Friday, May 30, 2014

Afterthoughts on Piketty’s Capital by David Harvey


Thomas Piketty has written a book called Capital that has caused quite a stir. He advocates progressive taxation and a global wealth tax as the only way to counter the trend towards the creation of a “patrimonial” form of capitalism marked by what he dubs “terrifying” inequalities of wealth and income.

He also documents in excruciating and hard to rebut detail how social inequality of both wealth and income has evolved over the last two centuries, with particular emphasis on the role of wealth. He demolishes the widely-held view that free market capitalism spreads the wealth around and that it is the great bulwark for the defense of individual liberties and freedoms.

Free-market capitalism, in the absence of any major redistributive interventions on the part of the state, Piketty shows, produces anti-democratic oligarchies. This demonstration has given sustenance to liberal outrage as it drives the Wall Street Journal apoplectic.

The book has often been presented as a twenty-first century substitute for Karl Marx’s nineteenth century work of the same title. Piketty actually denies this was his intention, which is just as well since his is not a book about capital at all. It does not tell us why the crash of 2008 occurred and why it is taking so long for so many people to get out from under the dual burdens of prolonged unemployment and millions of houses lost to foreclosure. It does not help us understand why growth is currently so sluggish in the US as opposed to China and why Europe is locked down in a politics of austerity and an economy of stagnation.

What Piketty does show statistically (and we should be indebted to him and his colleagues for this) is that capital has tended throughout its history to produce ever-greater levels of inequality. This is, for many of us, hardly news. It was, moreover, exactly Marx’s theoretical conclusion in Volume One of his version of Capital. Piketty fails to note this, which is not surprising since he has since claimed, in the face of accusations in the right wing press that he is a Marxist in disguise, not to have read Marx’s Capital.

Piketty assembles a lot of data to support his arguments. His account of the differences between income and wealth is persuasive and helpful. And he gives a thoughtful defense of inheritance taxes, progressive taxation and a global wealth tax as possible (though almost certainly not politically viable) antidotes to the further concentration of wealth and power.

But why does this trend towards greater inequality over time occur? From his data (spiced up with some neat literary allusions to Jane Austen and Balzac) he derives a mathematical law to explain what happens: the ever-increasing accumulation of wealth on the part of the famous one percent (a term popularized thanks of course to the “Occupy” movement) is due to the simple fact that the rate of return on capital (r) always exceeds the rate of growth of income (g). This, says Piketty, is and always has been “the central contradiction” of capital.

But a statistical regularity of this sort hardly constitutes an adequate explanation let alone a law. So what forces produce and sustain such a contradiction? Piketty does not say. The law is the law and that is that. Marx would obviously have attributed the existence of such a law to the imbalance of power between capital and labor. And that explanation still holds water. The steady decline in labor’s share of national income since the 1970s derived from the declining political and economic power of labor as capital mobilized technologies, unemployment, off-shoring and anti-labor politics (such as those of Margaret Thatcher and Ronald Reagan) to crush all opposition.

 As Alan Budd, an economic advisor to Margaret Thatcher confessed in an unguarded moment, anti-inflation policies of the 1980s turned out to be “a very good way to raise unemployment, and raising unemployment was an extremely desirable way of reducing the strength of the working classes…what was engineered there in Marxist terms was a crisis of capitalism which recreated a reserve army of labour and has allowed capitalists to make high profits ever since.” The disparity in remuneration between average workers and CEO’s stood at around thirty to one in 1970. It now is well above three hundred to one and in the case of MacDonalds about 1200 to one.

But in Volume 2 of Marx’s Capital (which Piketty also has not read even as he cheerfully dismisses it) Marx pointed out that capital’s penchant for driving wages down would at some point restrict the capacity of the market to absorb capital’s product.

Henry Ford recognized this dilemma long ago when he mandated the $5 eight-hour day for his workers in order, he said, to boost consumer demand. Many thought that lack of effective demand underpinned the Great Depression of the 1930s.

 This inspired Keynesian expansionary policies after World War Two and resulted in some reductions in inequalities of incomes (though not so much of wealth) in the midst of strong demand led growth. But this solution rested on the relative empowerment of labor and the construction of the “social state” (Piketty’s term) funded by progressive taxation. “All told,” he writes, “over the period 1932-1980, nearly half a century, the top federal income tax in the United States averaged 81 percent.” And this did not in any way dampen growth (another piece of Piketty’s evidence that rebuts right wing beliefs).

By the end of the 1960s it became clear to many capitalists that they needed to do something about the excessive power of labor. Hence the demotion of Keynes from the pantheon of respectable economists, the switch to the supply side thinking of Milton Friedman, the crusade to stabilize if not reduce taxation, to deconstruct the social state and to discipline the forces of labor. After 1980 top tax rates came down and capital gains – a major source of income for the ultra-wealthy – were taxed at a much lower rate in the US, hugely boosting the flow of wealth to the top one percent. But the impact on growth, Piketty shows, was negligible. So “trickle down” of benefits from the rich to the rest (another right wing favorite belief) does not work. None of this was dictated by any mathematical law. It was all about politics.

But then the wheel turned full circle and the more pressing question became: where is the demand? Piketty systematically ignores this question. The 1990s fudged the answer by a vast expansion of credit, including the extension of mortgage finance into sub-prime markets. But the resultant asset bubble was bound to go pop as it did in 2007-8 bringing down Lehman Brothers and the credit system with it.

 However, profit rates and the further concentration of private wealth recovered very quickly after 2009 while everything and everyone else did badly. Profit rates of businesses are now as high as they have ever been in the US. Businesses are sitting on oodles of cash and refuse to spend it because market conditions are not robust.

Piketty’s formulation of the mathematical law disguises more than it reveals about the class politics involved. As Warren Buffett has noted, “sure there is class war, and it is my class, the rich, who are making it and we are winning.” One key measure of their victory is the growing disparities in wealth and income of the top one percent relative to everyone else.

There is, however, a central difficulty with Piketty’s argument. It rests on a mistaken definition of capital. Capital is a process not a thing. It is a process of circulation in which money is used to make more money often, but not exclusively through the exploitation of labor power. Piketty defines capital as the stock of all assets held by private individuals, corporations and governments that can be traded in the market no matter whether these assets are being used or not.

This includes land, real estate and intellectual property rights as well as my art and jewelry collection. How to determine the value of all of these things is a difficult technical problem that has no agreed upon solution. In order to calculate a meaningful rate of return, r, we have to have some way of valuing the initial capital. Unfortunately there is no way to value it independently of the value of the goods and services it is used to produce or how much it can be sold for in the market. The whole of neo-classical economic thought (which is the basis of Piketty’s thinking) is founded on a tautology. The rate of return on capital depends crucially on the rate of growth because capital is valued by way of that which it produces and not by what went into its production.

 Its value is heavily influenced by speculative conditions and can be seriously warped by the famous “irrational exuberance” that Greenspan spotted as characteristic of stock and housing markets.

