Lenin's imperialism as the highest stage of capitalism

Imperialism: The Highest Stage of Capitalism

Lenin begins Imperialism: The Highest Stage of Capitalism by describing World War I as an imperialist war, which he defines as a predatory war to plunder and annex, a war for the benefit of capitalistic moneyed interests in a struggle for monopolistic control. He sees the economic system of capitalism as "a world system of colonial oppression" which makes slaves of the majority of the world's people to profit a handful who control the wealth. The war, he states, was to decide which financial "marauders" (the Germans or the English) would gain the lion's share of the world's wealth. He argues that as long as imperialism exists, peace and reform will be impossible.

Meanwhile, tens of millions of downtrodden people are "oppressed, deceived and duped," their clear sight obscured by the contradictions of imperialism and the revolutionary crisis brewing all over the world. Once their eyes are opened, he predicts (in 1916) a proletariat revolution will take place. Lenin believes that imperialism, which he sees as a final stage of capitalism, signals decay of the system, something like the "crisis" of an illness when the body begins to lose ground and death approaches. This is my metaphor, but I think it is apt because Lenin equates capitalism with parasitism, and parasitism implies a disease. The parasites are the "less than one-tenth of the inhabitants of the globe...of very rich and very powerful states which plunder the whole world...." (p. 13).

Because of enormous profits in exports, billions of dollars over and above huge profits gained at home, capitalists have money to bribe the "labor aristocracy" who will side with the them in a revolution (because the rich, with their bribes and incentives, allow the labor aristocracy to live so comfortably). Therefore, Lenin believes the roots of the system must be exposed and its political and sociological implications recognized. This is his stated purpose for writing the book. Imperialism, he says, is the signal that social revolution is imminent. Lenin's thesis is that capitalism has evolved through clear and successive stages of development into imperialism

According to Lenin, the first stage of capitalism was the development of free competition at the beginning of industrialization around 1860. However, this stage, which he refers to as the "old" style capitalism, where manufacturers competed with each other for buyers of their goods, lasted only about 40 years. The old style gave rise to ever-larger enterprises where fewer and fewer big companies began to control more and more production. This he calls a concentration of production.

Monopolies were the intended result. Monopolies were often established through the development of cartels, trusts, and syndicates -- large combinations of enterprises which banded together to limit competition and fix prices. Cartel members agree on conditions of sale and terms of payment, and the amount of goods that will be produced. They divide the market among themselves. They fix the prices and divide the profits (p. 22).

Lenin argues that the cartels have become part of "the foundation of economic life," so that now people accept without question that "large spheres" of industry have been removed from the realm of free competition (p. 21). He shows with statistics the steady growth and proliferation of cartels. For example, the United States had 185 trusts in the year 1900; by 1907, the number of trusts had increased to 250.

He states that "Not infrequently cartels and trusts concentrate in their hands seven or eight tenths of the total output of a given branch of industry" (pp. 22-23). They gain a grip on all the business. The resulting transformation of free competition into monopolies is "a general and fundamental law of the present stage of development of capitalism" (p. 20).

When competition is transformed into a monopoly, the focus of industry shifts to technical proficiency and reducing the cost of production. Workers sometimes are offered bonuses to come up with inventions and ideas for greater, more efficient productivity. Lenin refers to this as part of the "socialization of production" (p. 25). The old free competition between manufacturers is gone at this point. Concentration has reached the point where combines can estimate sources of raw materials (who has them and how much) and capture control over them. Competitors who cannot get raw materials are forced out. The capacity of the market is also estimated, and the combines divide up the market between themselves. They gain control over transportation and monopolize skilled labor and get the best engineers. The organization and cooperation amounts to an established social order. Despite this socialization that develops, however, wealth and control remain in the hands of a few private owners.

Lenin states that cartels and combines are so powerful they throttle smaller industries. He lists eight methods cartels use for squelching competition: (1) Stop supply of raw materials; (2) stop supply of labor by means of corrupt "alliances" with trade unions, which permit their members to work only for cartels; (3) cut off deliveries; (4) close trade outlets; (5) make agreements with buyers so they only trade with the cartels; (6) cut prices to ruin outside companies (after they're ruined, raise the prices); (7) stop credit; and (8) boycott. At this stage competition is absent, and Lenin states: "...the big profits go to the 'geniuses' of financial manipulation" (p. 27). Thus, in his estimation, at this stage the most successful business person is not the one who understands the market and what customers need, but the one who has secured a dominating position through dirty tricks and unscrupulous practices.

