Imperialism after Lenin

Philip Ferguson in a talk given in 2004 looks at the underlying forces driving world capitalism today.

In Capital, Marx notes that at a certain point of development the capitalist system itself, in particular the property form, becomes an obstacle to the further development of the production forces and even to the further development of capitalism itself. The chief barrier to capital turns out to be capital itself. At this point capital attempts to escape the limitations of its own natural laws of motion and find new ways of operating. This indicates that capitalism has reached the end of the road, and socialism is required.

In its own perverse way, capital begins to establish what Lenin called ‘transitional forms’ – forms which indicate that the means of production are trying to go beyond capitalism to a new form of society. Of course, they cannot, as long as capitalist property forms constrain them and the capitalist class holds political power. However they can last for a long time in the absence of a revolutionary challenge. As Lenin noted, there are no hopeless situations for capitalism in economic terms. In fact, in Imperialism, Lenin suggested that the imperialist epoch, the highest and final stage of capitalism, could last “for a fairly long period” if what he called the “opportunist abscess” in world politics, namely social democracy, was not decisively defeated.

In Imperialism, Lenin identified key transitional forms, such as monopolies, and the other means used by capital to escape the limitations of its own laws of motion.

What I want to look at is how imperialism has evolved since, the importance of distinguishing form and content in understanding what has changed and was not changed, and lastly at some new survival mechanisms and transitional forms thrown up by imperialism.

This is only a brief overview. I won’t be going into great detail and there are a number of important issues to do with globalisation that I haven’t got time to deal with.

Marx noted that the constraints of capitalist social relations on production bring about an historic tendency of the rate of profit to fall. As this tendency was expressed more and more potently in the late 1800s, for instance during the ‘long depression’ from the later 1870s until the early 1890s, movements of capital and commodities become increasingly propelled by evasive actions – in particular to escape from geographical places and industrial sectors afflicted by falling profit rates and to escape forms of organisation and competition in which the crisis is expressed.

Lenin’s concept took forward these insights of Marx. For instance, he saw that the internationalisation of capital was increasingly the result not of capitalist dynamism but of the inability of capital to sustain itself and expand much further within the old national terrain alone.

Lenin also noted, however, “It would be a mistake to believe that this tendency to decay precludes the possibility of the rapid growth of capitalism.”

In the 1920s and 1930s, capitalism was most notable by the decay side of the decay-expansion dialectic. Capital reached its low-point with the Great Depression, beginning in 1929, although most of the capitalist world have experienced severe economic problems throughout the 1920s. Britain, the oldest imperialist power, had 10 percent unemployment for most of the 1920s before the Depression, for instance. In the US the fall of the rate of profit in the industrial sphere resulted in a speculative spree in the artificial economy, a spree which put prices in the artificial sphere so out of kilter with real values that everything came tumbling down in the Wall Street crash of 1919.

In the developed capitalist countries with the weakest economies, eg Germany and Italy, the combination of economic problems and heightened class conflict meant that ruling classes had to abandon bourgeois democracy and rule by naked force. Eventually the economic problems heightened conflict between the major capitalist powers and brought them to war, as had happened in 1914.

Economic meltdown, imperialist war and ongoing direct rule and oppression in the colonies all served to discredit imperialism and vindicate Lenin’s analysis. All over the world, imperialist capitalism appeared discredited and millions flocked to Marxism. Even in the West, the intellectual defenders of the idea that society worked best by letting the hidden hand of the market have full rein were few and far between.

Indeed, the terms imperialism and imperialist, which had been badges of honour in the early 1900s, became thoroughly discredited. The revelation of the Nazi horrors, which had taken the racial aspects of imperialist thinking to their logical, horrendous conclusions, served to discredit the politics of imperialism.

After WW2, however, there were several significant changes.