If we subtract housing and real estate – to say nothing of the value of the art collections of the hedge funders – from the definition of capital (and the rationale for their inclusion is rather weak) then Piketty’s explanation for increasing disparities in wealth and income would fall flat on its face, though his descriptions of the state of past and present inequalities would still stand.

Money, land, real estate and plant and equipment that are not being used productively are not capital. If the rate of return on the capital that is being used is high then this is because a part of capital is withdrawn from circulation and in effect goes on strike. Restricting the supply of capital to new investment (a phenomena we are now witnessing) ensures a high rate of return on that capital which is in circulation.

The creation of such artificial scarcity is not only what the oil companies do to ensure their high rate of return: it is what all capital does when given the chance. This is what underpins the tendency for the rate of return on capital (no matter how it is defined and measured) to always exceed the rate of growth of income. This is how capital ensures its own reproduction, no matter how uncomfortable the consequences are for the rest of us. And this is how the capitalist class lives.

There is much that is valuable in Piketty’s data sets. But his explanation as to why the inequalities and oligarchic tendencies arise is seriously flawed. His proposals as to the remedies for the inequalities are naïve if not utopian.

 And he has certainly not produced a working model for capital of the twenty-first century. For that we still need Marx or his modern-day equivalent.

Thursday, May 29, 2014

Satyajit Das: The Cultural Transformation of the World of Finance

Political Economy Research advises you to watch the Costas Lapavitsas video below has an introduction to Finance before watching Satyajit Das on Cultural Transformation of Finance

Monday, May 19, 2014

Russia: Its Monopoly Capital and its Status as a Great Imperialist Power from RCIT

Democracy and Class Struggle publish this analysis from RCIT has it is one of the few attempts to concretely describe Russian Imperialism. We would like readers views on this article.

