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XVII. Economic Crises

The Basis of Capitalist Crises of Overproduction

Starting from the beginning of the nineteenth century, from the time when large-scale machine industry first arose, the course of capitalist extended reproduction has been periodically interrupted by economic crises.

Capitalist crises are crises of overproduction. A crisis shows itself first of all in the’ fact that commodities cannot be sold, since they have been produced in quantities greater than can be bought by the main consumers—the mass of the people—whose purchasing power is confined under capitalist relations of production within extremely narrow limits. “Surplus" goods encumber the warehouses. The capitalists curtail production and dismiss workers. Hundreds and thousands of enterprises are closed down. Unemployment increases sharply. A great number of petty producers are ruined, in both town and country. The lack of outlet for the goods produced leads to disorganisation of trade. Credit connections are broken. The capitalists experience an acute shortage of money for payments. The exchanges crash-the prices of shares, bonds and other securities fall headlong. A wave of bankruptcies of industrial, commercial and banking concerns sweeps forward.

Overproduction of commodities during crises is not absolute but relative. This means that an excess of commodities exists only in relation to demand effective in terms of money, but not at all in relation to the actual requirements of society. During crises the working masses suffer extreme want in respect of elementary necessities, their requirements are satisfied worse than at any other time. Millions of people starve because “too much" grain has been produced, people suffer from cold because “too much" coal has been produced. The working people are deprived of means of livelihood just because they have produced these means in too great a quantity. Such is the crying contradiction of the capitalist mode of production, under which, in the words of the French Utopian Socialist Fourier, “plenty becomes the source of poverty and want".

Upheavals in economic life often occurred under pre-capitalist modes ofproduction, too. But they were called forth some extraordinary elemental or social calamity: flood, drought, wars or epidemics sometimes laid waste entire countries, dooming population to famine and extinction. The radical difference, however, between these economic upheavals and capitalist crises is that the hunger and want caused by these upheavals were an outcome of the low level of development of production, the extreme shortage of products; whereas under capitalism crises are engendered by the growth of production alongside the wretched standard of living of the masses, by a relative “excess" of commodities produced.

As has been shown above (in Chapter IV), the possibility of crises is inherent even in simple commodity production and circulation. Only under capitalism, however, do crises become inevitable, for then production assumes a social character but the product of the socialised labour of many thousands and millions of workers passes into private appropriation by the capitalists. The contradiction between the social character of production and the private, capitalist form of appropriation of the results of production, which is the fundamental contradiction of capitalism, furnishes the basis for economic crises of overproduction. Thus the inevitability of crises is rooted in the system of capitalist economy itself.

The basic contradiction of capitalism shows itself as an antithesis between the organisation of production in the individual enterprises and the anarchy of production in society as a whole. In each separate factory the workers’ labour is organised and subordinated to the single will of the employer. But in society as a whole, owing to the supremacy of the private ownership of the means of production, anarchy of production reigns and excludes planned development of the economy. Therefore the complex conditions which are necessary for the realisation of the social product under capitalist extended reproduction are inevitably broken up. These violations gradually accumulate until the onset of a crisis, when the process of realisation falls into complete disorder.

In their hunt for the highest possible profits the capitalists expand production; improve technique, introduce new machinery and throw vast masses of commodities on to the market. Acting in the same direction is the constant tendency of the rate of profit to fall, which arises from the growth in the organic composition of capital. The employers endeavour to make up for the fall in the rate of profit by increasing the amount of profit, through expansion of the scale of production and the quantity of commodities produced. Thus capitalism has an inherent tendency to expand production, a tendency towards a huge growth in production potentialities. But as a result of the impoverishment of the working class and of the peasantry, the effective demand of the working people is relatively reduced. In consequence of this the expansion of capitalist production inevitably encounters the narrow limits of consumption by the bulk of the population. It ensues from the basic economic law of capitalism that the aim of capitalist production—the extraction of profit on an ever-increasing scale—inevitably comes into contradiction with the means for attaining this aim—the extension of production. Crisis is that moment in the course of capitalist extended reproduction when this contradiction appears in the acute form of overproduction of commodities, for which no outlet can be found.

“The basis of the crisis lies in the contradiction between the social character of production and the capitalist form of appropriation of the results of production. An expression of this basic contradiction of capitalism is the contradiction between the colossal growth of capitalism’s potentialities of production, calculated to yield the maximum of capitalist profit, and the relative reduction of the effective demand of the vast masses of the working people whose standard of living the capitalist always try to keep at the minimum level" (Stalin, “Political Report of the Central Committee to the XVIth Congress of the CPSU(B)", Works, vol. XII, pp. 250-1.)

The basic contradiction of capitalism comes to light in the class antagonism between proletariat and bourgeoisie. Characteristic of capitalism is the split between the two most important conditions of production: between the means of production, concentrated in the hands of the capitalists, and the direct producers, who are deprived of everything except their labour-power. This split is vividly revealed in the crises of over-production, when a vicious circle is formed: on the one hand a surplus of means of production and products, and on the other a surplus of labour-power, masses of unemployed who are without the means of existence.,

Crises are the inescapable companions of the capitalist mode of production. To abolish crises one must abolish capitalism.
Cyclic Character of Capitalist Reproduction

Capitalist crises of overproduction recur at definite intervals of time, every eight to twelve years. The inevitability of crises is determined by the general economic laws of the capitalist mode of production, which operate in all counties taking the capitalist path of development. At the same time the course of each crisis, the form in which it appears and its special features, depend also on the concrete conditions of development of the particular country concerned. Partial crises of over-production, affecting particular branches of industry, occurred in Britain as far back as the end of the eighteenth century and the beginning of the nineteenth. The first industrial crisis which embraced a country’s economy as a whole broke out in Britain in 1825. In 1836 a crisis began in Britain and then spread to the. U.S.A. as well. The crisis of 1847-8, which embraced Great Britain, a number of countries of the European continent and the U.S.A., was, in essence, a world crisis. The crisis of 1857 affected the principal countries of Europe and America. It was followed by the crises of 1866, 1873, 1882 and 1890. The most serious was that of 1873, which marked the beginning of the transition from pre-monopoly capitalism to monopoly capitalism. In the twentieth century crises occurred in 1900-3 (this crisis began in Russia, where it was felt much more strongly than in any other country), in 1907, 1920-1, 1929-33, 1937-8 and 19489 (in the U.S.A).

The period from the beginning of one crisis to the beginning of another crisis is called a cycle. A cycle is made up of four phases: crisis, depression, recovery and boom. The fundamental phase of a cycle is the crisis, which provides the starting point for a new cycle.

The crisis is that phase of a cycle in which the contradiction between the growth of the productive potentialities and the relative reduction of effective demand breaks out in an acute and, destructive form. This phase of a cycle is characterised by overproduction of commodities which cannot find outlets, by a sharp fall in prices, by an acute shortage of means of payment and by stock exchange crashes which bring in their train mass bankruptcy, a sharp curtailment of production, a growth in unemployment, and a fall in wages. The fall in the prices of commodities, unemployment, direct destruction of machinery, equipment and entire works—all this means a tremendous destruction of society’s productive forces. Through the ruin and collapse of a large number of concerns and the destruction of part of the productive forces the crisis forcibly adapts, and that within a very short time, the magnitude of production to the magnitude of effective demand. “The crises are always but momentary and forcible solutions of the existing contradictions, violent eruptions, which restore the disturbed equilibrium for a while." (Marx, Capital, Kerr edition, vol. III, p. 292.)

The depression is the phase of the cycle which comes immediately after the crisis. This phase of the cycle is characterised by the fact that industrial production stagnates, prices of commodities are low, trade proceeds sluggishly, and there is an abundance of spare money capital. In the depression period the prerequisites are created for the ensuing recovery and boom. The accumulated stocks of commodities are partly destroyed and partly sold off at reduced prices. The capitalists endeavour to find a way out from the stagnant condition of production by reducing the costs of production. They seek this objective, first, by intensifying in every way the exploitation of the workers, further reducing wages and heightening the intensity of labour; second, by re-equipping their works, renewing their fixed capital, introducing technical improvements, all with the aim of making production profitable at the low prices which prevail owing to the crisis. The renewal of fixed capital gives a fillip to the growth of production in a number of branches. Enterprises which manufacture equipment receive orders and in their turn create a demand for all kinds of raw material and other materials. Thus there opens a way out of the crisis and depression and for transition to recovery.

Recovery is that phase of the cycle during which enterprises revive from their disturbed condition and proceed to an extension of production. Gradually the level of production attains Its former height, prices rise, profits grow. Recovery passes into boom.