1. The old European imperialisms, usually with a lot of pressure from the oppressed in the colonies, abandoned direct rule in Africa and Asia. The United States, partly through being forced to compete with a Soviet Union which had embraced the right of nations to self-determination after 1917 and partly to gain access to raw materials, markets and investment opportunities which the old European powers had shut them out of, supported such decolonisation.

2. The postwar economic boom turned out to be the biggest and most dramatic expansion of capitalist production ever. Massive economic expansion and dynamism and rising living standards for workers in the First World, a product of sustained growth and increases in productivity which enabled workers to buy more use-values in the form of commodities with their wages, seemed to suggest a bright new dawn of capitalism.

Decolonisation and the postwar boom seemed to go against the analysis of imperialism by Lenin. Western powers did not need colonies and capitalism was no longer in decay. There was a retreat from Marxism and from Lenin’s analysis of imperialism among much of the left.

However, this indicated the impressionism of much of the left more than it did the incorrectness of Lenin’s analysis. Lenin had noted the dialectic between decay and expansion, and he had also differentiated between particular political and organisational forms and means through which imperialism operated at a particular point in time and the more fundamental content of imperialism.

Those bourgeois ideologists and leftists who said that Lenin on imperialism was old hat failed to understand Lenin’s underlying approach, for instance they failed to distinguish between form and content. The form of something can change significantly, without its content, without its essence changing. Capitalism, for instance, can operate in a variety of political forms, from liberal bourgeois democracy through to military or fascist dictatorship. The political form is certainly important, but it does not define the essence of a society, which is its mode of production.

Thus the physical removal of imperialist soldiers and civil servants from the old colonies, and their replacement by members of emerging local elites did not at all change the underlying economic relationship of those countries with the imperialist powers. In fact, formal political independence could make it cheaper for imperialism to control them. Imperialism did not have to bear the costs of direct rule.

The other indication of widespread impressionism on the left was connected to the postwar boom. Instead of using Marx’s theory to elaborate the factors which had made the boom possible many on the left in the West simply declared Marx and Lenin to have been wrong. Much of the left retreated from a materialist critique of the political economy and practical workings of capital into a moral critique of bad stuff capitalism did, a stance which reached its height with the emergence of the New Left’ in the 1960s and early 1970s.

In fact, there were very good reasons for the postwar boom – the Depression and world war had destroyed vast chunks of inefficient capital, concentrated and centralised capital, driven down the price of labour-power, destroyed a number of imperialist powers leaving the world open to the victors, most especially the United States. War industries had also stimulated technological development, Although starting out after these events on a narrower basis for , or at a lower level than several decades earlier, there was massive scope after 1945 for economic expansion.

However, as Marx had noted, capitalism has a tendency to develop unevenly, because expansion is based not on logical human considerations but on the basis of profitability. So what happened after WW2 was that the vast opportunities for profitable investment within the First World ensured only limited investment in the Third World. The economies of the Western powers themselves boomed, while Latin America, Africa and most of Asia stagnated, through lack of serious capital investment. Instead, these areas were plundered for cheap raw materials and what investment did take place was geared mainly to facilitating the grabbing and export of these raw materials.

Acute underdevelopment in Africa, Asia and Latin America, which also invariably meant repressive regimes as the material basis for bourgeois democracy was lacking, tended to facilitate rebellion. A chunk of countries – most notably China, but also part of Korea and Vietnam, broke free of imperialist domination and sought to develop along non-capitalist lines.

The very success of the postwar boom in the West, meanwhile, was creating a new crisis, beneath the surface of economic dynamism and prosperity. The boom meant that a greater and greater proportion of capital was invested in means of production, technology and other parts of constant capital in relation to the share of capital invested in labour-power. Yet, whereas the forms of constant capital, such as machinery, can only reproduce their own value, labour-power – and labour-power alone – produces new, expanded value. This change in the composition of invested capital therefore has a tendency to lower the rate of profit.

