holding and Finance Companies--A Study in Modern Capitalism and Securities--Tr.), I. Aufl., Jena, 1909, p. 212.] "In 1907 the various works of the United States Steel Corporation employed no less than 210,180 workers and other employees. The largest enterprise in the German mining industry, the Gelsenkirchen Mining Company (Gelsenkirchener Bergwerksgesellschaf t) in 1908 had a staff of 46,048 workers and office employees."**[Ibid., p. 218.] In 1902, the United States Steel Corporation already produced 9,000,000 tons of steel.*** [Dr. S. Tschierschky, Kartell und Trust, Göttingen, 1903, p 13.] Its output constituted in 1901 66.3 per cent, and in 1908, 56.I per cent of the total output of steel in the United States.**** [Th. Vogelstein, Organisationsformen, p. 275.] The output of ore was 43.9 per cent and 46.3 per cent, respectively.

The report of the American Government Commission on Trusts states: "Their superiority over competitors is due to the magnitude of its enterprises and their excellent technical equipment. Since its inception, the Tobacco Trust has devoted all its efforts to the substitution of mechanical for manual labor on an extensive scale. With this end in view it bought up all patents that had anything to do with the manufacture of tobacco and spent enormous sums for this purpose. Many of these patents at first proved to be of no use, and had to be modified by the engineers employed by the trust. At the end of 1906, two subsidiary companies were formed solely to acquire patents. With the same object in view, the trust built its own foundries, machine shops and repair shops. One of these establishments, that in Brooklyn, employs on the average 300 workers; here experiments are carried out on inventions concerning the manufacture of cigarettes, cheroots, snuff, tinfoil for packing, boxes, etc. Here, also, inventions are perfected.* [Report of the Commissioner of Corporations on the Tobacco Industry, Washington, 1909, p. 266, cited according to Dr. Paul Tafel, Die nordamerikanischen Trusts und ibre Wirkungen auf den Fortschritt der Technik (North American Trusts and Their Effect on Technical Progress--Tr.), Stuttgart, 1913, p. 48.] "Other trusts also employ so-called developing engineers whose business it is to devise new methods of production and to test technical improvements. The United States Steel Corporation grants big bonuses to its workers and engineers for all inventions suitable for raising technical efficiency, or for reducing cost of production."** [Dr. P. Tafel, ibid., p. 49.]

In German large-scale industry, e.g., in the chemical industry, which has developed so enormously during these last few decades, the promotion of technical improvement is organized in the same way. By 1908 the process of concentration of production had already given rise to two main "groups" which, in their way, were also in the nature of monopolies. First these groups constituted "dual alliances" of two pairs of big factories, each having a capital of from twenty to twenty-one million marks: on the one hand, the former Meister Factory at Höchst and the Cassella Factory at Frankfurt am Main; and on the other hand, the aniline and soda factory at Ludwigshafen and the former Bayer factory at Elberfeld. Then, in 1905, one of these groups, and in 1908 the other group, each concluded an agreement with yet another big factory. The result was the formation of two "triple alliances," each with a capital of from forty to fifty million marks. And these "alliances" have already begun to come "close" to one another, to reach "an understanding" about prices, etc.* [Riesser, op. Cit., third edition, p. 547 et seq. The newspapers (June 1916) report the formation of a new gigantic trust which combines the chemical industry of Germany.]

Competition becomes transformed into monopoly. The result is immense progress in the socialization of production. In particular, the process of technical invention and improvement becomes socialized.

This is something quite different from the old free competition between manufacturers, scattered and out of touch with one another, and producing for an unknown market. Concentration has reached the point at which it is possible to make an approximate estimate of all sources of raw materials (for example, the iron ore deposits) of a country and even, as we shall see, of several countries, or of the whole world. Not only are such estimates made, but these sources are captured by gigantic monopolist combines. An approximate estimate of the capacity of markets is also made, and the combines "divide" them up amongst themselves by agreement. Skilled labor is monopolized, the best engineers are engaged; the means of transport are captured: railways in America, shipping companies in Europe and America. Capitalism in its imperialist stage leads right up to the most comprehensive socialization of production; it, so to speak, drags the capitalists, against their will and consciousness, into some sort of a new social order, a transitional one from complete free competition to complete socialization.

Production becomes social, but appropriation remains private. The social means of production remain the private property of a few. The general framework of formally recognized free competition remains, but the yoke of a few monopolists on the rest of the population becomes a hundred times heavier, more burdensome and intolerable.

The German economist, Kestner, has written a book especially devoted to "the struggle between the cartels and outsiders," i.e., the capitalists outside the cartels. He entitled his work Compulsory Organization, although, in order to present capitalism in its true light, he should, of course, have written about compulsory submission to monopolist combines. It is instructive to glance at least at the list of the methods the monopolist combines resort to in the present day, the latest, the civilized struggle for "organization": 1) stopping supplies of raw materials (. . . "one of the most important methods of compelling adherence to the cartel"); 2) stopping the supply of labor by means of "alliances" (i.e., of agreements between the capitalists and the trade unions by which the latter permit their members to work only in cartelized enterprises); 3) stopping deliveries; 4) closing of trade outlets; 5) agreements with the buyers, by which the latter undertakes to trade only with the cartels; 6) systematic price cutting (to ruin "outside" firms, i.e., those which refuse to submit to the monopolists. Millions are spent in order to sell goods for a certain time below their cost price; there were instances when the price of benzine was thus reduced from 40 to 22 marks, i.e., almost by half!); 7) stopping credits; 8) boycott.

Here we no longer have competition between small and large, technically developed and backward enterprises. We see here the monopolists throttling those which do not submit to them, to their yoke, to their dictation. This is how this process is reflected in the mind of a bourgeois economist:

"Even in the purely economic sphere," writes Kestner, "a certain change is taking place from commercial activity in the old sense of the word towards organizational speculative activity. The greatest success no longer goes to the merchant whose technical and commercial experience enables him best of all to estimate the needs of the buyer and who is able to discover and, so to speak, 'awaken' a latent demand; it goes to the speculative genius" (?!) "who knows how to estimate, or even only to sense in advance the organizational development and the possibilities of certain connections between individual enterprises and the banks...."

Translated into ordinary human language this means that the development of capitalism has arrived at a stage when, although commodity production still "reigns" and continues to be regarded as the basis of economic life, it has in reality been undermined and the bulk of the profits go to the "geniuses" of financial manipulation. At the basis of these manipulations and swindles lies socialized production; but the immense progress of mankind which achieved this socialization, goes to benefit . . . the speculators. We shall see later how "on these grounds" reactionary, petty-bourgeois critics of capitalist imperialism dream of going back to "free," "peaceful," and "honest" competition.

"The prolonged raising of prices which results from the formation of cartels," says Kestner, "has hitherto been observed only in relation to the most important means of production, particularly coal, iron and potassium, but has never been observed in relation to manufactured goods. Similarly, the increase in profits resulting from this raising of prices has been limited only to the industries which produce means of production. To this observation we must add that the industries which process raw materials (and not semimanufactures) not only secure advantages from the cartel formation in the shape of high profits, to the detriment of the finished goods industry, but secured also a dominating position over the latter, which did not exist under free competition."* [Kestner, op. cit., p. 254. ]

The words which we have italicized reveal the essence of the case which the bourgeois economists admit so reluctantly and so rarely, and which the present-day defenders of opportunism, led by K. Kautsky, so zealously try to evade and brush aside. Domination, and violence that is associated with it, such are the relationships that are typical of the "latest phase of capitalist development"; this is what inevitably had to result, and has resulted, from the formation of all-powerful economic monopolies.

We will give one more example of the methods employed by the cartels. Where it is possible to capture all or the chief sources of raw materials, the rise of cartels and formation of monopolies is exceptionally easy. It would be wrong, however, to assume that monopolies do not arise in other industries in which it is impossible to corner the sources of raw materials. The cement industry, for instance, can find its raw materials everywhere. Yet in Germany this industry too is strongly cartelized. The cement manufacturers have formed regional syndicates: South German, Rhine-Westphalian, etc. The prices fixed are monopoly prices: 230 to 280 marks a carload, when the cost price is 180 marks! The enterprises pay a dividend of from 12 per cent to 16 per cent--and it must not be forgotten that the "geniuses" of modern speculation know how to pocket big profits besides what they draw in dividends. In order to prevent competition in such a profitable industry, the monopolists even resort to sundry stratagems: they spread false rumors about the bad situation in their industry; anonymous warnings are published in the newspapers, like the following: "Capitalists, don't invest your capital in the cement industry!"; lastly, they buy up "outsiders" (those outside the syndicates) and pay them "compensation" of 60,000, 80,000 and even 150,000 marks.* [L. Eschwege, "Zement" in Die Bank, 1909, Vol. 1, p. 15 et seq.] Monopoly hews a path for itself everywhere without scruple as to the means, from paying a "modest" sum to buy off competitors to the American device of "employing" dynamite against them.

