From International Socialism 2:99, Summer 2003.
Copyright © International Socialism.
Copied with thanks from the International Socialism Archive at http://www.lpi.org.uk.
Marked up by Einde O’Callaghan for the Marxists’ Internet Archive.
The US assault against Iraq has seen protests in virtually every major city in the world, not merely for peace, but against ‘imperialism’. The word has been used by the unlikeliest of people to express their abhorrence at US government actions.
But there is not always clarity as to what imperialism means at the beginning of the 21st century. To some it represents the culmination of the development of capitalism over the last two and half centuries – the ‘highest stage’ of the system. To some it represents simply a grab for profitable raw materials or investment which the system as a whole could manage without, or a drive to increase the profits of just one section of the US ruling class, the military-industrial complex. There are even some who hold that states trying to conquer other states is an archaic practice followed by certain political leaders in contradiction to the dynamics of the system as whole. So Michael Hardt, co-author of the highly influential Empire, writes that ‘the US is fast becoming an imperialist power along the old European model, but on a global scale’, but hastens to add that ‘business leaders around the globe recognise that imperialism is bad for business because it sets up barriers that hinder global flows’.  And Bernard Cassen, the leader of ATTAC in France and a key figure in the World Social Forum, claimed shortly before the attack on Iraq, ‘Whether war breaks out or not, B-52s and special forces will not alter poverty in Brazil or hunger in Argentina’. 
The disagreements were between people who were agreed in resisting the latest act of aggression by the world’s most powerful – and most dangerous – state. But they remain important in determining how we fight back in the long term. If imperialism is merely a set of state actions cut off from the wider dynamic of the system, then pressures to reform the state can bring peace. It is even possible to see the drive to war as something standing in opposition to the wider trend of the system – whether you call this, as apologists for the system do, ‘free trade’, or as some opponents do, ‘empire’. By contrast, if it is organically linked to the system as a whole, you have to overthrow the system to remove the threat.
The best known statement about the centrality of imperialism to the system is Lenin’s pamphlet Imperialism: The Highest Stage of Capitalism. It was written in the midst of the First World War. Its aim was to be a ‘popular outline’, showing how the resort to war was a product of the ‘latest stage of capitalism’ – the original subtitle to the work:
Capitalism has grown into a world system of colonial oppression and financial strangulation of the overwhelming majority of the people of the world by a handful of ‘advanced’ countries. And this ‘booty’ is shared by two or three world-dominating pirates (America, England, Japan), armed to the teeth who embroil the whole world in their war over the division of their booty. 
The capitalist powers, he points out, have partitioned the world between them on the basis of ‘a calculation of the strength of the participants, their general economic, financial, military and other strength’. But ‘the relative strength of these participants is not changing uniformly, for under capitalism there cannot be an equal development of different undertakings, trusts, branches of industry or countries’. A partition of the world that corresponded to the relative strength of the great powers at one point no longer does so a couple of decades later. The partitioning of the world gives way to struggles over the repartitioning of the world:
Peaceful alliances prepared the ground for wars and in their turn grow out of wars. One is the condition for the other, giving rise to alternating forms of peaceful and non-peaceful struggle on one and the same basis, that of imperialist connections and interrelations of world economics and world politics. 
Lenin’s theory was not just a theory of military conflicts between the great powers. He insisted these conflicts were a product of changes in capitalism itself:
Half a century ago, when Marx was writing Capital, free competition appeared to the overwhelming majority of economists to be a ‘natural law’ ... Marx had proved that free competition gives rise to the concentration of production, which, in turn, at a certain stage of development, leads to monopoly. Today, monopoly has become a fact ... The rise of monopolies, as the result of the concentration of production, is a general and fundamental law of the present stage of development of capitalism ... For Europe, the time when the new capitalism definitely superseded the old can be established with fair precision; it was the beginning of the 20th century. 
This is something quite different from the old free competition between manufacturers, scattered and out of touch with one another, and producing for an unknown market. Concentration has reached the point at which it is possible to make an approximate estimate of all sources of raw materials (for example, the iron ore deposits) of a country and even, as we shall see, of several countries, or of the whole world. Not only are such estimates made, but these sources are captured by gigantic monopolist associations. An approximate estimate of the capacity of markets is also made, and the associations ‘divide’ them up amongst themselves by agreement. Skilled labour is monopolised, the best engineers are engaged; the means of transport are captured – railways in America, shipping companies in Europe and America. 
But once this stage is reached, competition between the giant corporations is no longer based simply – or even mainly – on the old purely market methods. Taking control of raw materials so that rivals cannot get them, blocking rivals’ access to transport facilities, selling goods at a loss so as to drive rivals out of business, denying them access to credit, are all methods used: ‘There is no longer a competitive struggle between small and large, between the technically developed and the technically backward. We see here the monopolists throttling all those who do not submit to the monopoly, to its yoke, to its dictation’.  ‘Monopolies bring with them everywhere monopolist principles: the utilisation of “connections” for profitable deals takes the place of competition in the open market’. 
And central among the connections are those linking the monopolies based in a particular country to its state. Lenin quoted the experience of four major industries to justify this account – steel and zinc, oil, and the electrical and merchant shipping of Europe and North America. From these he concluded that the development of monopoly at home has its corollary in the use of state power to establish influence abroad. The competitive struggle between the monopolies became a struggle between their states to control different parts of the world:
The capitalists divide the world, not out of any particular malice, but because the degree of concentration which has been reached forces them to adopt this method in order to obtain profits. And they divide it ‘in proportion to capital’, ‘in proportion to strength’, because there cannot be any other method of division under commodity production and capitalism. 
The epoch of the latest stage of capitalism shows us that certain relations between capitalist associations grow up, based on the economic division of the world; while parallel to and in connection with it, certain relations grow up between political alliances, between states, on the basis of the territorial division of the world, of the struggle for colonies, of the ‘struggle for spheres of influence’. 
This found expression in the division of the world into the great empires – the British, the French, the Russian, the Belgian and the Dutch, which divided most of Asia and Africa between them in Lenin’s time. But Lenin was insistent that imperialism involved more than the division between the great powers of what we would today call the ‘Third World’. He criticises Karl Kautsky for writing, ‘Imperialism ...consists in the striving of every industrial capitalist nation to bring under its control or to annex all large areas of agrarian territory, irrespective of what nations inhabit it’.  The imperialist division of the world, Lenin insisted, was increasingly centred on industrial areas: ‘The characteristic feature of imperialism is precisely that it strives to annex not only agrarian territories, but even most highly industrialised regions (German appetite for Belgium; French appetite for Lorraine)’. 
Lenin’s fellow Bolshevik, Bukharin – whose Imperialism and World Economy was written shortly before Lenin’s work, but which appeared afterwards, with an introduction by Lenin – made the argument just as forcefully:
Where formerly many individually owned enterprises competed with each other, there appears the most stubborn competition between a few gigantic capitalist combines pursuing a complicated and, to a considerable degree, calculated policy. There finally comes a time when competition ceases in an entire branch of production ... The centralisation process proceeds apace. Combines ... in industry and banking ... unite the entire ‘national’ production, which assumes the form of a company of companies, thus becoming a state capitalist trust. Competition reaches its highest, the last conceivable, stage of development. It is now competition of the state capitalist trusts on the world market ... Competition is reduced to a minimum within the boundaries of the ‘national’ economies, only to flare up in colossal proportions, such as would not have been possible in any of the preceding historical epochs ... The centre of gravity is shifted in the competition of gigantic, consolidated and organised economic bodies possessed of a colossal fighting capacity in the world tournament of ‘nations’ ... Imperialist annexation is only a case of the general application of the general capitalist tendency towards centralisation of capital ...
One may distinguish two sorts of centralisation: the one where an economic unit absorbs another unit of the same kind, and the one which we term vertical centralisation, where an economic unit absorbs another of a different kind ... An example of horizontal imperialist annexation is the seizure of Belgium by Germany [in the First World War]; an example of the vertical annexation is the seizure of Egypt by England ... It is customary to reduce imperialism to colonial conquests alone ... Now, however, the time has come for a fundamental redivision ... Even the territory of the home country is drawn into the process of redivision. 
Lenin and Bukharin’s works were produced in the middle of the First World War, and their aim was to explain the forces behind it. Their enduring power lies in the way in which they still provide an explanation, like no other, of the whole of what has been called the ‘30 years war’ of the 20th century – the great military clashes that tore Europe apart, causing a total of 50 million deaths and devastation all the way from the channel to the Volga, and sucking into the maelstrom hundreds of millions of people in the most distant stretches of the world. It was an explanation that spurred opponents of war in Europe and North America to challenge not merely the militarists, but also the economic system as a whole. And it spurred a whole generation of people fighting to shake off the shackles of empire in the Third World to see some sort of identity of interest with the workers’ movements of the advanced countries.
The sheer power of this theory of imperialism has led to repeated attempts to refute it. Since Bukharin became a non-person during the high tide of Stalinism,  most of the attacks – and defences – have been directed at Lenin’s pamphlet.
The attacks have generally concentrated on two interlinked fronts. They have denied any empirical link between the great expansion of the Western colonial empires and the dynamics of capitalism. And they have argued that peaceful free trade rather than a militaristic struggle to control chunks of territory is the most profitable course for the majority of capitalists to pursue.