Russia’s economy is dominated by a small group of monopolies owned by super-rich capitalists, called “oligarchs,” who have close relations with the state apparatus. In fact, Russia’s monopolies dominate the domestic market even more than their counterparts in other imperialist states.
 According to a recent OECD study, Russia’s small and medium-sized enterprises account for only about one fifth of employment and an even smaller share of output, whereas in most OECD economies both figures are above one half. (28)
Probably the most important Russian monopoly is Gazprom, the world’s largest gas company, which controls over 93% of Russia’s natural gas production and about a quarter of the world’s known gas reserves. (29) Another important monopoly is the Sberbank which is Europe's third-largest bank when ranked by market capitalization.
These two companies, Sberbank and Gazprom, account for more than half of the turnover of the Russian stock exchange. (30) Other huge corporations are Rosneft and LUKoil, both oil companies; Transneft, a pipeline company; Sukhoi, an aircraft-manufacturer; Unified Energy Systems, an electricity giant; and Aeroflot.
These Russian monopolies are closely linked with the imperialist state apparatus. The state-capitalist sector plays a decisive role among many Russian monopolies. For example, the state has retained Golden Shares in 181 firms. (31) State-backed companies account for 62% of Russia's stock market. (32)
The state capitalist sector controls 36% of Russia’s oil sector and 79% of its gas sector. (33) According to the German magazine Der Spiegel, the Russian state controls more than 50% of the country’s banks and 73% of the transportation industry. Likewise, government control of the oil industry has grown from 10%, at the beginning of the Putin era in 1999, to 45% in 2013. (34)
Russia’s Rise as an Economic Power
According to the World Bank, Russia is about to overtake Germany as the world’s fifth largest economy in terms of purchasing power parity for 2012. (35) It calculates Russia’s GDP at US$ 3.4 trillion.
The International Monetary Fund lists Russia as the eighth largest world economy with a GDP of $US 2 trillion. Regardless, Russia has become a great economic power. Its ruling class has successfully overcome the collapse of the 1990s.
Russia is not dominated by other imperialist countries but rather dominates and exploits other countries and peoples.
Russia’s successful resistance to being taken over by foreign imperialist powers is related to the history of the country’s capitalist restoration. According to one estimate, by 1998 “only 3% of former state properties had been sold to foreign buyers in the Russian Federation, compared to 48% in Hungary and 15% in the Czech Republic. Moreover, privatization sales to foreigners in the latter groups accelerated after 1998, while it remained practically non-existent in the Russian Federation.(36)
Russia’s rise as an economic power is also reflected in its relatively low level of debt. Since Putin’s rise to power, Russia’s external debt stocks – as a percent of its Gross National Income – declined from 57.9% (2000) to 31.1% (2011). (37) Equally, Russia’s government debts have fallen dramatically from 99% of GDP in December of 1999 to 8.4% of GDPin 2012. (38)
At the same time Russia’s foreign monetary reserves have increased significantly to about US$ 500 billion (equivalent of about 25% of Russia’s GDP).
Russia’s rise as an economic power is also reflected in the turnaround in the ratio of its reserves and external debt. While the ratio of Russia’s reserves to external debt stocks expressed as a percent stood at 16.6% in 2000, by 2011 it reached 83.6%.
Capital Export of Russian Monopolies
Since 2000, Russia has been able to substantially increase its outward foreign investments. Russia's share of global FDI outflows increased from 1% in 2000, to 1.5% in 2005, and reached 4% in 2011. For example, in 2010 Russian companies invested $US 9 billion for cross-border mergers and acquisitions, up from $US6 billion in 2005. (39)
Table 4 demonstrates that Russia is increasingly becoming a major foreign investor. Russia (and China) have already overtaken Italy and are in the same league with Germany.
Table 4                Foreign Direct Investment Outflows of various Countries, 2007-2012 ($US millions) (40)
Where do Russian capitalists invest abroad? If we don’t include fake foreign investments, i.e., investments in countries which serve Russia as off-shore centers, we see that Russian monopolies exported about 38.1% of its foreign investments to Western European EU countries. The US and Switzerland were also important destinations. However, the Russians also invested about 25.5% of their capital in former USSR countries and Eastern Europe. An additional 4.1% of their FDI went to other former Stalinist states like Serbia, Montenegro, and Vietnam. If we add other semi-colonies like Turkey and Ireland, we see that Russian monopolies invested about 36% of their FDI in semi-colonial countries.
Russia’s thirty largest multi-national corporations rank among Europe’s largest 500 companies. (41)
Russia as a Great Political and Military Power
Russia’s relative power is even greater on the political level. Russia has a permanent seat in the UN Security Council and is/was a member state of the G8. Russia demonstrated her hegemonial role during the war in Georgia in 2008 when she annexed South-Ossetia and Abkhazia against the will of the Western imperialist powers which supported the Saakashvili regime in Georgia.
Similarly, Russia is the primary power behind the Assad regime in Syria. In the autumn of 2013, the Putin regime was able to force the Obama administration to back down from its military plans and to agree to a new round of negotiations in Geneva.
In the spring of 2014, Russia is once again demonstrating its role as a great power in the context of the Ukrainian crisis as Russia faces off against the EU and US for influence in the Ukraine. These are practical examples which serve to emphasize the extent to which Russia is a great power challenging the influence of the senior Western imperialist powers.
Russia’s status as a great power on a political level goes hand in hand with its status as a great military power. As we have shown above in Table 3, today Russia has the worlds’ third-largest military budget. In addition to this, Russia has the world’s second most powerful nuclear arsenal after the US. (42) Its arms monopolies are also the second-ranked competitors in the global armaments market.
Another manifestation of Russia’s status as a great power is the number of military bases which it possesses abroad. Russia runs military bases in eight CIS countries. In addition to them, Russia also has a naval base in Tartus (Syria).
Russia’s Internal Colonies
Lenin showed how great imperialist powers also strive to exploit other countries and to subjugate them to their sphere of influence. Russia oppresses and exploits other nations both inside and outside its state. Nearly one fifth (19.1%) of Russia’s population belong to ethnic and national minorities. The most important ones are the Tatars (3.9%), Ukrainians (1.2%), Bashkirs (1.1%), Chuvashes (1.1%), Chechens (1%), the Armenians (0.9%) and other, smaller peoples. All told, there are over 185 ethnic groups living in Russia.
As the following figures show, a substantial share of Russia’s raw materials – of which oil and gas are the most prominent but are by no means the only ones – are located in regions with a significant proportion of national minorities
Extreme inequality exists between the different regions of Russia. This is a legacy of the Tsarist Empire which was never really overcome by the Stalinist USSR. For example, the average monthly income in Moscow is about six times as high as in Kalmykiya.
Poverty is particularly widespread in the regions with sizeable national minority populations. Relative poverty varies from 40% in Amur Oblast and the Republic of Buryatia to 30% in Moscow. Absolute poverty is 36% in Buryatia and 21% in Lipetsk Oblast. Samara and Tatarstan show very similar patterns, with relative poverty rates of 37% and 35%, respectively, and absolute poverty rates of 28% and 25%. (46)
Putin’s Eurasian Union: An Imperialist Attempt to Subjugate Central Asian and Eastern European Semi-Colonies
Since the 1990s, Russia’s ruling class has undertaken a number of initiatives all of which have the goal of creating a political and economic sphere of influence under Russian leadership. Shortly after coming to power, Putin created the Eurasian Economic Community in October 2000. For several years, the Putin regime has undertaken serious steps to drive forward a closer economic and political bloc under Russian hegemony.
A so-called Customs Union was already established in 2007, its current members being Belarus, Kazakhstan, and Russia. A number of semi-colonial states are presently considering joining the Customs Union: Armenia, Georgia, Kyrgyzstan, Gagauzia (the separatist republic in Moldavia), and Tajikistan.
Under Yanukovych, the Ukrainian government also expressed interest in joining, but the Maidan coup and the takeover of pro-EU right-wing forces makes this unlikely in the short term. On the other hand, Crimea did split from the Ukraine and has joined Russia. Given the present political crisis in the country, the future of the eastern parts of the Ukraine is uncertain. Finally, the Vietnamese government has also expressed interest in joining the Customs Union.
Meanwhile, the Putin regime has moved ahead and introduced steps to form the Eurasian Union. This development would create a common market of goods, capital, and labor, and ensure the operation of common macroeconomic, competitive, financial, and other regulations, including the harmonization of policies such as energy and transport. In November 2011, the heads of Russia, Kazakhstan, and Belarus announced that a Single Economic Space would be launched as of 1 January 2012. The Eurasian Union, which will be similar to the European Union, is to be launched by 1 January 2015. While Russia, Kazakhstan, and Belarus are members, other countries currently have candidate status (Armenia, Kyrgyzstan, and Tajikistan). (47)
In addition Russia is – beside the European Union – the most important trading partner for the Central Asian and Eastern European countries. In absolute terms, the trade volumes between the Central Asian Republics and Russia increased during the period 1995–2011 by almost 1,100%.
In Table 5 we see that Russia is one of the top three trading partners for Eastern European countries outside the EU.
Table 5Trade Patterns of Non-EU Eastern European Countries, 2010 (in percent) (48)
EU 27’s Share of Trade
Russia’s Share of Trade-
Turkey’s Share of Trade
32.1 (1st place)
20.8 (2nd)
4.4 (6th)
46.9 (1st)
7.4 (3rd)
8.2 (2nd)
25.1 (2nd)
48.2 (1st)
0.6 (10th)
31.7 (1st)
4.4 (7th)
15.6 (2nd)
52.3 (1st)
12.3 (3rd)
4.8 (4th)
In the Ukraine, the EU and Russia are the major powers which compete for market share and influence. Before the beginning of the Great Recession in 2008, the EU monopolies were able to continually increase their trade share. However, since the recession the situation has reversed itself. Between 2000 and 2010, the Ukraine’s exports to the EU fell to 25.4% and the share of imports from the EU to 31.4%. At the same time the Customs Union (Russia, Belarus, and Kazakhstan) was able to increase its trade with the Ukraine: exports to and imports from these countries increased to 32.3% and 42% respectively. (49)
When we examine the Central Asian semi-colonies, we note an even more hegemonial position for Russian imperialism. Central Asia is highly dependent on Russian imports (mostly energy products and manufactured products). While the EU comes as the second largest import source, China’s share has dramatically increased in the last decade and is now the third largest source of imports.
The EU, Russia, and China are also the main export partners of the Central Asian countries. The EU and China managed to increase their market share between 2000 and 2010. During this same decade, Russia’s share declined but it remained the second largest export destination for Central Asia.
To summarize, we can conclude that Russian imperialism has and is increasingly successful in subjugating a number of semi-colonial countries in Eastern Europe and Central Asia.
Migration and Super-Exploitation
As an imperialist power Russia also profits from migration. The migrants constitute a sizeable minority among the working class in Russia. As non-Russian workers, they are both nationally oppressed and super-exploited by Russian capitalists. Their lower wages provide an important source for extra-profits from Russia’s monopoly capital.
In their vast majority, Russian capitalists profiteer at the expense of migrants who originate from two different sources: On one hand, millions of migrants from Russia’s oppressed national minorities relocate to the country’s richer metropolises; on the other hand, millions of migrants from Russia’s peripheral semi-colonies enter the country.
The population in the poorer regions in Russia – such as the Far East District, Siberia, the Urals or Privolzhe – is being systematically diminished due to emigration. David Lane, a bourgeois expert on Russia, reports: “National ethnic minorities figured disproportionately in population movement. These areas were ones which had a continuous export of people.(50)
Migration from the Central Asian republics has increased dramatically in the last decade. According to official statistics approximately 12.3 million legal migrants currently reside inside Russia. In addition, another 5-8 million migrants have illegally entered the country in order to work there. Estimates of the percent of foreign migrants among all employed in Russia is about 8–10 %, which is close to levels in some European countries such as Germany and Austria. However, this appears to be an underestimation. In addition, this figure does not include the migrants from oppressed nations within Russia.
Such massive migration is driven by the extreme inequality of wages that exists between Russia and her semi-colonial periphery. For example, at the close of the first decade of the 2000s, the average wage in Tajikistan was just 10% of the average Russian wage, while those in Kyrgyzstan and Uzbekistan were just slightly above 20%. Average Russian wages were three times as high as those in Moldova and two and a half times higher than those in Armenia. (51)
Also contributing to migration from the poor semi-colonial countries is surplus population unable to find employment. The majority of Russia’s migrants come from Uzbekistan, Tajikistan, and Kyrgyzstan. By the end of 2010, migrants from these three countries accounted for 55% of the total legal foreign workforce in Russia.
Migration constitutes a massive drain on the human capital of the semi-colonial countries and hence reduces their ability to increase their own national wealth. Between 620,000 and 1,000,000 Kyrgyz migrants are estimated to work abroad currently (most of them in Russia). (52)Migrants account for 17% of the economically active population of Kyrgyzstan, for almost 37% from Tajikistan, and for 15% of the employed population from Uzbekistan.
The RCIT considers Russia, as well as the US and the EU, to be imperialist powers. As we outlined above in our discussion of China, in the event of a military confrontation between two imperialist powers, Bolshevik Communists will refuse to take the side of one of the two warring sides. Instead, in both camps, we will raise the slogan “The main enemy is at home”.
In a conflict between Russia and an oppressed nation – like the Chechens – we unconditionally defend the right of national self-determination for oppressed nationalities.
(1) The RCIT has elaborated its position on these conflicts in numerous statements.
On the Georgian War in 2008 see: LFI (Predecessor organization of the RCIT): Georgia War with Russia - A Socialist Analysis, 10.8.2008,; LFI: After Georgia: inter-imperialist tensions growing, 22.8.2008,; LFI: Georgia conflict signals the rise of Imperialist rivalry, 21.10.2008,


