THIS NOTE is with reference to the extract entitled “The Genesis and Development of Modern Finance Capital” written by Henri Houben and published in Red Star, April, 2012. On reading the article, one is constrained to say that while claiming itself to be a Marxist approach to finance capital, the said article skips over certain fundamental aspects of the Marxist-Leninist position on the subject. A glaring drawback of the whole analysis is its gross disregard of the Leninist approach to finance capital. The entire discussion is not only completely silent on the conceptualization made by Lenin in his epochal work on finance capital, namely, Imperialism, the Highest Stage of Capitalism, but also pursues a different perspective on it as elucidated by other writers such as Hilferding which was vehemently criticized by Lenin himself.
For instance, according to Lenin, imperialism was the further development of capitalism with the emergence of finance capital as a qualitatively new category fundamentally different from industrial capital that had its dominant role in competitive or pre-monopoly capitalism. On the other hand, Houben, in his article opines. “Finance capital [the domination of industry by banking capital], therefore, is not a deviation from capitalism but a necessity arising from the intense competition between larger and larger enterprises. Its domination over the ‘real economy’ is therefore entirely unsurprising.” This clearly smacks of Rudolf Hilferding who defined finance capital as capital controlled by banks and employed by industrialists. Explaining Hilferding’s definition as the consequence of the mistaken understanding of the primacy of circulation over production, Lenin emphasized that finance capital is neither banking capital nor industrial capital but a specifically new type arising in the period of imperialism. From the Leninist perspective, finance capital is the coalescence or interweaving of the capital of major banking monopolies with that of industrial monopolies. Thus it is the merger of monopoly industrial capital with monopoly banking capital.
Describing its essence, Lenin wrote: “The concentration of production; the monopolies arising there from; the merging or coalescence of banks with industry—such is the history of the rise of finance capital and such is the content of that concept.” Further, unlike Houben’s interpretation of finance capital as “not a deviation from capitalism but a necessity arising from the intense competition between larger and larger enterprises”, Lenin writes: “…capitalism became capitalist imperialism only at a definite and very high stage of its development, when certain of its fundamental characteristics began to change into their opposites, when the features of the epoch of transition from capitalism to a higher social and economic system had taken shape and revealed themselves all along the line. Economically, the main thing in this process is the displacement of capitalist free competition to capitalist monopoly.” Thus, keeping in mind the dialectical interrelationship between competition and monopoly, it should be stated that unlike free enterprise capitalism, imperialism is marked by the domination of monopoly, an aspect also ignored by Houben in his analysis.
Obviously, Marx and Engels studied capitalism that belonged to the era of free competition or laissez-faire capitalism. But it was left to Lenin to make an exhaustive study of the new phenomena in the development of capitalism from the position of Marxism. Of course, Marx also had noted about the speculative and parasitic tendencies of capital by evolving the concept of “fictitious capital” in Vol. III, chapter 7 of Capital. But the available trends at that time were not sufficient to put it as a major trend or principal aspect of capitalism. Thus the parasitic and speculative operations of fictitious capital were subordinate to industrial capital during competitive capitalism. It was the emergence of finance capital and the analysis based on its fundamental characteristics, especially its parasitism, stagnation and decay that prompted Lenin to develop the Marxist theory of imperialism. A study on finance capital which claims to be Marxist cannot ignore these crucial questions in its analysis.
Houben’s analysis of the post World War II developments associated with finance capital as “more or less a continuation of the structures put in place in the 19th century” is also at variance with objective historical facts and the whole course of qualitative development and transformation that have occurred within imperialism and finance capital under colonialism and neocolonialism. For instance, as already noted, Houben situates the emergence of finance capital within “the intense competition” among large enterprises. The same logic is applied when he explains the recent so-called “financial exuberance” or internationalization of finance capital under neo-liberalism primarily in terms of inter-imperialist contradictions. Are the recent developments a mere continuation of the structures put in the 19th century or a question of inter-imperialist rivalries alone?