The statement that cartels can abolish crises is a fable spread by bourgeois economists who at all costs desire to place capitalism in a favorable light. On the contrary, monopoly which is created in certain branches of industry, increases and intensifies the anarchy inherent in capitalist production as a whole disparity between the development of agriculture and that of industry, which is characteristic of capitalism in general, is increased. The privileged position of the most highly cartelized, so-called heavy industry, especially coal and iron, causes "a still greater lack of coordination" in other branches of industry--as Jeidels, the author of one of the best works on "the relationship of the German big banks to industry," admits.* [O. Jeidels, Das Verhaltnis der deutschen Grossbanken zur Industrie mit besonderer Berucksichtigung der Eisenindustrie (The Relationship of the German Big Banks to Industry, With Special Reference to the Iron Industry--Tr.), Leipzig, 1905, p. 271.]

"The more developed an economic system is," writes Liefmann, an unblushing apologist of capitalism, "the more it resorts to risky enterprises, or enterprises abroad, to those which need a great deal of time to develop, or finally, to those which are only of local importance."** [R. Liefmann, Beteiligungs- und FinanzierungsgeseUschaften, p. 434] The increased risk is connected in the long run with the prodigious increase of capital, which overflows the brim, as it were, flows abroad, etc. At the same time the extremely rapid rate of technical progress gives rise to increasing elements of disparity between the various spheres of national economy, to anarchy and crises. Liefmann is obliged to admit that: "In all probability mankind will see further important technical revolutions in the near future which will also affect the organization of the economic system" ... electricity and aviation.... "As a general rule, in such periods of radical economic change, speculation develops on a large scale." ...*** [Ibid., pp. 465-66.]

Crises of every kind--economic crises most frequently, but not only these--in their turn increase very considerably the tendency towards concentration and towards monopoly. In this connection, the following reflections of Jeidels on the significance of the crisis of 1900, which, as we have already seen, marked the turning point in the history of modern monopoly, are exceedingly instructive:

"Side by side with the gigantic plants in the basic industries, the crisis of 1900 still found many plants organized on lines that today would be considered obsolete, the 'pure' " (non-combined) "plants, which had arisen on the crest of the industrial boom. The fall in prices and the falling off in demand put these 'pure' enterprises into a precarious position, which did not affect the gigantic combined enterprises at all or only affected them for a very short time. As a consequence of this the crisis of 1900 resulted in a far greater concentration of industry than the crisis of 1873: the latter crisis also produced a sort of selection of the best equipped enterprises, but owing to the level of technical development at that time, this selection could not place the firms which successfully emerged from the crisis in a position of monopoly. Such a durable monopoly exists to a high degree in the gigantic enterprises in the modern iron and steel and electrical industries owing to their very complicated technique far-reaching organization and magnitude of capital, and, to a lesser degree, in the engineering industry, certain branches of the metallurgical industry, transport, etc."* [Jeidels, op. cit., p. 108.]

Monopoly! This is the last word in the "latest phase of capitalist development." But we shall only have a very insufficient, incomplete, and poor notion of the real power and the significance of modern monopolies if we do not take into consideration the part played by the banks.

II. THE BANKS AND THEIR NEW ROLE

The principal and original function of banks is to serve as middlemen in the making of payments. In doing so they transform inactive money capital into active, that is, into capital yielding a profit; they collect all kinds of money revenues and place them at the disposal of the capitalist class.

As banking develops and becomes concentrated in a small number of establishments, the banks grow from humble middlemen into powerful monopolies having at their command almost the whole of the money capital of all the capitalists and small businessmen and also the larger part of the means of production and of the sources of raw materials of the given country and in a number of countries. This transformation of numerous humble middlemen into a handful of monopolists represents one of the fundamental processes in the growth of capitalism into capitalist imperialism; for this reason we must first of all deal with the concentration of banking.

In 1907-08, the combined deposits of the German joint stock banks, each having a capital of more than a million marks, amounted to 7,000,000,000 marks; in 1912-13, these deposits already amounted to 9,800,000,000 marks. An increase of 40 per cent in five years; and of the 2,800,000,000 increase, 2,750,000,000 was divided amongst 57 banks, each having a capital of more than 10,000,000 marks. The distribution of the deposits between big and small banks was as follows :*[ Alfred Lansburgh, "Funf Jahre deutsches Bankwesen" (Five Years of German Banking--Tr.), in Die Bank, 1913, No. 8, p. 728.]

PERCENTAGE OF TOTAL DEPOSITS

The small banks are being ousted by the big banks, of which nine concentrate in their hands almost half the total deposits. But we have left out of account many important details, for instance, the transformation of numerous small banks practically into branches of the big banks, etc. Of this we shall speak later on.

At the end of 1913, Schulze-Gaevernitz estimated the deposits in the nine big Berlin banks at 5,100,000,000 marks, out of a total of about 10,000,000,000 marks. Taking into account not only the deposits, but the total bank capital, this author wrote: "At the end of 1909, the nine big Berlin banks, together with their affiliated banks, controlled 11,300,000,000 marks, that is, about 83 per cent of the total German bank capital. The Deutsche Bank, which together with its affiliated banks controls nearly 3,000,000,000 marks, represents, parallel with the Prussian State Railway Administration, the biggest and also the most decentralized accumulation of capital in the old world."* [Schulze-Gaevernitz, "Die deutsche Kreditbank" in Grundriss der Sozialökonomik (The German Credit Bank in Outline of Social economics--Tr.), Tübingen, 1915, pp. 12 and 137.]

We have emphasized the reference to the "affiliated" banks because this is one of the most important distinguishing features of modern capitalist concentration. The big enterprises and the banks in particular, not only completely absorb the small ones, but also "annex" them, subordinate them, bring them into their "own" group or "concern" (to use the technical term) by acquiring "holdings" in their capital, by purchasing or exchanging shares, by a system of credits, etc., etc. Professor Liefmann has written a voluminous "work" of about 500 pages describing modern "holding and finance companies,"* [R. Liefmann, Beteiligungs- und Finanzierungsgesellschaften. Eine Studie über den modernen Kapitalismus und das Effektenwesen, I. Aufl., Jena, 1909, p. 212.] unfortunately adding "theoretical" reflections of a very poor quality to what is frequently undigested raw material. To what results this "holding" system leads as regards concentration is best illustrated in the book written on the big German banks by Riesser, himself a "banker." But before examining his data, we will quote a concrete example of the "holding" system.

The Deutsche Bank "group" is one of the biggest, if not the biggest, of the big banking groups. In order to trace the main threads which connect all the banks in this group, it is necessary to distinguish between "holdings" of the first, second and third degree, or what amounts to the same thing, between dependence (of the lesser banks on the Deutsche Bank) in the first, second and third degree. We then obtain the following picture:** [Alfred Lansburgh, "Das Beteiligungssystem im deutschen Bankwesen" (The Holding System in German Banking -- Tr.) in Die Bank, 1910, 1, p.500.]

The Deutsche Bank has holdings:		Dependence, 1st Degree	Dependence, 2nd Degree	Dependence, 3rd Degree
	Permanently	in 17 banks	of which 9 in 34	of which 4 in 7
	For an indefinite period	" 5 "	--	--
	Occasionally	" 8 "	" " 5 " 14	" 2 " 2
	Total	in 30 banks	of which 14 in 48	of which 6 in 9

Included in the eight banks dependent on the Deutsche Bank in the "first degree," "occasionally," are three foreign banks: one Austrian (the Wiener Bankverein) and two Russian (the Siberian Commercial Bank and the Russian Bank for Foreign Trade). Altogether, the Deutsche Bank group comprises, directly and indirectly, partially and totally, 87 banks; and the total capital--its own and others which it controls--is estimated at between two and three billion marks.

It is obvious that a bank which stands at the head of such a group, and which enters into agreement with half a dozen other banks only slightly smaller than itself for the purpose of conducting exceptionally big and profitable financial operations like floating state loans, has already outgrown the part of "middleman" and has become a combine of a handful of monopolists.

The rapidity with which the concentration of banking proceeded in Germany at the end of the nineteenth and the beginning of the twentieth centuries is shown by the following data which we quote in an abbreviated form from Riesser:

SIX BIG BERLIN BANKS

Year	Branches in Germany	Deposit banks and exchange offices	Constant holdings in German joint-stock banks	Total establishments
1895	16	14	1	42
1900	21	40	8	80
1911	104	276	63	450

We see the rapid expansion of a close network of canals which cover the whole country, centralizing all capital and all revenues, transforming thousands and thousands of scattered economic enterprises into a single national capitalist, and then into a world capitalist economy. The "decentralization" that Schulze-Gaevernitz, as an exponent of present-day bourgeois political economy, speaks of in the passage previously quoted, really means the subordination of an increasing number of formerly relatively "independent," or rather, strictly local economic units, to a single center. In reality it is centralization, the enhancement of the role, the importance and the power of monopolist giants.