The same process sets off countervailing tendencies, which I don’t have time to go into here, but eventually the countervailing tendencies fail to work any longer and more direct measures are required to stave off crisis. There are a raft of measures which capital uses at this point – driving down wages, laying off workers and making those remaining work longer and harder, cutting costs of raw materials, exporting capital to areas where the rate of profit is higher, stimulating demand by expanding credit, price-fixing, developing cartels and monopolies, investing in the artificial economy (shares, forex, land speculation, arbitrage and so on).

A good example of how things have changed since the 1800s and yet how the essence has stayed the same is the case of Britain. In the 1800s, after the Industrial Revolution, Britain became the workshop of the world. Its industrial output was greater than that of any other capitalist power for most of the century and its productivity was such that it churn out industrial products cheaper than places like India. Cheap British industrial goods could flood the Indian market and wipe out Indian handcraft manufacture and burgeoning industry. Back then, Britain’s industrial exports reflected the immense productivity of British industry and the dynamism of British capitalism.

Today, Britain is probably the most internationalised capitalist player. Britain exports about a quarter of its annual output, more than most other G7 countries. A section of its biggest companies earn most of their profits abroad. For instance, pharmaceutical giant Glaxo Wellcome generates about 90 percent of its profits outside Britain. Yet Britain’s dependence on exported capital, whether in the form of investments or commodity capital, does not reflect British capitalism’s dynamism, let alone any significant edge in productivity and competitiveness. In fact, Britain trails the West in productivity. Thus the export of money capital and commodities reflects the weakness of domestic profitability.

The difference between Britain at the height of its industrial power and today is also reflected in the role of financial services. A hundred and fifty years ago, financial services were an outgrowth of a dynamic industrial sector. Industrial expansion required the development and expansion of financial services and London was the world’s leading financial centre because Britain was the number one industrial power.

Today the relatively low productivity of the industrial sector in Britain and the country’s decline as an industrial producer means that the economy is increasingly dependent on financial services to stay afloat. Financial services is actually Britain’s largest export earner, responsible for about 20 per cent of national output.

Thus the very kind of things which globalisation theorists point to as expressions of the dynamism of capitalism today are reflections of stagnation and decay at the very heart of the system – the production process in industry.

The fall in the rate of profit in the West, and the onset of stagnation at home, drove the export of capital when the postwar boom collapsed in the early-mid-1970s. While there was a susbsequent marked expansion of investment in the Third World in the 1970s and, especially, the 1980s. most foreign direct investment flows were, and remain, within the imperialist world itself. (See graph 2 and graph 3). It was not until the very end of the 1980s that the rate of FDI increase in the Third World equalled the rate of increase of FDI within the imperialist world and in the early 1990s, the rate of increase in the Third World began to markedly rise, although the actual amount of FDI going between imperialist countries remained greater than that going into the Third World.

The reality is that, despite all the hoopla of the globalisation theorists and the historic universalising tendencies of capital (noted by Marx and Engels as far back as the Communist Manifesto) capital remains constrained by the profit motive. Investment and development in one part of the world is offset by lack of investment and underdevelopment in another part of the world.

The massive scope for highly profitable investment within the imperialist world after WW2 meant much more limited investment in the Third World. The crisis of profitability in one imperialist country after another in the 1970s and 1980s drove capital abroad, albeit mainly within the imperialist world and from the late 80s into the Third World. However, imperialist investment within the Third World is highly uneven.

Most FDI in the countries of Africa, Latin America and Asia (excluding Japan, as an imperialist country itself) goes to a tiny handful of countries. Take the period in the early-mid 90s, when there was a dramatic expansion of FDI outside the imperialist heartlands: in 1994 a third of such FDI went into China alone, another third was shared between Malaysia, Thailand, Argentina and Mexico. You will note that none of these countries are in Africa. Indeed, 90 percent of FDI in the non-imperialist countries went into just 20 countries in Asia and Latin America. Much of Latin America and Asia, and pretty much all of Africa, missed out. Africa, in particular, remains starved of investment and development, even within the confines of capitalist investment and development.

