IMPERIALISM, THE HIGHEST STAGE OF CAPITALISM – Vladimir Lenin

Soviet leader Vladimir Lenin wrote this book to paint “a composite picture of the world capitalist system… at the beginning of the twentieth century”. This was in the middle of the Russian Revolution that began in 1917, and also in the midst of the First World War. Lenin wrote:

“the war of 1914-1918 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 re-partition of colonies, “spheres of influence” of finance capital, etc.”

In other words, the ruling classes of the major empires started the war to benefit themselves. And, of course, the poorer, subordinate classes did most of the fighting. Lenin’s view was that wars like this were an inherent feature of the current stage of capitalism. He wrote “imperialist wars are absolutely inevitable under such an economic system, as long as private property in the means of production exists.”

Many small business owners and entrepreneurs talk about a purer, more honest capitalism. They claim we lost that form of capitalism to this one. The problem with that, according to Lenin, is that we were always headed here. Capitalist competition was always going to lead to monopolies and cartels. Those “pure” forces were always going to lead to the worst abuses that we see from capitalism. We were driven here by the forces of competition and concentration. These drives existed as part of capitalism all along. This horrific state we’re in is their natural conclusion.

Lenin invokes the idea that capitalism is about private property and free competition. Yet as Marx and Lenin both tried to show, capitalism changes over time. Capitalism is no longer about “small proprietor[s], competition, democracy” for Lenin. It’s about domination. Furthermore, global capitalism is about the “financial strangulation” of most of the world. This is done for the benefit of a few of the most advanced countries. Germany, America, Great Britain, Japan, etc.

These colonial powers pursue superprofits. Keep in mind, capitalists get profit from exploiting the labor of workers. They get plenty of this at home. By superprofits, we mean even greater profits, above and beyond their domestic ones. These come from exploiting workers and resources from colonized nations. Superprofits can be so great that capitalists use them to bribe labor leaders. The same goes for more successful members of the working class. They start to realize the system of exploiting foreign nations works to the benefit of workers in imperial nations. Capitalists argue American life improved when clothing, food and electronics became cheaper. This was largely due to companies exploiting cheaper labor and resources abroad. That goes for the average worker as much as the CEO, supporters argue. Lenin believes this subset of the working class ultimately starts to see its interests align with capitalists. They start defending their policies and furthering their goals.

Capitalism concentrates production of goods and services into a few rich companies. It may not seem that way at first, or in any particular industry. But that’s the trend, long term, everywhere. Lenin cites a variety of statistics from his time in an attempt to prove this. They show that not only is productive output increasing, but it’s also concentrated in fewer and fewer firms as time goes along. “Tens of thousands of huge enterprises are everything: millions of small ones are nothing,” he writes. These rich enterprises are aided by banks and the finance capital they control.

Combination also important to Lenin. By this, he means a process of combining many enterprises into one. Each individual enterprise concerns itself with a different part of the production process. Together, they take hold of the entire process from raw material to finished product. This allows them an even greater share of profits. We also see conglomerates attempting this in modern capitalism.

Concentration of capital leads to monopoly. Larger firms swallow up the smaller ones through attrition, bankruptcy buyouts and mergers. This is all driven by free competition. Yet following this inherent road of capitalism leads to the end of competition.

“Competition has reached the point at which it is possible to make an approximate estimate of all sources of raw materials… Not only are such estimates made, but these sources are captured by gigantic monopolist combines. An approximate estimate of the capacity of the markets is also made, and the combines “divide” them up amongst themselves by agreement.”

“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.”

Lenin argues that success in business is no longer about who makes the best product for the buyer. Not when monopolies and cartels get involved, at least. It’s about who can best navigate this more vast world of global enterprises and banks. The winners can secure investment, corner control of key resources, and crush competitors. Bankers and finance guys reap most of the rewards.

“Cartels became one of the foundations of economic life… 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 among themselves to be produced. They fix prices. They divide the profits among the various enterprises.”