(28) OECD Economic Surveys: Russian Federation, 2011, pp. 68-69
(29) Dirk Holtbrügge and Heidi Kreppel: Determinants of outward foreign direct investment from BRIC countries: an explorative study, International Journal of Emerging Markets Vol. 7 No. 1, 2012, p. 10
(30) The Economist: Emerging-market multinationals. The rise of state capitalism, Jan 21st 2012,
(31) Golden Shares gives the state the right of decisive vote, thus to veto all other shares, in a shareholders-meeting.
(32) The Economist: Emerging-market multinationals. The rise of state capitalism, Jan 21st 2012,
(33) Gyuzel Yusupova: Kartellverfahren gegen russische Erdölfirmen in den Jahren 2008–2010, in: Russland-Analysen Nr. 217, 25.03.2011 p. 30
(34) Der Spiegel: Promising but Perilous: German Firms Put Off by Russian Corruption, April 03, 2013,
(35) World Bank: Gross domestic product 2012, PPP; World Development Indicators database, 17 December 2013
(36) Kálmán Kalotay: The future of Russian outward foreign direct investment and the eclectic paradigm: What changes after the crisis of 2008–2009? UNCTAD 2010, pp. 16-17
(37) World Bank: International Debt Statistics 2013, p. 238
(38) See Russia Government Debt To GDP, and Ernst & Young: Russia 2013. Shaping Russia’s future, p. 9
(39) Benjamin Utter: Outward Foreign Direct Investment to the Natural Resource Sectors by Global Public Investors from Emerging Economies: Trends, Causes, Effects; World Trade Institute 2011, p. 14
(40) UNCTAD: World Investment Report 2012, pp. 169-172 and UNCTAD: World Investment Report 2013, pp. 212-216
(41) Wladimir Andreff: Comparing Outward Foreign Direct Investment Strategies of Russian and Chinese Multinational Companies: Similarities and Specificities, EAEPE Conference - Beyond Deindustrialisation: The Future of Industries, Paris, November 7-9, 2013, p. 36
(42) Stockholm International Peace Research Institute: Armaments, Disarmament and International Security, 2012, Summary, p. 14
(43) Asya Pereltsvaig: Traditionalism vs. Assimilation Among Indigenous Peoples of Siberia, March 22, 2012,
(45) Les Rowntree, Martin Lewis, Marie Price, William Wyckoff: Diversity Amid Globalization: World Regions, Environment, and Development 2nd Edition.
(46) Irina Denisova: Income Distribution and Poverty in Russia (2012), OECD Social, Employment and Migration Working Papers, No. 132, OECD Publishing, p. 30
(47) See on this e.g. Rilka Dragneva and Kataryna Wolczuk: Russia, the Eurasian Customs Union and the EU: Cooperation, Stagnation or Rivalry?, Chatham House, August 2012, pp. 4-5
(48) Ben Judah, Jana Kobzova and Nicu Popescu: Dealing with A Post-BRIC Russia; The European Council on Foreign Relations, 2011, p. 26
(49) Ramūnas Vilpišauskas, Raimondas Ališauskas, Laurynas Kasčiūnas, Živilė Dambrauskaitė, Vytautas Sinica, Ihor Levchenko, Victor Chirila: Eurasian Union: a Challenge for the European Union and Eastern Partnership Countries, Public Institution Eastern Europe Studies Centre, 2012, p. 31
(50) David Lane: Dynamics of Regional Inequality in the Russian Federation: Circular and Cumulative Causality, in: Russian Analytical Digest No. 139, 18 November 2013, p. 6
(51) Mikhail Golovnin and Aleksandra Yakusheva: Regional Effects of the Global Economic Crisis in the CIS: Migrants’ Remittance, in:  EDB Eurasian Integration Yearbook 2011, p. 76
(52) Evgeny Vinokurov and Vladimir Pereboyev: Labour Migration and Human Capital in Kyrgyzstan and Tajikistan: Impact of Accession to the SES, in: EDB Eurasian Integration Yearbook 2013, p

What is the current phase of Imperialism by Michael Burke

Political Economy Research publish this article by Michael Burke on Imperialsm in 2014 to start a discussion about Imperialism Today on Political Economy Research.

While Michael Burke is correct in dismissing some of the facile descriptions of Russian and Chinese Imperialism that we have seen, we are however of the view that Russian and Chinese Imperialism are alive (Chechnya and South China Seas come to mind) and well in the 21st century but they need much better concrete analysis than what we have seen to date.

We hope to rectify the omissons by publishing some existing qualatative and quantatative analysis on Russia and China and also contributing some of our own analysis during the remainder of 2014.

One analysis of Chinese Imperialism from a Trotskyist RCIT perspective to begin with is here :

For an RCIT Analysis of Russian Imperialism

We also invite contributions from those wishing to contribute to the discussion about Imperialism in 2014.

A new situation requires a new analysis, and each new factor in the situation requires a specific and concrete analysis, placing it and its weight correctly in the overall situation.

In world politics, the new situation is that the US was unable to bomb Syria, it finds itself negotiating with, rather than bombing Iran, and its coup in the Ukraine may not be entirely successful in drawing Russia’s neighbour into NATO’s sphere of influence.