In the older capitalist countries this "banking network" is still more close. In Great Britain and Ireland, in 1910, there were in all 7,151 branches of banks. Four big banks had more than 400 branches each (from 447 to 689); four had more than 200 branches each, and eleven more than 100 each.

In France, three very big banks, Credit Lyonnais, the Comptoir National and the Societe Generale, extended their operations and their network of branches in the following manner.* [Eugen Kaufmann, Das frantösische BankaDesen, Tübingen, 1911, pp. 356.]

	Number of branches and offices			Capital in million francs
	In the provinces	In Paris	Total	Own capital	Borrowed capital
1870	47	17	64	200	427
1890	192	66	258	265	1245
1909	1033	196	1229	887	4363

In order to show the "connections" of a big modern bank, Riesser gives the following figures of the number of letters dispatched and received by the Disconto-Gesellschaft, one of the biggest banks in Germany and in the world (its capital in 1914 amounted to 300,000,000 marks):

	Letters received	Letters dispatched
1852...	6,135	6,292
1870...	85,800	87,513
1900...	533,102	626,043

The accounts of the big Paris bank, the Credit Lyonnais, increased from 28,535 in 1875 to 633,539 in 1912.* [Jean Lescure, L'epargne en France (Savings in France--Tr.), Paris, 1914, p. 52.]

These simple figures show perhaps better than lengthy disquisitions how the concentration of capital and the growth of bank turnover are radically changing the significance of the banks. Scattered capitalists are transformed into a single collective capitalist. When carrying the current accounts of a few capitalists, a bank, as it were, transacts a purely technical and exclusively auxiliary operation. When, however, this operation grows to enormous dimensions we find that a handful of monopolists subordinate to their will all the operations, both commercial and industrial, of the whole of capitalist society; for they obtain the opportunity-- by means of their banking connections, their current accounts and other financial operations--first, to ascertain exactly the financial position of the various capitalists, then to control them, to influence them by restricting or enlarging, facilitating or hindering credits, and finally entirely determine their fate, determine their income, deprive them of capital, or permit them to increase their capital rapidly and to enormous dimensions, etc.

We have just mentioned the 300,000,000 marks capital of the Disconto-Gesellschaft of Berlin. This increase of the capital of the bank was one of the incidents in the struggle for hegemony between two of the biggest Berlin banks-- the Deutsche Bank and the Disconto. In 1870, the first was still a novice and had a capital of only 15,000,000 marks, while the second a capital of 30,000,000 marks. In 1908, the first had a capital of 200,000,000, while the second had 170,000,000. In 1914 the first increased its capital to 250,000,000 and the second, by merging with another first-class big bank, the Schaaffhausenscher Bankverein, increased its capital to 300,000,000. And of course, this struggle for hegemony went hand in hand with the more and more frequent conclusion of "agreements" of an increasingly durable character between the two banks. The following are the conclusions that this development of banking forces upon specialists in banking who regard economic questions from a standpoint which does not in the least exceed the bounds of the most moderate and cautious bourgeois reformism:

Commenting on the increase of the capital of the Disconto-Gesellschaft to 300,000,000 marks, the German review, Die Bank, wrote: "Other banks will follow this same path and in time the three hundred men, who today govern Germany economically, will gradually be reduced to fifty, twenty-five or still fewer. It cannot be expected that this latest move towards concentration will be confined to banking. The close relations that exist between individual banks naturally lead to the bringing together of the industrial syndicates which these banks favor.... One fine morning we shall wake up in surprise to see nothing but trusts before our eyes, and to kind ourselves faced with the necessity of substituting state monopolies for private monopolies. However, we have nothing to reproach ourselves with, except for having allowed things to follow their own course, slightly accelerated by the manipulation of stocks."* [A. Lansburgh, "Die Bank mit den 300 Millionen" in Die Bank, 19!4, , p. 426.]

This is an example of the impotence of bourgeois journalism which differs from bourgeois science only in that the latter is less sincere and strives to obscure the essence of the matter, to conceal the wood by trees. To be "surprised " at the results of concentration, to "reproach" the government of capitalist Germany, or capitalist "society" ("ourselves"), to fear that the introduction of stocks and shares might "accelerate" concentration in the same way as the German "cartel" specialist Tschierschky fears the American trusts and "prefers" the German cartels on the grounds that they "may not, like the trusts, excessively accelerate technical and economic progress"* [ S. Tschierschky, op.cit., p.128.]--is not this impotence?

But facts remain facts. There are no trusts in Germany; there are "only" cartels--but Germany is governed by not more than three hundred magnates of capital, and the number of these is constantly diminishing. At all events, in all capitalist countries, notwithstanding all the differences in their banking laws, banks greatly intensify and accelerate the process of concentration of capital and the formation of monopolies.

The banking system presents indeed the form of common bookkeeping and of the distribution of means of production on a social scale, but only the form," wrote Marx in Capital half a century ago (Russ. trans. Vol. III, part II, p. 144). [8] The figures we have quoted on the growth of bank capital, on the increase in the number of the branches and offices of the biggest banks, the increase in the number of their accounts, etc., present a concrete picture of this "common bookkeeping" of the whole capitalist class; and not only of the capitalists, for the banks collect, even though temporarily, all kinds of money revenues--of small businessmen, office clerks, and of a tiny upper stratum of the working class. It is "common distribution of means of production" that, from the formal aspect, grows out of the modern banks, numbering some three to six of the biggest in France, and six to eight in Germany, control billions and billions. In substance, however, the distribution of means of production is by no means "common," but private, i.e., it conforms to the interests of big capital, and primarily, of huge, monopoly capital, which operates under conditions in which the masses of the population live in want, in which the whole development of agriculture hopelessly lags behind the development of industry, while-within industry itself the "heavy industries" exact tribute from all other branches of industry.

In the matter of socializing capitalist economy the savings banks and post offices are beginning to compete with the banks; they are more "decentralized," i.e., their influence extends to a greater number of localities, to more remote places, to wider sections of the population. Here is the data collected by an American commission on the comparative growth of deposits in banks and savings banks:* [Statistics of the National Monetary Commission, quoted in Die Bank, 1910, I, p.1200.]

DEPOSITS (IN BILLIONS OF MARKS)

As they pay interest at the rate of 4 per cent and 4.25 per cent on deposits, the savings banks must seek "profitable" investments for their capital, they must deal in bills, mortgages, etc. The boundaries between the banks and the savings banks "become more and more obliterated." The Chambers of Commerce of Bochum and Erfurt, for example, demand that savings banks be "prohibited" from engaging in "purely" banking business, such as discounting bills; they demand the limitation of the "banking" operations of the post office.* [Die Bank, 1913, pp. 811, 1022; 1914, p. 713.] The banking magnates seem to be afraid that state monopoly will steal upon them from an unexpected quarter. It goes without saying, however, that this fear is no more than the expression of the rivalry, so to speak, between two department managers in the same office; for, on the one hand, the billions entrusted to the savings banks are in the final analysis actually controlled by these very same bank capital magnates, while, on the other hand, state monopoly in capitalist society is merely a means of increasing and guaranteeing the income of millionaires in one branch of industry or another who are on the verge of bankruptcy.

The change from the old type of capitalism, in which free competition predominated, to the new capitalism, in which monopoly reigns, is expressed, among other things, by a decline in the importance of the Stock Exchange. The review, Die Bank, writes: "The Stock Exchange has long ceased to be the indispensable medium of circulation that it was formerly when the banks were not yet able to place the bulk of new issues with their clients."** [Die Bank, 1914, p.316. ]

"'Every bank is a Stock Exchange,' and the bigger the bank, and the more successful the concentration of banking, the truer does this modern aphorism become."*[Dr. Oscar Stillich, Geid- und Bankroesen, Berlin, 1907, p. 169] "While formerly, in the 'seventies, the Stock Exchange, flushed with the exuberance of youth" (a "subtle" allusion to the Stock Exchange crash of 1873, to the company promotion scandals, [9] etc.), "opened the era of the industrialization of Germany, nowadays the banks and industry are able to 'do it alone.' The domination of our big banks over the Stock Exchange... is nothing else than the expression of the completely organized German industrial state. If the domain of the automatically functioning economic laws is thus restricted, and if the domain of conscious regulation by the banks is considerably enlarged, the national economic responsibility of a few guiding heads is immensely increased," so writes the German Professor Schulze-Gaevernitz,**[Schulze-Gaevernit2, Die deutsche Kreditbank in Grundriss der sozialökonomik, Tübingen, 1915, p. 101.] an apologist of German imperialism, who is regarded as an authority by the imperialists of all countries, and who tries to gloss over a "detail," viz., that the "conscious regulation" of economic life by the banks consists in the fleecing of the public by a handful of "completely organized" monopolists. The task of a bourgeois professor is not to lay bare the entire mechanism, or to expose all the machinations of the bank monopolists, but rather to present them in a favorable light.