The boom is that phase of the cycle in which production rises above the highest point attained in the previous cycle, before the crisis. During a boom new industrial enterprises, railways, etc., are built. Prices rise; merchants try to buy as many commodities as possible in the expectation of a further rise in prices, and by so doing stimulate manufacturers to expand production still further. The banks readily grant advances to manufacturers and traders. All this makes it possible to extend’ the" scale of production and trade far beyond the limits of effective demand. In this way the conditions for the next crisis of overproduction are created.

Before the onset of a crisis production attains its highest level, but selling possibilities seem to be even greater. Over-production already exists, but in a hidden form. Speculation pushes up prices and inflates the demand for commodities to an excessive degree. Goods surpluses pile up. Credit still further conceals the fact of overproduction: the banks go on financing industry and trade, artificially sustaining the expansion of production. When overproduction attains its highest point, the crisis breaks out. Then the whole cycle is repeated.

Each crisis gives a stimulus to mass renewal of fixed capital. Endeavouring to restore the profitability of their enterprises by means of a sharp reduction of prices, the capitalists, besides intensifying the exploitation of the workers, are obliged to introduce new machinery and machine-tools, new methods of production. At the expense of intensified exploitation of the working class, ruin of the small producers, absorption of many enterprises by their competitors, the large capitalists bring about new investments of capital. Thus, the way out of the crisis is effected by the internal forces of the capitalist mode production. But with the transition to recovery and boom, violations of the conditions of reproduction, disproportions, contradictions between the growth of production and the narrow limits of effective demand, inevitably begin to pile up once more. In consequence, a new crisis of overproduction inevitably breaks out within a more or less definite space of time. “It is true that the periods in which capital is invested are different in time and place. But a crisis is always the starting-point of a large amount of new investment. Therefore it also constitutes, from the point of view of society, more or less of a new material basis for the next cycle of turnover." (K. Marx, Capital, Kerr edition, vol. II, p. 211.) In the decisive branches of large-scale industry the longevity of the basic means of production, taking into account not only physical but also moral depreciation, amounts on the average to about ten years. The inevitability of periodical mass renewal of fixed capital serves as the material basis for the periodicity of crises, which recur regularly throughout the history of capitalism.

Every crisis prepares the ground for fresh and still deeper crises, so that as capitalism develops their destructive force and acuteness becomes greater and greater.
Agrarian Crises

Capitalist crises of overproduction, which bring in their train unemployment, a fall in wages, and reduction in the effective demand for agricultural produce, inevitably give rise to partial or general, overproduction in the sphere of agriculture. Crises of overproduction in agriculture are called agrarian crises.

Behind the inevitability of agrarian crises is the same fundamental contradiction Of capitalism which constitutes the basis of industrial crises. At the same time, agrarian crises have certain special features: they are usually more prolonged than industrial crises.

The agrarian crisis of the last quarter of the nineteenth century, which involved the West-European countries, Russia and eventually also the U$A., began in the first half of the 1870’S and continued in one form or another down to the middle of the 1890’s. It arose because the development of maritime transport and the extension of the network of railways began to bring to the markets of Europe large quantities of cheaper grain from America, Russia and India. The production of grain was less costly in America owing to the opening-up of new and fertile lands there and the availability of free land which bore no charge of absolute rent. Russia and India could export grain to Western Europe at low prices because the Russian and Indian peasants, crushed by unbearable taxes, were obliged to sell their grain very cheaply. The European capitalist tenant-farmers and peasants could not stand up to this competition, owing to the high rents exacted from them by the landlords. After the first world war, in the spring of 1920, owing to the great reduction in the effective demand of the population, an acute agrarian crisis broke out; it affected the non-European countries (U.S.A., Canada, Argentina, Australia) with particular violence. Agriculture had not yet recovered from this crisis when, at the end of 1928, clear signs of a new one made their appearance in Canada, U.S.A., Brazil and Australia. This crisis embraced the principal countries of the capitalist world exporting raw materials and foodstuffs. The crisis involved all branches of agriculture; it became interwoven with the industrial crisis of 1929-33 and continued down to the beginning of the second world war. After the second world war an agrarian crisis again broke out in the largest countries exporting agricultural produce—the U.S.A., Canada, Argentina-and in a number branches of agriculture in the Western European Countries.

The protracted nature of agrarian crises is due to the following main causes.

First, the landlords by virtue of the monopoly of private property in land compel the tenants to go on paying during agrarian crises the same ground-rent which they agreed to in their tenancy agreement. When the prices of agriculture commodities fall, the ground-rent is paid at the cost of a further reduction of the wages of agricultural workers, and also at cost of the profits of the tenants, sometimes even by drawing the capital advanced by them. Consequently it becomes extremely hard for them to emerge from the crisis by introducing technical improvements and reductions in the costs of production.

Secondly, agriculture under capitalism is a backward branch of the economy compared with industry. Private ownership of land, survivals of feudal relations, the necessity of paying absolute and differential rent to the landlords—all these so many obstacles in the way of a free influx of capital into agriculture, and hindrances to the development of the productive forces. The organic composition of capital is lower agriculture than in industry; fixed capital, the mass-scale renewal of which is the material basis, of the periodicity industrial crises, plays a very much smaller role in agriculture than in industry.

Thirdly, the petty producers (the peasants) strive during crises to keep up their former level of production, so as at costs to hang on to their bit of land, whether it be their own property or leased; this they do at the price of exhausting labour, underfeeding and destructive use of the soil and cattle. This still further increases the overproduction of agricultural produce.

Thus the common basis for the protracted character of agrarian crises is the monopoly of private property in land, the, feudal survivals connected with this and the extreme backwardness of agriculture in capitalist countries. The main burden of agrarian crises falls on the bulk of the peasantry. An agrarian crisis ruins a mass of petty common producers; breaking up established property relations, it hastens the differentiation of the peasantry and the development of capitalist relations in agriculture. At the same time agrarian crises have a devastating effect on agriculture in the capitalist countries, causing a diminution in the sown area, a fall in the level agricultural technique, and a lowering of agricultural crops and of the productivity of stockbreeding.
Crises and the Sharpening of the Contradictions of Capitalism

Economic crises in which all the contradictions of the capitalist mode of production violently explode, inevitably lead to a further deepening and sharpening of these contradictions.

As a rule, capitalist crises of overproduction are universal in character. Beginning in a particular branch of production, they rapidly embrace the entire national economy. Arising first in one country or a few countries, they spread over the whole capitalist world.

Every crisis leads to a sharp decline in production, a fall in the wholesale prices of commodities and in the price of shares on the exchanges a decline in the volume of both domestic and external trade. The scale of production falls to a level which prevailed a number of years previously. In the nineteenth century the level of the economic life of capitalist countries was thrown back during crises by three to five years, in the twentieth century by decades.

The output of coal in the U.S.A. fell during the crisis of 1873 by 9.1 per cent, during that of 1882 by 7.5 per cent, during that of 1893 by 6.4 per cent, during that of 1907 by 13.4 per cent, during that of 1920-1 by 27.5 per cent and during that of 1929­33 by 40.9 per cent. The production of pig-iron in the U.S.A. fell by the following amounts during the crises indicated: 1873—27 per cent, 1882—12.5 per cent, 1893— 27.3 per cent, 1907—38.2 per cent, 1920-1—54.8 per cent, 1929-33—79.4 per cent.

In Germany the total volume of industrial production fell during the crisis of 1873 by 6.1 per cent, 1890—3.4 per cent, 1907—6.5 per cent, and 1929-33—40.1 per cent.

In Russia during the crisis of 1900-03 the smelting of iron declined by 17 per cent the output of oil by 10 per cent, the rolling of rails by 30 per cent, and the production of sugar by 19 per cent.

The crisis of 1857 threw the U.S.A. back two years in output of coal, four years in production of pig-iron, two years in exports and three years in imports. The crisis of 1929 threw the U.S.A, back 28 years in output of coal, 36 years in output of pig-iron, 31 years in outputs of steel, 35 years in exports and 31 years in imports. Britain was thrown back by the 1929 crisis 35 years in coal output, 76 years in pig-iron output, 23 years in steel output and 36 years in external trade.

Economic crises vividly reveal the predatory character of capitalism. During every crisis, while millions of people are in extreme want, doomed to poverty and hunger, vast quantities of commodities are destroyed because they cannot find a market—wheat, potatoes, milk, cattle, cotton. Whole factories, shipyards, blast-furnaces are closed down or sold for scrap, grain crops and technical crops are destroyed and plantations of fruit trees are cut down.

During three years of the 1929-33 crisis 92 blast-furnaces were pulled down in the U.S.A., 72 in Britain, 28 in Germany and 10 in France. The tonnage of sea-going vessels destroyed in those years amounted to more than 6V2 million registered tons.