This overturns recent history. The overthrow of the Soviet Union in 1991 was accompanied by the US-led Gulf War. Since that time, the US and its various allies have bombed, invaded or intervened in Somalia (twice), Yugoslavia, Haiti, Afghanistan, the Philippines, Liberia, Iraq, the Maghreb, Yemen, Libya, Pakistan, Libya and South Sudan. The US has also led, organised or outsourced countless other interventions, overthrown governments and destabilised economies in pursuit of its interests. There has also been a series of coups and attempted coups in Latin America with varied success, and the so-called ‘colour revolutions’ in Eastern Europe to install pro-US, pro-NATO governments, as well as the US hijacking of the Arab Spring.

However, the economic rise of China has warranted a strategic ‘pivot’ towards Asia in an attempt to curb the rise of the only economy that could rival US supremacy in the foreseeable future. Given this absolute priority and the reduced circumstances of the US economy, it has been necessary to suspend new large-scale direct military interventions elsewhere.

This curb on US power has had immediate and beneficial consequences for humanity. Syria could not be bombed and neither could Iran. In these, Russian opposition to US plans was a key political obstacle, especially as the US wanted to deploy multilateral and multinational forces to do its bidding and needed the imprimatur of the UN Security Council. The US response to this blockage has been to increase pressure on Russia, most dramatically with its ouster of the elected Ukrainian government in a coup and its attempt to breach the country’s agreed neutrality by bringing it into NATO.

This curb on US power, however limited or temporary, should be welcomed by all socialists, by all democrats and simply by all those who desire peace. Instead, we have the strange spectacle that some on the left have raised the charge that Russia is imperialist, or that China is, or countries such as Brazil, or India or South Africa are‘sub-imperialist’!

This is not a coincidence. In the US State Department’s frustration it has produced every type of calumny against Putin, including that he is an imperialist[i] and akin to Hitler. Self-styled socialists who simply echo these charges are not highly amenable to logical argument. But it is vital for socialists to understand the nature of imperialism and its current manifestation[ii].


Concrete political aims must be set in concrete circumstances. All things are relative, all things flow and all things change. Lenin, Two Tactics of Social Democracy in the Democratic Revolution
The most important single work of Marxism on the subject of imperialism is Lenin’s Imperialism the Highest Stage of Capitalism.

Lenin’s stated aim in writing the work was to demonstrate that the 1914-1918 war was imperialist (that is an annexationist, predatory, war of plunder) on the part of both sides; it was a war for the division of the world, for the partition and repartition of colonies and spheres of influence of finance capital, and so on.

Furthermore, he argued, that the character of the war, its class character, was determined by the position of the ruling classes of the warring countries and of the whole world, as the ruling classes of the belligerent countries had between them annexed almost the entire world. Therefore, he concluded imperialist wars are absolutely inevitable under such an economic system, as long asprivate property in the means of production exists[iii].

However, Lenin was categorical in warning that this was a study of imperialism in a given historical epoch and this was specifically (or concretely) ‘a composite picture of the world capitalist system at the beginning of the twentieth century’. As shown below, he also highlighted how this composite might change, as it was already changing.

Therefore it completely contravenes Lenin’s injunctions in this and other works, indeed it is completely alien to the method of Marxism, to abstract from his pamphlet one or two important features of imperialism at this point, and use them as a measuring rule for modern imperialism. Imperialism, like all phenomena, must be analysed concretely, and only after taking all the main factors into account, and so establish its laws of motion.

Changing politics

Three decisive changes in world politics have occurred since Lenin wrote his great work. As we shall see, the world economy has not stood still either, like all phenomena it too has continued to ‘flow’, in Lenin’s words.

The first decisive political change was in the contest over who would be the dominant imperialist in the world, which began in 1914 was resolved by 1945. The US had become the single dominant imperialist power and would countenance no serious rivalry from other imperialists. The best they could hope for was to play some subordinate but mutually beneficial role as a junior ally of US imperialism.

The second decisive change took place between in the short period between Lenin’s writing the pamphlet and its later Preface. The Russian Revolution meant that for the first time the working class was able to lay hold of and maintain state power. Since that time, and notwithstanding the overthrow of the Soviet Union, there have been continuously some parts of the globe where the working class holds state power, including Cuba, Viet Nam and Venezuela. Of these workers’ states by far the weightiest in the world economy is China. In all these cases, private property in the means of production is not the dominant form of ownership in the domestic economy. However, all are obliged to operate in a global capitalist system in which imperialism dominates.

Taking advantage of this contradiction, the third change is that the anti-colonial and national liberation struggles were able to free the great bulk of humanity from burden of direct colonial rule, and in some cases this led ultimately to socialist revolution.

These three facts, US supremacy within the imperialist bloc, the continuous existence of workers’ states and the wave of direct decolonisation, are entirely new factors. They are decisive in understanding that the main antagonism in the world is no longer inter-imperialist competition (which has certainly not been abolished).

Now, the pre-eminence of the US and the existence of workers’ states with real political and economic weight means that principal contradiction in world politics is between the US and its imperialist allies versus the workers states and the countries oppressed by imperialism (including the semi-colonial world and the remaining colonies). Of these, the biggest, the weightiest threat to US economic interests is the rise of China.

Changing economics

In Imperialism the Highest Stage of Capitalism, Lenin sums up the main economic features of imperialism in that period. To some readers these are well-known, but they are worth repeating here. Worth repeating too is his own characterisation of this definition, which is that it was a special stage in the historical development of capitalism (which has continued to develop).

The five features identified by Lenin are as follows:
(1) the concentration of production and capital has developed to such a high stage that it has created monopolies which play a decisive role in economic life;
(2) the merging of bank capital with industrial capital, and the creation, on the basis of this “finance capital”, of a financial oligarchy;
(3) the export of capital as distinguished from the export of commodities acquires exceptional importance;
(4) the formation of international monopolist capitalist associations which share the world among themselves, and
(5) the territorial division of the whole world among the biggest capitalist powers is completed.

Lenin’s starting-point is the concentration of production into monopolies, which is the basis of imperialism. This concentration is the inevitable outcome of ‘free competition’ between capitalists and has as a result risen exponentially since the pamphlet was written. Concentration means capitalist rivals are eliminated, and soincreased profits require expansion overseas.

The increase in concentration of production and trend towards monopolisation can be illustrated by the fact that the largest companies in the world are now larger than most countries. The tenth largest company in the world has revenues of well over US$200bn, and only 40 countries in the world have a greater level of annual GDP. In Lenin’s time, 44% of all US industrial output was carried out by just 3,000 firms. Now the output of just 130 firms is equivalent to 48% of US GDP[iv].

Concentration of production within the imperialist bloc has also increased. The dominance of the US is evident from the fact that it boasts nearly one-third of the leading Fortune 500 global firms, the same as its next three imperialist rivals together. At the turn of the twentieth century US Steel was the largest company in the world, with average net profits of US$34million. This is equivalent just under US$1 billion in today’s terms. In 2013 the most profitable company in the world was Apple, with profits of US$42bn. Aside from the few loss-makers, most companies in the Fortune 500 had profits far in excess of US$1 billion in 2013.