We are still far from living in a globalised world, let alone one which is united by common living standards and opportunities.

Lastly, I want to look briefly at the idea that capital is now supranational or transnational and at the development of transitional forms since Lenin.

The idea that capital has evolved beyond the nation-state and we are now living in the era of transnational companies is widely held on both the right and left. The most emphatic left statement of this view is probably Hardt-Negri’s recent book Empire. On the right, neo-liberals celebrate the domination of the world by the free market and free trade, by the free movement of goods, services and money.

As I have already noted, there are very real limits to the globalisation even of investment. Moreover, the world is still characterised more by limited access than free access to markets. Take something like dairy products, NZ’s chief export earner. Fonterra, as a highly efficient producer, may favour free trade in dairy commodities, but only six percent of the international market for dairy products is without restriction. Sectors of the US economy, including core parts of US agriculture, are especially highly protected. The capitalist state regulates trade in favour of the interests of national capital.

The vast bulk of so-called transnational firms are still rooted within individual imperialist countries and still make the largest part of their profits in the domestic market. The firms that don’t tend to be based in the more stagnant imperialist countries, not Japan, the United States and Germany.

Inter-imperialist rivalry also indicates the crucial role played by the nation-state in modern society in general and in advancing the interests of national capital in particular. The US government, for instance, was very specific about who would be given contracts for the so-called rebuilding of Iraq. Modern inter-imperialist rivalry would simply not exist if capital really had moved beyond being primarily national capital and become global capital.

In fact the politico-economic trend today is towards heightened inter-imperialist rivalry and heightened military intervention in the Third World by imperialist states carefully guarding the economic interests of their own capitalists.

An interesting example of the national basis of global companies, by the way, is Fonterra in NZ. With $12 billion in assets, this is NZ’s largest company and a huge player in the international dairy market. Most of its earnings do actually come from exports and it now has a couple of dozen processing plants overseas. However, the largest single sector of its profits come from within NZ and its production remains concentrated within NZ. This is even more the case with huge companies based in much bigger capitalist countries like the United States.

Now to conclude with the transitional forms. I want to look at the development of one of these forms, monopoly, and then at some new forms post-Lenin.

A good indication of the trend toward monopoly can be seen in the formation of Fonterra in NZ in 2001. In the food retail industry internationally in the later 1990s and early 2000s, there was something like one major merger or acquisition every two days. These mergers in turn made it essential for food production companies to merge, in order to be able to supply enough commodities to bigger and bigger retail companies.

More significantly, throughout the imperialist world, mergers and acquisitions have been a central feature of capitalism in the past several decades. In the 1980s, the value of such deals quadrupled. In fact funds, often largely obtained on credit, tended to be used for buy-outs, takeovers and mergers, rather than investment in new machinery and technology to increase productivity and expand output.

While the transitional forms noted by Lenin have continued, more important at some times than others in the past 90 years, some new ones have emerged as well. These include the emergence of diversified financial instruments like junk bonds and derivatives, the massive expansion of credit, new institutions of international economic regulation (IMF, WTO, World Bank, OECD) and a massive expansion of state intervention. All of these are reflections of the inability of capital to spontaneously reproduce and expand itself according to its own laws of motion.

While the state has attempted to roll back spending on the ‘social wage’, it has tended to expand its assistance to capital throughout the imperialist world. There is a gamut of state subsidies to capital throughout the imperialist world, of which lucrative contracts to the arms industry in the US is only the most visible and notorious. The role of the state has expanded because capital can no longer operate smoothly on the basis of its own laws of motion.

Of course, the problems that beset capitalism in its senile, imperialist stage are not only problems for capital. Most significantly, they are problems for humanity. Until the great mass of humanity shifts from being the passive object of these problems to being the active agent for their solution, through the abolition of this outmoded way of organising society, the current state of the world really will be as good as it gets. And, in fact, it promises to get worse.