In the same way, Riesser, a still more authoritative economist and himself "a banker," makes shift with meaningless phrases in order to explain away undeniable facts:

"... the Stock Exchange is steadily losing the feature which is absolutely essential for national economy as a whole and for the circulation of securities in particular--that of being not only a most exact measuring-rod, but also an almost automatic regulator of the economic movements which converge on it."* [Riesser, op. cit., 4th ed, p. 629.]

In other words, the old capitalism, the capitalism of free competition with its indispensable regulator, the Stock Exchange, is passing away. A new capitalism has come to take its place, bearing obvious features of something transient, a mixture of free competition and monopoly. The question naturally arises: to what is this new capitalism "passing"? But the bourgeois scholars are afraid to raise this question.

"Thirty years ago, businessmen, freely competing against one another, performed nine-tenths of the work connected with their business other than manual labor. At the present time, nine-tenths of this "brain work" is performed by officials. Banking is in the forefront of this evolution."** [Schulze-Gaevernit2, "Die deutsche Kreditbank" in Grundriss der Socialekonomik, Tübingen, 1915, p. 151.] This admission by Schulze-Gaevernitz brings us once again to the question: to what is this new capitalism, capitalism in its imperialist stage, passing?

-- -- --

Among the few banks which remain at the head of all capitalist economy as a result of the process of concentration, there is naturally to be observed an increasingly marked tendency towards monopolist agreements, towards a bank trust. In America, not nine, but two very big banks, those of the billionaires Rockefeller and Morgan, control a capital of eleven billion marks.* [Die Bank, 1912, 1, p. 435.] In Germany the absorption of the Schaaffhausenscher Bankverein by the Disconto-Gesellschaft to which we referred above, was commented on in the following terms by the Frankfurter Zeitung,[10] an organ of the Stock Exchange interests:

"The concentration movement of the banks is narrowing the circle of establishments from which it is possible to obtain credits, and is consequently increasing the dependence of big industry upon a small number of banking groups. In view of the close connection between industry and the financial world, the freedom of movement of industrial companies which need banking capital is restricted. For this reason, big industry is watching the growing trustification of the banks with mixed feelings. Indeed, we have repeatedly seen the beginnings of certain agreements between the individual big banking concerns, which aim at restricting competition."**[Quoted by Schulze-Gaevernitz, ibid.. p. 155.]

Again and again, the final word in the development of banking is monopoly.

As regards the close connection between the banks and industry, it is precisely in this sphere that the new role of the banks is, perhaps, most strikingly felt. When a bank discounts a bill for a firm, opens a current account for it, etc., these operations, taken separately, do not in the least diminish its independence, and the bank plays no other part than that of a humble middleman. But when such operations are multiplied and become an established practice, when the bank "collects" in its own hands enormous amounts of capital, when the running of a current account for a given firm enables the bank--and this is what happens--to obtain fuller and more detailed information about the economic position of its client, the result is that the industrial capitalist becomes more completely dependent on the bank.

At the same time a personal union, so to speak, is established between the banks and the biggest industrial and commercial enterprises, the merging of one with another through the acquisition of shares, through the appointment of bank directors to the Supervisory Boards (or Boards of Directors) of industrial and commercial enterprises, and vice versa. The German economist, Jeidels, has compiled most detailed data on this form of concentration of capital and of enterprises. Six of the biggest Berlin banks were represented by their directors in 344 industrial companies; and by their board members in 407 others, making a total of 751 companies. In 289 of these companies they either had two of their representatives on each of the respective Supervisory Boards, or held the posts of chairmen. We find these industrial and commercial companies in the most diverse branches of industry: insurance, transport, restaurants, theaters, art industry, etc. On the other hand, on the Supervisory Boards of these six banks (in 1910) were fifty-one of the biggest industrialists, including the director of Krupp, of the powerful "Hapag" (Hamburg-American Line), etc., etc. From 1895 to 1910, each of these six banks participated in the share and bond issues of many hundreds of industrial companies (the number ranging from 281 to 419).* [Jeidels, op. cit.; Riesser, op. cit.]

The "personal union" between the banks and industry is supplemented by the "personal union" between both and the government. "Seats on Supervisory Boards," writes Jeidels, "are freely offered to persons of title, also to ex-civil servants, who are able to do a great deal to facilitate"relations with the authorities."..."Usually, on the Supervisory Board of a big bank, there is a member of parliament or a Berlin city councillor."

The building, 60 to speak, of the big capitalist monopolies is therefore going on full steam ahead in all "natural" and "supernatural" ways. A sort of division of labor is being systematically developed amongst some hundreds of kings of finance who reign over modern capitalist society:

"Simultaneously with this widening of the sphere of activity of certain big industrialists" (joining the boards of banks, etc.) "and with the allocation of provincial bank managers to definite industrial regions, there is a growth of specialization among the directors of the big banks. Generally speaking, this specialization is only conceivable when banking is conducted on a large scale, and particularly when it has widespread connections with industry. This division of labor proceeds along two lines: on the one hand, relations with industry as a whole are entrusted to one director, as his special function; on the other, each director assumes the supervision of several separate enterprises, or of a group of enterprises in the same branch of industry or having similar interests." ... (Capitalism has already reached the stage of organized supervision of individual enterprises.) ... "One specializes in German industry, sometimes even in West-German industry alone" (the West is the most industrialized part of Germany), "others specialize in relations with foreign states and foreign industry, in information about the personality of industrialists and others, in Stock Exchange questions, etc. Besides, each bank director is often assigned a special locality or a special branch of industry; one works chiefly on Supervisory Boards of electric companies, another chemical, brewing, or beet-sugar plants, a third in a few isolated industrial enterprises, but at the same time works on the Supervisory Boards of insurance companies.... In short, there can be no doubt that the growth in the dimensions and diversity of the big banks' operations is accompanied by an increase in the division of labor among their directors with the object (and result) of, so to speak, lifting them somewhat out of pure banking and making them better experts, better judges of the general problems of industry and the special problems of each branch of industry, thus making them more capable of acting within the respective bank's industrial sphere of influence. This system is supplemented by the banks' endeavors to elect to their Supervisory Boards men who are experts in industrial affairs, such as industrialists, former officials, especially those formerly in the railway service or in mining," etc.* [Jeidels, op. cit., p. 57.]

We find the same system only in a slightly different form in French banking. For instance, one of the three biggest French banks, the Credit Lyonnais, has organized a financial research service (service des etudes financieres), which permanently employs over fifty engineers, statisticians, economists, lawyers, etc. This costs from six to seven hundred thousand francs annually. The service is in turn divided into eight departments: one specializes in collecting information concerning industrial establishments, another studies general statistics, a third with railway and steamship companies, a fourth, securities, a fifth, financial reports, etc.* [An article by Eug. Kaufmann on French banks in Die Bank, 1909, p. 851 et seq.]

The result is, on the one hand, the ever growing merger, or, as N. I. Bukharin aptly calls it, coalescence, of bank and industrial capital and, on the other hand, the growth of the banks into institutions of a truly "universal character." On this question we think it necessary to quote the exact terms used by Jeidels, who has best studied the subject:

"An examination of the sum total of industrial relationships reveals the universal character of the financial establishments working on behalf of industry. Unlike other kinds of banks, and contrary to the demand sometimes expressed in literature that banks should specialize in one kind of business or in one branch of industry in order to prevent the ground from slipping from under their feet-- the big banks are striving to make their connections with industrial enterprises as varied as possible regarding locality and branch of industry and are striving to eliminate the unevenness in the distribution of capital among localities and branches of industry resulting from the historical development of individual enterprises." "One tendency is to make the connections with industry general; another tendency is to make them durable and close. In the six big banks both these tendencies are realized, not in full, but to a considerable extent and to an equal degree."

Quite often industrial and commercial circles complain of the "terrorism" of the banks. And it is not surprising that such complaints are heard, for the big banks "command," as will be seen from the following example. On November 19, 1901, one of the big, so-called Berlin "D" banks (the names of the four biggest banks begin with the letter D) wrote to the Board of Directors of the German Central Northwest Cement Syndicate in the following terms: "As we learn from the notice you published in a certain newspaper of the 18th inst., we must reckon with the possibility that the next general meeting of your syndicate, to be held on the 30th of this month, may decide on measures which are likely to effect changes in your undertaking which are unacceptable to us. We deeply regret that, for these reasons, we are obliged henceforth to withdraw the credit which had been hitherto allowed you.... But if the said next general meeting does not decide upon measures which are unacceptable to us, and if we receive suitable guarantees on this matter for the future, we shall be quite willing to open negotiations with you on the grant of a new credit."* [Dr. Oscar Stillich, Geld und Bankwesen, Berlin, 1907, p. 148.]