The role of banks has also increased, but in an even more pronounced way. Lenin uses detailed data to show that the 9 leading banks in Germany held deposits of 10 billion German Marks. Two banks in the US, owned by the plutocrats JP Morgan and Rockefeller had deposits equivalent to 11 billion German Marks. These were equivalent to US$2.4 billion and US$2.6 billion in 1913 exchange rates. In today’s terms these are equivalent to US$56 billion and US$62 billion respectively. In 2013, Germany’s largest bank Deutsche Bank alone had deposits equivalent to US$727 billion. JP Morgan Chase is the biggest bank in the US which in 2013 held deposits of US$ 1,288 billion. At the same time, Lenin identifies the growth in traded securities to the equivalent of 479 billion French Francs. This is the equivalent of US$ 2,700 billion in today’s terms. But this is a fraction of the current level of international claims held by banks in the imperialist centres, of US$32,859 billion[v].

Taken together these data show that the main features identified by Lenin, the concentration of capital and monopoly and the increasing dominance of finance capital have both become more pronounced and more dominant features of imperialism.

However, value can only be extracted if it is produced. Just as imperialism is a parasitic extension of capitalism, the dominance of finance capital is a parasitic characteristic of imperialism, which leads to its decay.

Parasitism and decay

Under a system of super-exploitation, the capitalist has a diminishing incentive to develop the productive forces of the economy as profits can be increased simply by increasing the scope of territory and the number of slaves held by the slave-owners. This was noted by Marx in his analysis of the Southern slave states of America.

In a different context, imperialism too is a system of super-exploitation, one which attempts to embrace the whole world. Marx had earlier shown that the first imperial power, Britain in Ireland, had benefited from a higher rate of exploitation in its colony, with the imperial power ‘pocketing the excess’ profits even beyond the rate of exploitation in their own domestic market. As the brutality and rapaciousness of the regime increases, so too does its parasitical nature. This leads to decay and its vulnerability to competition from a more vigorous system of production.

At the beginning of the twentieth century Britain was the premier trading nation in the world, via its empire. However, Lenin points out that Britain’s profits from its foreign and colonial trade was just one-fifth of its profits derived from its overseas financial investments. Britain had already become a ‘rentier state’, primarily living off these investments.

Britain had run a trade deficit, the value of imports exceeding the value of exports for most of the period from the 1890s to the outbreak of the 1914-18 war[vi]. But the very high level of interest income (or rent) on its overseas possessions meant that the balance on the current account (the combined balance of trade in goods and services plus overseas interest payments) remained in surplus. This overall surplus on the current account ended in the 1930s. Repeated devaluations of the overvalued pound frequently redressed this imbalance by making exports cheaper and increasing the value of overseas interest payments in pound sterling terms. The discovery of North Sea oil also gave a temporary boost, but deficits on the current account have become such a fixed feature of the British economy since that in some official data it is sometimes referred to as the current account deficit, rather than the current account balance.

The deficit on the current account must have an off-setting item to balance it. This is the capital account, the net flows of capital rather than of interest payments or dividends. When Britain fell into a current account deficit in the 1930s it was obliged to become a net importer of capital to off-set it.

As noted above, Lenin had identified the export of capital as one of the key features of imperialism at the beginning of the twentieth century. Only the most hide-bound or scholastic reading of Lenin would then argue that in the 1930s Britain passed from being an imperialist nation to an oppressed one. Instead, the parasitism and decay of British imperialism has led it into a new and more decrepit, leech-like phase. Where Britain has trod the United States has followed.

Capital importers

The much greater size of the US domestic market, the consequent scope for increasing the division of labour and the greater productivity of its industries all meant the capitalist mode of production retained a degree of vigour there that had long become a distant memory in Britain. This was reinforced by the pre-eminent position of the US following the 1914 to 1945 world wars.

However the US too has become a net importer of capital over a different timescale. This is shown in Chart 1 below. The US became an importer of capital because the growth of the economy was insufficient to maintain both the growth in living standards of the population and to fund the Viet Nam war. The US became an importer of capital in the course of the Viet Nam war and in order to pay for it.

Chart 1. US Current Account Balance 1960 to 1980, US$ billions
Source: Federal Reserve Economic Data

The US did not become an economically oppressed nation while it was raining more bombs on Viet Nam, Laos and Cambodia than were dropped in the whole of the Second World War. Instead,imperialism and the dominant imperialist power has entered a new phase, where it sucks in capital from the rest of the world. It does so without in advance being either a net exporter of goods or of capital.

As Lenin and a host of commentators had shown, in an earlier phase imperialism had been an exporter of capital. By the early 1970s the US (and Britain, long before) had become importers of capital.

Persistently incurring new net debts will tend to run down any existing net stock of overseas capital. This is precisely what has happened. The US, as well as France and Britain are imperialist powers who own no net overseas assets, that is to say, their overseas debts are greater than their overseas assets. This is shown in Table 1 below.

Table 1. Net International Investment Position 2012, US$ billions
Source: IMF, International Financial Statistics[vii]

The US is the world’s biggest net overseas debtor. It requires capital inflows to support the living standards of the population while maintaining the same level of military spending as the rest of the top 10 nations put together. These debts in return require interest payments, which in turn piles up further debt.

Yet the most remarkable feature of the current economic aspects of imperialism is that the US, a country which has no net assets but only net debts, achieves a surplus on its investment income account. The net flows on the investment income account are shown in Table 2 below.

Table 2. Investment Income Account, Net Flows, 2012, US$ billions
Source: World Bank, Data, Net Primary Income[viii]

Taken together these five imperialist powers have effectively no net overseas assets, as the net assets of Japan and Germany are effectively balanced by the net debts of the US, France and the UK. Yet in 2012 they received a net US$526 billion in net payments of interest and dividends from the rest of the world.

Within this bloc, the US is clearly pre-eminent. It extracted more interest from the rest of the world than Japan, despite having net debts greater than the level of Japan’s net assets. France and the UK were junior partners in this role. By contrast, both Japan and Germany are able to sustain trade surpluses because of accumulated levels of productivity (and in Japan’s case severe restrictions on imports). For them, there is no imperative to engineer investment income surpluses, these are a natural outcome of their trade-driven accumulation of overseas assets. Even so, along with France and the UK, they too play a supporting role in the global system of imperialism and benefit from it.

[* The UK is undergoing a particular period of turmoil in its overseas accounts, associated with the continuing crisis of its banking system and their overseas operations. In the prior year the surplus was $42 billion. But it remains to be seen to what extent the UK can recover this position].

Finance Capital

A capitalist economy is one in which there is generalised commodity production. Money is the universal commodity, standing in for all other commodities in the process of exchange. The control over the direction or allocation of money capital therefore becomes decisive in the development of capitalism itself. The medium for this allocation is the banks[ix].