The destructive effect of agrarian crises is clear from the following figures. In the U.S.A. between 1926 and 1937 more than two million farms were compulsorily sold for debt. The revenue from agriculture shrank from 6.8 milliard dollars in 1929 to 2.4 milliard dollars in 1932. During the same period sales of agricultural machinery and equipment were reduced from 458 million dollars a year to 65 million (one-seventh), and the demand for artificial fertilisers fell by nearly a half The U.S. Government took all kinds of steps to reduce agricultural production. In 1933 10.4 million acres of cotton crop were destroyed by ploughing over, 6.4 million pigs were bought and destroyed by the State, and wheat was burned in the fire-boxes of locomotives. In Brazil about 22 million sacks of coffee were destroyed, and in Denmark 117 thousand head of cattle.

Crises cause incalculable sufferings to the working class, the bulk of the peasantry and the working people as a whole. They bring about mass unemployment, which condemns hundreds of thousands and millions of people to enforced idleness, poverty and hunger. The capitalists make use of unemployment to intensify in every way the exploitation of the working class, and sharply to reduce the standard of living of all the working people.

The number of workers employed in manufacturing industry in the U.S.A. fell by 11.8 per cent at the time of the 1907 crisis. During the 1929-33 crisis the number of workers in America’s manufacturing industry decreased by 38.8 per cent, and the total wages bill fell by 57.7 per cent. According to American statisticians, 43 million man-years were lost between 1929 and 1938 as a result of unemployment.

Crises enormously increase the insecurity of the working people’s lives, their fear of the morrow. Through spending years out of work, workers lose their skill, and after the crisis has ended many of them cannot return to industry any more. The housing conditions of the working people are greatly worsened; the number of homeless people wandering about the country in search of work increases. During crises the number of suicides caused by desperation rises markedly, and destitution and crime increase.

Crises lead to a sharpening of class contradictions between the proletariat and the bourgeoisie, between the bulk of the peasantry and the landlords, usurers and kulaks who exploit them. During a crisis the working class is deprived of many of the achievements which it has won through long and hard struggle against the exploiters and the bourgeois State. This shows the workers that the only way to salvation from want and hunger lies through abolishing capitalist wage slavery. The broadest masses of the proletariat, doomed by crises to tremendous privations, acquire class consciousness and revolutionary determination. The inability of the bourgeoisie to control the productive forces of society undermines the faith of the petty-bourgeois strata of the population in the enduring nature of the capitalist order. All this leads to a sharpening of the class struggle in capitalist society.

The bourgeois State renders aid to the capitalists during crises in the form of subsidies, the cost of which is paid in the long run by the working masses. Using its apparatus of coercion and compulsion, the State helps the capitalists to wage an offensive against the standard of living of the working class and the peasantry. All this intensifies the impoverishment of the working masses. At the same time, crises reveal the complete incapacity of the bourgeois State to curb to any degree the elemental laws of capitalism. In capitalist countries it is not the State that controls the economy but, on the contrary, the State itself is in the power of capitalist economy, in subjection to big capital.

Crises are the clearest indication that the productive forces brought into being by capitalism have outgrown the framework of bourgeois production relations, so that the latter have become a brake on the further growth of the productive forces.

“The crisis shows that present-day society could produce an incomparably greater quantity of products, which could go to improve the lives of all the working people, if only the land, the factories, the machines, etc., were not in the grip of a handful of private owners who draw millions from die poverty of the people." (Lenin, “Lessons of the Crisis", Works, Russian edition, vol. v, p. 76.).

Every crisis brings nearer the downfall of the capitalist mode of production.

Inasmuch as crises exhibit with particular clarity and sharpness the insoluble contradictions of capitalism, testifying to the inevitability of its doom, bourgeois economists try in every way possible to conceal the true nature and causes of crises. Endeavouring to gloss over the inevitability of crises under capitalism, they usually explain crises as resulting from accidental causes which they claim could be eliminated while maintaining the capitalist system of economy intact.

With this purpose, the economists of the bourgeoisie proclaim the ultimate, cause of crises to be either a violation in the proportionality between branches of production or the lagging of consumption behind production, and they propose as a means of curing capitalism of crises that such types of “consumption" be guaranteed as armaments drives and wars. In fact, neither disproportionality of production nor the contradiction between production and consumption are accidental defects of the capitalist mode of production, but inevitable ways in which the basic contradiction of capitalism manifests itself, the contradiction which cannot be eliminated while capitalism exists. Certain bourgeois economists have gone so far as to declare that crises are caused by sun­spots, on the grounds that these exert an influence on the harvest and so on the whole of economic life.

In the intervals between crises the defenders of the bourgeoisie usually come out with sweeping statements to the effect that crises are no more and capitalism has taken the road of crisis-free development; the very next crisis shows up the mistakenness of such statements. Life invariably reveals the complete bankruptcy of such prescriptions for curing capitalism of crises.
The Historical Tendency of Capitalist Development.
The Proletariat as the Grave-digger of Capitalism

After capitalism had become the dominant system, the concentration of property in a few hands advanced with giant strides. The development of capitalism leads to the run of the petty producers, who fall into the ranks of the army of wage-workers. Along with this, the competitive struggle among the capitalists becomes acute, as a result of which one capitalist lays low many others. The concentration of capital means concentration of enormous wealth in the hands of an ever narrower circle of persons.

In developing large-scale production, capitalism gives birth to its own grave-digger in the person of the working class, which comes forward to assume the role of guide and leader of all the working and exploited masses. The development of industry is accompanied by the growth of the proletariat, in numbers, solidarity, consciousness and degree of organisation. The proletariat advances ever more resolutely in struggle against capital. The development of capitalist society, which is accompanied by a sharpening of the. antagonistic contradictions inherent within it and by an intensification of class struggle, prepares the conditions necessary for the victory of the proletariat over the bourgeoisie.

The theoretical expression of the fundamental interests of the working class is Marxism—scientific socialism—which is an integral, harmonious outlook on the world. Scientific socialism teaches the proletariat to unite for class struggle against the bourgeoisie. The class interests of the proletariat coincide with the interests of the progressive development of human society, they merge with the interests of the overwhelming majority of society, for the revolution of the proletariat means the abolition not of this or that form of exploitation but of all exploitation in general.

While at the dawn of capitalism a few usurpers in the shape of the capitalists and landlords expropriated the masses of the people, the development of capitalism leads inevitably to the expropriation of the usurpers by the masses of the people. This task is carried out by the socialist revolution, which socialises the means of production and sweeps away capitalism along with its crises, unemployment and poverty of the masses.

“The monopoly of capital becomes a fetter upon the mode of production which has sprung up and flourished along with and under it. Centralisation of the means of production and socialisation of labour at last reach a point where they become incompatible with their capitalist integument. This integument is burst asunder. The knell of capitalist property sounds. The expropriators are expropriated." (Marx, Capital, Kerr edition, vol. I, p. 837.)

Such is the historical tendency of development of the capitalist mode of production.


(1) Economic crises are crises of overproduction. Underlying crises is the contradiction between the social character of production and the private capitalist form of appropriation of the products of labour. The forms in which this contradiction is expressed are, first, the antithesis between the organisation of production within the individual capitalist enterprises and the anarchy of production in society as a whole, and, second, the contradiction between the huge growth in the productive potentialities of capitalism and the relative reduction in the purchasing capacity of the working masses. The basic contradiction of capitalism shows itself in the class antagonism between the proletariat and the bourgeoisie.,

(2) The period from the beginning of one crisis to the beginning of another is called a cycle. A cycle consists of the following phases: crises, depression, recovery, boom. The material foundation of the periodicity of capitalist crises is the necessity for periodical renewal of fixed capital. Interwoven with industrial crises are agrarian crises, which are distinguished by their protracted character owing to the monopoly of private property in land, the existence of feudal survivals and the backwardness of agriculture under capitalism.

(3) Capitalist crises mean destruction of the productive forces on a gigantic scale. They bring with them incalculable sufferings for the working masses. It is in crises that there is most clearly revealed the historically-limited character of the bourgeois system, the inability of capitalism to control any further the productive forces which have matured within its womb. In order to abolish crises it is necessary abolish capitalism.

(4) The historical tendency of capitalist development is, on the one hand, that it develops the productive forces and socialises production, thus creating the material prerequisites for Socialism, and, on the other hand, that i gives birth to its own grave-digger in the person of the proletariat, which organises and heads the revolutionary struggle of all the working people for liberation from the yoke of capital.

XVIII. Imperialism-The Highest Stage of Capitalism. The Basic Economic Law of Mono poly

The Transition to Imperialism

Pre-monopoly capitalism, with free competition predominating, attained the apex of its development in the 1860’s and 1870’s. During the last third of the nineteenth century there took place the transition from pre-monopoly to monopoly capitalism. Monopoly capitalism finally took shape towards the end of the nineteenth and the beginning of the twentieth centuries.

Monopoly capitalism, or imperialism, is the highest and last stage of capitalism, with the replacement of free competition by the dominance of monopolies as its fundamental distinguishing feature.