The first argument is not difficult to deal with. The great period of growth of the Western empires was the last quarter of the 19th century. Some European powers (Britain, Holland, France) already had empires, inherited from a previous phase of capitalist development, but not until the 1880s did they seek to divide all the world between them. In 1876 no more than 10 percent of Africa was under European rule. By 1900 more than 90 percent was colonised. In the same period Britain, France, Russia and Germany established wide spheres of influence extending out from colonial enclaves in China; Japan took over Korea and Taiwan; France conquered all of Indochina; the US seized Puerto Rico and the Philippines from Spain; and Britain and Russia agreed to an informal partitioning of Iran.
This was the period in which the export of capital became a central feature of the economy of Britain, still the world’s dominant capitalist country. Total investment in foreign stocks rose from £95 million in 1883 to £393 million in 1889. It soon equalled 8 percent of Britain’s gross national product and absorbed 50 percent of savings.  Its biggest colony, India, accounted for 12 percent of its exports of goods and 11 percent of its capital exports, while providing a surplus to Britain’s balance of payments that could help pay for investments elsewhere in the world.  At the same time, many of the raw materials required for the most technologically advanced industries of the time came from colonial areas (vegetable oils for margarine and soap manufacture, copper for the electrical industry, rubber and oil for the fledgeling automobile industry).
The 1870s and early 1880s had been a period of depressed markets, falling prices, and low profits and dividends in Britain. With the growth of foreign investment this ‘great depression’ came to an end. 
It is not true that the exports of capital, let alone of goods, went to the colonies. Much went to the US, and quite a lot went to Latin American countries like Argentina. But what mattered for both politicians and industrial interests was that ‘Britain ruled the waves’. There was a global empire, in which direct dominance in some parts of the world contributed to hegemony – and defence of economic interests – in other areas.
As I have put the argument elsewhere:
Colonies offered the capitalists of the colonial power protected outlets for investment. They also provided military bases to protect routes to investment elsewhere. For Britain possessions such as Malta, Cyprus, Egypt, South Yemen and the Cape were important not just as sources of profit in their own right, but as stopping-off places to India – and India, ‘the jewel in the crown’, was also a stopping-off place to Singapore, the tin and rubber of Malaya, the recently opened markets of China, and the rich dominions of Australia and New Zealand. The empire was like a woven garment which stopped British capitalism catching a cold: a single thread might seem of little importance, but if snapped the rest would start unravelling. At least that was how those who ran the empire, their colleagues in the City of London and their friends in British industry saw things. 
Where British capitalism went, others wanted to follow and set about grabbing what they could. It was usually a case of first come, first served. France took huge swathes of North and West Africa, Belgium’s king seized a vast area of the Congo region, and the Dutch consolidated their scattered holdings in the East Indies into a modern empire. But the one country in Europe that was beginning to overtake British capitalism industrially, Germany, was the last to join the race, only getting Tanganyika (the main part of modern Tanzania), South West Africa (Namibia), Cameroon, Togo and Rwanda-Burundi as consolation prizes. By the turn of the century there were powerful voices in German industry connected to the National Liberal Party (after 1918 the National People’s Party) who were arguing that German business could only compete globally if Germany had more colonies – or at least a sphere of influence stretching through eastern and south eastern Europe.
Whichever way you look at the 1890s and the 1900s – or for that matter the 1920s and the 1930s – you find that empire was seen as a positive economic advantage by capitalist classes. There would be differences of opinion over the advantages to be gained from particular imperialist adventures. There was no great divergence about the benefits of empire in general.
But this still leaves open the second objection. Was it really in the interests of businessmen to see their taxes burnt up in wars that disrupted markets? Would it not have been preferable for them to have forced through policies based on free trade and peaceful competition for markets, pushing aside those narrow interests which benefited directly from arms spending and colonies?
This was essentially the argument of one of the first accounts of imperialism, produced by the English liberal economist Hobson, whose work was published in 1902. He saw imperialism as the product of one interest group, those connected with certain financial institutions. These opted for guaranteed returns of interest on overseas loans rather than taking the risks involved in industrial investment at home, and welcomed colonial expansion as a way of making sure their state guaranteed the safety of their investments:
Seeing that the imperialism of the last three decades is clearly condemned as a business policy, in that at enormous expense it has procured a small, bad, unsafe increase of markets, and has jeopardised the entire wealth of the nation in rousing the strong resentment of other nations, we may ask, ‘How is the British nation induced to embark upon such unsound business?’ The only possible answer is that the business interests of the nation as a whole are subordinated to those of certain sectional interests that usurp control of the national resources and use them for their private gain. 
He identifies these as being the arms manufacturers, ‘the great manufacturers for export trade’, ‘the shipping trade’, but insists that ‘by far the most important economic factor in imperialism is the influence relating to investments ... The period of energetic imperialism has been coincident with a remarkable growth in the income from external investments ... To a larger extent every year Great Britain is becoming a nation living upon tribute from abroad, and the classes who enjoy this tribute have an ever-increasing incentive to employ the public policy, the public purse and the public force to extend the field of their private investments, and to safeguard and improve their existing investments.’
So one small section of the capitalist class has, in effect, turned the state to its own advantage, despite the harm it does to the rest:
Aggressive imperialism, which costs the taxpayer so dear, which is of so little value to the manufacturer and trader, which is fraught with such grave incalculable peril to the citizen, is a source of great gain to the investor who cannot find at home the profitable use he seeks for his capital, and insists that his government should help him to profitable and secure investments abroad.
This includes a layer of rentiers – bond holders who receive their dividends regularly without ever having to worry themselves with productive or commercial activity of any sort. But at the centre of it is something ‘still more dangerous’ – ’the special interest of the financier, the general dealer in investments ...the great financial houses, who use stocks and shares not so much as investments to yield them interest, but as material for speculation in the money market’.
He adds, in a passage that shows hostility to ‘finance’ rather than capitalism as a whole, which has the potential to lead in a dangerous direction:
United by the strongest bonds of organisation, always in closest and quickest touch with one another, situated in the very heart of the business capital of every state, controlled, so far as Europe is concerned, chiefly by men of a single and peculiar race, who have behind them many centuries of financial experience, they are in a unique position to control the policy of nations. 
The alternative to imperialism, on Hobson’s reasoning, was not the revolutionary overthrow of capitalism, but governmental action to expand the domestic economy and defend the interests of industry against finance. Such action would form the basis of an alliance uniting trade unions and the great majority of business interests in opposition to the rentiers and the finance capitalists.
Ten years later Karl Kautsky, the veteran theorist of the German Social Democratic Party, came up with a very similar account of imperialism. The political biography by Massimo Salvadori summarises his view:
In the past several years finance capitalism had come to the forefront of the internal and international scene. The finance capitalists, who drew their profits from the export of capital, represented the most reactionary and militaristic force in domestic politics, since they had a direct interest in transforming each national state into an apparatus of support for their own expansion. Imperialism was therefore directly linked to finance capitalism. But the interests of finance capital were not identical to those of industrial capital, which could expand only by broadening its markets through free trade. It was from the industrial sector that impulses towards international concord arose in the bourgeois camp. It was with this sector that social democracy should link up to safeguard peace. Imperialism, the expression of one phase of capitalist development and the cause of armed conflicts, was not the only possible form of development of capitalism. 
Along with finance capitalists, Kautsky also saw the arms producers as having an interest in imperialism and war. But he maintained that ‘the economic costs of rearmament, while they favoured the development of some sectors of industry, were detriments to others’.  ‘The source of the political power of finance capital, which aimed at subjugating all society, could be traced back to its union with militarism and the bureaucracy’. 
From his view that capitalism as whole had no interest in partitioning the world into rival colonies, Kautsky drew the conclusion that it was approaching a new stage. He developed this argument in an article he wrote in 1914 in which he saw the colonisation of the previous three decades as a result of industrial capitalists trying to secure for themselves raw materials and markets.
‘Capitalist accumulation in industry can proceed freely only when the agricultural region which supplies its raw material and consumes its products is constantly being enlarged.’ There were various ways to do this. One was called ‘imperialism’, especially fostered by the system of investing capital in agrarian countries which encouraged ‘efforts to reduce these lands to a state of political dependence’. ‘The effort to subdue and hold agrarian regions’ had caused serious conflicts between the great capitalist powers which led to ‘tremendous competition in armaments’ and ‘long-prophesied world war’.
But, he went on to argue, ‘this phase of imperialism’ was not necessary to the continued existence of capitalism:
There is no economic necessity for the continuation of the great competition in the production of armaments after the close of the present war. At best such a continuation would serve the interests of only a few capitalist groups. On the contrary capitalist industry is threatened by the conflicts between the various governments. Every far-sighted capitalist must call out to his associates: Capitalists of all lands unite! From a purely economic point of view, therefore, it is not impossible that capitalism is now to enter upon a new phase, a phase marked by the transfer of trust methods to international politics, a sort of super-imperialism. 
Lenin’s Imperialism is very much a critique of Kautsky. It rests on three planks.
First, there is the argument that the whole system is in a monopoly stage. Monopolies are not just, as are Hobson’s financiers or Kautsky’s finance capitalists, individual elements within each national economy. They are the central, dominating forms of capital, dragging other sections behind them.
Second, in such a situation the political ‘influence’ they exert is not an accidental feature. It is intrinsic to the form capitalist competition now takes. No large capital can survive unless it has connections to the state and uses these to expand at the expense of other capitals. Or, to put the argument another way, capitalism is never simply an abstract system of free flowing capital. The system has always been composed of different individual capitals, each run by people who attempt to use their connections with each other and with the state to cheat the market. But under the ‘free market’ capitalism of Marx’s time, none was big enough to influence the dynamic of the system as a whole. By contrast, in Lenin’s picture individual capitals dominate each major sector of production within each country and are able, through their connections with each other and the state, to impose a whole new dynamic of political and military expansionism on society as a whole.