As a result, the degree of concentration of capital and the dominance of monopolies depends on the financial capacity of the banks. The scale of necessary investment requires access to large-scale savings. The elimination of rivals requires financial resources. So, the creation of Ford Motors, Standard Oil and AEG relied on the emergence of JP Morgan, Rockefeller and Deutsche Bank respectively. This control over the allocation capital places the banks in an increasingly dominant position in the capitalist economy. Dominance over the global financial system is the essential condition for dominance over an entire economic system dominated by finance capital.

As the dominant force in the global financial system, the US directs resources for its own needs. It charges vastly higher rates of interest when it recycles capital overseas than it is willing to pay. This explains how it is possible for the US to draw in interest income when it owns no net assets. At the same time, the US and its junior partners in France and the UK have not grown as rapidly as the world economy over a prolonged period, and yet they are continually able to draw in capital from the rest of the world. This too is only possible because of the US dominance over the global financial system, with Britain and France playing an important subordinate role.

The US dominates all global transactions through the trading pre-eminence of the US Dollar, which accounts for approximately 85% of all foreign exchange transactions.[x] Firms seeking to raise capital privately are inspected by the US-dominated ratings’ agencies. Governments are frequently obliged to apply to the IMF or World Bank, where the US dominates. The obligatory criteria under which these finances are disbursed, or not, comprises privatisations, reduced government spending, lower living standards and financial ‘liberalisation’. These have the effect of allowing greater access to domestic markets for the imperialist powers, their firms and their banks, and most especially allows access to domestic savings, which are required to fund the external deficits of the US and the other imperialists. It is no accident that the ideology underpinning these criteria is called the ‘Washington Consensus’. It amounts to dominance over the financial system which dominates the world and gives the US privileged access to its resources.

This is far removed from the era of ‘free trade’, between firms and nations which ended by the turn of the twentieth century. In any event this frequently involved robbing the colonies of goods or raw materials for far below their value, or in many cases simply outright plunder. It is even further removed from the trade of one large country with another, say Brazil with Venezuela or China in Africa. These can be mutually beneficial trading relationships, even while governed by laws of the capitalist market.

Instead, the parasitic imperialist powers are able to conjure capital and interest from the rest of the world, seemingly out of thin air and on a repeated basis. It is comparable to free trade only in the way that an armed robber is akin to a market stallholder. In both cases money changes hands, but US dominance over the global financial system leaves as little in return as the robber. And this is not a one-off, but it is a continuous flow of capital.

It is only possible to rob someone repeatedly if a knife is held to their throat. The extraordinary US expenditure on its military and the willingness of its French and British aides de camp to support its military adventures (even their disappointment when the US was obliged to refrain from bombing Syria) is explained by this imperative to plunder the rest of the world. Military dominance and repeated shows of military force are necessary to underpin a system of global financial extortion.

The negative effects of imperial domination are not most frequently felt through war. This is just the most extreme symptom. Instead, a consequence of the dominance of the US and its interests in global finance is that even any changes in the economic or monetary conditions of the US reverberate globally. Abrupt changes in the US repeatedly manifest themselves as regional or even global crises. This is shown in Chart 2 below.

Chart 2. US Long-Term Interest Rates and Financial Market Crises
Source: Federal Reserve Economic Data

The chart above shows long-term US interest rates and some of the main financial market crises. The yields on US government debt change if there is an alteration in the balance of supply and demand for capital in the US. This was the case when Reagan came to office and hugely expanded the US budget deficit. It has also been the case with (increasingly modest) economic revivals in 1994, in 1997 and the very mild economic upturn in 2012. In all cases the increased demand for capital in the US led to a rise in US long-term interest rates.

The consequence was that capital flowed out of the semi-colonial world and into the US, leaving the former in crisis. This occurred with the Latin America debt crisis of the early 1980s, the global financial crisis in the early 1990s, the Asian financial crisis of 1997 and 1998. The recent ‘emerging market’ slowdown is only milder to date because the rising demand for capital in the US to fund rising consumption has been extremely modest by historical standards. Yet among the countries most affected by this slowdown include Brazil, Russia, South Africa, Turkey[xi], and so on, precisely those countries which are foolishly described as sub-imperialist, or even in Russia’s case, without the diminishing prefix. It is only those countries who are able impose capital controls that can partly insulate themselves from being a store of savings for the US (and face fierce opposition from the US for doing so). This imperial dependence on capital inflows is the reason that the US, and its proxies like the IMF are so adamant that capital movements be ‘liberalised’.

In each case after these major crises the subsequent outflow of capital from the semi-colonial countries restored the US domestic balance of supply and demand for savings and so US long-term interest rates declined. But the outflow of capital left devastation in its wake in the semi-colonial countries affected.

Increased parasitism, further decay

The impact of US dominance is felt not only in the colonial and semi-colonial countries but also in the subordinate imperialist countries themselves. As noted above, in 1994 there was a global financial crisis provoked by an increased demand for capital in the US which affected all countries unevenly.

While the UK and France attempt to benefit directly from the dominance of the US and the role of global finance, Japan and Germany remain more closely related to the archetypal imperialist power of the early twentieth century. Highly competitive industries and persistent trade surpluses have previously allowed the build-up of a stock of overseas assets from which German and Japanese imperialism draw interest from the rest of the world. Consequently, they have had less incentive to support domestic finance at the expense of domestic industry. As a result Japan and Germany have much less to gain from the increased dominance of US-led global finance in the worldwide system of imperialism.

After 1945, the US aim of bolstering capitalist allies as a bulwark against the Soviet Union prioritised the rebuilding of war-ravaged Japan and Germany. This was state intervention to preserve the capitalist system. But it was only after the US had established its supreme dominance over the rest of the world, including the subordination of these other imperialist powers through war.

The weight of the imperialist economies is not static, either as a group or individually. They have undergone a series of dramatic changes. The only constant is US dominance. Chart 3 below shows the relative weight of these five imperialist economies in the world economy, both individually and as a group. The data is shown in the table below.

Three distinct dates are chosen. 1913 represents a snapshot of the world economy on the eve of 1914-1918 war. 1951 represents the post-1945 settlement. This is also the highest recorded point of imperialist power on a world scale as accounted for by share of world GDP and is also the highest recorded level for the weight of the US in the global economy. 2008 is the final data available from Maddison before his death, and of course coincides with the onset of the global financial crisis.

Chart 3
Source: Author’s calculation from Maddison data

The high-point of these imperialist powers in terms of share of world GDP was 1951. There has been a sharp decline since that time (which has almost certainly been deepened by the effects of the crisis). Within that bloc, the US has returned to its former starting point a century ago, whereas most of the other imperialist powers have declined in a more marked way. The UK has experienced the most spectacular fall of all, its weight in the world economy declining by two-thirds in a hundred years. Japan is the partial exception to this rule, having been only on the verge of becoming an imperial power at the beginning of the twentieth century and being utterly devastated by war and nuclear bombing by the early 1950s.