Here it should unequivocally be stated that an analysis of finance capital today will be incomplete without an examination of the structures, institutions, methods, tools, etc. at the realm of economy, polity, military and culture erected by US led imperialism for giving a new dimension to the global export and expansion of finance capital and its intensified penetration while transforming colonialism into neocolonialism. More precisely, no Marxist-Leninist analysis of finance capital accumulation is possible without an elucidation of the strategy and tactics adopted by imperialism under neo-colonialism regarding which Houben is completely silent. Though he mentions about WTO as an institution that facilitates the global operations of finance capital today, several vital issues concerning the role played by the Bretton Woods international monetary system, the preeminence of dollar, the policy of international Keynesianism and state monopoly capitalism, etc. in the neocolonial accumulation process during the quarter century immediately following World War II which eventually led to the unprecedented economic crisis called stagflation in the seventies leading to the collapse of Keynesianism and advent of neo-liberalism as a new method of capital accumulation since the eighties, all culminating in the ‘financialisation’of the entire world economy, are all being ignored by Houben in his analysis of finance capital. It is common knowledge that the internationalization of finance today is inseparably linked up with the unhindered international mobility of capital following the abolition of all capital controls by the neoliberal state which itself after giving up its erstwhile ‘developmental’ role has become a ‘facilitator’ of corporate accumulation conditioned by the further ideological and political setbacks suffered by international proletariat since the seventies.
Rather than taking up this task of unraveling the laws of motion of finance capital, the most destructive parasitism of which was in abeyance during Keynesianism and which is bouncing back with intensified vigour under neo-liberalism, Houben’s attempt to interpret the operations of finance capital today in terms of what he calls a contradiction between US imperialism on the one hand and European and Japanese imperialism on the other or more specifically with reference to what he calls the contradiction between the “Anglo-Saxon model” and “Rhenish model” is incapable of explaining the complex process taking place today. In fact, this is just whipping at the symptoms rather than an unraveling of the logic of finance capital after World War II. As in the case of competition and monopoly changing their positions under imperialism as pointed out by Lenin, rather than contradiction, collusion among finance capitalists has become the major aspect under neo-liberalism , since an open confrontation among imperialists today will lead to a shrinking of the imperialist market which with the Chinese integration with it has expanded to its farthest limits, thereby adversely affecting the global mobility and expansion of speculative finance capital.
While inter-imperialist contradictions continue and the possibility of war is there as long as imperialism exists, an elucidation of the globalization of finance capital solely in terms of inter-imperialist contradiction is an insufficient explanation. On the contrary, the evolution, growth and crisis associated with speculative finance under neo-liberalism are to be explained with respect to the very process of neoliberal accumulation on a world scale which in essence is rooted in the fundamental contradiction between the social nature of production and its private appropriation. Today, the captains of finance capital or the “financial oligarchy” as Lenin calls it are engaged in this private appropriation or surplus value extraction through unknown levels of parasitism, decay and destructive speculation by remaining in the sphere of circulation rather than engaging in production. Contrary to the apprehensions raised by Houben in the beginning of his analysis, there is no question of a compartmentalization between the real economy and the financial economy and all those who know the fundamentals of capitalist development will agree that by remaining in the sphere of finance and ballooning the speculative bubble, finance capitalists are extracting surplus value created by living labour at the sphere of production. But this extraction today by finance capitalists who are engaged in developing the speculative spheres with the invention of newer and newer devices is more indirect than direct and the changing mode of production and class relations involved in this neoliberal accumulation can be analyzed and the strategy and tactics of revolution today can be conceived only be unraveling the macro-economic operations of modern finance capital. Here again, the methodology developed by Lenin is still an indispensable tool for studying the new developments.