Finally, Lenin backs up his points by his empirical accounts of the development of major industrial concerns. It is his ability to marshal such arguments and facts that enables Lenin to insist so convincingly that any agreement between the great capitalist powers at the end of the First World War will give way to new conflict and renewed war.
There are, however, certain subsidiary problems with the way Lenin presents his arguments that leave a back door open for arguments of the Kautsky sort.
In his pamphlet Lenin readily acknowledges his use of Hobson’s work and that of the Austrian Marxist economist Hilferding, who was also an important influence on Kautsky’s views on imperialism.  Lenin is critical of both. But he puts at the very centre of his analysis Hilferding’s use of the phrase ‘finance capital’ to describe the dominant feature of the system in its imperialist phase, and he accepts much of Hobson’s description of the dominant and parasitic role of finance within this.
Hilferding had carried through a very important account of the changes in capitalism in the quarter of a century after Marx’s death in 1883 – the rise of the joint stock company in place of the individual entrepreneur, the growing importance of the banks as a source of investment, and the role of the state in protecting the markets of already mature national capitalisms. There was, he argued, a merging together of financial capital and industrial capital to produce a synthesis of the two.
But there was a central ambiguity in Hilferding’s own use of ‘finance capital’. At some points it meant a merger of finance and industry – or at least financial interests lubricating the merger of industrial concerns: ‘The banks have to invest an ever-increasing part of their capital in industry, and in this way they become to a greater and greater extent industrial capitalists. I call bank capital ... which is actually transformed in this way into industrial capital, finance capital’.  ‘Industry becomes increasingly dependent upon bank capital, but this does not mean that the magnates of industry also become dependent on banking magnates’. 
On this basis giant trusts and cartels were emerging that could dominate whole sectors of industry. They leaned on the state to protect their domestic markets, so enabling them to raise their prices at home – and attempt to conquer foreign markets with lower prices. It was this pressure of the combined finance-industrial capitals that changed the whole attitude of capital to the state. ‘It is not free trade England, but the protectionist countries, Germany and the United States, which become the models of capitalist development,’ wrote Hilferding.  Far from continuing with the traditional liberal notion of a minimal ‘night-watchman state’, the great trusts wanted a state with the power to widen its boundaries so as to enlarge the market in which they could gain monopoly profits: ‘While free trade was indifferent to colonies, protectionism leads directly to a more active colonial policy, and to conflicts of interest between different states’.  The drive for empire was endemic in the most modern forms of capitalism. And since British, French and, to a lesser degree, Dutch and Belgian capitalism had already carved the world up between them, the expansion of German capitalism inevitably meant military clashes with them.
But Hilferding also used the term ‘finance capital’ in a way resonant of Hobson’s description of finance as something with interests in opposition to those of the mass of industrial capitals:
The mobilisation of capital and the continual expansion of credit gradually bring about a complete change in the position of the money capitalists. The power of the banks increases, and they become the founders and eventually the rulers of industry, whose profits they seize for themselves as finance capital, just as formerly the old usurer seized, in the form of ‘interest’, the produce of the peasants and the ground rent of the lord of the manor. 
The finance capitalists were then seen as the force pushing for colonies and wars, even while the industrial capitalists want to hold back. In a review Kautsky paraphrased Hilferding as calling finance capital ‘the most brutal and violent form of capital’. 
But the ambiguity in Hilferding’s formulation enabled him to draw a directly contradictory conclusion and so say that the rise of finance capital has an ameliorative impact on the rest of the system, by bringing about a growing organisation of the national economy, making it less subject to slumps, booms and market frenzies: ‘The mass psychoses which speculation generated at the beginning of the capitalist era ...seem gone forever’.  Within a few years Hilferding was developing this into a whole theory of ‘organised capitalism’, supposedly on its way to banishing major economic crises and the inevitable drive towards war forever. 
The use of the term ‘finance capital’ can still lead to such confusions today. Those who preach very limited reforms of the present system, like Will Hutton, blame the problems of British capitalism on the political dominance of City of London financiers, while a section of the anti-globalisation movement see a ‘Tobin tax’ directed against the cross-border financial flows as the way to deal with economic crises and world poverty.
Lenin was scathing about the trend in Hilferding’s politics, describing him as an ‘ex-Marxist’.  But he took over the term finance capital and puts it at the centre of his own theory. In doing so he left his own work open to ambiguous interpretations. His intention was to insist that the tendency towards monopoly meant that the core capitals in each country were driven to imperialist policies of dividing and redividing the world. For this reason, he criticised one of Hilferding’s definitions of ‘finance capital’ as ‘capital controlled by banks and employed by industrialists’ as ‘incomplete’:
It is silent on one extremely important fact: the increase of concentration of production and of capital to such an extent that concentration leads, and has led, to monopoly ... 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. 
But the phraseology of certain other parts of the pamphlet has allowed people to interpret him as saying, rather as Hobson and Kautsky did, that financial interests and the banks were mainly responsible for imperialism. This was especially so when, basing himself on Hobson, he insisted on the ‘parasitic’ character of finance capital, writing of ‘the extraordinary growth of a class, or rather of a social stratum of rentiers, ie people who live by “clipping coupons”, who take no part in any enterprise whatever, whose profession is idleness. The export of capital, one of the most essential economic bases of imperialism, still more completely isolates the rentiers from production, and sets the seal of parasitism on the whole country that lives by exploiting the labour of several overseas countries and colonies’.  This stress on the ‘parasitism’ of finance capital allowed some people who supposedly based themselves on his work to claim in the decades after his death that it was possible to form anti-imperialist alliances with sections of industrial capital against finance capital – that is, to fall back precisely into the Kautsky policy that Lenin attacked so bitterly.
It also seemed to make the whole theory of imperialism rest upon the key role of the banks in exporting financial capital. But this did not fit with the picture even when Lenin was writing, let alone in the decades afterwards. The export of finance – and of the rentiers – was a central feature of British capitalism in the two decades before Hobson wrote. But Britain no longer ‘showed the future’ to other capitalist countries, as it had in Marx’s day. Its new competitors, like Germany and the US, had leapt over Britain when it came to the concentration and monopolisation of industry. In the German case it was the industrial combines, especially those in heavy industry, that sought to expand beyond national frontiers by the establishment of colonies and spheres of influence. Moreover, the characteristic feature of the US and Russian economies in this period was not the export of capital but the inflow of funds from other capitalist countries (although here there was some re-export of capital). On a strict reading of Lenin’s Imperialism these would seem not to be imperialist states at all at the time of the First World War, even though both had joined in the partitioning of the rest of the world in the previous quarter of a century.
This focus on financiers is even more problematic when we come to the quarter of a century after Lenin wrote. Britain began to go down the German road with the formation of its own great industrial near-monopolies (ICI, Unilever, etc ), while it was heavy industry that played the key part in pushing the redivision of Europe in Germany’s interests in the 1930s. And, as Tony Cliff pointed out, Japanese imperialism followed a policy of industrialising parts of its Taiwanese, Korean and Manchurian colonies as an extension of its own economy.  Overall Cliff noted, ‘While in the years 1860 to 1914 the quantity of capital invested abroad by the advanced capitalist countries grew almost uninterruptedly, from 1914, by when imperialism had reached maturity, the quantity of capital invested abroad never rose above the level of l914 and even declined below it’. 
What is more, far from the imperialist powers becoming deindustrialised parasites living to an ever increasing extent off incomes obtained from production elsewhere in the world, they experienced the expansion of new industries in the years between the wars, which increased the gap between them and most of the rest of the world. Yet they also remained intent on imperialist expansion, with Britain and France grabbing most of the Middle East and the former German colonies, Japan expanding into China, and Germany then beginning to carve out a new empire in Europe.
Lenin, by leaning excessively on Hobson’s interpretation of Britain before 1900, damages his own argument.
Bukharin’s account of imperialism holds up much better, despite being much less widely known. He uses the category of ‘finance capital’ repeatedly in Imperialism and World Economy. But he explicitly warns against seeing it as something distinct from industrial capital.
‘Finance capital ...must not be confused with money capital, for finance capital is characterised by being simultaneously banking and industrial capital’.  It is inseparable, for Bukharin, from the trend towards domination of the whole national economy by ‘state capitalist trusts’:
The individual production branches are in various ways knit together into one collective body, organised on a large scale. Finance capital seizes the entire country in an iron grip. ‘National economy’ turns into one gigantic combined trust whose partners are the financial groups and the state. Such formations we call state capitalist trusts. 
The export of capital to satisfy the desire of rentiers is only one subordinate feature of a system in which giant industrial firms increasingly linked to the state struggle with each other in international competition. This competition takes place on three different fronts – for commodity exports, for raw material and for capital exports: ‘Those three roots of the policy of finance capitalism, however, represent in substance only three facets of the same phenomenon, namely of the conflict between the growth of productive forces on the one hand, and the “national” limits of the production organisation on the other’. 
In his later Economics of the Transformation Period, Bukharin suggests that ‘finance capitalism’ tends towards a new imperialist stage of capitalism, state capitalism:
The state organisation of the bourgeoisie concentrated within itself the entire power of this class. Consequently, all remaining organisations ... must be subordinated to the state. All are ‘militarised’ ... Thus there arises a new model of state power, the classical model of the imperialist state, which relies on state capitalist relations of production. Here ‘economics’ is organisationally fused with ‘politics’; the economic power of the bourgeoisie unites itself directly with the political power; the state ceases to be a simple protector of the process of exploitation and becomes a direct, capitalist collective exploiter ...
