The News Megathread Imperialism Reading Group: Week 1 - January 13th to January 19th, 2025

Chapter 1: Concentration of Production and Monopolies

Capitalism’s most characteristic feature is perhaps the growth and concentration of industry into massive enterprises. Lenin quotes figures to this effect in Germany between 1882 and 1907; both in terms of concentration of workers and production. The latter is much greater due to massive businesses being more productive; less than 1% of businesses use over 75% of the steam+electric power. Lenin also quotes figures from America, demonstrating an even greater degree of monopolization, showing that it is an international trend.

A single massive enterprise can be part of many branches of industry, which makes them less reliant on trading between those branches (particularly when raw materials are expensive), which increases profits relative to other enterprises, leading to them becoming yet more powerful. Countries with high tariffs only further lead to monopolization. In countries with freer trade, such as Britain in Lenin’s day, monopolization instead occurs because once a massive, technically-advanced enterprise is established (with a massive amount of capital investment), it is harder to launch competing enterprises both due to the initial capital demand, and because a new enterprise would flood the market with new products, and - unless there is a sudden expansion in demand - the price of the products produced would not generate sufficient profit for either the new or old enterprise. Hence, Marx’s analysis that competition must lead to monopoly is proven correct.

Monopoly capitalism overcame competitive capitalism at the beginning of the 20th century, but it has a rich prehistory which begins in the 1860s. There was an international industrial depression from the 1870s to the 1890s. By the start of the depression, Britain had completed its construction of competitive capitalism and Germany was still the battleground between handicraft and industry. During the depression, the cartels slowly coalesced. At the end of the depression, these business cartels collaborated to take advantage of a brief boom in 1889-1890, driving up prices to their own ultimate detriment, leading to a five-year period of bad trade and low prices. This did not dissuade the cartels, but instead emboldened them, leading them to soon take control of entire fields of industry; mining most notably, initially. The cartel system acquired a coke syndicate, then a coal syndicate. By the 1910s, many industrial fields now no longer had free competition.

A cartel is a group of enterprises, businesses, etc, who use pre-arranged agreements to subvert market mechanisms, deciding the quantities and prices of goods and dividing profits between them. This is more efficient than markets, hence their growth. Some examples are the Rhine-Westphalian Coal Syndicate, which by 1910 controlled over 95% of all coal output in the area. Another is the Standard Oil Company in the US, and the United States Steel Corporation, which hire engineers specifically for inventing more cost-efficient production methods. The Tobacco Trust’s organisation is particularly enlightening; it formed subsidiary companies just to acquire patents, and its massive capital means it can form its own machine shops for various inventions in the field of cigarette production. Ease of access to raw materials is no substantial factor for monopolization; the German cement industry was highly cartelised into regional syndicates which raised prices, despite the ease of access to the raw materials for cement.

Eventually, all sources of raw material are analyzed, their yearly output predicted and divided up between enterprises, transportation methods are bought up by them, and they have near-guaranteed access to the most skilled labour. For new businesses that which to compete, their logistics are halted; unions are forbidden from working with them; prices are cut to ruin them (as the monopolies can better handle it than new businesses); boycotts are created; and many other underhanded and dishonest tricks. This is how the social order transforms from free competition to complete socialisation, to benefit a few. The bulk of profits now go to those adept at financial manipulation, such as speculators.

Cartels cannot abolish capitalist crises; on the contrary, they intensify them. As cartelised industries increase in strength, other industries suffer from an increasing lack of coordination. In this disparity, there is anarchy and crises. In turn, crises increase the tendency towards monopoly. For example, during the crisis of 1900 in which prices and demand fell, the non-cartel enterprises were in a precarious position, which barely affected the cartel enterprises, due to their durability, created by the magnitude of capital invested and the complicated methods of production that provide a significant barrier of entry to other enterprises.

Chapter 2: Banks and their New Role

Banks transform capital that is inactive into capital that can yield profit for use by the capitalist class.

When banks merely carry the current accounts of a few capitalists, it is a mostly technical and auxiliary operation. However, banks also undergo concentration and monopolization, meaning that they eventually come to possess vast amounts of the money capital of all larger and smaller capitalists in any one country; and, therefore, control over much of the means of production. This transforms them into something else entirely.

Lenin returns to Germany for an example, demonstrating a 40% growth in combined deposits from 1907 to 1912 among fairly large banks (above a capital of 1 million marks), while small banks become either squeezed out of the story or become branches of the larger banks. However, when looking at total bank capital, the nine biggest Berlin banks controlled over 80% of total German bank capital; and these massive banks have affiliated banks which they have acquired via purchase or exchanging shares, annexing them into their own groups/concerns. For example, Deustche Bank comprised 87 banks in some fashion.

In Germany, the six largest banks rapidly expanded at the turn of the 20th century, transforming thousands of scattered enterprises into a single national capitalist economy, then later into a world capitalist economy. These trends are only more advanced in older capitalist systems like in Britain and France. In the United States, two very large banks - Rockefeller and Morgan - control a capital of 11 billion marks; roughly comparable to those of the nine largest banks in Germany.

Bank monopolists are capable, due to their banking connections, to determine the financial positions of capitalists and then control them by restricting or enlarging them, or give or restrict credit. This gives them the power to either destroy them or increase their capital rapidly. Like with industrial enterprises, “competing” banks are often collaborators, forming increasingly durable agreements. In doing so, banks now control, directly and indirectly, much of the population of their countries; and agricultural capital stagnates and lags behind profitable heavy industries, to the detriment of the working classes. It is under this paradigm that even industry cartels can be commanded from yet higher in the economy.

The bank monopolists link up with the industrial enterprises and bank directors are appointed to the supervisory boards of industrial and commercial enterprises. This leads to increasing interdependency between banks and industry; for example, six of the biggest Berlin banks were represented by their directors in over 300 industrial companies and by their board members in over 400. These companies range across the whole of society, not merely heavy industry. The opposite also occurs, in which the supervisory boards of banks are staffed by industrialists. Additionally, bank monopolists collaborate with the state; supervisory board seats are sometimes given to members of parliament or city councillers.

At a certain level of power and concentration, this leads to a division of labour among the bank monopolists. Each director has his own special function; for example, a director may specialize in dealing with industry; or another with a certain set of specific enterprises with which he has good connections; or yet another with a foreign enterprise. This leads them out of pure banking, into becoming experts and analysts of fields of industry, or insurance, or commercial trade, and so on. This makes them more competent at those roles, resulting in better decisions, and thus more profit. This is supplemented by efforts to introduce experts to supervisory boards, such as the aforementioned industrialists. Indeed, one large French bank has a financial research service which has departments on many sectors on the economy. The largest banks become universal, without specialisation.

Lenin says that the turn of the 20th century marked the death of the old banking system of middlemen, and the birth of the new system of the domination of financial capital over industrial capital. Indeed, the crisis of 1900, right on the turn of the century, massively intensified this process, albeit with mergers taking place in the years before then.

The savings-banks and post offices are more decentralized, spreading to more remote places and wider sections of the population, and are beginning to compete with banks. But as they pay interest on deposits and seek profitable investments for their capital to provide that interest, they become more and more like the banks (and indeed become controlled by the very same banking monopolists).

Lenin remarks that larger banks become increasingly like stock exchanges; whereas before the 1870-90 depression the Stock Exchange was regarded by bourgeois economists as “youthful”, they are now essentially dominated by the big banks.