As a matter of fact, this is small capital's old complaint about being oppressed by big capital, but in this case it was a whole syndicate that fell into the category of "small" capital! The old struggle between small and big capital is being resumed at a new and immeasurably higher stage of development. It stands to reason that the big banks' enterprises, worth billions, can accelerate technical progress with means that cannot possibly be compared with those of the past. The banks, for example, set up special technical research societies, and, of course, only "friendly" industrial enterprises benefit from their work. To this category belong the Electric Railway Research Association, the Central Bureau of Scientific and Technical Research, etc.

The directors of the big banks themselves cannot fail to see that new conditions of national economy are being created; but they are powerless in the face of these phenomena.

"Anyone who has watched, in recent years," writes Jeidels, "the changes of incumbents of directorships and seats on the Supervisory Boards of the big banks, cannot fail to have noticed that power is gradually passing into the hands of men who consider the active intervention of the big banks in the general development of industry to be necessary and of increasing importance. Between these new men and the old bank directors, disagreements of a business and often of a personal nature are growing on this subject. The issue is whether or not the banks, as credit institutions, will suffer from this intervention in industry, whether they are sacrificing tried principles and an assured profit to engage in a field of activity which has nothing in common with their role as middlemen in providing credit, and which is leading the banks into a field where they are more than ever before exposed to the blind forces of trade fluctuations. This is the opinion of many of the older bank directors, while most of the young men consider active intervention in industry to be a necessity as great as that which gave rise, simultaneously with big modern industry, to the big banks and modern industrial banking. The two parties are agreed only on one point: that there are neither firm principles nor a concrete aim in the new activities of the big banks."* [Jeidels, op. cit., pp. 83-84]

The old capitalism has had its day. The new capitalism represents a transition towards something. It is hopeless, of course, to seek for "firm principles and a concrete aim" for the purpose of "reconciling" monopoly with free competition. The admission of the practical men has quite a different ring from the official praises of the charms of "organized" capitalism sung by its apologists, Schulze-Gaevernitz, Liefmann and similar "theoreticians."

At precisely what period were the "new activities" of the big banks finally established? Jeidels gives us a fairly exact answer to this important question:

"The connections between the banks and industrial enterprises, with their new content, their new forms and their new organs, namely, the big banks which are organized on both a centralized and a decentralized basis, were scarcely a characteristic economic phenomenon before the nineties; in one sense, indeed this initial date may be advanced to the year 1897, when the important 'mergers' took place and when, for the first time, the new form of decentralized organization was introduced to suit the industrial policy of the banks. This starting point could perhaps be placed at an even later date, for it was the crisis of 1900 that enormously accelerated and intensified the process of concentration of industry and of banking, consolidated that process, for the first time transformed the connection with industry into the actual monopoly of the big banks, and made this connection much closer and more active."** [lbid., p. 181. ]

Thus, the twentieth century marks the turning point from the old capitalism to the new, from the domination of capital in general to the domination of finance capital.

III. FINANCE CAPITAL AND THE FINANCIAL OLIGARCHY

"A steadily increasing proportion of capital in industry," writes Hilferding, "ceases to belong to the industrialists who employ it. They obtain the use of it only through the medium of the banks which, in relation to them, represent the owners of the capital. On the other hand, the bank is forced to sink an increasing share of its funds in industry. Thus, to an ever-increasing degree the banker is being transformed into an industrial capitalist. This bank capital, i.e., capital in money form, which is thus actually transformed into industrial capital, I call 'finance capital.' " "Finance capital is capital controlled by banks and employed by industrialists."* [R. Hilferding, Finance Capital, Russ. ed., Moscow, 1912, pp. 338-39.]

This definition is incomplete in so far as it is silent on one extremely important fact: the increase of concentration of production and of capital to such an extent that concentration leads, and has led, to monopoly. But throughout the whole of his work, and particularly in the two chapters which precede the one from which this definition is taken Hilferding stresses the part played by capitalist monopolies.

The concentration of production; the monopolies arising therefrom; the merging or coalescence of the banks with industry--such is the history of the rise of finance capital and such is the content of this term.

We now have to describe how, under the general conditions of commodity production and private property, the "business operations" of capitalist monopolies inevitably become the domination of a financial oligarchy. It should be noted that the representatives of bourgeois German-- and not only German--science, like Riesser, Schulze-Gaevernitz, Liefmann and others, are all apologists of imperialism and of finance capital. Instead of revealing the "mechanics" of the formation of an oligarchy, its methods, the size of its revenues "innocent and sinful," its connections with parliaments, etc., etc., they obscure and embellish them. They evade these "vexed questions" by pompous and vague phrases, appeals to the "sense of responsibility" of bank directors, by praising "the sense of duty" of Prussian officials, giving serious study to the petty details of absolutely ridiculous parliamentary bills for the "supervision" and "regulation" of monopolies, playing spillikins with theories, like, for example, the following "scientific" definition, arrived at by Professor Liefmann: "Commerce is an occupation having for its object: collecting goods, storing them and making them available."* [R. Liefmann, op. cit., p. 476.] (The Professor's italics.) . . . From this it would follow that commerce existed in the time of primitive man, who knew nothing about exchange, and that it will exist under Socialism!

But the monstrous facts concerning the monstrous rule of the financial oligarchy are so glaring that in all capitalist countries, in America, France and Germany, a whole literature has sprung up, written from the bourgeois point of view, but which, nevertheless, gives a fairly truthful picture and criticism--petty-bourgeois, naturally--of this oligarchy.

The "holding system," to which we have already briefly referred above, should be made the cornerstone. The German economist, Heymann, probably the first to call attention to this matter, describes the essence of it in this way:

"The head of the concern controls the principal company" (literally: the "mother company"); "the latter reigns over the subsidiary companies" ("daughter companies") "which in their turn control still other subsidiaries" ["grandchild companies"], "etc. In this way, it is possible with a comparatively small capital to dominate immense spheres of production. Indeed, if holding 50 per cent of the capital is always sufficient to control a company, the head of the concern needs only one million to control eight million in the second subsidiaries. And if this 'interlocking' is extended, it is possible with one million to control sixteen million, thirty-two million, etc."* [Hans Gideon Heymann, Die gemischten Werke im deutschen Grosseisengewerbe, Stuttgart, 1904, pp. 268-69.]

As a matter of fact, experience shows that it is sufficient to own 40 per cent of the shares of a company in order to direct its affairs,** [Liefmann, Beteiligungsgesellschaften, etc., 1st ed., p. 258.] since a certain number of small, scattered shareholders find it impossible, in practice, to attend general meetings, etc. The "democratization" of the ownership of shares, from which the bourgeois sophists and opportunist so-called "Social-Democrats" expect (or say that they expect) the "democratization of capital," the strengthening of the role and significance of small-scale production, etc., is, in fact, one of the ways of increasing the power of the financial oligarchy. Incidentally, this is why, in the more advanced, or in the older and more "experienced" capitalist countries, the law allows the issue of shares of smaller denomination. In Germany, the law does not permit the issue of shares of less than one thousand marks denomination, and the magnates of German finance look with an envious eye at England, where the issue of one-pound shares (= 20 marks, about 10 rubles) is permitted. Siemens, one of the biggest industrialists and "financial kings" in Germany, told the Reichstag on June 7, 1900, that "the one pound share is the basis of British imperialism."* [Schulze-Gaevernitz in Grundriss da Sozialökonomie, V, 2, p. 110.] This merchant has a much deeper and more "Marxian" understanding of imperialism than a certain disreputable writer who is held to be one of the founders of Russian Marxism [11] and believes that imperialism is a bad habit of a certain nation....

But the "holding system" not only serves enormously to increase the power of the monopolists; it also enables them to resort with impunity to all sorts of shady and dirty tricks to cheat the public, for the directors of the "mother company" are not legally responsible for the "daughter company," which is supposed to be "independent," and through the medium of which they can "pull off" anything. Here is an example taken from the German review, Die Bank, for May 1914:

"The Spring Steel Company of Kassel was regarded some years ago as being one of the most profitable enterprises in Germany. Through bad management its dividends fell from 15 per cent to nil. It appears that the Board, without consulting the shareholders, had loaned six million marks to one of its 'daughter companies,' the Hassia, Ltd., which had a nominal capital of only some hundreds of thousands of marks. This commitment, amounting to nearly treble the capital of the 'mother company,' was never mentioned in its balance sheets. This omission was quite legal and could be hushed up for two whole years because it did not violate any point of company law. The chairman of the Supervisory Board, who as the responsible head had signed the false balance sheets, was, and still is, the president of the Kassel Chamber of Commerce. The shareholders only heard of the loan to the Hassia, Ltd. long afterwards, when it had been proved to have been a mistake". . . (the writer should put this word in quotation marks) . . . "and when Spring Steel shares dropped nearly 100 per cent, because those in the know were getting rid of them....