State capitalist relations of production are, logically and historically, a continuation of finance capitalist relations and constitute the completion of the latter. It is therefore not surprising that the starting point of their development constituted those organisational forms that were given by finance capital, i.e. syndicates, trusts and banks. 
Once this stage is reached ‘there is a struggle of economies against each other, a war of capitalist competition. The form of this competition can be widely different. The imperialist policy ... is one form of this competition.’
War now becomes central to the system, arising from the competition between the ‘state capitalist trusts’, but also feeding back into and determining their internal organisation:
With the formation of state capitalist trusts, competition is being almost entirely shifted to foreign countries; obviously, the organs of the struggle that is to be waged abroad, primarily state power, must therefore grow tremendously ... Whenever a question arises about changing commercial treaties, the state power of the contracting groups of capitalists appears on the scene, and the mutual relations of those states – reduced in the final analysis to the relations between their military forces – determine the treaty. When a loan is to be granted to one or the other country, the government, basing itself on military power, secures the highest possible rate of interest for its nationals, guarantees obligatory orders, stipulates concessions, struggles against foreign competitors. When the struggle begins for the exploitation by finance capital of a territory that has not been formally occupied by anybody, again the military power of the state decides who will possess that territory. In ‘peaceful’ times the military state apparatus is hidden behind the scenes where it never stops functioning; in war times it appears on the scene most directly ...
If state power is generally growing in significance, the growth of its military organisation, the army and the navy, is particularly striking. The struggle between state capitalist trusts is decided in the first place by the relation between their military forces, for the military power of the country is the last resort of the struggling ‘national’ groups of capitalists. The immensely growing state budget devotes an ever larger share to ‘defence purposes’, as militarisation is euphemistically termed ...
Every improvement in military technique entails a reorganisation and reconstruction of the military mechanism; every innovation, every expansion of the military power of one state, stimulates all the others. What we observe here is like the phenomenon we come across in the sphere of tariff policies where a raise of rates in one state is immediately reflected in all others, causing a general raise ...
Capitalist society is unthinkable without armaments, as it is unthinkable without wars. And just as it is true that not low prices cause competition but, on the contrary, competition causes low prices, it is equally true that not the existence of arms is the prime cause and the moving force in wars (although wars are obviously impossible without arms) but, on the contrary, the inevitableness of economic conflicts conditions the existence of arms. This is why in our times, when economic conflicts have reached an unusual degree of intensity, we are witnessing a mad orgy of armaments. 
Speaking in 1922, he argued:
The main groups of the bourgeoisie are now of the nature of trustified groups within the framework of the state ... It is quite conceivable that such a form of enterprise should resort chiefly to violent forms of competition ... Thus arise the new forms of competition which lead to military attack by the state. 
Bukharin here foreshadows the version of imperialism that characterised the late 1930s and the 1940s. But in one respect he was weaker than Lenin – in terms of drawing the political consequence of his theory when it came to the countries oppressed by imperialism.
Imperialism: The Highest Stage of Capitalism had had an enormous impact on the colonial liberation movements – and on those showing solidarity with them in the imperialist countries. This was partly because it was a clear call for workers within imperialist countries to oppose the policies of their own rulers. It was also because it was read in association with other writings by him on the right of peoples to self determination.
In these Lenin had dealt with the political implications of imperialism. He saw that the revolt of the oppressed nationalities within the great empires that dominated the world could tear them apart. These revolts could arouse much wider layers of the population to action and weaken the Western capitalist states running the great empires – and this was true even if the revolts were led by remnants of the old pre-capitalist exploiting classes or by the newly emerging bourgeois groups. What mattered was that these local exploiting classes were politically dominated by the states of the great empires, and in fighting back weakened those states. Revolutionary socialists had to encourage and aid such fightbacks by unconditionally supporting the right of political self determination in the face of imperialist oppression.
Lenin was criticised in the years before 1917 by other revolutionaries, such as Rosa Luxemburg, Pyatakov and Bukharin. They said that political independence under the leadership of such exploiting groups would be meaningless, since they would still be economically dependent upon the more powerful imperialist ruling classes within a world capitalist system.
This was neither here nor there for Lenin. The struggle for national self determination was a political struggle, directed against concrete oppressive political institutions, the world’s most powerful states.
He spelt this out strongly after the Dublin rising against British rule in 1916:
To imagine that social revolution is conceivable without revolts by small nations in the colonies and in Europe, without revolutionary outbursts by a section of the petty bourgeoisie with all its prejudices, without a movement of the politically non-conscious proletarian and semi-proletarian masses, against oppression by the landowners, the church, and the monarchy, against national oppression, etc. – to imagine all this is to repudiate social revolution. So one army lines up in one place and says, ‘We are for socialism,’ and another somewhere else and says, ‘We are for imperialism,’ and that will be a social revolution! Only those who hold such a ridiculously pedantic view could vilify the Irish rebellion by calling it a ‘putsch’. Whoever expects a ‘pure’ social revolution will never live to see it. Such a person pays lip-service to revolution without understanding what revolution is. 
He was insistent on the difference between political independence and economic independence. One was achievable through political struggle, and the other was a utopian demand once capitalism had established a world market, so making production in any one state, even the most powerful, dependent on production elsewhere.
But the potential forces for political struggle were enormous. Lenin prophesied rebellions for the rights of oppressed nationalities within all of the great empires – and his prophecy proved correct in the years after 1916 when such rebellions took off in Ireland, India, Egypt and Indonesia, and against the European and Japanese ‘concessions’ in China. And his insistence that the workers’ parties on the left had unconditionally to support such rebellions attracted towards the newly formed Communist International a number of important activists from the colonial movements.  By the mid-1920s Communist advisers were playing a key role in nationalist armies fighting for control of southern China, and over the next three decades Communists provided with a bowdlerised version of Lenin’s theory by Stalin were able to influence some important national liberation movements in the colonial world (although, they could lose such influence when, as in during the Quit India movement of 1942, Stalin’s influence led them to oppose national liberation struggles).
But there was one big problem with Lenin’s theory when it came to the colonial world. Imperialism: The Highest Stage of Capitalism held that the export of capital to the colonies would lead to their industrial development:
The export of capital influences and greatly accelerates the development of capitalism in those countries to which it is exported. While, therefore, the export of capital may tend to a certain extent to arrest development in the capital-exporting countries, it can only do so by expanding and deepening the further development of capitalism throughout the world. 
One of Lenin’s earliest works, The Development of Capitalism in Russia, had been directed against those who denied the possibility of capitalist development. He continued to stand by this position when he wrote Imperialism. It was this belief that industrial development was increasingly in the colonies that led him to describe the colonising countries as ‘parasitic’. 
However, the attraction of Communism to many in the national liberation movements had been because of the perception that capitalism was not producing appreciable industrial advance. In many Third World countries there was a very large urban middle class which suffered from impoverishment, precarious job opportunities and unemployment, as well as political marginalisation by the colonial set-up. The lack of willingness of movements dependent on the local bourgeoisie to wage a consistent and determined struggle against colonialism could attract some of the urban middle class to Communism – provided Communism addressed their concerns about economic development as well as political independence. A debate over this issue arose in the Communist International in 1927-1928, just before complete Stalinisation destroyed any possibility of rational debate within it.
Jane Degras has written:
The chief point in dispute was whether the colonies were being ‘decolonised’, i.e. whether the metropolitan countries were promoting or retarding the industrialisation of their colonies; India served as the focus of this discussion ... Members of the British delegation believed Britain was industrialising India to take advantage of cheap labour there. Bukharin in his introductory speech came out against the decolonisation theory; the Indians themselves were divided; Roy ... had written that decolonisation was proceeding and contained the seeds of the dissolution of the British Empire. He is said to have advanced the decolonisation theory at the end of 1927. The bourgeoisie were not only withdrawing from the national revolution, but were moving towards an agreement with the imperialists to contain it. S. Tagore (appearing under the name Narayan) claims that ... in April 1927 he and Bukharin agreed that some sort of decolonisation was proceeding in India. 
Kuusinen, Stalin’s man in the Comintern at the time, then intervened to insist, ‘If it were true that British imperialism had really turned to the industrialisation of India, we should have to revise our entire conception of the nature of imperialist colonial policy’  – without, of course, recognising that any ‘revision’ would have meant agreeing with Lenin’s writings! He then went on to claim, ‘Investment was not industrialisation ... Britain was determined to destroy the industry of India and thrust the proletariat back into the villages; it has found its agent in Gandhi.’
Two British delegates, Arnot and Rothstein, argued back, ‘Imperialism by its own contradictions fostered industrial development in the colonies that was going to compete with it, thus transferring domestic contradictions onto the world scene’.  But the theses of the Congress were adamant: ‘There is an objective impossibility of a non-capitalist path of development for the backward countries ... The specific colonial forms of capitalist exploitation ... hinder the development of the productive forces of the colonies’.  This argument became cast in stone during the following decades of Stalinism, when it was used to argue that the only way colonial and ex-colonial countries could develop economically was to follow the pattern established in the USSR.
There was a convergence between this current of ideas rooted in the Stalinist tradition with another current that had arisen, more or less independently, in Latin America. Direct colonial rule had ended in most of the region in the 1820s. But in the first decades of the 20th century the conditions of life of people in large areas of it were hardly different to those for the colonised peoples of Africa and Asia. There were impoverished peasantries, urban bourgeoisies unable fully to wrest power from landed oligarchies, and a large, educated petty bourgeoisie which resented its inability to achieve lifestyles like those that existed in North America and Western Europe.