The transition from pre-monopoly capitalism to monopoly capitalism (imperialism) was prepared by the entire process of development of the productive forces and relations of production in bourgeois society.

The last third of the nineteenth century was marked by large-scale technical advances and by the growth and concentration of industry. In metallurgy, new methods of smelting steel were introduced widely (Bessemer, Thomas Martin). A rapid spread of new types of prime mover—the dynamo, the internal combustion engine, the steam turbine, the electric motor—accelerated the development of industry and transport. The progress made in science and technique made possible the production of electric power on a mass scale in fuel-burning power stations and later in large hydro-electric stations. The use of electric power led to the creation of a number of new branches of the chemical industry and of metallurgy. The use of chemical methods was extended in a number of branches and processes of production. Improvements in the internal combustion engine made possible the appearance and spread of motor transport and later of aviation.

In the middle of the nineteenth century the predominant place in the industry of the capitalist countries was still occupied, by light industry. Numerous enterprises of comparatively small size belonged to individual owners and the relative importance of joint-stock companies was comparatively slight. The economic crisis of 1873 brought about the collapse of many businesses of this kind and gave a strong fillip to the concentration and centralisation of capital. The predominant role in the industry of the main capitalist countries now began to be played by heavy industry—above all, metallurgy and engineering, and also the mining industry, for the development of which enormous amount of capital were needed. The spread of joint-stock companies on a wide scale still further increased the centralisation of capital.

The volume of world industrial production grew threefold between 1870 and 1900. World smelting of steel grew from 0.5 million tons in 1870 to 28 million tons in 1900, and world smelting of pig-iron from 12.2 million tons to 40.7 million. The development of power engineering, metallurgy and chemistry led to a growth in the world output of coal (from 218 million tons in 1870 to 769 million in 1900); and of petroleum (from 0,8 million tons to 20 million tons). The growth of industrial production was closely connected with the development of railway transport. In 1835, ten years after the construction of the first railway, there were 1,500 miles of railway track in the world; in 1870 there were over 125,000, and in 1900 500,000. Maritime routes came to be served by large vessels driven by steam-operated machinery and internal combustion engines.

During the nineteenth century the capitalist mode of production spread rapidly throughout the world. At the beginning of the 1870’s the oldest bourgeois country, Britain, still produced more cloth, smelted more pig-iron and mined more coal than the U.S.A., Germany, France, Italy, Russia and Japan taken together. Britain held the leading place in world industrial production and an undivided monopoly of the world market. Towards the end of the nineteenth century the situation underwent a marked change. In the younger capitalist countries large-scale, industries of their own had grown up. Owing to this, Britain lost her industrial leadership and her monopoly position on the world market. In respect of volume of industrial production the U.S.A. took first place in the world, and Germany first place in Europe. Russia was moving rapidly along the path of industrial development, though this was hindered by the numerous survivals of serfdom in the country’s economic and social system and by the Tsarist regime, which was rotten through and through.

As the transition to imperialism took place the contradictions between the productive forces and the production relations of capitalism came to assume ever more acute forms. The subjection of production to the capitalists’ hunt for the highest possible profit created very many barriers to the development of the productive forces. Economic crises of overproduction began to recur more frequently, their destructive force increased, and the army of unemployed became more numerous. Alongside the growth of poverty and misery among the working masses of town and country there took place an unprecedented increase in the wealth concentrated in the hands of a small group of exploiters. The sharpening of the irreconcilable class contradictions between the bourgeoisie and the proletariat led to intensification of the economic and political struggle of the working class.

During the period of transition to imperialism the largest capitalist Powers of Europe and, America made themselves masters of huge colonial possessions by force and fraud. The ruling circles of the capitalistically developed countries transformed the majority of the inhabitants of the globe into colonial slaves who hated their oppressors and struggled against them. Colonial conquests enormously extended the field for capitalist exploitation; at the same time the degree of exploitation of the working masses steadily grew. The extreme sharpening of the contradictions of capitalism found expression in devastating imperialist wars, which carried off a host of human lives and destroyed a vast quantity of material wealth.

The historical credit for having undertaken a Marxist analysis of imperialism as the highest stage of capitalism, and at the same time as the eve of the socialist revolution of the proletariat, belongs to V. I. Lenin. In his classic work Imperialism, the Highest Stage if Capitalism, and in a number of other works, mostly written during the first world war, Lenin summed up the development of world capitalism in the half-century which had elapsed since

Marx’s Capital appeared. Basing himself on the laws, discovered by Marx and Engels, of the rise, development and decline of capitalism, Lenin gave an exhaustive scientific analysis of the economic and political essence of imperialism, its laws and its insoluble contradictions.

In Lenin’s classic definition, the fundamental economic features of imperialism are the following:

“(1) The concentration of production and capital developed to such a high stage that it 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, which has become extremely important, as distinguished from the export of commodities; (4) the formation of international capitalist monopolies, which share the world among themselves; and (5) the territorial division of the whole world among the greatest capitalist Powers is completed." (Lenin, “Imperialism, the Highest Stage of Capitalism", Selected Works, 1950, English edition, vol. I, Pt. 2, p.525.)
Concentration of Production and Monopolies.
Monopolies and Competition.

Free competition, which prevailed in the pre-monopoly stage of capitalism, brought about a rapid process of concentration of production in ever larger enterprises. The operation of the law of concentration and centralisation of capital inevitably led to the victory of large and very large enterprises, as compared with which the small and medium enterprises came to play an ever more subordinate role. In its turn the concentration of production prepared the transition from the dominance of free competition to that of monopolies which abolished freedom of competition and at the same time made the competitive struggle in the capitalist world especially fierce and devastating.

In Germany, there were concentrated in enterprises with more than fifty workers each, in 1882 22 per cent of all manual and clerical workers, in 1895 30 per cent, in 1907 37 per cent, in 1925 47.2 per cent, and in 1939 49.9 per cent. The share of the largest enterprises (those employing more than a thousand) in the whole of industry grew from 1907 to 1925 as follows: in terms of the numbers employed from 9.6 per cent to 13.3 percent and in horse­power, from 32 per cent to 41 per cent.

In 1952 in Western Germany 84.6 per cent of all workers were concentrated in enterprises with 50 or more workers and of these, 3411 per cent were in the largest enterprises, with 1,000 and upwards in employment.

In the U.S.A. in 1904 the largest enterprises, those with production valued at a million dollars or over, made up 0.9 per cent of the total number of enterprises; in these enterprises 25.6 per cent of the total number of workers were employed and they contributed 38 per cent of the entire gross output of industry. In 1909 the largest enterprises, representing 1.1 per cent of the total, employed 30.5 per cent of all workers in industry and provided 43.8 per cent of the entire gross industrial output. In 1939 the largest enterprises, making up 5.2 per cent of the total number, concentrated 55 per cent of all the workers employed and 67.5 per cent of the entire gross output of industry. A still narrower group of gigantic industrial corporations, each with assets amounting to more than 100 million dollars, produced in 1954 47 per cent of the total amount of industrial production and received 63 per cent of the total volume of profits. In France in 1952 more than 48 per cent of the total wage bill was paid by very large enterprises numbering only 0.5 per cent of the total number.

Russia’s industry was marked by a high degree of concentration. In Russia in 1879 large enterprises (with more than 100 workers each) comprised 4.4 per cent of the total and in them was concentrated 54.8 per cent of the total production. In 1903 76.6 per cent of all the industrial workers were concentrated in large enterprises, and they were responsible for the overwhelming bulk of industrial production.

Concentration of production takes place most quickly in heavy industry and in new branches of industry (chemical, electrical engineering, automobile, etc.) and lags behind in light industry, in which in every capitalist country there are many small and medium enterprises.

One of the forms of concentration of production is combination, i.e., the uniting in one enterprise of various forms of production which constitute either consecutive stages in the working up of a raw material (e.g., metallurgical combines, which unite the mining of the ore, the smelting of the pig-iron, the conversion of the iron into steel and the manufacture of rolled articles), or which are auxiliary to one another (e.g., use of by-products of an industry). Combination gives the large enterprises still greater preponderance in the competitive struggle.

At a certain level of development the concentration of production brings about monopoly in real earnest. A few dozen giant concerns can more easily come to an agreement amongst themselves than can hundreds and thousands of small ones. On the other hand, in the process of competitive struggle which is played out among themselves by the largest concerns, victory goes to the industrial giants which dispose of enormous amounts of profit, and monopoly ensures high profits. Thus free competition gives place to monopoly. This change-over constitutes the economic essence of imperialism. The bringing about of monopoly by concentration of production is a regular feature of the present stage of capitalist production.