"This typical example of balance-sheet jugglery, quite common in joint-stock companies, explains why their Boards of Directors are willing with a far lighter heart to undertake risky transactions than individual businessmen. Modern methods of drawing up balance sheets not only make it possible to conceal doubtful undertakings from the ordinary shareholder, but also allow the people most concerned to escape the consequence of unsuccessful speculation by selling their shares in time while the individual businessman risks his own skin in everything he does....

"The balance sheets of many joint-stock companies put us in mind of the palimpsests of the Middle Ages from which the visible inscription had first to be erased in order to discover beneath it another inscription giving the real meaning of the document." (Palimpsests are parchment documents from which the original inscription has been obliterated and another inscription imposed.)

"The simplest and, therefore, most common procedure for making balance sheets indecipherable is to divide a single business into several parts by setting up 'daughter companies'--or by annexing such. The advantages of this system for various objects--legal and illegal--are so evident that big companies which do not employ it are quite the exception."* [L. Eschwege, "Tochtergesellschaften" (Subsidiary companies -- Tr.) in Die Bank, 1914, I, p.545.]

As an example of a huge monopolist company that extensively employs this system, the author quotes the famous General Electric Company (to which we shall refer again later on). In 1912, it was calculated that this company held shares in 175 to 200 other companies, dominating them, of course, and thus controlling a total capital of about 1,500,000,000 marks.** [Kurt Heinig, "Der Weg des Elektrotrusts" (The Path of the Electric Trust--Tr.) in Neue Zeit, 1912, 30 Jahrg., 2, p. 484. ]

All rules of control, the publication of balance sheets, the drawing up of balance sheets according to a definite form, the public auditing of accounts, etc., the things about which well-intentioned professors and officials--that is, those imbued with the good intention of defending and embellishing capitalism--discourse to the public, are of no avail. For private property is sacred, and no one can be prohibited from buying, selling, exchanging or mortgaging shares, etc.

The extent to which this "holding system" has developed in the big Russian banks may be judged by the figures given by E. Agahd, who for fifteen years was an official of the Russo-Chinese Bank and who, in May 1914 published a book, not altogether correctly entitled Big Banks and the World Market.* [E. Agahd, Grossbanken und Weltmark. Die wirtschaftliche und politische Bedeutung der Grossbanken im Weltmarkt unter Berücksichtigung ibres Einflusses auf Russlands Volkswirtschaft und die deutschrussischen Beziehungen (Big Banks and the World Market. The economic and political significance of the big banks on the world market, with reference to their influence on Russia's national economy and German-Russian relations.--Tr.), Berlin, 1914.] The author divides the big Russian banks into two main categories: a) banks that come under the "holding system," and b) "independent" banks--"independence," however, being arbitrarily taken to mean independence of foreign banks. The author divides the first group into three sub-groups: 1) German holdings, 2) British holdings, and 3) French holdings, having in view the "holdings" and domination of the big foreign banks of the particular country mentioned. The author divides the capital of the banks into "productively" invested capital (in industrial and commercial undertakings), and "speculatively" invested capital (in Stock Exchange and financial operations), assuming, from his petty-bourgeois reformist point of view, that it is possible, under capitalism, to separate the first form of investment from the second and to abolish the second form.

Here are the figures he supplies:

BANK ASSETS

(According to Reports for October-November, 1913)

in millions of rubles

Groups of Russian Banks	Capital invested
	Productively	Speculatively	Total
a 1) Four banks: Siberian Commercial, Russian, International, and Discount Bank	413.7	859.1	1,272.8
a 2) Two banks: Commercial and Industrial, and Russo-British	239.3	169.1	408.4
a 3) Five banks: Russian-Asiatic, St. Petersburg Private, Azov-Don, Union Moscow, Russo-French Commercial	711.8	661.2	1.373.0
(11 banks) Total: a) =	1,364.8	1,689.4	3.054.2
b) Eight banks: Moscow Merchants, Volga-Kama, Junker and Co., St. Petersburg Commercial (formerly Wawelberg), Bank of Moscow (formerly Ryabushinsky), Moscow Discount, Moscow Commercial, Moscow Private	504.2	391.1	895.3
(19 banks) Total:	1,869.0	2,080.5	3.949.5

According to these figures, of the approximately four billion rubles making up the "working" capital of the big banks, more than three-fourths, more than three billion, belonged to banks which in reality were only "daughter companies" of foreign banks, and chiefly of the Paris banks (the famous trio: Union Parisienne, Paris et Pays-Bas and Societe Generale), and of the Berlin banks (particularly the Deutsche Bank and Disconto-Gesellschaft). Two of the biggest Russian banks, the Russian (Russian Bank for Foreign Trade) and the International (St. Petersburg International Commercial Bank), between 1906 and 1912 increased their capital from 44,000,000 to 98,000,000 rubles, and their reserves from 15,000,000 to 39,000,000 "employing three-fourths German capital." The first bank belongs to the Berlin Deutsche Bank "concern" and the second to the Berlin Disconto-Gesellschaft. The worthy Agahd is deeply indignant at the fact that the majority of the shares are held by the Berlin banks, and that, therefore, the Russian shareholders are powerless. Naturally, the country which exports capital skims the cream: for example, the Berlin Deutsche Bank, in placing the shares of the Siberian Commercial Bank on the Berlin market, kept them in its portfolio for a whole year, and then sold them at the rate of 193 for 100, that is, at nearly twice their nominal value, "earning" a profit of nearly 6,000,000 rubles, which Hilferding calls "promoter's profits."

Our author puts the total "capacity" of the principal St. Petersburg banks at 8,235,000,000 rubles, about 8.25 billions, and the "holdings," or rather, the extent to which foreign banks dominated them, he estimates as follows French banks, 55 per cent; English, 10 per cent; German 35 per cent. The author calculates that of the total of 8,235,000,000 rubles of functioning capital, 3,687,000,000 rubles, or over 40 per cent, fall to the share of the syndicates Produgol and Prodamet [12]--and the syndicates in the oil, metallurgical and cement industries. Thus, owing to the formation of capitalist monopolies, the merging of bank and industrial capital has also made enormous strides in Russia.

Finance capital, concentrated in a few hands and exercising a virtual monopoly, exacts enormous and ever-increasing profits from the floating of companies, issue of stock, state loans, etc., strengthens the domination of the financial oligarchy and levies tribute upon the whole of society for the benefit of monopolists. Here is an example, taken from a multitude of others, of the "business" methods of the American trusts, quoted by Hilferding: in 1887, Havemeyer founded the Sugar Trust by amalgamating fifteen small firms, whose total capital amounted to 6,500,000 dollars. Suitably "watered," as the Americans say, the capital of the trust was declared to be 50,000,000 dollars. This "over-capitalization" anticipated the monopoly profits, in the same way as the United States Steel Corporation anticipates its future monopoly profits in buying up as many iron ore fields as possible. In fact, the Sugar Trust set up monopoly prices, which secured it such profits that it could pay 10 per cent dividend on capital "watered" sevenfold, or about 70 per cent on the capital actually invested at the time the trust was formed! In 1909, the capital of the Sugar Trust amounted to 90,000,000 dollars. In twenty-two years, it had increased its capital more than tenfold.