Movements began to arise in the inter-war years that saw the main obstacle to economic advance as lying in the stultifying influence of British and American imperialism. Haya de la Torre, son of an unsuccessful businessman, formed the Alianza Revolucionaria Peruana (APRA) in 1924 around a programme of nationalism and anti-imperialism which gathered wide support from both the middle class and workers in Peru, and encouraged middle class activists in other countries to follow suit: ‘For at least 20 years, from 1930 to 1950, Haya de la Torre was the anti-imperialist guide of a whole generation of enlightened bourgeois and even of the proletariat’. 
The crisis of the early 1930s hit the Latin American economies – and their ruling classes – very hard. From 1900 to 1930 they had, if anything, gained slightly from trends in world trade.  Now they saw the price of their exports collapse. As economic crisis turned to political crisis, sections emerged within the ruling class who formed blocs with sections of the middle class, and in some cases certain leaders of the labour movement, to push for an economic policy designed to shift resources from the production of raw materials and food to industrialisation.
As Roxborough writes:
The theorists ... argued there was an immediate and direct link between changes in the industrialised countries at the centre and the underdeveloped countries at the periphery. From the late 19th century until the middle of the 20th ...Latin America had taken on the role of supplier of raw materials and foodstuffs to the industrialised nations and had, in return, imported manufactured products ... They argued – and on this there is some controversy – that ... the terms of trade had been moving against Latin American nations since about 1870. This meant that every quantum of Latin American exports brought in return a smaller and smaller quantum of imports of manufactured goods ... The only realistic policy for Latin American countries to adopt was a deliberate policy of fostering ... import substitution industrialisation ... This meant an attack on the old landed exporting oligarchies by a process of land reform and export diversification, and a redistribution of income to increase consumer demand for relatively low priced manufactured goods ...
In political terms, the strategy was seen as an alliance of nearly all social classes against the landed oligarchy ... In many ways this analysis was similar to the argument put forward by the Communist Party, which ... argued that revolutionaries should support the ‘progressive national bourgeoisie’ in its struggle to remove the last vestiges of feudalism and imperialist domination, and modernise the economy. 
Governments like that of Vargas in Brazil and then that of Peron in Argentina moved strongly in the direction suggested by such arguments, but so did others, so that for a time the policy was virtually the orthodoxy. Such governments were not in any serious sense hostile to US or Western European capitalism. But their policies did face varying degrees of opposition from powerful landowning classes who had commercial and financial links with Britain or the US, and it was possible for the ‘populist’ politicians to give a nationalist and supposedly anti-imperialist tinge to their policies. Co-opting the APRA-type nationalism of the middle classes, they interpreted history before and after independence from Spain as being one of imperialist domination. This enabled them to get their way in pushing recalcitrant sections of capital into line, denouncing them as ‘anti-national’, while enjoying the support of other sections who stood to gain massively from industrialisation policies. It also enabled them to fragment the working class movement between those who, putting class interests first, denounced their domestic policies (and the governments as ‘fascist’, or at least ‘semi-fascist’), and those who justified being co-opted by those governments on the grounds that they were ‘fighting imperialism’. 
The Second World War was the great and barbaric confirmation of the classic theory of imperialism. Lenin and Bukharin had insisted, in opposition to people like Kautsky, that the great capitalist powers would be forced to move from peace to war as they strove to partition and repartition the world. And this is what happened in the mid to late 1930s in response to unprecedented economic crisis. Each national capitalism turned to a greater or lesser degree to an integration between national capital and the national state – and the other side of this ‘state monopoly capitalism’ was the use of ‘protectionist’ measures to restrict direct market competition from foreign capitalists. World trade, which had risen fourfold between 1891 and 1925, by 1932 had fallen back to the level of 1905. The imperialism of countries seeking to penetrate distant parts of the world through capital exports turned into the imperialism of countries trying to form tight trading blocs in opposition to each other. But capitalist states could not simply undo their dependence upon components and materials from outside their own borders. This put a greater premium than before on the national state being able to exert direct political influence to control resources beyond its own borders – to imperialism of one sort or another.
The result was a recurrence, on a more intense basis, of the tension that had culminated in the First World War. The established colonial powers, especially Britain and France, were able to rely upon their existing empires – enlarged by the seizure of German colonies and much of the Middle East in the aftermath of the First World War – to create political-economic blocs, dominated by their own currencies (known respectively as the sterling area and gold bloc). The US was able to increase its influence, particularly in Latin America, after buying up many British investments there during the First World War. The world’s second industrial power, Germany, was restricted to an even narrower national territory than in 1914. It had lost its colonies, and France had made a series of alliances in Eastern Europe (the ‘Little Entente’) directed at reducing German influence there, and even over German-speaking Austria. In the Far East expanding Japanese capitalism similarly felt penned in by the colonial rule exercised by the French over Vietnam, the British over Malaya, the Dutch over the East Indies (present day Indonesia) and the US over the Philippines – as well as by the continuing British and French ‘concessions’ in China.
The rulers of Germany and Japan went for political options that, as well as repression of the working class movement at home, subordinated individual capitalists to programmes of national capitalist accumulation imposed by the state. The Nazi government used dictatorial political powers to impose regimentation on the economy. The major capitalist groups remained intact. But from now on they were subordinated to the needs of an arms drive which they themselves supported. Armaments and the expansion of heavy industry drove the whole economy forward, providing markets and outlets for investment. However, there was one major problem with any such policy. Germany was not a self contained economic unit. The only way to overcome instability in raw material sources was to expand the boundaries of the German Reich so as to incorporate neighbouring economies, and to subordinate their industries to the German military drive. The logic of state-directed monopoly capitalism led to a form of imperialism Lenin had referred to in 1916 and which was central to Bukharin’s theory – the seizure of ‘highly industrialised regions’.  Beyond a certain point such expansion led to inevitable clashes with other great powers who feared threats to their own spheres of influence and empires. As they reacted by resorting to armed force, the German regime in turn had to direct even more of the economy towards arms – and reach out to grab new territory – in order ‘defend’ the lands it had already grabbed.
As I have written elsewhere:
Once the path of military expansion had been decided upon, it fed upon itself. To challenge the existing empires required the maximum military-industrial potential. Every successful imperialist adventure increased this – for example, the Japanese takeover of Manchuria, the German annexation of Austria and then Czechoslovakia. But at the same time it increased the hostility of the existing empires – leading to the need for a greater arms potential and further military adventures. The breaking points were the German seizure of western Poland and the Japanese onslaught on Pearl Harbour. 
The rulers of the existing French and British empire were driven to resist. Many were reluctant to do so with the experience of the previous world war in mind. They feared that the cost of another would eat up their already diminished foreign investments, they were terrified of a repetition of the revolutionary upheavals that had threatened 20 years before, and they saw the rapidly industrialising USSR as nearly as dangerous as their old German rival. They hoped that somehow a German imperialism controlling the core of north western and central Europe would be able to coexist with their own domination of vast tracts of Africa and Asia. But in the end they were forced to fight. For Britain and France what was involved was no longer a struggle to grab new sources of surplus value, but to hang on to what they already had. They had to fight together against German imperialism if their own imperialisms were not to suffer. Their alliance was joined in the summer of 1941 by Russia, once the logic of German expansion led it to move on from victory over Poland, Belgium and France to push into the Ukraine and south east towards the oil of Baku. A few months later the US was also forced into the war as the logic of Japanese imperialism led it to try to grab the poorly defended Far Eastern possessions of all the Western capitalisms.
The alliance against Germany and Japan overshadowed the clashes between the other imperialisms. In the 1920s there had been predictions of a major clash between the US and Britain both by some within the British Foreign Office and by Leon Trotsky. The predictions were not fulfilled. There were sharp clashes of interest between the British and US governments in the course of the Second World War. They jostled for influence over Saudi Arabia with its oilfields, and there was bitter resentment by British ministers like Eden over the way the US effectively made British capitalism liquidate overseas investments in order to pay its bills for US weapons and food.  But greater hostility to the demands of German and Japanese imperialism led to British imperialism accepting, grudgingly, a subordination to US interests.
The clash of imperialisms in the 1930s had taken the form of the conflict between Britain and France with their diffuse global empires and Germany as it built a continental empire in Europe. With the defeat of Germany, a new conflict in some ways similar grew up between the two great victors of the war.
The US had aspirations for its industries, the most advanced and productive in the world, to penetrate the whole world economy through ‘free trade’. The Western European powers, exhausted by the war, were in no position to challenge it directly (although British politicians often expressed a private desire to be so). But the other victor, the USSR, was in such a position. Its ruling bureaucracy had embarked with a degree of success on the forced industrialisation of their country in the late 1920s by subordinating everything to accumulation of means of production, building a state capitalism of their own at the expense of the gains made by workers and peasants in the revolution of 1917. This gave them the means, through large and powerful land forces, to dominate virtually the whole of northern Eurasia, from the borders of Western Europe right through to the Pacific. But with levels of industrial productivity less than half those of the US, they were in no position to sustain themselves in economic competition through free trade.
In 1947 and 1948 they decided to contest the US attempt at global hegemony by blocking its access to the economies under their control – not just the territory of the old Russian Empire, but also the countries of Eastern Europe which they subordinated to their military-industrial goals. The US, for its part, rushed to cement its hegemony over Western Europe through finance to pro-American Christian Democrat and Social Democrat political parties, a Marshall Plan for reviving European industry within parameters favourable to US interests, the creation of the NATO military alliance and setting up US bases in Europe.