Under imperialism, banks and finance capital become the new masters of the system. Lenin writes that “in such periods of radical economic change… speculation develops on a large scale.” He’s saying that when the economy is good and growth is high, investors are going to throw a lot of money into the market. They’ll invest in every venture or idea they think might take off. They’ll also try to buy up as many resources, and as much in land, facilities or tools they can to get an advantage.

So how does banking turn that process into huge profits, and how does it leave bankers in charge? Banks play the “middleman” role between those who have cash saved and those who need it to do business. They “transform inactive money capital into active, that is, into capital yielding a profit”. A customer’s deposits get put to work by bankers. Other companies or individuals borrow that cash to produce goods and services. A transaction here and there doesn’t give banks that much power over their customers. But multiply that by hundreds or thousands of transactions on an ongoing basis? For one thing, the banks are making huge amounts of money on interest and other fees. But that volume also gives a bank immeasurable information about their clients. That information is power, Lenin argues.

The finance gurus then find ways to levy that power into real influence. Bank directors gain specializations to work with specific industries. You’ll find some specializing in tech, or fossil fuels, or manufacturing, and so on. Banks offer seats on their boards of directors to ex-government officials and other notables. They can grease the wheels of transactions, removing regulatory hurdles. The result is that industries and banks become ever more closely intertwined. Banks can then use the threat of withdrawing credit or favorable terms to get companies to do their bidding. Banks hold more and more of the real capital while the industrialists only get to borrow it.

Once banks have concentrated themselves enough power and influence, they form a near-monopoly of their own. They get to set terms with their clients, extract more in profits, and get their fingers in more pies – the world over. Remember how in capitalist crises, the small fish get eaten by the bigger fish who can survive? It’s the same with banks. In bad times, the bigger ones consolidate their power, “merging” and “reorganizing”. The revolving door of corruption deepens. Officials who want cushy jobs and perks collude with the banks and corporations that supply them. Contracts and positions get awarded not based on competition but based on “who you know”. It’s not about traditional ideas of merit or being the most innovative and efficient. It’s about connections.

In this new imperialist system, the landowners/landlords and finance firms/banks reign. The richest countries in Lenin’s time were Britain, France, Germany and the US. They were also the finance capital leaders, and the rest of the world was in their debt and supplying tribute to them. Much of that world was subject to them as outright colonies, as well.

Small banks get eaten up by bigger, more concentrated banks over time. This is much like corporations do in the long term. Through this process, “scattered capitalists are transformed into a single collective capitalist.” And remember, it’s no longer the glory days of capitalism when the guy who produced the most goods most efficiently was king. Per Lenin, “typical of the latest stage of capitalism, when monopolies rule, is the export of capital.”

Some countries and some parts of economies are always going to develop faster than others under capitalism. A few, the richest, have way way way more available capital than the rest. Lenin argues that capitalists could focus their resources on alleviating poverty and starvation. They could improve the living standards of almost everyone to decent levels. But for the most part, they won’t. If they did, they wouldn’t be capitalists living under capitalism. Their incentives would have to be different. They’d be losing an opportunity to maximize their profits if they acted so selfless.

And so keeping many people in poverty, working for poverty wages, is to their advantage. So is exploiting nations that are poorer in capital. There, land, labor and raw materials are cheap. It’s a great opportunity for capitalists to export their machines and factories there. They can make greater profits than they will in the overdeveloped “core” countries. In doing this, they create a truly “global market”. Countries and companies make informal agreements to divide the world. Their interests and branch offices reach far and wide.

Lenin argues that after capitalism matured in the major capitalist countries, it expanded. It had to do this; the only other choice was stagnation, and eventual failure. The period of colonial expansion had a direct connection to the needs of Big Finance. Once capitalism finished taking hold in Britain, its leading politicians endorsed more colonization. Their corporations needed new markets for their goods and new land for settlement. They also needed more resources and cheap labor to exploit.

Lenin also notes that earlier forms of imperialism existed, too. Britain practiced these earlier forms, as did France, Portugal and Spain. Rome, as well, was a major imperial power in its own manner and time. Lenin is referring to the specific form of imperialism dominated by financial interests. It doesn’t mean he doesn’t recognize the others.