In France the domination of the "financial oligarchy" (Against the Financial Oligarchy in France, the title of the well-known book by Lysis, the fifth edition of which was published in 1908) assumed a form that was only slightly different. Four of the most powerful banks enjoy, not a relative, but an "absolute monopoly" in the issue of bonds. In reality, this is a "trust of big banks." And monopoly ensures monopolist profits from bond issues. Usually a borrowing country does not get more than 90 per cent of the sum of the loan, the remaining 10 per cent goes to the banks and other middlemen. The profit made by the banks out of the Russo-Chinese loan of 400,000,000 francs amounted to 8 per cent; out of the Russian (1904) loan of 800,000,000 francs the profit amounted to lo per cent; and out of the Moroccan (1904) loan of 62,500,000 francs it amounted to 18.75 per cent. Capitalism, which began its development with petty usury capital, is ending its development with gigantic usury capital. "The French," says Lysis, "are the usurers of Europe." All the conditions of economic life are being profoundly modified by this transformation of capitalism. With a stationary population, and stagnant industry, commerce and shipping, the "country" can grow rich by usury. "Fifty persons, representing a capital of 8,000,000 francs, can control 2,000,000,000 francs deposited in four banks." The "holding system," with which we are already familiar, leads to the same result. One of the biggest banks, the Societe Generale, for instance, issues 64,000 bonds for its "daughter company," the Egyptian Sugar Refineries. The bonds are issued at 150 per cent, i.e., the bank gains 50 centimes on the franc. The dividends of the new company were found to be fictitious the "public" lost from go to 100 million francs. "One of the directors of the Societe Generale was a member of the board of directors of the Sugar Refineries." It is not surprising that the author is driven to the conclusion that "the French Republic is a financial monarchy"; "it is the complete domination of the financial oligarchy; the latter dominates over the press and the government."* [Lysis, Contre l'oligarchie financiere en France (Against the Financial Oligarchy in France--Tr.), 5 ed., Paris, 1908, pp. 11, 12, 26, 39, 40, 48.]

The extraordinary high rate of profit obtained from the issue of securities, which is one of the principal functions of finance capital, plays a very important part in the development and consolidation of the financial oligarchy. "There is not a single business of this type within the country that brings in profits even approximately equal to those obtained from the flotation of foreign loans," says the German magazine, Die Bank.** [Die Bank, 1913, No. 7, p. 630. ]

"No banking operation brings in profits comparable with those obtained from the issue of securities!" According to the German Economist, the average annual profits made on the issue of industrial stock were as follows:

	Per cent		Per cent
1895	38.6	1898	67.7
1896	36.1	1899	66.9
1897	66.7	1900	55.2

"In the ten years from 1891 to 1900 more than a billion marks were 'earned' by issuing German industrial stock."*** [Stillich, op. cit., p. 143, also W. Sombart, Die deutscbe Volleswirtschaft im 19. Jahrhundert (German National Economy in the Nineteenth Century--Tr.), 2. Aufl., 1909, S. 526, Anlage 8.]

During periods of industrial boom, the profits of finance capital are immense, but during periods of depression, small and unsound businesses go out of existence; the big banks acquire "holdings" in them by buying them up for a mere song, or participate in profitable schemes for their "reconstruction" and "reorganization." In the "reconstruction" of undertakings which have been running at a loss, "the share capital is written down, that is, profits are distributed on a smaller capital and continue to be calculated on this smaller basis. Or, if the income has fallen to zero new capital is called in, which, combined with the old and less remunerative capital, will bring in an adequate return. Incidentally," adds Hilferding, "all these reorganizations and reconstructions have a twofold significance for the banks: first, as profitable transactions; and secondly, as opportunities for securing control of the companies in difficulties."* [Finance Capital, p. 172.]

Here is an instance. The Union Mining Company of Dortmund was founded in 1872. Share capital was issued to the amount of nearly 40,000,000 marks and the market price of the shares rose to 170 after it had paid a 12 per cent dividend for its first year. Finance capital skimmed the cream and earned a trifle of something like 28,000,000 marks. The principal sponsor of this company was that very big German Disconto-Gesellschaft which so successfully attained a capital of 300,000,000 marks. Later, the dividends of the Union declined to nil: the shareholders had to consent to a "writing down" of capital, that is, to losing some of it in order not to lose it all. By a series of "reconstructions," more than 73,000,000 marks were written off the books of the Union in the course of thirty years. "At the present time, the original shareholders of the company possess only 5 per cent of the nominal value of their shares,"* [Stillich, op. cit., p. 138, and Liefmann, p. 51.] but the banks "earned something" out of every "reconstruction."

Speculation in land situated in the suburbs of rapidly growing big towns is a particularly profitable operation for finance capital. The monopoly of the banks merges here with the monopoly of ground rent and with monopoly of the means of communications, since the rise in the price of land and the possibility of selling it profitably in allotments, etc., is mainly dependent on good means of communication with the center of the town; and these means of communication are in the hands of large companies which are connected, by means of the holding system and by the distribution of positions on the directorates, with the interested banks. As a result we get what the German writer, L. Eschwege, a contributor to Die Bank, who has made a special study of real estate business and mortgages, etc., calls a "bog." Frantic speculation in suburban building lots; collapse of building enterprises (like that of the Berlin firm of Boswau and Knauer, which raked in as much as 100,000,000 marks with the help of the "sound and solid" Deutsche Bank-- the latter, of course, acting through the holding system, i.e., secretly, behind the scenes, and getting out of it with a loss of "only" 12,000,000 marks), then the ruin of small proprietors and of workers who get nothing from the fictitious building firms, fraudulent deals with the "honest" Berlin police and administration for the purpose of gaining control of the issue of building site tenders, building licenses, etc., etc.* [ In Die Bank, 1913, p. 952, L, Eschwege, Der Sumpf; ibid., 1912, 1, p. 223 et seq. ]

"American ethics," which the European professors and well-meaning bourgeois so hypocritically deplore, have, in the age of finance capital, become the ethics of literally every large city in every country.

At the beginning of 1914, there was talk in Berlin of the formation of a "transport trust," i.e., of establishing "community of interests" between the three Berlin transport undertakings: The city electric railway, the tramway company and the omnibus company. "We have known," wrote Die Bank, "that this plan is contemplated since it became known that the majority of the shares in the bus company had been acquired by the other two transport companies.... We may fully believe those who are pursuing this aim when they say that by uniting the transport services, they will secure economies, part of which will in time benefit the public. But the question is complicated by the fact that behind the transport trust that is being formed are the banks, which, if they desire, can subordinate the means of transportation, which they have monopolized, to the interests of their real estate business. To be convinced of the reasonableness of such a conjecture, we need only recall that the interests of the big bank that encouraged the formation of the Elevated Railway Company were already involved in it at the time the company was formed. That is to say: the interests of this transport undertaking were interlocked with the real estate interests. The point is that the eastern line of this railway was to run through land which, when it became certain the line was to be laid down, this bank sold at an enormous profit for itself and for several partners in the transactions."...* ["Verkehrstrust" in Die Bank, 1914, I, p. 89. ]

A monopoly, once it is formed and controls thousands of millions, inevitably penetrates into every sphere of public life. regardless of the form of government and all other "details." In the economic literature of Germany one usually comes across obsequious praise of the integrity of the Prussian bureaucracy, and allusions to the French Panama scandal [13] and to political corruption in America. But the fact is that even the bourgeois literature devoted to German banking matters constantly has to go far beyond the field of purely banking operations and to speak, for instance, about "the attraction of the banks" in reference to the increasing frequency with which public officials take employment with the banks, as follows: "How about the integrity of a state official who in his inmost heart is aspiring to a soft job in the Behrenstrasse?"** ["Der Zug zur Bank" The Attraction of the Bank--Tr.) in Die Bank, 1909, I, p. 79. ] (the street in Berlin in which the head office of the Deutsche Bank is situated). In 1909, the publisher of Die Bank, Alfred Lansburgh, wrote an article entitled "The Economic Significance of Byzantinism," in which he incidentally referred to Wilhelm II's tour of Palestine, and to "the immediate result of this journey, the construction of the Baghdad railway, that fatal 'great product of German enterprise,' which is more responsible for the 'encirclement' than all our political blunders put together."* [Ibid., p. 301. ] (By encirclement is meant the policy of Edward VII to isolate Germany and surround her with an imperialist anti-German alliance.) In 1911, Eschwege, the contributor to this same magazine to whom we have already referred, wrote an article entitled "Plutocracy and Bureaucracy," in which he exposed, for example, the case of a German official named Volker, who was a zealous member of the Cartel Committee and who, it turned out some time later, obtained a lucrative post in the biggest cartel, i.e., the Steel Syndicate. Similar cases, by no means casual, forced this bourgeois author to admit that "the economic liberty guaranteed by the German Constitution has become in many departments of economic life, a meaningless phrase" and that under the existing rule of the plutocracy, "even the widest political liberty cannot save us from being converted into a nation of unfree people."** [Ibid 1911, 2, p. 825; 1913, 2, p. 962.]

As for Russia, we will limit ourselves to one example. Some years ago, all the newspapers announced that Davydov, the director of the Credit Department of the Treasury, had resigned his post to take employment with a certain big bank at a salary which, according to the contract, was to amount to over one million rubles in the course of several years. The Credit Department is an institution, the function of which is to "coordinate the activities of all the credit institutions of the country" and which grants subsidies to banks in St. Petersburg and Moscow amounting to between 800 and 1,000 million rubles.* [E. Agahd, op. cit., p. 202.]