The developing conflict cannot be explained by economics as often understood, in terms simply of profit and loss accounting. The armaments bills of both great powers soon exceeded anything their rulers could hope to gain from the increased exploitation of the lesser powers under their control. At no stage in the 1940s or 1950s did total US overseas investment (let alone the much smaller return on that investment) exceed US spending on arms. Even in the period of ‘disarmament’ prior to the outbreak of the Korean War ‘military expenditure totalled something like $15 billion a year. Thus it was not only 25 times as high as the sum of private capital exports, but it was also many times greater than the sum of foreign aid. Marshall aid did not total more than $5 billion in any one year’. 
Thirty years later US overseas investment had grown many times over. The total was now about $500 billion ($200 billion of direct investment plus bank loans worth perhaps $300 billion). On top of this there were something like $300 billion of foreign assets controlled by US multinationals.  Total expenditure on ‘defence’ had also risen to around $200 billion – less now than total overseas investment, but still substantially more than the profits that could possibly accrue from that investment.
The picture for the USSR will have been somewhat similar. In the years 1945-1950 it pillaged Eastern Europe, removing plant and equipment wholesale from East Germany and Romania, and forced the region as a whole to accept prices below world market levels for goods going to the USSR proper.  But even in that period the economic gains from this must have been substantially less than the escalation of the USSR’s arms budget once the Cold War had well and truly begun. And from 1955 onwards, fear of rebellion in Eastern Europe led the Soviet government to relax the direct economic pressure on its states. Their pattern of economic development was still to some extent determined by the strategic demands of the USSR, but direct exploitation seems to have virtually disappeared.
The imperialism which necessitated arms spending was not the imperialism of a single empire in which a few ‘finance capitalists’ at the centre make huge super-profits by holding billions of people down. This, after all, was a period in which international trade was much less important than it had been before 1914 – an index of trade in manufactures as a proportion of world output fell from 1.2 in 1914 to 1.0 in 1930, and then slumped to 0.7 in 1940 and 0.6 in 1950.  Rather it was the imperialism of rival empires, in which – as Bukharin had described it in 1916 – the combined capitalists of each ruling class had to divert funds from productive investments to military expenditure in order to ensure that they hung on to what they already possessed.
The calculation in both Washington and Moscow was simple. To relax the level of military spending was to risk losing strategic superiority to the rival imperialism, enabling it to seize territory. So the Russians lived in fear of an attempted US ‘roll back’ of Eastern Europe, which would have broken these economies from the USSR’s grasp, leading in turn to the possibility of an unravelling of the ties which bound the other constituent parts of the USSR to its Russian centre (something that did in fact happen eventually with the great economic and political crisis that shook the whole Eastern Bloc in the years 1989 to 1991). In a somewhat similar way, the US ruling class feared the USSR pulling other Western states – in particular West Germany or Japan – into its sphere of influence, enabling it to vastly increase its military-economic potential for challenging US interests everywhere.
As one US spokesman put it at the time of the Korean War:
Were either of the two critical areas on the borders of the Communist world to be overrun – Western Europe or Asia – the rest of the free world would be immensely weakened ... in economic and military strength to resist further aggression ... If Western Europe fell, the Soviet Union would gain control over 300 million people, including the largest pool of skilled manpower in the world. Its steel production would be increased by 55 million tons a year to 94 million, a total almost equal to our own ... Its coal production would leap to 950 million tons compared to our 550 million. Electric energy in the area of Soviet domination would be increased from 130 to 350 billion kW hours, or almost up to our 400 billion. 
So the pattern was laid for the next 30 years, of each of the two great powers reaching out to draw as much of the world into its sphere of influence so as to gain a strategic advantage over the other. They fought a bloody war over control of the Korean peninsula, not because of the little wealth it possessed, but because of the strategic implications for the whole of the East Asian and Pacific region. They gave aid and arms to regimes which fell out with their rival – the US to ‘Communist’ Yugoslavia so as to gain a foothold in the Balkans close to Russia’s borders; the USSR to Cuba so as to get a toehold in the Caribbean close to US borders; the USSR armed Somalia to fight an Ethiopia armed by the US, and then, in a quick turn around, the USSR armed Ethiopia and the US Somalia; Egypt was pulled into the Soviet sphere of influence briefly, and China left it to make an ad hoc arrangement with the US.
Even this might not have been enough to explain the sheer level of military expenditure at the height of the Cold War – equivalent to nearly 20 percent of US national output and probably twice that proportion of the substantially lower USSR national output.  But arms expenditure had one other great advantage for US capitalism. A massive upsurge in spending by the state on armaments during the Second World War to over 40 percent of national output had had the unintended consequences of providing a market for private capital, pulling it out of the developing recession of 1937 to 1939 and permitting a doubling of total output without lowering the rate of profit.  During the Cold War there were similar gains with a lower level of arms spending (see figure 3). Profit rates remained more or less constant through the 1950s, sustaining investment and preventing the economy experiencing the sort of devastating slumps it had known 20 years before. One of the great absurdities of capitalism – that the destruction of value can alleviate the tendency to periodic crises  – encouraged the great arms race between the two rival imperialisms of the Cold War years.
The Cold War clash of imperialisms came to an end with the collapse of the Soviet Bloc in the late 1980s. But during its course enormous changes had taken place within the structure of world capitalism as a whole.
The Second World War fits neatly with the theory of imperialism as expounded in 1916, especially by Bukharin, but not with the emphasis taken over by Lenin from Hobson on financial capital and investments overseas. So do the 40 or so years of the Cold War, although in a way not recognised by many on the left at the time (and some still today).
Britain, France, Holland and Belgium reacted to the defeat of Germany and Japan by re-establishing their hold over their old colonial possessions in the Far East, North Africa and the Middle East – even if France often relied upon British or US troops to retake colonies for it. There were also attempts to maintain independent imperialist policies, with Britain developing its own nuclear weapons since key sections of its political establishment did not trust the US to defend its interests at all times. Britain maintained its own military presence ‘east of Suez’, at considerable cost to itself, until the late 1960s. Britain and France together embarked on one last military adventure in defiance of the US with the Suez war of 1956.
But the trend in the post-war decades was away from the colonial policies and conflicts between Western capitalist powers, as theorised by Lenin and Bukharin, which had characterised the previous 70 years. Britain finally abandoned attempts to hang on to the jewel in the colonial crown, the Indian subcontinent, in 1947 after a major mutiny by its Indian sailors, and began in the same year a long retreat from the eastern Mediterranean. Malaysia and the African colonies were to follow in the next two decades. Dutch imperialism tried to hang on to the East Indies, but had conceded defeat by 1950. French resistance to abandonment of empire was stronger – an unsuccessful nine-year war to hold on to Indochina was followed by an equally unsuccessful nine-year attempt to keep Algeria, but by the 1960s it too gave up all of its formal empire apart from a couple of islands in the Caribbean and Pacific.
The US replaced Western European influence in some regions. It took control of South Vietnam when the French withdrew in 1954 – until it too was forced to withdraw after the most bitter of wars in the mid-1970s. It became the dominant influence in most of the Middle East and parts of Africa. But, like the European powers, it retreated from formal colonisation, granting independence to the Philippines and keeping direct control only over Puerto Rico.
This retreat from direct colonisation had as a direct corollary the end of the old clashes between the Western powers over the partitioning of the rest of the world. The drive to war between them seemed to have gone once and for all. It was also accompanied by something else unexpected by the Lenin and Bukharin theories of imperialism – once divested of their colonies, each of the Western economies participated in a boom that eventually lasted more than a quarter of a century, saw minimal unemployment, and maintained profit levels without apparent trouble despite regular rises in living standards for their workers. And the advanced countries without any colonies – West Germany, Japan and Italy – had the economies which expanded fastest of all. It almost looked as if Hobson had been right in his claims that colonies were a drain on the economy which would otherwise be able to provide massive reforms at home.
In fact, the driving force behind the boom was precisely the Cold War imperialist rivalry between the US and the USSR, with its massive arms expenditure. Far from there being a ‘surplus’ of capital in the advanced countries, there was a shortage, and the exports of capital stayed down at the very low levels they had sunk to in the great slump of the 1930s.
As Mike Kidron pointed out in 1962:
Even in Britain ...the significance of capital exports has declined tremendously: latterly they have run at about 2 percent of gross national product compared with 8 percent in the period before World War One; they now absorb less than 10 percent of savings compared with some 50 percent before; and returns on foreign investment have been running at slightly over 2 percent of national income compared with 4 percent in the 1880s, 7 percent in 1907 and 10 percent in 1914. Between 1895 and 1913, 61 percent of all new capital issues were on overseas account; by 1938 they were down to 30 percent and more recently accounted for no more than 20 percent of the total. 
And foreign investment was decreasingly directed towards the less industrialised parts of the world: ‘The concentration of activity is increasingly within the developed world, leaving all but a few developing countries outside the reach of the new dynamism’. 
The figures for the Latin America show the decline in the importance of foreign investment in the post-war period:
Percentage Share of Foreign Direct Investment
The last figures can be compared with those of Canada, where the figure was 8 percent in 1950 and 12 percent in 1970. 
A shift in the demand for Third World products took place at the same time as the changing in the pattern of investment. At the beginning of the First World War raw materials from agricultural countries were indispensable for industrial production in the West, and colonial control was an important way for industrialised countries to ensure their own supplies and block access to their rivals. But the interruptions to trade during the two world wars forced them to try to find substitutes for such raw materials. So the first half of the 20th century saw the invention of artificial fertilisers, synthetic rubber, rayon, nylon and a vast range of plastics. And during and after the Second World War there was a massive transformation of agriculture in both Europe and North America, with the use of industrial outputs and subsidies to raise food output, so reducing reliance on imports from the rest of the world. In a world now awash with raw material and foodstuffs, withdrawal from colonies in Africa and Asia was no longer the threat it would once have been to the industrialists of the European countries, and companies which had made their fortunes from such things now began to diversify their investments into new lines of business. By the early 1960s the bigger firms in Britain were consciously shifting their focus from the lands of the old empire to the new markets in Europe and North America.