Monopoly means an agreement, alliance or association between capitalists who concentrate in their hands the production and sale of a substantial part of the production of one or a number of branches, in order to fix high prices for commodities and obtain monopolist high profits. Sometimes monopolies are individual very large concerns which occupy a dominant position in a particular branch of industry.

The simplest forms of monopoly are short-term agreements about selling-prices. These are known by a variety of names: conventions, corners, rings, etc. More advanced forms of monopoly are cartels, syndicates, trusts and concerns. A cartel is a monopolistic alliance, the partners in which agree on conditions of sale and terms of payment, divide the markets amongst themselves: decide the quantity of goods to be produced, and fix prices. The quantity of goods which each partner in a cartel is allowed to produce and sell is called his quota; exceeding the quota is punished by payment of a fine to the common fund of the cartel. A syndicate is a monopoly organisation in which the sale of goods, and sometimes also the purchase of raw material, is effected through a common office. A trust is a monopoly in which the ownership of all the enterprises is unified, their owners having become shareholders who draw profit in accordance with the number of shares they hold. A trust is headed by a management which is in charge of all production, sale of goods and finance in respect of the previously independent enterprises. Trusts frequently form part of wider unions called concerns. A concern is an association of a number of enterprises in different branches of industry, commercial firms, banks, transport and insurance companies, based upon common financial dependence on a particular group of very big capitalists.

Monopolies occupy the commanding heights in the economies of the capitalist countries. They embrace heavy industry and also many branches of light industry, railway and river transport, banks, home and foreign trade and have also brought agriculture under their yoke.

Iron and steel production in the U.S.A. is dominated by eight monopolies which in 1953 controlled 83 per cent of all the country’s steel-production capacity; the two largest of them, the United States Steel Corporation and the Bethlehem Steel Corporation, disposed of 49 per cent of the total productive capacity. The oldest monopoly in the U.S.A. is the petroleum trust, Standard Oil. In the motor-car industry three firms are of decisive importance: General Motors, Ford and Chrysler. In the electrical engineering industry the dominant position is occupied by two firms: General Electric and Westinghouse. The chemical industry is controlled by the Dupont de Nemours concern and the aluminium industry by the Mellon concern.

In Britain the role played by monopoly associations grew especially after the first world war, when cartel associations arose in the textile, coal and iron and steel industries and in a number of new industries. Imperial Chemical Industries controls about nine-tenths of the total production of basic chemicals, about two-fifths of that of dyes and almost the entire production of nitrogen in the country. It is closely connected with the principal, branches of British industry and in particular with armaments concerns.

In Germany cartels became widespread at the end of last century. In the period between the two world wars the country was dominated by the Steel Trust (“Vereinigte Stahlwerke"), which employed about 200,000 manual and clerical workers, the coal monopolies, the Krupp arms concern, and the “General Electric" (A.E.G.) and Siemens electrical equipment concerns. In Western Germany in 1952 the large joint-stock companies (those with capital in excess of 10 million marks) held 74 per cent of all the capital of joint-stock companies. By 1955 their share of total share capital had grown to 80 per cent. In the mining industry the largest firms owned 90 per cent of all the share capital, in iron and steel 81 per cent, and in the oil industry 99 per cent. The capitals of the three companies which succeeded the Chemical Trust were three times as large as the capitals of all the remaining companies in the chemical industry of Western Germany. In the electrical engineering industry eight large firms owned 82 per cent of the share capital. Two of the largest of them, “General Electric" (A.E.G.) and Siemens, together with the firms under their control, possessed 75 per cent of all the share capital in the electrical engineering industry.

In France at the present time the entire production of aluminium is concentrated in the hands of a single company. One firm controls 80 per cent of the entire production of dye-stuffs; 75 per cent of shipbuilding is in the hands of two companies. Three companies control 72 per cent of the cement industry, 90 per cent of the manufacture of rubber tyres, 65 per cent of the sugar industry. In enterprises belonging to four companies are produced 96 per cent of the total output of cars. Five companies control 70-75 per cent of all steel production, 90 per cent of oil-refining, and 50 per cent of cotton textiles.

In Italy, in Japan and even in such small countries as Belgium, Sweden and Switzerland, monopoly organisations hold the commanding heights in industry.

In pre-revolutionary Russia large monopolies embraced first of all the chief branches of heavy industry. The “Prodamet" syndicate (association for sale of the products of metallurgical enterprises) which arise in 1902, controlled the marketing of more than four-fifths of Russia’s iron and steel output. In 1904 the “Prodvagon" syndicate was organised; this held an almost complete monopoly of the production and marketing of railway trucks. A syndicate of the same kind united the locomotive-making works. The “Produgol" syndicate was formed in 1904 by the largest coal enterprises of the Donbas, which belonged to French and Belgian capital; it embraced three-quarters of the entire coal output of the Donbas.

Bourgeois economists, trying to whitewash present-day capitalism, affirm that the spread of monopoly tends to cure the bourgeois system of such evils as competition, anarchy of production and crises. In fact, however, not only can imperialism not eliminate competition, anarchy of production and crises, but it renders still more acute all the contradictions of capitalism.

Lenin showed that imperialism is incapable of reconstructing capitalism from top to bottom. Alongside the predominant role of monopolies there continue to exist in all capitalist countries numerous medium and small enterprises and masses of petty producers—peasants and craftsmen.

The monopolies formed in certain branches of industry intensify the chaotic character which is inherent in capitalist economy as a whole. “The monopolies, which have grown out of free competition, do not eliminate the latter but exist over it and alongside of it, and thereby give rise to a number of very acute, intense antagonisms, frictions and conflicts." (Lenin, “Imperialism", Selected Works, 1950, English edition, vol. I, Pt.. 2, p. 524.).

First, competition does not cease inside the monopolies. The members of syndicates and cartels fight among themselves for the most profitable markets and for the largest share (quota) of production and sales. Within the trusts and concerns a struggle goes on over the managing positions, over the controlling interests and over the distribution of profits.

Secondly, competition goes on between the monopolies: both between monopolies in one and the same branch and between monopolies in different branches which supply each other with goods (e.g., the steel and motor-car trusts) or which produce goods that can be substituted for one another (coal, petroleum, electrical power). Under conditions of a limited capacity of the internal market the monopolies which produce consumer, goods wage a ferocious struggle for outlets for their goods.

Thirdly, competition goes on between the monopolies and the enterprises outside the monopolies. The monopolised branches stand in a privileged position relative to others. The monopolies take all possible measures to strangle “outsider", “pirate" enterprises which do not form part of the monopoly associations. The dominance of monopoly imparts to the competitive struggle a particularly destructive and predatory character. The monopolies unleash for the purpose of strangling a rival all possible methods of direct coercion, bribery and blackmail, resort to complicated financial intrigues and make extensive use of the State apparatus.

The dominance of monopoly leads to further socialisation of production. But the fruits of this socialisation fall into the hands of a few monopolists, whose oppression of the remainder of the population becomes particularly heavy. There takes place a further deepening of the basic contradiction of capitalism—the contradiction between the social character of production and the private capitalist form of appropriation, as’ a result of which crises become still more devastating.
Concentration and Monopoly in Banking.
The New Role of the Banks

Our conception of the actual power and importance of present-day monopoly cannot be sufficiently complete unless note be taken of the role of the banks. The concentration of capital and the transition from free competition to monopoly take place in banking as in industry. At first the banks served mainly as intermediaries for payments. With the development of capitalism the activity of the banks as traders in capital became more extensive. The accumulation of capital and concentration of production in industry led to the concentration in the banks of enormous amounts of spare money seeking profitable application. The share of the large-scale banks in the total amount of bank turnover steadily grew.

In banking as in industry; concentration leads to monopoly. By means of share purchases, granting of credit, etc., the largest banks subject the small ones to themselves. Once having acquired a monopoly position, the big banks conclude agreements among themselves about the division of spheres of influence. Monopoly unions of banks are formed. Each union of this kind rules over dozens and sometimes even of smaller banks, which become in fact branches of the big ones. Through a widespread network of branches the big banks gather together in their safes the resources of a great number of enterprises. Nearly all the money capital of the capitalist class and the savings of other strata of the population are placed at the disposal of small groups of banking magnates.

In the thirty-three years before the first world war (1880-1913) the mere increase in the total of deposits in the banking systems of the four largest capitalist States—the U.S.A., Germany Britain and France-amounted to 127 milliard marks. From then onward the increase in deposits was still more rapid: in a period less than half as long, from 1913 to 1928, deposits in these countries grew by 183 milliard marks.

In the U.S.A. the share taken by the twenty largest banks in the total deposits of all the banks was in 1900 15 per cent, in 1929 19 per cent, in 1939 27 per cent and in 1952 29 per cent. The total number of commercial banks in the U.S.A. declined between 1920 and the end of 1954 from 30,000 to 14,400. In Britain the total balances of the five biggest banks amounted in 1900 to 28 per cent, in 1916 to 37 per cent, In 1929 to 73 per cent and in 1952 to 79 per cent of the total balances of all the British banks of deposit. In France in 1952 six banks of deposit held 66 per cent of the total deposits in all the French banks. In Germany on the eve of the first world war, about one half of the total deposits in all the banks were concentrated in the big Berlin banks, and in 1929-32 two-thirds.