This still left just 9.5% of the world’s population in these 5 countries to enjoy the benefits of one-third of world output in 2008. Within those countries a tiny minority of the population takes the lion’s share. All manner of chauvinist and racist explanations are advanced for this unequal distribution of global income, and the accumulated wealth it brings. But in reality it is only possible if most of the world is dominated by a global system of imperialismthe forcible transfer of incomes and wealth from most of the world to a minority of it. This system includes ideological, legal, institutional, commercial and financial strands. All of these are underpinned by the aggressive exercise of military dominance, led by the US.

A century ago, Britain had already become a ‘rentier nation’, living off its overseas income. The factual verdict on this strategy in terms of delivering growth is devastating. By contrast, Japan’s post-War success was built on very high levels of investment and favoured nation status in its trade relationships with the US. Japanese investment as a proportion of GDP rose to what was then an unprecedented level of 30% of GDP and in consequence GDP growth accelerated to over 8% per annum.

However this period is already at an end. The Japanese domestic economy has not been accumulating net new capital for some years and the structural trade surpluses have become deficits. Growth has also stagnated for 25 years and it seems probable that like the US, France and the UK, Japan’s net overseas assets will dwindle towards zero (or below).

A decisive blow was struck by the US against both Japan and West Germany in the late 1960s. Both countries had been growing more strongly than the US over a considerable period based on much higher levels of investment. Using the pressure of its military relationships, in a series of measures the US forced sharp revaluations of both the Japanese Yen and the Deutsche Mark. It suspended the convertibility of the US Dollar and finally collapsed the entire post-WWII Bretton Woods financial system. In this way it was able to disguise a substantial devaluation of the US Dollar as a widespread but piecemeal revaluation of other major currencies, while its grip on Middle East oil ensured this did not lead to an outright balance of payments crisis in the US.

The effect was not to increase US growth but to slow both the Japanese and German economies for a generation, just as it had used the combination of its military and financial muscle to devastating effect against France and the UK during the Suez crisis in 1956. The US later repeated this feat particularly in relation to Japan, by redirecting Japanese capital towards the US arms race to bankrupt the Soviet Union in the 1980s. The most important outcome was the overthrow of the Soviet Union and its reduction to the status of a semi-colonial country, primarily producing raw materials for the (US-dominated) international markets. A side-effect was to foster the collapse of Japanese growth into stagnation, which has been unaltered since 1990.
Inter-imperialist rivalry has not been abolished. But the US has used a combination of its financial and military dominance to ensure its own dominance within the imperialist bloc, even as that bloc has been in relative decline.


The concentration of capital and the dominance of finance capital have both become more pronounced features of global capitalism in the current phase of imperialism.

Simultaneously, the decayed and parasitical ‘rentier nation’ that Britain had already become over a century ago is now the norm for the imperialist countries as a whole and for its dominant country, the United States.
Like an ancient despot, the US and its allies draw in tribute from the rest of the world in the form of a continuous inflow of capital. There is even a substantial net inflow of interest income, even though they possess no net overseas assets, only liabilities.

The main mechanism for this worldwide extortion is the US dominance over the global financial system, which is itself the dominant sector of capitalism. This is only possible because it is underpinned by the vast military resources of the US, which are far greater than all its major rivals combined, and which it exercises repeatedly and brutally.

Like Britain before it, the US has become a ‘rentier nation’, whose main overseas income is derived from the exaction of interest and other payments rather than net trade. But this has entered a new phase, where the tribute of interest income continues to flow even though there are no assets on which it is based. Without any net overseas assets, this is only possible because of its status as imperial power. Imperialism is a global system of super-exploitation, directed by control over finance capital and supported by military dominance. The sole imperial super-power is the US, supported by its allies.

Because imperialism has entered a more decrepit phase does not make it more benign. On the contrary. The US relentlessly seeks to extend its interlocking systems of military alliances, trade treaties and financial predominance because it is in relative decline. The vampire always seeks fresh blood.

Using ‘imperialism’ as a term of abuse, or even as a synonym for a large trading nation, albeit one possessing nuclear weapons, is to rob it of all scientific value. The fact that US imperialism can occasionally be challenged or stymied by some combination of semi-colonial countries and worker’s states acting in concert does not alter the essential meaning. Instead, these challenges are a reflection of the relative economic decline of the imperialist powers in general combined with a growing and related war-weariness on the part of the population. The US insistence on its own supremacy within the imperialist bloc has only exacerbated that collective decline, while preserving its own dominant status.

Rather than echo the frustrations of the US State Department, socialists and communists welcome the current impotence of the US, for however long it lasts and however limited it is. In 1997 a triumphalist US imperialism set out its bold plan to brook no global or regional opposition and to be able to fight two major wars simultaneously[xii]. In 2013 the US and its allies were unable to begin bombing Syria.

Imperialism is the enemy of all humanity and its set-backs or defeats are a cause for celebration as they represent an advance for all humankind and the struggle for socialism.

[i] This is not new. At the outbreak of war in 1914, most leaders of the Socialist Parties in Europe promptly discovered that their real enemy was the same as the one identified by their own bourgeoisie.
“The scientific concept of imperialism, moreover, is reduced to a sort of term of abuse applied to the immediate competitors, rivals and opponents of the two imperialists mentioned, each of whom holds exactly the same class position as his rivals and opponents! This is not at all surprising in this day of words forgotten, principles lost, philosophies overthrown, and resolutions and solemn promises discarded.
Lenin, preface to Bukharin’s ‘Imperialism and the World Economy’,

[ii] As the US became free to engage in increased military adventures with the collapse of the Soviet Union, there arose a concerted effort to disguise this by arguing that ‘imperialism’ was a diffuse and unspecific phenomenon. Hardt and Negri led the way in‘Empire’ arguing that ‘imperialism has no address.’ Imperialism is a global system of exploitation, but it has a sole superpower protagonist which is headquartered in Washington DC.

[iii] This essay cannot possibly do justice to the scope of Lenin’s work, which relied on exhaustive and voluminous research in a host of languages. The notebooks for his pamphlet encompass hundreds of works, in Volume 39 of his Collected Works . However, with access to modern and publicly available databases it is possible to analyse some of the most important features identified by him and to update them in light of factually altered conditions. This can be done without the volume of work that Lenin was obliged to do, and should be done by socialists seeking to understand the development of capitalism.

[iv] The Fortune 500 list of leading global firms contains 130 from the US In 2013 their combined revenues was equivalent to just under $16 trillion, approximately the same as US GDP.

[v] Bank for International Settlements, BIS Quarterly Review, Q3 2013

[vi] Bank of England, Three centuries of economic data There is an accompany dataset which shows the trade deficit from 1891 to 1906, followed by a trade surplus until the outbreak of the war. Dataset can be accessed here

[vii] IMF,

[viii] World Bank,

[ix] Lenin drew on Hilferding’s ‘Finance Capital’ which analysed the dominance of finance capital beginning with the role of money which ‘stands in the place of’ all other commodities.

[x] BIS, Annual Foreign Exchange Survey, Reuters report

[xi] Financial Times, Emerging Market: Fears of Contagion

[xii] Project for the new American Century,