At this point Lenin stops to discuss the pivotal role of banks in the "new capitalism." Beginning around the turn of the last century banks began to merge. Smaller banks were often absorbed and subordinated into bigger banks. As this happened, the function of banks began to change. Lenin states "The principal and primary function of banks is to serve as an intermediary in the making of payments." Part of this intermediary role was to extend credit. But a transformation took place in which numerous intermediaries were reduced to a handful of monopolists, and the old capitalism based on free competition turned into monopoly. Small banks were pushed aside by big banks, or turned into branches of big banks. The result was the development of big banking groups. These big banking groups were no longer intermediaries, but combines of monopolists. All the capital and revenues became centralized, first nationally and then internationally. This "concentration of capital..." greatly changed "the significance of banks" (p. 35).

Lenin explains that bank operations grew to enormous dimensions so that "a handful of monopolists control all the operations, both commercial and industrial, of the whole of capitalist society" (p. 35). He goes on to say that banks know the exact financial situations of various capitalists and can control them by restricting or enlarging their credit. Banks can ruin a client or "increase their capital rapidly to enormous dimensions" (p. 36); in either case, the capitalist is dependant on the bank. Where once banks were merely intermediaries, now banks are able to "intensify and accelerate the process of concentration of capital and the formation of monopolies" (p. 37). Big industry has become more and more dependant on a small number of big banking groups. Plus, he points out the growing inter-relationship between banks and industry. Big industrialists sit on the boards of banks and share in their management.

Finance capital," the most common form of capital, is raised by the sale of securities (stocks, bonds, etc.) to company shareholders. People who run the company are supposed to be responsible to the shareholders and to safeguard the shareholders' money, but this is not always what happens in actual practice. Lenin argues that the "holding system" produces a financial oligarchy, that is, a system in which a few control everything for corrupt and selfish purposes.

The holding system enables monopolists "to resort with impunity to all sorts of shady tricks to cheat the public, for the directors of the parent company are not legally responsible for the subsidiary companies, which are supposed to be 'independent'" (p. 49). The directors of the parent company control the subsidiary companies, which in turn control other subsidiaries; thus, the subsidiaries are not really independent. Balance sheets are typically indecipherable for shareholders to read or understand, and this is how the directors want it: "The simplest and, therefore, most common procedure for making balance sheets indecipherable is to divide a single business into several parts by setting up subsidiary companies" (p. 50).

Subsidiary companies are so commonplace, Lenin argues, that it would be difficult to find an important company that did not use them for various legal and illegal advantages. Lenin concludes that "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., tightens the grip of financial oligarchies and levies tribute upon the whole of society for the benefit of monopolists" (p. 53). He points out that four countries (in 1917) -- England, France, Germany, and the United States -- own 80 per cent of the world's finance capital; thus, in his view, the whole rest of the world is subjugated, that is, indebted to and tributary to those four "international banker countries."

Where once monopolists exported goods to other countries to make a profit, now they export finance capital. This is another symptom of the imperialistic stage of capitalism -- what to do with excess wealth? Lenin states that it would not be capitalism if the excess wealth were used to improve the quality of life for the millions of people who are still underfed and leading lives of misery. Instead, the capital is exported to "backward" countries and used to make more profits. In backward countries (now called developing nations) where there is a shortage of capital, labor is cheap, raw materials are cheap, and the price of land is low -- ideal conditions for making a profit. Investment in foreign countries brings big returns. For one thing, it accelerates the development of capitalism in those countries, and it allows the countries that are exporting capital to obtain certain advantages. For example, the investor may get "a coaling station, a contract to construct a harbour, a fat concession, or an order for guns" (p. 65). An industry that loans money to a poor country profits first from the loan itself; then, it pockets other profits from the same loan when the borrower uses the loan to buy goods from the lender (for example, to purchase railway materials from the Steel Syndicate). Instead of competition for the market, "connections" are used to make these profitable transactions: "The most usual thing is to stipulate that part of the loan that is granted shall be spent on purchases in the country of issue, particularly on orders for war materials, or for ships, etc." (p. 66).

With this development of exporting capital, the result has been gigantic international cartels, trusts, and syndicates, or monopolist capatalist combines, as Lenin calls them. Together the combine divides up the world into spheres of influence, sets prices, and shares the profits with each other, thus creating world-wide "super-monopolies."

Lenin cites the example of the electric industry at the turn of the last century. In Europe A.E.G., which consisted of seven or eight companies, each formed by combining several companies, by 1912 had become just one big combine controlling countless companies. In the United States General Electric came out on top. The result was there were only two electric companies in the world, A.E.G. And General Electric, and no other electric company anywhere could be completely independent of them. These two made an agreement to divide the world between them, and competition ended. This has happened in many industries -- oil, mercantile shipping, railroads, and steel being some examples Lenin gives. He then explains: "The capitalists divide the world, not out of any particular malice, but because the degree of concentration which has been reached forces them to adopt this method in order to get profits" (p. 75). Capitalists then form alliances based on the economic division of the world, while parallel alliances are formed between governments in their struggles for colonies and for economic territories.

