We have republished the part of the article dealing with Finance Capital has this has been seen has critical for understanding Imperialism but we are particularly grateful to Sam Williams for pointing out that Lenin saw Japan has Imperialist despite its lack of finance capital.
Under the old capitalism of free competition that reached its highest level of development in Britain during the first three-quarters of the 19th century, businesses were owned by individuals or by small groups of partners. Individual owners of ongoing businesses often speak of “my employees” or “my workers” or “my hands,” as though they actually own their workers outright, though under capitalism they only own their purchased labor power.
What is today called investment banking was just developing in 19th-century Britain and was generally conducted by firms that were separate from those conducting commercial banking. The commercial banks were relatively small-scale enterprises—humble middlemen, as Lenin called them—a far cry from the gigantic universal banks that dominate capitalism today. A business owned by a single “boss” or a small group of partners was typical of the old industrial capitalism of the age of free competition. These relations can still be found in those sectors of the present-day capitalist economy where production is carried out on a relatively small scale.
The situation is quite different with those capitalists who own only finance capital—which I, following Marx and Engels, have called money capitalists in this blog. The bank commercials talk about making your money work for you. But whoever saw a gold bar, dollar bill or checkable bank deposit actually work? What the bank is really saying to the “moneyed public”–owners of usually small amounts of “moneyed” capital—is that by converting their money savings into capital the bank will arrange to have the surplus value-producing working class work a certain number of hours for its customers free of charge. It is only in this sense that money “works.”
Nowadays, stocks, bonds and money market instruments are often owned by mutual funds managed by professional money managers. The individual owners of the mutual fund shares often don’t directly own such assets. The reason that mutual funds are so popular is that intelligent “stock picking” is difficult for small “investors.” Small, and sometimes not so small, individual money capitalists lack the knowledge to distinguish which stocks are “overvalued” on the stock market from those that are “undervalued.” While the stock market is often wrong about the value of stocks, its participants collectively are more informed than most individual capitalists.
A mutual fund embodies the banking principle. Individuals who have surplus money or savings do not have the ability to individually lend their surplus money, so they deposit it in a bank that does the lending and shares the interest income with its depositors. A mutual fund applies this principle to stocks, bonds, money market funds and so on. Very often the mutual funds are actually owned by large universal banks.
The same is true of pension funds. A group of employees, themselves not capitalists, save for their retirement. A certain amount of their salaries or wages is set aside and invested. But the employees are in no position to know what to invest their retirement savings in. Therefore, their savings are pooled and put under the control of a professional money manager who is knowledgeable, or supposedly knowledgeable, and in a position to invest the savings more or less intelligently.
One of the changes in monopoly capitalism since Lenin’s day is that back then the great mass of corporate shares was still owned and managed by individuals.
Today, in contrast, the great mass of stocks, bonds and other securities is managed by institutional investors such as bank-managed trust funds, pension funds, mutual funds, hedge funds, insurance companies and money market funds. These institutions, in turn, are increasingly owned or controlled by the few universal banks. In this way, “moneyed capital” is transformed into finance capital controlled by a few gigantic banking institutions.
In a country rich in finance capital, there is in addition to the extremely rich people found in all capitalist countries—for example, the Russian and Ukrainian “oligarchs”–there is a large “middle class” of “modest savers.” This middle class comes to include the more privileged upper levels of the working class, who may own some mutual funds or be beneficiaries of pension funds through various job-related retirement plans.
It is quite possible for a country to be poor in finance capital even if it is relatively rich in industrial capital. For example, a large number of factories, mines, and large-scale capitalist farms might be located in such a country, making it rich in industrial capital. Britain is the classic example of a country that in the age of free competition was rich in industrial capital—it was the workshop of the world—while today Britain is not so rich in industrial capital but very rich in finance capital.
The U.S. has evolved in the same direction. While a century ago the U.S. was very rich in industrial capital, today de-industrialization has vastly reduced the relative wealth of the U.S. in industrial capital. However, the U.S. remains very much number one in finance capital.