The concentration of industry and the formation of banking monopolies leads to an essential alteration in mutual relations between the banks and industry. As the size of enterprises grows, ever greater becomes the importance of the large-scale, long-term credits granted by the banks to the industrial capitalists. The growth in the amount of deposits placed at the disposal of the banks creates extensive possibilities for such long-term investment of banking resources in industry. The most widespread form in which the money resources of the banks are invested in industry is the purchase of shares in various enterprises. The banks facilitate the formation of joint-stock enterprises by undertaking the reorganisation of private capitalist enterprises into joint-stock companies and the formation of new joint-stock companies (promotion). The sale and purchase of shares is carried out to an ever-increasing extent through the medium of the banks.

The interests of the banks and of the industrial enterprises become merged ever closer and closer. When a bank finances a few large enterprises in a particular branch of industry, it becomes interested in monopolistic agreements between these enterprises and facilitates such agreements. In this way the banks greatly intensify and accelerate the process of concentration of capital and formation of monopolies. The transformation of the banks from modest intermediaries into a handful of all powerful monopolists is one of the fundamental processes of the transition from the capitalism of the epoch of free competition to monopoly capitalism.
Finance Capital and the Financial Oligarchy

As a result of the banks becoming joint owners of industrial, commercial and transport enterprises and acquiring their shares and bonds and of industrial monopolies in their turn possessing shares in the banks connected with them, an interweaving of monopoly banking and industrial capital takes place and a new kind of capital arises-finance capital. Finance capital is the capital of banking and industrial monopolies which has become knit together into one. The epoch of imperialism is the epoch of finance capital.

Defining finance capital, Lenin emphasised three factors of primary importance:

“The concentration of production; the monopolies arising therefrom; the merging or coalescence of the banks with industry—such is the history of the rise of finance capital and such is the content of this term. (Lenin, Imperialism, Selected Works, 1950, English edition, vol. I, Pt. 2, p: 478.)

The coalescence of bank capital with industrial capital is strikingly expressed in the personal union of the heads of the banking and industrial monopolies. The same persons head the largest monopoly associations in banking, industry, commerce and the other branches of capitalist economy.

In Germany before the first world war the six biggest Berlin banks had their representatives serving as directors of 344 industrial enterprises and as members of 407 more; 751 companies in all. On the other hand, fifty-one of the biggest industrialists were members of the governing bodies of these six banks. Later on, this personal union developed still further. In 1932 there were seventy of the biggest industrialists on the governing bodies of the three principal Berlin banks. In the U.S.A. in 1950 a narrow group made up of 400 industrialists and bankers occupied one-third of the 3,705 of the directors’ posts in 250 of the largest corporations (joint-stock companies), possessing 42 per cent of all the capital in the country.

In every capitalist country a small handful of the biggest bankers and industrial monopolists hold in their grasp all the vitally important branches of the economy and dispose of the overwhelming bulk of social wealth. Management by capitalist monopolies inevitably becomes the rule of a finance oligarchy (the Greek word “oligarchy" means literally “the rule of a few"). Imperialism is marked by the omnipotence of the monopoly trusts and syndicates, the banks and the finance oligarchy in the developed capitalist countries.

The domination of the finance oligarchy is effected in the economic sphere above all by means of the so-called “holding system". This means that a big financier or group of financiers controls the principal joint-stock company (the “parent company") which heads the concern; this company in its turn, through owning the controlling interests in them, dominates the “daughter companies" which depend on it; “grand-daughter companies" are similarly situated, and so on. By means of this system the financial bosses are able to control vast sums of the capital of others.

By means of a widely ramified system of holdings, the eight biggest financial groups in the U.S.A.-Morgan, Rockefeller, Kuhn-Loeb, Mellon, Dupont, and the Chicago, Cleveland and Boston groups-occupy the dominant position in that country’s whole economy. The Morgan group’s sphere of influence in 1948 embraced banks and corporations with a total capital of 55 milliard dollars; the Rockefeller group controlled 26.7 milliard, the Dupont group 6.5 milliard and the Mellon group 6 milliard. In 1955 the total number of corporations in the U.S.A. exceeded 660,000. Over 75 per cent of the total amount of the assets of all corporations was concentrated, by means of the holding system, in the hands of 66 milliardaire corporations (i.e., corporations with assets of a milliard dollars and upwards), which disposed directly of 28.3 cent of the total amount ofassets.

The finance oligarchy, making use of its effective monopoly position, obtains vast and ever growing amounts of profit from promotion (i.e., the creation of joint-stock companies), from issuing shares and bonds, from floating State loans and from profitable State orders. Finance capital, concentrated in a few hands, levies an ever-increasing tribute from society.

The financial oligarchy rules in the political sphere too. Both the internal and external policies of the bourgeois states are subordinated to the self-interest of the biggest monopolies.
Export of Capital

Characteristic of pre-monopoly capitalism, in which free competition was predominant, was the export of goods.Characteristic of imperialist capitalism, with the domination of monopoly, became the export of capital.

The export of capital is undertaken for the purpose of obtaining higher profits. It occurs in two main forms: either by the making of loans to governments, towns and banks mother countries, or by the establishing abroad of industrial, commercial and banking enterprises, obtaining of concessions, building of railway lines, and also the buying up cheap of already existing enterprises in countries weakened, for example, by war.

The export of capital is caused, first, by the domination of monopoly in all the countries of developed capitalism and, second, by the monopoly position of a few rich countries in which the accumulation of capital has attained very great dimensions. A vast “superabundance of capital" came into being in these countries on the threshold of the twentieth century.

The “superabundance of capital" in developed capitalist countries is negative in character, for the low standard of living of the masses in these countries sets limits to the further growth of production, and the lagging of agriculture behind industry becomes increasingly marked, together with the unevenness of development of various branches of economy generally. If only capitalism could raise up agriculture and could increase the standard of living of the. working masses, then there could be no question of a “superabundance of capital". But then capitalism would not be capitalism, for both unevenness of development and a semi-starvation standard of living for the mass of the population are fundamental conditions and prerequisites of this mode of production. The superabundance of capital in capitalistically developed countries is thus only relative.

“The necessity for exporting capital arises from the fact that in a few countries capitalism has become ‘overripe’ and (owing to the backward state of agriculture and the impoverished state of the masses) capital cannot find a field for ‘profitable’ investment." (Lenin, “Imperialism", Selected Works, 1950, English edition, vol. I, Pt. 2, p.495.)

In its search for maximum profits, “surplus" capital hastens abroad. Capital is exported predominantly to backward countries, in which there is little capital, wages are low, raw material is cheap, and the price of land is comparatively small. In these countries monopoly capital is able to obtain and does actually obtain vast profits. The export of capital is closely connected with the growth in the export of commodities: the monopolies which export capital usually press their goods upon the debtor countries on conditions profitable to themselves. Foreign monopolies seize control of markets and sources of new material in debtor countries.

Capital is exported not only to backward countries but also to industrially developed ones. This happens during the period of especially rapid development of such countries, which creates a demand for an influx of capital from abroad (e.g., U.S.A. before the first world war), or else when they are weakened as a result of war (Germany after the first world war, the Western European capitalist countries after the second world war).

Bourgeois economists and politicians depict the export capital as “aid" and “a boon" allegedly conferred by the developed capitalist countries on backward peoples. In fact, the export of capital, while hastening the development of capitalist relations in backward countries, conduces at the same time to the all-round enslavement and plundering of these countries by alien monopolists. Export of capital provides one of the bases for the system of imperialist oppression, in which a few rich usurer-countries exploit the greater part of the world. As a result of the export of capital the world is divided into a handful of usurer-States and a gigantic majority of debtor-States.

The export of capital has important consequences for the capital-exporting countries. These countries on the one hand multiply their wealth and strengthen their position on the world market. They receive from abroad a continual flow of surplus-value in the form of interest on loans or profits from overseas enterprises. On the other hand, stagnation in the industrial development of the capital-exporting countries themselves not infrequently sets in. One of the chief results of the export of capital is a growth of rivalry between the Powers, a struggle for the most profitable spheres of investment of capital.

Down to the first world war the principal countries exporting capital were Britain, France and Germany. Their capital investments abroad amounted to 175-200 milliard francs: Britain-75-100 milliard, France-60 milliard, GermanY-44 milliard. Export of capital from the U.S.A. did not as yet play any great role, amounting to less than 10 milliard francs.