Aggressive colonization and territorial division of the world began precisely when the "old capitalism" or free competition ended and monopolies emerged. Thus, Lenin sees the development of exporting capital as inextricably linked to colonization.

Before free competition ended, the prevailing thought was that colonies would be liberated, that their separation from Britain, for example, was "inevitable and desirable" (p. 78). The colonies were regarded as burdensome. But by the turn of the century, opinion had shifted and imperialism (or acquiring new lands) was seen as a way to solve social (such as hunger and homelessness) problems. Colonial possessions (and the wealth they generated) increased enormously. Colonialism did exist before capitalism, but it was different (p. 82). With modern colonialism, monopolist combines dominate, and all sources of raw materials are under their control. The cartels make it impossible for others to compete with them. Colonial possession gives them a clear field in the subjugated country. Lenin points out: "The more capitalism is developed, the more the need for raw materials is felt, the more bitter competition becomes, and the more feverishly the hunt for raw materials proceeds throughout the whole world, the more desperate becomes the struggle for the acquisition of colonies" (p. 82). Colonial exploitation is imperialism, the final stage of capitalism.

To sum up, capitalism starts out as free competition, but through growth, cartels, and concentration of production, turns into monopoly, which is the opposite of free competition. Imperialism inevitably occurs during the monopoly stage of capitalism. Finance capital, the wealth of a few monopolist banks, leads to a division of the world into economic territories and through unhindered colonial policies, ownership of these countries. Lenin argues there are five steps or stages capitalism goes through:

The concentration of production and capital developed to such a high stage that it created monopolies which play a decisive role in economic life.

The merging of bank capital with industrial capital, and the creation, on the basis of this "finance capital," of a "financial oligarchy."

The export of capital becomes extremely important, as distinguished from the export of commodities.

The formation of international capitalist monopolies which share the world among themselves.

The territorial division of the whole world among the greatest capitalist powers is completed (p. 89).

When all these conditions have been established, imperialism is in full force. It is not just a policy carried out by countries towards other countries. It is not just a matter of annexation. It is part of an economic system in which there is rivalry between great monopolistic powers. He asks the question, "Is there under capitalism [italics his] any means of removing the disparity between the development of productive forces and the accumulation of capital on the one side, and the division of colonies and 'spheres of influence' for finance capital on the other side -- other than by resorting to war?" (p. 98). He implies there is not. Lenin maintains it is impossible to reform the system and no peace will ever be secured under it. "Imperialism is the epoch of finance capital and of monopolies, which introduce everywhere the striving for domination, not for freedom" (p. 120).

Lenin's analysis is based on his reading the work of economists, both for and against capitalism. He uses statistics to support his arguments. He also lived through and observed the second industrial revolution. He was an eye witness to aggressive colonization when countries scrambled to overtake smaller, weaker countries and thus increase their wealth. He reached the conclusion that when productive forces are aligned on one side and colonies with raw materials (dominated by finance capital) are on the other, war will ensue.

In Lenin's analysis of each stage of capitalism one cannot help but see examples everywhere of what he is claiming, so in some respect's his arguments have merit. For example, in the United States, the richest country on earth, the contradictions of capitalism are quite apparent in the suffering of homeless and destitute people who often live in areas where the temperature drops below 0 degrees (Farenheit). Furthermore, the effect of capitalism on the environment has been devastating. The fast food industry, for just one example, has been rapidly turning the rain forests into pasture land for grazing cattle, endangering the future production of oxygen these forests provide for all the world's people and animals to breathe. We also see big companies ruining their competition in a race to monopolize the market. Wal-mart, the largest retail store in the United States, does this by cutting prices so drastically that smaller stores cannot compete. Wal-mart is known for coming into a town, building on the outskirts, and destroying its "downtown" area where independent stores are put out of business. Soon the town has a depressed, boarded-up area downtown with abandoned buildings, litter, and crime.

Something Lenin failed to foresee was the development of "Agri-business." The capitalist answer to the farm problem was to completely run small farmers out of business in the United States. Agri-business raises animals in factories where animals have no quality of life and are sustained by drugs and growth hormones which make them ready for slaughter sooner, thus increasing the profits. Aside from the moral issues involved in the inhumane and cruel treatment of animals, many people in the U.S. are concerned about the quality of the food itself, which is cheap and plentiful, but full of pesticides, hormones, drugs, and preservatives which people cannot help ingesting into their human bodies. Capitalism, of course, does not concern itself with such problems.