Not all forms of monetary savings represent finance capital. In India and to a certain extent China, savings often consist of gold jewelry—essentially money material, gold bullion—that is shaped into jewelry. Savings in this form do not represent finance capital or capital in any form. The mere ownership of gold bullion—money—does not entitle its owner to an atom of surplus value. Generally, oppressed countries, with their underdeveloped banking systems, are poor in finance capital. A relatively large amount of savings are held in the form of hoarded money that is not converted into capital. In the more developed countries, “savings” are held in banks, mutual funds, money market funds, and so on.
This is one of the reasons why empirical-minded Keynes, who served in his youth as a colonial official in India, considered gold a “barbarous relic.”
Unlike hoarded gold, each unit of finance capital—a share in a mutual fund, hedge fund, or certificate of deposit issued by a bank—is a claim on a definite quantum of the total surplus value produced by the global working class. If you own a portion of finance capital in whatever form, you have a certain percentage of the world’s wage slaves working for you. The ownership of this “moneyed capital” is in its great mass centralized in the hands of financial institutions concentrated in certain countries. The countries that are rich in finance capital exploit the countries that are poor in finance capital.
Closely related to finance capital is wealth in real estate.
Real estate is a combination of landed property and the buildings built on top of it. Though not identical to finance capital, real estate is closely bound up with finance capital. The richer a country is in terms of finance capital the more the price of landed property is inflated in the country and therefore the more “valuable”–in terms of the amount of money it exchanges for on the market. Ultimately, the rising value of real estate originates in the unpaid labor of the global working class.
Therefore, how rich a country is in finance capital—or what amounts to the same thing, the extent to which a country is an exploiter or exploited country—will have a profound effect on the class struggle and the politics of the country, since large sections of the upper levels of the working class can own small amounts of finance capital, or are beneficiaries of pension funds, own stocks and bonds through Individual Retirement Accounts, or hold shares in mutual funds.
These more privileged workers don’t control the tiny quantities of finance capital they own and don’t own enough capital to be capitalists proper, because they cannot live off their interest or dividend income. They all the same do appropriate a certain quantity, if only a very small quantity, of the surplus value produced by the workers of the oppressed countries, as well as by the productive (of surplus value) workers of their own country.
This is one of the methods by which imperialism bribes the upper layer of the working class and the white-collar “employees.” In the exploited countries, the working class is more radical, and national liberation movements against exploitation of the nation tend to become the ally of the working-class movement. In contrast, the richer a country is in finance capital, the more it is an exploiter country, the more powerful reactionary nationalism becomes and the more “national feelings” become the ally of the exploiters.
However, the more imperialism is weakened by the resistance of the oppressed nations, the weaker imperialism becomes and the more the way is opened to radicalization of the working class and even the middle class. For example, U.S. society was thrown into profound turmoil by the resistance of the Vietnamese nation in the 1960s and early 1970s.
The anti-war movements in the imperialist countries are therefore not a detour in the “real” class struggle—the trade union struggle for higher wages, shorter hours and better conditions—but are an inevitable form that class struggle must take in the imperialist countries due to the basic economic nature of imperialism itself.
Because of the long-term trend toward concentration and centralization of capital, the real social base of the monopoly capitalist rulers narrows over time. In order to defend its position as ruling class as well as its empire, monopoly capitalism-imperialism is obliged to support all reactionary trends and forces in the world—racism, misogyny, homophobia, neo-fascism, absolute monarchies, police states and systems of universal surveillance. This is why in Lenin’s words imperialism means “reaction all along the line.”
The other side is that every democratic trend or movement both in the imperialist countries themselves as well as the oppressed countries comes into conflict with monopoly capitalism-imperialism.
Is China about to become the world’s leading imperialist nation? It has been reported that by the end of the current year—2014—the GDP of China according to the purchasing power parity—taking into account the differing price levels in different countries—will exceed that of the United States. (5) Already, China’s GDP on this basis is reported to exceed the GDP of Japan. Does this mean that China in this very year is in the process of replacing the United States as the world’s leading imperialist nation? And isn’t India emerging as a leading imperialist nation—admittedly not quite on the scale of “imperialist” China—in its own right eclipsing Japan?