After the first world war very great changes took place in world export of capital. Germany lost her capital invested abroad. The foreign investments of Britain and France were substantially reduced and the export of capital from the U.S.A. increased markedly. In 1929 the U.S.A. almost drew equal to Britain in the size of its foreign investments.

After the second world war the export of capital from the U.S.A. grew still more. By the end of 1949 American capital investments abroad exceeded the total of overseas capital investments of all the rest of the capitalist States put together. The total amount of American capital invested abroad grew from II.4 milliard dollars in 1939 to 39.5 milliard dollars at the end of 1953. The total amount of British capital investments abroad fell from 3.5 milliard pounds sterling in 1938 to 2 milliard in 1951.
Economic Division of the World between Alliances of Capitalists.
International Monopolies

As the export of capital grows and as the foreign connections and “spheres of influence" of the biggest monopolies expand, conditions arise for the division of the world market among them. International monopolies are formed.

International monopolies are agreements concluded between the biggest monopolies of various countries on’ the division of markets, price policy, and the volume of production. The formation of international monopolies means the attainment of a new level of concentration of production and capital, incomparably higher than before. Many international monopolies are formed with the very active participation of capitalist States, and are among the most important methods of economic expansion.

Defenders of international monopolies try to present them as instruments of peace, alleging that international agreements between monopolists can settle by peaceful means the contradictions which arise between imperialist groups and countries. Such assertions have nothing in common with reality. In fact, the economic division of the world between international monopolies is carried out in accordance with the strength of the parties, while the strength of the various monopoly groups undergoes changes. Each of them wages an unceasing struggle to enlarge its share and expand its sphere of monopoly exploitation. Changes in the balance of forces inevitably bring in their train intensification of the struggle for re-division of markets, and sharpening of the contradictions between the different groups and the States supporting them. International agreements between monopolists are notorious for their instability, and bear within them the seeds of inevitable conflicts.

International monopolies began to arise in the 1860’s-80’s. Towards the end of last century their total number did not amount to more than forty. On the eve of the first world war there were reckoned to be about 100 international cartels and before the second world war their number had risen to more than 300.

Even before the first world war the petroleum market was in practice divided between the American Standard Oil trust, controlled by Rockefeller, and the Royal-Dutch-Shell concern in which British capital wielded preponderant influence. The market for electrical equipment was shared between two monopoly firms: the German General Electric Company (A.E.G.) and the American General Electric Corporation, controlled by the Morgan group.

International monopoly agreements embraced even such fields as the production of armaments. The largest firms engaged in the manufacture of arms—Armstrong Vickers in Britain, Schneider-Creusot in France, Krupp in Germany, Bofors in Sweden—were linked together by a multitude of ties over a very long period.

International monopolies played a big part in preparing the second world war. The largest monopolies in the U.S.A., Britain and France, connected by cartel agreements with the German trusts, inspired and guided the policy of the ruling circles of these countries, a policy of encouraging and instigating Hitlerite aggression, which led to war.

After the second world war a series of international monopolies were formed to guarantee the economic and military interests of American Imperialism. This is the function for instance of the so-called “European Coal and Steel Union", embracing Western Germany, France, Italy, Belgium, Holland and Luxemburg.
Completion of the Territorial.
Division of the World among the Great Powers and the Struggle to Re-divide it

Along with the economic division of the world between alliances of capitalists, and in connection with it, there takes place a territorial division of the world among the bourgeois States, a struggle for mastery over foreign lands, a struggle for colonies and semi-colonies.

Colonies is the name given to countries which have been deprived of State independence and have become possessions of imperialist metropolitan States.

Semi-colonies is the name given to economically underdeveloped countries which are objects of colonial exploitation on the part of imperialist powers and are economically and politically dependent on these States but retain formal independence. Besides colonies and semi-colonies there exist in the period of imperialism a great variety of types of dependent countries whose degree of dependence varies and is subject to all sorts of changes. “Typical of this epoch is not only the two main groups of countries: those owning colonies, and colonies, but also the diverse forms of dependent. countries which, officially, are politically independent, but in fact are enmeshed in the net of financial and diplomatic dependence." (V. 1. Lenin, “Imperialism, the Highest Stage of Capitalism", Selected Works, 1950, vol. I, Pt. 2, p. 521.)

Defenders of the bourgeoisie depict imperialist rule over the colonies as a “civilising mission", having the aim of leading backward peoples on to the path of progress and independent development. In reality imperialism dooms the colonial and dependent countries to economic backwardness, and hundreds of millions of the inhabitants of these countries are doomed to suffer unheard-of oppression and slavery, lack of rights and poverty, hunger and ignorance. The seizure of colonies by the imperialist Powers leads to unprecedented worsening of national oppression and racial discrimination. In Lenin’s phrase, capitalism was transformed in its imperialist phase from the liberator of nations, which it had been in the period of struggle against feudalism, into a monstrous oppressor of nations.

As early as the middle of the eighteenth century Britain enslaved India, a country of most rich natural resources and with a population which in numbers many times exceeded that of the metropolis. In the middle of the nineteenth century the U.S.A. seized extensive territories belonging to its neighbour Mexico, and in the following, decades established its domination over a number of countries of Latin America.

In the 1860’s-70’s the colonial possessions of the European countries still occupied a comparatively small part of the overseas territories.

In the last quarter of the nineteenth century, in the period of transition to the monopoly stage of capitalism, the map of the world underwent radical changes. All the developed capitalist countries followed the oldest colonial power, Britain, on the road of territorial conquest. France became a great colonial power towards the end of the nineteenth century, with possessions amounting to 3.7 million square miles.

Germany seized a million square miles of territory with 14.7 million inhabitants, Belgium 900,000 square miles with 30 million inhabitants, the U.S.A. conquered the most important foothold in the Pacific Ocean-the Philippines-together with Cuba, Puerto Rico, Guam, Hawaii and Samoa, besides subjecting de facto a number of countries of South and Central America.

Between 1876 and 1914 the so-called “Great Powers" conquered about 10 million square miles of territory, which was one-and-a-half times the area of the metropolitan countries themselves. A number of countries were reduced to semi-colonial dependence on the imperialist States: China, with its population amounting to about a quarter of all mankind, and likewise Turkey and Persia (Iran). By the beginning of the first world war more than half of humanity was under the rule of the colonial Powers.

The imperialists establish and maintain their power over the colonies by methods of deceit and coercion, utilising the superiority of their military technique. The history of colonial policy is an unbroken chain of wars of conquest and punitive expeditions against the enslaved peoples, and also of bloody clashes between the countries possessing colonies. Lenin called the war of the United States against Spain in 1898 the first war of the imperialist type, marking the beginning of the epoch of imperialist wars. The revolt of the Filipino people against their conquerors was cruelly put down by the American forces.

Towards the beginning of the twentieth century the divisions of the world was complete. The colonial policy of the capitalist countries had led to the conquest of all the lands not hitherto occupied by the imperialists. No more “free" lands remained; a situation had been created in which every fresh conquest presupposed wresting territory from its owner. The completion of the division of the world placed on the order of the day they, struggle to re-divide it. The struggle to re-divide the already divided world is one of the fundamental distinguishing features of monopoly capitalism. This struggle eventually takes the form of a struggle for world domination, and inevitably leads to imperialist wars on a world scale.

Imperialist wars and arms races bring very heavy privations upon the peoples of all the capitalist countries and cost millions of human lives. At the same time wars and militarisation of the economy are profitable matters for the monopolies, bringing them particularly high profits.
The Basic Economic Law of Monopoly Capitalism

As already mentioned, the economic essence of imperialism consists of the replacement of free competition by the dominance of monopoly. The monopolies have as their aim in fixing monopoly prices, as Lenin put it, the obtaining of high monopoly profits, which considerably exceed the average profit. The obtaining of high monopoly profits by the monopolies results from the very nature of imperialism, and is guaranteed by the unprecedented intensification of the exploitation of the working class, by the plundering of the peasantry and other petty commodity producers, by the export of capital to backward countries and the sucking out of all the vital juices from these countries, by colonial conquests and imperialist wars, which are a goldmine for the monopolists. Lenin’s works devoted to setting forth the economic and political essence of imperialism contain the initial propositions of the basic economic law of monopoly capitalism. On the basis of Lenin’s initial propositions, Stalin formulated the basic economic law of modern capitalism.

The main features and requirements of the basic economic law of monopoly capitalism are the following:

“The securing of the maximum capitalist profit through the exploitation, ruin and impoverishment of the majority of the population of the given country, through the enslavement and systematic robbery of the peoples of other countries, especially backward countries, and, lastly, through wars and militarisation of the national economy, which are utilised for the obtaining of very high profits." (Stalin, Economic Problems of Socialism in the U.S.S.R., 1952, F.L.P.H. edition, pp. 43-4.)