There was, however, one great exception to this picture – oil. Here was the raw material of raw materials, the ingredient for manufacturing the plastics, the synthetic rubber and the artificial fibres, as well as providing for massively expanding energy needs and propelling the ever greater proliferation of motor vehicles, tanks and aircraft. And the supplies of it were increasingly to be found outside Europe and North America. In the early 1950s ‘gulf oil’ referred to reserves to be found around the Gulf of Mexico, especially in Texas. It was cost of pumping out that oil that determined world prices. By the mid-1970s, as was shown by the temporary interruption of supplies during the Arab-Israeli war of 1973, the gulf that mattered was the Persian Gulf. Saudi Arabia, Iraq, Iran, Kuwait, the petty sheikhdoms around the Arabian peninsula, were the countries that mattered. Control over their policies became increasingly important for the advanced capitalist states. Bribes, threats, weapons sales, the deployment of military ‘advisers’ and seconded troops were used to achieve this – and so was support for the world’s last classic colony, the Israeli settler state with its expulsion of most of the indigenous population and denial of rights to the rest. It was in this region that the wars that mattered for the world system increasingly took place – in 1947-1948, in 1956, in 1967, in 1973, in 1980-1989, in 1982, in 1991, in 2003.
The dismantling of the European colonial empires was a political fact of immense importance for something like half the world’s people who had lived under the thumb of such empires. It raised very important questions for those who had, in one way or another, fought against the hold of those empires. What happened to imperialism – and the fight against it – if empires no longer existed?
The reaction of many social democrats and liberals in the West was to say that imperialism no longer existed. This was, for instance, the conclusion drawn by the most widely known populariser of Marxism in Britain in the 1930s, John Strachey. In his End of Empire (1959) he argued that a combination of trade union pressure and government intervention had raised living standards, so that businesses no longer needed colonies to absorb the surplus and prevent overproduction. In effect, he was saying that Hobson’s alternative to imperialism, a reflation of the domestic economy, had prevailed and solved the system’s problems.
An important section of the left rejected such reasoning. They could see that the former colonial countries were still plagued by poverty and hunger – and that the Western firms that had benefited from empire remained entrenched in them. What is more, the end of the European empires was not the end to the violence inflicted on the peoples of what was now called the ‘Third World’ or the ‘South’. In many places the US state was picking up the baton of violent oppression from the departing Europeans. The French had hardly left Algeria before US troops were inflicting terror on Vietnam, and the US withdrawal from Vietnam was hardly over before it was backing attempts by apartheid South Africa to send troops to tear apart Angola, recently liberated from Portuguese rule.
Rejecting facile talk about an end to imperialism usually meant insisting on the continued relevance of Lenin’s 1916 analysis without recognising the changes that had occurred since it was written. Yet there was a real problem. The very strength of Lenin’s approach rested on its insistence that the great Western powers were driven to divide and redivide the world between them, leading to war on the one hand and direct colonial rule on the other. This hardly fitted a situation in which the possibility of war between Western states seemed increasingly remote and colonies had gained independence. Instead most of the left quietly redefined imperialism so as to refer simply to the exploitation of the Third World by Western capitalist classes, ignoring the drive towards war between imperialist powers so central to Lenin’s theory, and in practice seeing the whole system as a version of the ultra-imperialism forecast by Kautsky. At the same time they simply replaced talk of colonialism with talk of ‘neo-colonies’ or ‘semi-colonies’.
Lenin had written of ‘semi-colonies’. For him these were places like China at the time of the First World War, where colonial armies occupied enclaves of territory and used force to impose their will on the national government. They were countries where independence was a sham, concealing continued subordination to political control by forces in partial occupation of the country. There were some places where things did seem like this after the end of direct colonial control in the 1950s and 1960s. In many cases the departing colonial administrations were able to ensure that their place was taken by their own creatures. The new rulers were people who had collaborated with colonial rule in return for class privileges or a small share in its spoils, and there was enormous continuity in the personnel of the state, especially when it came to key positions in the armed forces. So, for instance, when France was finally forced to abandon Algeria, it also granted ‘independence’ to huge areas of West and Central Africa by handing power to people who continued, as in the past, to work with French companies, use the French currency – and invite French troops in periodically to maintain ‘order’. It was hardly surprising that in such instances people spoke of ‘neo-colonialism’.
But in some of the most important cases independence did mean independence. Governments proceeded not only to take seats in the United Nations and set up embassies all over the world. They also intervened in the economy, nationalising colonial companies, implementing land reforms, embarking on schemes of industrialisation inspired by the preaching of the Latin American dependency theorists or, often, by Stalin’s Russia. Such things were undertaken with varying degrees of success or failure in India, Egypt, Syria, Iraq, Algeria, Indonesia, Ghana, Equatorial Guinea, Angola, Taiwan and South Korea, as well as by the more radical regimes of China, Cuba and Vietnam.
Over time even some of the ‘docile’ ex-colonial regimes began to follow the same path. This was true, for instance, of the Malaysian regime (run by politicians fostered by the British in order to crush the anti-colonial insurgency of the late 1940s and early 1950s), of the Shah’s regime in Iran in the 1960s and early 1970s (brought to power in 1954 after a coup fostered by the CIA), and of the Taiwanese regime (established with US support after the victory of the People’s Liberation Army on mainland China in the late 1940s). Even Mobutu, brought to power with the help of the CIA in Congo-Zaire in 1965, nationalised the mighty Union Miniere de Haut Katanga mining corporation along with 70 percent of export earnings three years later.
To call regimes like Nasser’s Egypt or Nehru’s India ‘neo-colonial’ or ‘semi-colonial’ was a travesty – as it was with the classic ‘developmentalist’ regimes of Vargas in Brazil, the PRI in Mexico, Peron and those who ousted him in the 1950s in Argentina, or for that matter the nationalist regime run by Fianna Fail in Ireland from the early 1930s onwards. In each case, attempts were made to establish not only independent political entities, but also independent centres of capital accumulation. These still operated within a world dominated by the much stronger capitalisms of the advanced countries, but they were by no means mere playthings of them.
The success of such attempts varied enormously from place to place. A handful of countries made it into what might be called the ‘second division’ of advanced capitalism. This was true of South Korea, Taiwan, Singapore and Hong Kong – and by the 1990s of coastal China as it experienced industrial growth rates much higher than anywhere else in the world. In each of these cases the imposition of dictatorial regimes and the use of harsh repression to hold down the living standards of the mass of the population resulted in 30 percent or more of output being used for accumulation and successful industrialisation. But similar methods in many other places had very different outcomes. In the major Latin American countries nearly half a century of successful if slow accumulation was followed, in the 1980s, by a ‘lost decade’ of stagnation, debt crises and increased impoverishment of wide sections of the population. Argentina, an industrialised country whose workers once had living standards as high as those in France, began to stagnate from the early 1970s onwards. Sub-Saharan Africa underwent more than 30 years of falling output per head.
Even where ‘development’ did take place, it was usually accompanied by a combination of dictatorship and appalling conditions for the mass of people. This is why the feeling that nothing had changed with decolonisation was so widespread among sections of the middle class, workers and peasants. Inevitably there was growing disillusionment among the lower middle class and the workers – and sometimes sections of the peasantry – with the nationalist ‘developmentalist’ state. It became increasingly clear that it could not fulfil the promises it had made to improve the living standards of the mass of the population and improve the life chances of the middle class. This could easily translate into the feeling that it had betrayed the goal it had proclaimed of ‘national liberation’. Opposition movements took up its old slogans and directed them against it – even when, as in Argentina in the 1950s or India in the 1960s, the direct links between the state and foreign capital were still minimal. The nationalist ideology of the bourgeoisie and petty bourgeoisie seeking capitalist development became the left nationalist ideology of those who had suffered from the attempts at such development.
One expression of this was the popularity, particularly after the Cuban Revolution of 1959, of new, radical versions of dependency theory which fused the Stalinist and Latin American traditions and hegemonised much of the left worldwide in the 1960s. The writings of Paul Baran (especially The Political Economy of Growth) and André Gunder Frank (The Development of Underdevelopment) dominated most Marxist thinking on the subject (even though Gunder Frank did not see himself as Marxist). 
Baran wrote, ‘Far from serving as an engine of economic expansion, of technological progress and social change, the capitalist order in these countries has represented a framework for economic stagnation, for archaic technology and for social backwardness’,  and, ‘The establishment of a socialist planned economy is the essential, indeed indispensable, condition for the attainment of economic and social progress in underdeveloped countries’. 
Gunder Frank was just as adamant:
Short of liberation from this capitalist structure or the dissolution of the world capitalist system as a whole, the capitalist satellite countries, regions, localities and sectors are condemned to underdevelopment ... No country which has been tied to the metropolis as a satellite through incorporation in the world capitalist system has achieved the rank of an economically developed country except by finally abandoning the capitalist system. 
‘Socialism’ for Baran and ‘breaking with capitalism’ for Gunder Frank meant following the model of Stalinist Russia. 
The ‘dependentist’ argument, in either form, was a weak one. It rested on four unsustainable assumptions.