In this context, the neo-liberal operations of finance capital cannot be explained simply in terms of an “industrial” process as Houben attempts. For, originating in Thatcherism in England and Reaganomics in USA and being transplanted to the whole world through neoliberal globalization, a deindustrialization of hitherto unknown levels and destruction of several manufacturing lines became the major trend since the eighties. The intention was to create a large ‘reserve army ‘of the unemployed facilitating a forcible reduction of the wage rate at a global level. Imperialist theoreticians and neo-colonial institutions such as the World Bank euphemistically called the whole process as “jobless growth.” The erstwhile “Fordist” organization of production characterised by centralized production process and collective bargaining by workers were demolished and through what is called a “post-Fordist” flexible specialization a system of casualisation of workforce has accomplished.
On the other hand, a process of “financialisation” with new avenues of financial speculation in commodity, capital, currency and real estate markets through the development of commodity stock exchanges, “index trading”, futures and forward markets, derivative trade, etc., have become ubiquitous sky-rocketing the prices of all essential goods including food and fuel, services like health and education, land and shelter leading to a squeeze of the broad masses of toiling people. Today an objective evaluation of finance capital under neo-liberalism is not at all possible without explaining these twin processes of casualisation of work force and financialisation of the whole economy which are proceeding at a maddening pace.
As a result of this process and in search of fabulous profits, finance capital is lagging the productive economy far behind and exponentially developing the speculative bubble leading to unprecedented levels of wealth concentration on the one hand and gruesome poverty and deprivation of the world people on the other. And the decay and parasitism which are essential characteristics of finance capital as identified by Lenin have now assumed horrific proportions. Unlike the earlier periods of imperialism when speculation was feeding on a productive economy, today the financial speculation is thriving on a stagnant and moribund economy. The whole world is plunging into a deep recession and in spite of the injection of trillions of dollars of public funds into the coffers of an utterly parasitic class of corporate speculators who themselves are responsible for the present crisis, the latter is continuing with their destructive speculation. In his analysis of finance capital, Houben has left out all these vital aspects.
Finally, even while insisting on an analysis of finance capital based on the system of international subcontracting led by what he calls ‘industrial’ or ’commercial’ multinationals, Houben seems to miss certain crucial aspects of the problem. More precisely, the growth of international subcontracting in the neoliberal period is part of a ‘new international division of labour’ pertaining to a shift in the accumulation process devised by finance capital to tide over the crisis confronted by it since the 1970s. A crucial component of this has been the policy shift from the erstwhile Keynesian “import substitution” industrialization strategy to a totally new “export orientation” in economic activities in neocolonial countries. Along with the large scale migration of capital out of production to speculation, the new developments in technologies relating to transportation, communication, information and processing enabled imperialism to reap super-profits by involving the cheapest sources of labour mainly outside USA and Europe through the aforesaid post-Fordist flexible specialization and new international division of labour.
While, this “outsourcing” has resulted in a deindustrialization and abysmal reduction in wages in imperialist countries, it has converted several neocolonial countries into cheap-labour based export platforms or export-oriented economies leading to their further integration with imperialist market having several domestic distortions and repercussions. Associated with this, several export processing, free trade and special economic zones where finance capital wielded “extra-territorial” powers sprang up in different parts of the world. Of course, these and other developments are to be elucidated with respect to the efforts on the part of finance capital to reorient the accumulation process in the context of the ever-intensifying crisis confronted by it. A reading of the extract from Houben’s work lacks such an orientation.
To conclude, the failure on the part of the aforesaid study to make an objective evaluation of finance capital emanates from its gross disregard of the Leninist approach to finance capital which alone can deal with the long drawn out historical process of capital accumulation on a global scale. The very approach of the analysis which claims to be Marxist and at the same time totally disregarding Lenin’s contribution towards finance capital, even while quoting at length from several authors including even postmodern economists like David Korten is very intriguing. Since, Lenin’s theory of finance capital is the most powerful guide available for unraveling this complex historical category, negation of this tool has led the aforesaid study to have only a partial explanation on finance capital.