Thus, the basic economic law of capitalism, the law of surplus-value, is further developed and made concrete in the period of imperialism. In pre-monopoly capitalism free competition led to a levelling of the rate of profit of the individual capitalists, and the law of the average rate of profit prevailed. In the conditions of imperialism the monopolies secure for themselves high, monopolistic, maximum profits. It is precisely maximum profit that furnishes the driving force of monopoly capitalism. Outflow of capital from one branch to others also occurs in the monopoly stage of capitalism and the tendency to equalisation of profits exists. This tendency clashes, however, with the operation of the basic economic law of monopoly capitalism, the law of maximum capitalist profit. In the epoch of imperialism commodities produced by monopolised branch of production are sold for the most part at monopoly prices (exceeding the price of production and ensuring high monopoly profits, but commodities produced by non-monopolised branches are often sold at prices below the price of production, so that the entrepreneurs concerned do not receive even the average profit.

The objective conditions for the obtaining of maximum profit are created by the establishment of the dominance of the monopolies in the various branches of production. The concentration and centralisation of capital attains their highest level in the phase of imperialism. Because of this, the expansion of production calls (or vast investments of capital. On the other hand, in the period of monopoly capitalism a ferocious competitive struggle develops among these giant enterprises. It is the most powerful monopolies, which dispose of the largest capitals and receive the maximum profits, that are victorious in this struggle.

By drawing upon the maximum profits the monopolies are able to secure their supremacy in the capitalist world. The monopolies’ pursuit of maximum profits leads to a sharpening of all the contradictions of capitalism.

The general basis of the maximum profit of the capitalist monopolies, as of all capitalist profits, is surplus-value, extracted from the workers through exploiting them in the process production. The exploitation of the working class is raised the monopolies to its utmost extent. By using all kinds sweating systems of organisation and payment of labour an exhausting intensification of labour is achieved, which signifies above all a tremendous growth in the rate and amount of surplus-value extracted from the workers. Further, the intensification of labour leads to many of the workers becoming redundant and falling into the ranks of the unemployed, without hope of returning to industry. Also thrown out of work are all those workers who find the unbearably excessive speeding-up of the production processes beyond their strength.

In the U.S.A. the rate of surplus-value in mining and manufacturing industry, calculated on the basis of official data, was in 1889 145 per cent, in 1919 165 per cent, in 1929 210 per cent, in 1939 220 per cent and in 1947 about 260 per cent. Thus, over a period of less than sixty years the rate of surplus-value grew by 80 per cent.

At the same time, real wages decline as a result of the rise in the cost of living and the growing burden of taxation. In the epoch of imperialism the gap between the worker’s wages and the value of his labour-power grows ever wider. This signifies an intenser operation of the general law of capitalist accumulation, which causes the relative and absolute impoverishment of the proletariat. The growth in the exploitation of the working class in the process of production is supplemented by robbery of the working people as consumers; the workers have to overpay large sums to the monopolies, which fix high monopoly prices for the goods they produce and sell.

In the conditions of monopoly capitalism the goods produced by the monopolies are sold not at their prices of production but at substantially higher, monopoly prices.

A monopoly price is equivalent to the cost of production plus the maximum profit, which considerably exceeds the average profit; a monopoly price is higher than the price of production and, as a rule, exceeds the value of the goods. At the same time monopoly prices, as Marx already pointed out, cannot abolish the limits set by the value of commodities. The high level of monopoly prices does not alter the total sum of value and surplus-value produced in world capitalist economy. One of the sources of the maximum profit received by the monopolies is the redistribution of surplus-value, as a result of which the level of profits declines considerably in the non-monopolised enterprises. Maintaining prices at a high level which exceeds the value of the commodities, the monopolies appropriate the results of the growth in the productivity of labour and the reduction in the costs of production. What the monopolies gain the workers, the petty producers and the inhabitants of the dependent countries lose.

The fiscal policy of the bourgeois States serves as an important instrument of monopoly inflation of prices. In the epoch of free competition it was predominantly the weaker countries, whose industries needed protection from foreign competition, that resorted to high customs duties. In the epoch of imperialism, on the contrary, high tariffs serve the monopolies as a means of attack, of struggle for fresh markets. High tariffs help to keep up monopoly prices within the country.

For the purpose of conquering new markets abroad the monopolies make extensive use of dumping-the sale of goods in foreign markets at knockout prices, considerably less than the prices charged in the home market and often even below the cost of production. Expansion of external outlets by means of dumping helps to keep prices high inside the country itself without reducing production, while the losses caused by dumping are covered by charging these enhanced prices on the home market. After the external market in question has been conquered and consolidated by the monopolies, they go over to selling their goods there at high monopoly prices.

Exploitation of the bulk of the peasantry by the monopolies is expressed above all in the fact that the domination of the monopolies gives rise to an increasing divergence between the level of prices of agricultural produce and that of industrial products (the so-called price-"scissors"): while selling their goods at inflated prices, the monopolies at the same time buy t from the peasants the produce of their holdings at extremely, reduced prices (monopoly low purchase prices). Monopoly prices, which serve as a means of pumping resources out of agriculture, hold back its development. One of the most powerful instruments for the ruining of the peasant holdings is the development of mortgage credit. The monopolies get the peasants entangled in loans and then acquire their land, and chattels for themselves at very low prices. “Through mortgages, through the machinations of financial pirates, through high taxes and excise, through high rents and especially through competition on the part of the large capitalist landowners, the bourgeoisie is ruining the middle and small peasants," M. Thorez wrote in his work The Communist Party’s Policy in the Countryside.

The purchase of the peasants’ produce by the monopolies at extremely low prices does not mean at all that the urban consumer receives cheap foodstuffs. Between the peasant and the urban consumer stand the middlemen-merchants associated together in monopoly organisations which ruin the peasants and fleece the urban consumers.

Further a source of maximum profits for the monopolies is the enslavement and plundering of economically backward and dependent countries by the bourgeoisie of the imperialist States. The systematic robbery of the colonies and other backward countries and the transformation of a number of independent countries into dependent countries, constitute an integral feature of monopoly capitalism. Imperialism cannot live and develop without an uninterrupted flow of tribute from the foreign lands which it plunders.

The monopolies draw vast revenues above all from their capital investments in the colonial and dependent countries. These revenues are the fruit of the most ruthless, and inhuman exploitation of the working masses of the colonial world. The monopolies gain through non-equivalent exchange, i.e., selling their commodities in colonial and dependent countries at prices considerably in excess of their value, and buying the commodities produced in these countries at extremely low prices which do not cover their value. In addition, the monopolies draw from the colonies high profits on the transport, insurance and banking operations which they carry out.

Finally, wars and militarisation of the economy are one of the ways whereby the monopolies secure maximum profits. Wars enrich the magnates of finance capital to an enormous extent and in the intervals between wars, the monopolies try to maintain the high level of their profits through an unrestrained arms drive. Wars and militarisation of the economy bring the monopolists fat war contracts, paid for by the treasury at inflated prices, and an abundant flow of loans and subsidies from the resources of the State Budget. In wartime all labour laws are suspended, the workers are proclaimed to be in a state of mobilisation and strikes are forbidden. All this enables the capitalists to raise the degree of exploitation through screwing up the intensity of labour. At the same time the standard of living of the working masses falls as a result of the growth of taxation and the rising cost of living.

Thus the militarisation of capitalist economy both in war conditions and in peacetime means a severe intensification of the exploitation of the working masses in the interests of the growth of maximum profits for the monopolies.

The basic economic law of modern capitalism which determines the whole course of development of capitalism in its imperialist phase, enables us to understand and explain the inevitability of the growth and sharpening of the insoluble contradictions inherent in it.

(1) Imperialism, or monopoly capitalism, is the highest and last stage of development of the capitalist mode of production. The transition from pre-monopoly capitalism to monopoly capitalism took place in the last third of the nineteenth century. Imperialism finally took shape at the beginning of the twentieth century.

(2) The basic economic features of imperialism are: (i) concentration of production, and capital, attaining such a high level of development that it has created monopolies which play a decisive role in economic life; (ii) the merging of bank capital with industrial capital and formation on this basis of finance capital and a financial oligarchy; (iii) export of capital, as distinct from export of goods, assumes particularly great Importance; (iv) international monopoly alliances are formed among the capitalists to divide the world among themselves; (v) the territorial division of the earth among the largest imperialist powers is completed. The completion of the economic division of the world leads to a struggle to re-divide it, and this inevitably gives rise to imperialist wars on a world scale.

(3) The basic economic law of monopoly capitalism is the ensuring of the maximum capitalist profit through the exploitation, ruining and impoverishing of the majority of the inhabitants of the country concerned, through enslaving and systematically robbing the peoples of other countries, especially backward countries, and finally, through wars and militarisation of the national economy.

XIX. The Colonial System of Imperialism