Before we jump to these conclusions, we have to take certain things into account. The population of present-day China is about three times that of the United States. China, therefore, remains relatively poor in industrial capital relative to the United States.
But imperialism, as we have seen above, is not based on the relative level of industrial capital but of finance capital. If I as a citizen of the United States own X amount of finance capital in stocks, bonds and interest-bearing bank deposits, this doesn’t mean that I am entitled to X amount of surplus value produced by the workers of the United States. No, I am entitled to X amount of surplus value produced by the workers of the entire world.
What is the relative position of Russian banks today? If Russia today is not only capitalist, which it indeed is, but also imperialist, we would expect Russian banks to be increasingly prominent in the world, since the “great” universal banks are the most important organizations of finance capital. The publication Global Finance lists the world’s 50 biggest banks as of 2012 in terms of assets. Despite the size and natural wealth of Russia, not a single Russian bank appears on the list.
According to the Jan. 31, 2014, Wall Street Journal, based on assets of the world’s 100 biggest banks, only two Russian banks, OAO Sherbank and OAO VTB, appear. They come in at number 54 and 94, respectively. Sherbank evolved from the old Soviet savings bank system—in Russian, Sherbank means savings bank. Even today 51 percent of its stock is owned by the Russian central bank, which itself is state owned. According to Wikipedia, the Russian Federation state owns 60.9 percent of OAO VTB. While both banks today are universal banks, they are still quasi—state enterprises.
In and of itself, the lack of a single Russian bank in the top 50 banks, and only two among the top 100, is suggestive but not decisive. In today’s world, banking is highly centralized, and in many of the smaller imperialist countries all banking is foreign owned—though Russia is hardly a small country.
In addition, Russia is not a member of NATO or the European Union and is generally seen as far more independent of the U.S. than imperialist countries of “the West” such as the countries of Western Europe, Japan, Australia and New Zealand. Since Russian capitalist “imperialism” would have developed only over the last 25 years from its very modest roots in the pre-perestroika Soviet “second economy,” it would be expected to be sharply counter-posed to the established imperialism of the U.S.-centered world empire.
Russia would therefore be expected to be evolving its own gigantic banking institutions. Indeed, China is developing some very large banks, which does indicate a certain development of finance capital in that country, though the operation of these banks remains so far largely confined to China. Moreover, China as a whole, as we will see below, is still far too poor in finance capital to be considered anything close to being an imperialist country in its own right.
Russia, in contrast, which has not seen anything approaching the growth of industrial capital that China has experienced over the last quarter of a century, has yet to develop a single bank, even a state-owned bank, that ranks in the world’s top 50 banks.
The other features that Lenin took into account in distinguishing between imperialist countries and the exploited countries are less significant than they were in 1914, because there has been a century of capitalist development that has greatly reduced the weight of pre-capitalist modes of production and political forms compared to 1914.
For example, when Lenin wrote “Imperialism” in 1916, two years after World War I had begun and while it was still raging without a decisive outcome, the czarist military-feudal imperialism, though in its death agony, was still very much in existence and there was no way of knowing how long it would be able to hang on. Rapidly industrializing but relative to Britain, the U.S. and Germany still under-industrialized, Japan was still poor in finance capital. But Japan was using its highly developed military machine to seize colonies. Japan had seized Taiwan in a war against China in 1895, and Korea in 1910. Therefore, Lenin ranked Japan among the imperialist powers despite its relative poverty in finance capital.
Imperialism in 2014 compared to imperialism in 1914
If you have to describe the difference between the imperialism of 1914 and the imperialism of 2014 in one word, it would be NATO. Unlike in 1914, there is one military machine, or “czar,” that dominates the imperialist world. And its roots are not in feudal but purely capitalist relations. This machine includes the armed forces not only of the United States but also of other countries in the NATO “alliance,” including Britain, Germany, France and, though formally part of a separate security treaty, Japan as well. It also includes the armed forces of many of the “lesser” imperialist countries such as Canada and the smaller countries of Western Europe as well as, now, Eastern Europe.