Monopolies try to secure exclusive use of resources for themselves. They buy up as many mines and oilfields they can to make this happen. As resources grow scarcer, the competition for them gets more feverish. And as monopolies and conglomerates get bigger, it costs more to compete with them. The startup costs are too great for upstart competitors. You’d need too much in resources, too much in labor, too much in machinery. Competitors get priced out of the market. This assures that those that are already winning keep winning. Lenin quotes economist Hilferding by saying “finance capital does not want liberty, it wants domination”.

This goes in line with what Lenin says is the defining characteristic of imperialism. It’s not about free competition anymore. It’s about gaining control of everything and crowding everyone else out. It’s about “cartels, syndicates, and trusts.” It is the combined power of big industrial firms, big banks, and the governments that serve both. He lays out the five essential characteristics like this:

1. Concentrating production and capital into monopolies
2. Merging banks with industrial corporations, creating a “financial oligarchy”
3. Exporting capital becomes as important, or more important, than exporting commodities
4. forming cartels and monopolist conglomerates that carve out their territory on the globe;
5. the most powerful capitalist countries directly colonizing the world.

Lenin makes an argument that seems very hard to refute. He notes that he even takes pains to cite capitalist economists and their data to prove his main points. It’s true, he says, that there are other ways to muster growth besides conquering new markets. Corporations will still find ways of increasing efficiency and technology. These will allow them to squeeze a little more profit out of their existing enterprises. But in the end, the trend is clear to Lenin. Capital will continue to conquer, exploit, and squeeze out whatever it can from weaker nations.

Over time, the leading capitalist nations become less about making things. Instead, they’re creditors, holding poorer nations in debt. They use this to control these nations and extract profits from them. Meanwhile, elites work to divide the working class that still exists there. Better educated, better-paid domestic professional workers and managers are one side. They’re encouraged to think of their own interests as aligning with capitalists. This sets them in opposition to poorer, less-trained workers. Many of the latter are immigrants or minorities in places like the United States. Lenin (and Marx before him) argue this allows capitalists to even capture trade unions. These institutions, in theory led by and for workers, can support capitalist policies. Working class people in colonizing nations begin looking down on their counterparts abroad. This further weakens the working class, helping to worsen inequality. Weak reforms get proposed, which may raise wages and conditions – for a time – for domestic workers. But they do little to alter the system itself. It also makes revolution in the leading capitalist countries less likely.

Lenin’s arguing we can’t fight monopolies and cartels to bring back old-school capitalism. Even if you were successful at rolling back the clock, you’ll end up in the same position. Capitalism will always tend to concentrate more capital into fewer hands. The more successful capitalism is, the faster this will happen. To the author, there’s no alternative except eliminating capitalism and building another system.

Capitalists end up meeting considerable resistance to this form of imperialism, though. Despite being exploited, colonized nations still find ways to develop. They may even gain the resources they need to liberate themselves. Sooner or later, a colonized country starts to see itself as a nation in waiting, and a nation oppressed. They begin to form resistance movements that seek independence from colonizers. The leaders of finance capital know this is a major threat to their profits. They try to stop it, but at a certain point, the only way they can do this is by using more and more military force. This is often unsustainable for financial reasons, or due to public opinion at home or abroad.

To Sum Up:

• Imperialism is a form of international monopoly capitalism
• It grows out of free competition but is a different, higher form of capitalism
• Imperialism is also aided by colonial policy. Capitalists’ desire for more markets and profits leads to more demand for colonies.
• Imperialist countries and their dominant monopolies seize raw materials wherever possible
• Imperialists create monopolies and cartels
• They depend on the power of finance capital (banks)
• “The fight against imperialism is a sham and humbug” if you’re not also opposing its apologists. For Lenin, this includes the social democrats who try to make minor reforms. They claim they can build a kinder, gentler international capitalism. Lenin believes he’s proven they’re wrong.