It is characteristic of capitalism in general that the ownership of capital is separated from the application of capital to production, that money capital is separated from industrial or productive capital, and that the rentier who lives entirely on income obtained from money capital is separated from the entrepreneur and from all who are directly concerned in the management of capital. Imperialism, or the domination of finance capital, is that highest stage of capitalism at which this separation reaches vast proportions. The supremacy of finance capital over all other forms of capital means the predominance of the rentier and of the financial oligarchy; it means the singling out of a small number of financially "powerful" states from among all the rest. The extent to which this process is going on may be judged from the statistics on emissions, i.e., the issue of all kinds of securities.

In the Bulletin of the International Statistical Institute, A. Neymarck** [Bulletin de l'institut international da statistique, t. XIX, livr. II, La Haye, 1912. Data concerning small states. second column, are approximately calculated by adding 20 per cent to the 1902 figures.] has published very comprehensive, complete and comparative figures covering the issue of securities all over the world, which have been repeatedly quoted in part in economic literature. The following are the totals he gives for decades:

TOTAL ISSUES IN BILLIONS OF FRANCS

(Decades)

1871-1880............76.1

1881-1890............64.5

1891-1900...........100.4

1901-1910...........197.8

In the 1870's, the total amount of issues for the whole world was high, owing particularly to the loans floated in connection with the Franco-Prussian War, and the company-promoting boom which set in in Germany after the war. On the whole, the increase is relatively not very rapid during the three last decades of the nineteenth century, and only in the first ten years of the twentieth century is an enormous increase observed of almost 100 per cent. Thus the beginning of the twentieth century marks the turning point, not only in regard to the growth of monopolies (cartels, syndicates, trusts), of which we have already spoken, but also in regard to the growth of finance capital.

Neymarck estimates the total amount of issued securities current in the world in 1910 at about 815,000,000,000 francs. Deducting from this sum amounts which might have been duplicated, he reduces the total to 575-600 billion, which is distributed among the various countries as follows: (We will take 600,000,000,000.)

FINANCIAL SECURITIES CURRENT IN 1910

(In billions of francs)

Great Britain	142	479
United States	132
France	110
Germany	95
Russia	31
Austria-Hungary	24
Italy	14
Japan	12
Holland	12.5
Belgium	7.5
Spain	7.5
Switzerland	6.25
Denmark	3.75
Sweden, Norway, Rumania, etc.	2.5
Total	600

From these figures we at once see standing out in sharp relief four of the richest capitalist countries, each of which holds securities to amounts ranging approximately from 100 to 150 billion francs. Of these four countries, two, England and France, are the oldest capitalist countries, and, as we shall see, possess the most colonies; the other two, the United States and Germany, are leading capitalist countries as regards rapidity of development and the degree of extension of capitalist monopolies in industry. Together, these four countries own 479,000,000,000 francs, that is, nearly 80 per cent of the world's finance capital. In one way or another, nearly the whole of the rest of the world is more or less the debtor to and tributary of these international banker countries, these four "pillars" of world finance capital.

It is particularly important to examine the part which the export of capital plays in creating the international network of dependence and connections of finance capital.

IV. THE EXPORT OF CAPITAL

Typical of the old capitalism, when free competition had undivided sway, was the export of goods. Typical of the latest stage of capitalism, when monopolies rule, is the export of capital.

Capitalism is commodity production at its highest stage of development, when labor power itself becomes a commodity. The growth of internal exchange, and particularly of international exchange, is the characteristic distinguishing feature of capitalism. Uneven and spasmodic development of individual enterprises, of individual branches of industry and individual countries, is inevitable under the capitalist system. England became a capitalist country before any other, and by the middle of the nineteenth century, having adopted free trade, claimed to be the "workshop of the world," the purveyor of manufactured goods to all countries, which in exchange were to keep her supplied with raw materials. But in the last quarter of the nineteenth century, this monopoly was already undermined; for other countries, sheltering themselves by "protective" tariffs, developed into independent capitalist states. On the threshold of the twentieth century we see the formation of a new type of monopoly: firstly, monopolist capitalist combines in all capitalistically developed countries; secondly, the monopolist position of a few very rich countries, in which the accumulation of capital has reached gigantic proportions. An enormous "superabundance of capital" has arisen in the advanced countries.

It goes without saying that if capitalism could develop agriculture, which today frightfully lags behind industry everywhere, if it could raise the standard of living of the masses, who are everywhere still half-starved and poverty-stricken, in spite of the amazing technical progress, there could be no talk of a superabundance of capital. This "argument" is very often advanced by the petty-bourgeois critics of capitalism. But if capitalism did these things it would not be capitalism; for both uneven development and a semi-starvation level of existence of the masses are fundamental and inevitable conditions and premises of this mode of production. As long as capitalism remains what it is, surplus capital will be utilized not for the purpose of raising the standard of living of the masses in a given country, for this would mean a decline in profits for the capitalists, but for the purpose of increasing profits by exporting capital abroad to the backward countries. In these backward countries profits are usually high, for capital is scarce, the price of land is relatively low, wages are low, raw materials are cheap. The possibility of exporting capital is created by the fact that a number of backward countries have already been drawn into world capitalist intercourse; main railways have either been or are being built there, the elementary conditions for industrial development have been created, etc. The necessity for exporting capital arises from the fact that in a few countries capitalism has become "overripe" and (owing to the backward stage of agriculture and the impoverished state of the masses) capital cannot find a field for "profitable" investment.

Here are approximate figures showing the amount of capital invested abroad by the three principal countries:* [Hobson. Imperialism, London, 1902, p. 58; Riesser, op. cit., pp. 395 and 404; P. Arndt in Weltwirtschaftlicbes Archiv, Bd. 7, 1916, S. 35, Neymarck in Bulletin; Hilferding. Finance Capital, p. 492; Lloyd George, Speech in the House of Commons, May 4, 1915, reported in the Daily Telegraph, May 5, 1915; B. Harms, Probleme der Weltwirtschaft, Jena, 1912, S. 235 et seq., Dr. Siegmund Schilder, Entwicklungstendenzen der Weltwirtschaft (Trends of Development of World Economy--Tr.), Berlin, 1912, Band I, S. 150; George Paish, "Great Britain's Capital Investments, etc.," in Journal of the Royal Statistical Society, Vol. LXXIV, 1910-11, p. 67 et seq.; Georges Diouritch, L'expansion des barques allemandes a l'etranger, ses rapports avec le developpement economique de 1'Allemagne (Expansion of German Banks Abroad in Connection with the Economic Development of Germany--Tr.), Paris, 1909, p. 84.]

CAPITAL INVESTED ABROAD

(In billions of francs)

Year	Great Britain	France	Germany
1862	3.6	---	---
1872	15.0	10 (1869)	---
1882	22.0	15 (1880)	?
1893	42.0	20 (1890)	?
1902	62.0	27-37	12.5
1914	75-100.0	60	44.0

This table shows that the export of capital reached formidable dimensions only in the beginning of the twentieth century. Before the war the capital invested abroad by the three principal countries amounted to between 175,000,000,000 and 200,000,000,000 francs. At the modest rate of 5 per cent, the income from this sum should have reached from 8 to 10 billion francs a year. A solid basis for imperialist oppression and the exploitation of most of the countries and nations of the world, for the capitalist parasitism of a handful of wealthy states!

How is this capital invested abroad distributed among the various countries? Where is it invested? Only an approximate answer can be given to this question, but one sufficient to throw light on certain general relations and connections of modern imperialism.

APPROXIMATE DISTRIBUTION OF FOREIGN CAPITAL
(ABOUT 1910)

	(In billions of marks)
	Great Britain	France	Germany	Total
Europe	4	23	18	45
America	37	4	10	51
Asia, Africa and Australia	29	8	7	44
Total	70	35	35	140

The principal spheres of investment of British capital are the British colonies, which are very large also in America (for example, Canada) not to mention Asia, etc. In this case, enormous exports of capital are bound up most closely with vast colonies, of the importance of which for imperialism we shall speak later. In the case of France the situation is different. French capital exports are invested mainly in Europe, primarily in Russia (at least ten billion francs). This is mainly loan capital, government loans and not investments in industrial undertakings. Unlike British, colonial imperialism, French imperialism might be termed usury imperialism. In the case of Germany, we have a third type; colonies are inconsiderable, and German capital invested abroad is divided most evenly between Europe and America.

The export of capital affects and greatly accelerates the development of capitalism in those countries to which it is exported. While, therefore, the export of capital may tend to a certain extent to arrest development in the capital exporting countries, it can only do so by expanding and deepening the further development of capitalism throughout the world.

The countries which export capital are nearly always able to obtain certain "advantages," the character of which throws light on the peculiarity of the epoch of finance capital and monopoly. The following passage, for instance, occurred in the Berlin review, Die Bank, for October 1913:

"A comedy worthy of the pen of Aristophanes is lately