The armed forces of many, though not all, oppressed nations are thoroughly controlled by the global military machine headquartered in the Pentagon and commanded by the White House. The situation where the “czar” in the White House dominates the world militarily will not last forever. Indeed, the law of uneven development undermines it, but it is very much the situation in the world of 2014.
If imperialism is fated to last for decades more, it will inevitably change in the future just as it has changed over the century that followed the outbreak of the great war in August 1914. Our analysis of imperialism in 2014 centered on a “czar” in the White House will then be quite out of date, much as Lenin’s writings on Russian imperialism are out of today. But in order to orient ourselves correctly in 2014, our “homeland in time,” so to speak, we have to understand the world we are living in and not a purely speculative world that may or may not come into existence at some point in the future.
The real imperialist countries
The imperialism of 1914 was still intermixed with the imperialism of pre-capitalist origins. While this was most evident in czarist Russia, it also characterized the Hapsburg Austro-Hungarian Empire, itself a relic of the medieval Holy Roman Empire of the German people. Like czarist Russia, Austria-Hungary was a prison house of nations—though on a somewhat smaller scale than its czarist counterpart.
Today’s imperialism, by contrast, is pretty much purged of the still significant pre-capitalist elements that characterized the imperialism of 1914. A century of capitalist development, two world wars, successive crises of overproduction, including the super-crisis of 1929-33, and not least of all the revolutions of the 20th century, including the Russian Revolution of 1917 and the Chinese Revolution of 1949, though they have not yet led to the downfall of imperialism have largely purged it of the pre-capitalist elements that were still significant in 1914.
Finance capital the decisive factor
This brings us to the question of finance capital. The Credit Suisse Global Wealth Databook 2012 divides the countries of the world into four categories according to wealth—not income—per adult. This is a rough proxy for the average amount of finance capital that is owned by individuals in each country, since finance capital—stocks, bonds, money market funds and bank accounts—form the great bulk of wealth in today’s world.
This is true despite the fact that ownership of finance capital is anything but even within the imperialist countries themselves. The top group, with over U.S. $100,000 average wealth per adult, pretty much defines the imperialist countries, including the “white colony” of Israel. These countries are the United States—no surprise here—Canada, all the countries of Western Europe with the exception of Portugal but none of the East European countries. Australia, New Zealand, Japan, Iceland, Finland, Norway, and Sweden are also among the countries in the top group. These countries in the economic sense are exploiting countries and are therefore imperialist countries.
Only a few countries in this $100,000 plus club don’t quite fit in the traditional list of imperialist countries. Leaving aside some Arab oil monarchies, which are hardly countries in any real sense, we find Taiwan. However, Taiwan is not really a country either but a part of China that is a neo-colony of the United States. There is also the case of Ireland, a country oppressed and exploited for centuries by Great Britain, which is listed by Credit Suisse in the $100,000 plus group. Significantly, however, South Korea does not belong to this top group.
With these few qualifications, Credit Suisse’s list of countries with average adult wealth exceeding $100,000 is a list of real imperialist countries. The other feature that all countries in this group have in common is that they are all allied with—really satellites of—a single country, the United States of America.
The second group of countries have an average wealth level of between $25,000 and $100,000 per adult. In this group, we find Mexico, Colombia, Chile, Uruguay, Saudi Arabia, the Czech Republic, Slovakia, Slovenia, the Baltic states, Greece, Turkey, Portugal, and a few Arab oil monarchies that are not really countries in the usual sense. Most of these countries are semi- or neo-colonies. Perhaps only Portugal, which had a colonial empire in Africa until the 1970s, might be considered imperialist.
The third group of countries, very poor in finance capital, includes most of the Latin American countries, Brazil, Argentina and so on; South Africa; the countries of North Africa; most of the East European countries, including Poland and Russia; China; and Indonesia. These countries are most certainly not imperialist. And this is where we find China despite its remarkable industrial progress over the last quarter of a century, completely unmatched by Russia. Quite the contrary. None of the countries is this category can remotely be considered imperialist.
Finally, we have the countries that are poorest in finance capital. These include the countries of central Africa; India, despite its industrial progress; Vietnam; Bolivia and Guyana in South America; and Ukraine. Though Ukraine was among the richest areas of the Soviet Union, it now is among the countries that are poorest in finance capital.
No Russian imperialism
If we use the criterion of an independently powerful military machine, there is really only one imperialist power, or “czar,” in today’s world, the United States of America. If we use the criterion of countries that are rich in finance capital—that is, share in the exploitation of the countries of the world, despite their being military and political satellites of the U.S., we do not find Russia or for that matter China among them. Nor do we find Russia or China in the second category. In terms of finance capital, Russia belongs definitely to countries that are in the lower half of the countries that are definitely not imperialist. Today’s Russia is very far indeed from becoming an imperialist country, and if anything is in danger of falling into the fourth tier where Ukraine already is.
Some otherarguments that Russia is imperialist
Supporters of the view that Russia is imperialist point to Russia’s status as a “great power.” Czarist Russia was considered a great power in the 18th, 19th and early 20th centuries, and the Soviet Union was a “superpower” along with the U.S. during the Cold War. So, the argument goes, today’s Russian Federation must also be ranked as a great power, if not a superpower. And aren’t great powers imperialist?
This argument, as we have seen above, is based on unhistorical analogies where completely different epochs are lumped together. But what about Russia’s missiles and nuclear weapons that are inherited not from the czarist Russia of 1914 but from the Soviet Union of the late 20th century? Though Russia’s nuclear capacity has perhaps been degraded since the destruction of Soviet power, it still appears to be capable of turning the world, including the United States, into radioactive dust.
Therefore, isn’t this proof that present-day Russia is imperialist?
During the Cold War, it gradually became evident that nuclear weapons are extremely dangerous to use in modern warfare. Even if a nuclear power launched a major nuclear attack against a non-nuclear country, the environmental consequences of using such a weapon would devastate the attacking country even in the absence of any counterattack. Mother nature herself would launch a devastating counterattack. Russia’s ability to destroy the United States with nuclear weapons at the price of destroying Russia itself, even if the U.S. did not counterattack, doesn’t make Russia an imperialist country.
The role of the semi-state-owned Gazprom oil and gas company is sometimes cited as evidence that Russia is an imperialist country. However, virtually all oil-rich countries that are not imperialist themselves such as Mexico, Nigeria and Saudi Arabia have similar oil companies. Indeed, Gazprom is evidence that Russia is not imperialist. It underlines that Russia is a supplier of raw materials, the historical role of oppressed, not imperialist, countries.
Gazprom itself is far from the world’s biggest state or quasi-state oil company. Its wealth is exceeded by among others the Iranian National Oil Company and the state oil companies of Venezuela and Nigeria. If Russia is imperialist because of Gazprom, so are Venezuela, Nigeria and Iran.
By the eve of perestroika 30 years ago, the Soviet Union led the world in the basic branches of industry—though not in consumer goods. Not surprisingly, today capitalist Russia has had some success in exporting steel, machine tools and military commodities. Russia was in 2013 number five when it comes to steel production, a far cry from the number one position the Soviet Union enjoyed just before perestroika.
The current number one country is the People’s Republic of China while Russia has fallen below India, which is number four. The United States, which prior to the Soviet Union was the world’s leading steel producer, is now number three. In 2013, Germany, a much smaller country than China, Russia or the U.S. was number seven.
In 1914, steel production, the “heart” of heavy industry, was concentrated in the imperialist countries. Today there is a growing trend for steel production to be “farmed out” to non-imperialist countries such China and India. Considering these factors, Russia’s relatively high rank as the number five steel producer in 2007 hardly makes it imperialist
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