It assumed that capitalists from the advanced countries who invested in the Third World deliberately chose not to build up industry, even when it would have been profitable to do so, for fear of competing with industrial capital in their home states. So much of Gunder Frank’s argument is of the circular form: industrial development did not take place because foreign merchant capital predominated, and this shows industrial development was stopped by foreign capital. This assumption, of course, was completely opposed to Lenin’s belief, based on the experience of pre-revolutionary Russia, that foreign capital could go into the building of industry. It also failed to account for the considerable industrial development that had taken place in Argentina and the British dominions before the First World War and in Mexico, Argentina and Brazil from the 1930s onwards.
Its second false assumption was that the Western states at all time have an interest in using their power to prevent any such industrialisation. In practice, they have done so at some points, but not at others. So Britain followed policies which prevented industrialisation of some parts of its empire, but at other points was quite happy to see industrialisation take place (for instance, with the growth of enormous shipbuilding and engineering industries in north east Ireland, or of jute mills in Bengal).
Thirdly, it assumed that the Western powers were able so to manipulate the Latin American governments as to prevent them following independent policies. Yet the reality was much more complex. Any powerful state has a variety of instruments for bending a less powerful state to its will. But it can rarely achieve more than part of what it wants. So, for instance, Britain did try to influence the outcome of the civil wars that plagued Argentina between the final achievement of independence in the 1820s and the early 1860s. But it was never fully successful, and was usually reduced to trying to make sure the outcome was the least worst from its point of view. The civil wars themselves, and the balance of forces determining their outcome, were a result of internal divisions within the Argentinian exploiting classes (rivalries between the great landowners of the interior and the merchants of Buenos Aires), with each looking for foreign allies to back its claims. This was a very different situation to that which prevailed in Europe’s direct colonies or in its semi-colonial enclaves in China – although it had some similarities with Britain’s self governing ‘white dominions’. 
Finally, the theory insisted that because the ruling class of one country was ‘dependent’ upon its trade and investment patterns with bigger capitalist countries, it inevitably lost any ability to forge an independent path of capital accumulation and economic development. But this would rule out any such independence for most of the world’s capitalist countries. For a good half century the European economies, for instance, have been to a high degree dependent on what happens in the US economy (hence the old saying, ‘When the US gets a cold, Europe gets pneumonia’). The Dutch economy is to a very high degree dependent on what happens in Britain and Germany. But this has not turned the European ruling classes simply into puppets of the US, or the Dutch ruling class into a plaything of British and German interests.
Dependency theory appealed to people because it recognised the reality that much of the world was not automatically pulled out of poverty simply by embracing capitalism. But its remedy, cutting the poorer parts of the world off from the great concentrations of wealth (including that pillaged by imperialism in the past) in the advanced countries, was not an adequate one. These concentrations of wealth meant that the capitalists of the advanced countries could nearly always outcompete their new rivals – and outgun them if necessary. The USSR may have been able to industrialise (at enormous cost to its people) after 1928. Brazil and Argentina, and later Egypt and India, may have been able to build up some basic industries. But by the late 1960s there were limits as to how much further they could proceed using the model of self contained industrialising. Yet this was the model which dependency theory, whether in its old or its new form, propagandised.
Dependency theory reached its high point of popularity in the late 1960s and early 1970s as the last wave of anti-colonial struggles drove the US out of Vietnam, liberated Angola, Mozambique and Guinea-Bissau from the Portuguese, and ended white rule in Zimbabwe. Yet it was precisely at this time that it showed its inadequacy as, one after another, the old liberated states reached an economic impasse. If there were any doubts, the case of Cambodia proved it. To the praise of some dependency theorists, the Pol Pot regime that came to power in the mid-1970s cut off its economic links with the outside world and tried to follow a policy of completely ‘independent’ development – and the result was a death toll possibly even worse than that caused by US bombing in defence of the country’s previous regime.
Mike Kidron had warned in 1971 that ‘independent’ development was no longer a viable option in Third World countries. He wrote of, ‘the end of a terrible illusion, held as fervently by many seeming revolutionaries as by members of the more orthodox schools: that economic development in backward countries is possible without revolution in the developed’.  He was not wholly right. The ‘illusion’ persisted for a good while longer, and a handful of states that had travelled along the path of ‘independent development’ at enormous cost to their workers and peasants were able to adopt a new strategy of accumulation based upon opening up their economies to foreign capital and trade. But most were damned whichever path they now took.
Imperialism had changed from Hobson’s time to that of the Second World War. It had changed again in the post-war years. In the late 1960s and 1970s a third change took place.
For 20 years the Western powers were united behind US leadership in their opposition to a Soviet Bloc which was joined by China after the victory of the Communist forces there in 1949. There were occasional tensions between them. Britain and France, as we have seen, tried to wage war on Egypt without US backing, and failed. Sections of the British and French establishment were, at first, fearful of a revived German capitalism, but eventually swallowed their doubts with German rearmament in 1954 and the establishment of a limited economic union between the most important Western European continental states, the Coal and Steel Community (later to become the European Common Market and eventually the European Union). Between 1953 and 1956 there was also fear that Stalin’s successors would offer to unite their part of Germany, the German Democratic Republic, with West Germany, in return for the united Germany leaving the Western bloc. Lord Ismay, first secretary general of NATO, described its role for the European powers as being ‘to keep the Russians out, the Americans in and the Germans down’.
But these tensions seemed marginal in the face of a series of Cold War conflicts – open war in Korea, eyeball to eyeball confrontations over two very small islands off the China coast, Quemoy and Matsu, the Berlin crisis of 1961 and, finally, the Cuban missile crisis of 1962, which was probably the closest the world came to nuclear war.
Things changed slowly after the Cuba crisis. China began to follow a course increasingly divergent to that of Russia and then in open opposition to it, with near war between the two in 1969 and the visit of US President Nixon to Beijing in 1971 – at the height of his war against Russia’s ally Vietnam. There were divergences, although never as wide or as open, in the Western camp as well. The European powers did not see any gain for themselves in providing military backing for the US war in Vietnam or even diplomatic cover for its hostility to Cuba. And once he had managed to bring the Algerian war to an end, France’s President De Gaulle was openly critical of the way the US used the predominance of the dollar in world trade to buy up overseas investments on the cheap. This led some people to speculate about a new round of inter-imperialist conflict, ‘Europe versus America’.  But the disagreements never seemed to get out of hand. The US did not put much pressure on its allies to do more over Vietnam or Cuba, and, despite De Gaulle, the other European powers tolerated the expansion of its dollar-based funds in Europe. Hostility to the rival imperialism in the East kept the Western imperialisms co-operating with each other when it came to major issues.
The more important shifts were those taking place beneath the surface.
The economic balance between the various Western states underwent a long term change, as Germany and Japan grew rapidly (see figure 2). In 1945 the US had accounted for something over 50 percent of world output; by the 1980s the figure was down to about 25 percent. In 1953 the US accounted for 59 percent of the advanced countries’ combined GNP, and by 1977 only 48 percent; in the same period Japan’s share rose from 3.6 percent to 13.2 percent, and of West Germany from 6.5 percent to 13.2 percent.  In the early 1960s Japan’s manufacturing exports were less than a third of the US’s; by the late 1970s they were at the same level. And, after a small downturn with the world economic recession of 1974-75, they continued to grow more rapidly than the US’s for another decade. The US – and to a lesser extent Britain – were paying the price of sustaining the whole world economy through arms spending. Essentially the US’s arms industry kept its economy booming, and so provided a market for German and Japanese exports. Meanwhile, without massive arms bills themselves, Germany and Japan were able invest more in industry and begin to catch up with the US in terms of productivity and competitiveness.
Along with this went a second great shift within the system as a whole. From the late 1960s onwards there were growing financial flows across national boundaries. Foreign currency commitments of West European banks increased eightfold between 1968 and 1974. The flows sped up massively after the quadrupling of world oil prices in 1973-1974. Oil producing states were suddenly in receipt of enormous funds which their rulers mostly deposited in US banks, which then in turn lent them to certain newly industrialising countries (especially Brazil) and Eastern Bloc countries (Poland and Hungary). These were still booming and seemed to offer a safe return on the loans. The booms did not outlast the next world economic recession in 1980-1982, and difficulties in paying interest on the loans brought the countries to the verge of bankruptcy. But the circuits of finance continued their expansion. By September 1985 total lending to the world banking system totalled $2,347 billion,  and the Eurobond market increased 70 percent in size in that year alone.
Parallel with the growth in international banking went an explosive expansion of international currency deals which made attempts by governments to control national banking systems seem increasingly futile. As the Financial Times noted in the mid-1980s, ‘Deregulation and technological advance’ was pulling ‘the world banking market into a single great pool of capital’,  and leading to ‘visionary phrases’ from ‘top international bankers’ such as ‘globalisation of securities markets’ and ‘serving the customer in a single world marketplace’. 
The growth of finance was accompanied by a resurrection of the feature Hobson, Hilferding and Lenin had paid so much attention to – the export of capital. The stock of foreign direct investment (FDI) had amounted to only 4 percent of world gross domestic product in 1950 (as against 9 percent in 1913). In 1999 it reached 15.9 percent.  Total world FDI outflows amounted to $37 billion by 1982. By 1990 they had shot up to $235 billion and in 2000 to $1,150 billion. By the last date they were equivalent to around one sixth of total world fixed capital formation.  But there was one major departure from the Hobson-Lenin picture. The flows were not from industrial to ‘underdeveloped’ countries. They were overwhelmingly to areas where industry already existed.
‘The key point to notice is that stock of both inward and outward FDI are concentrated in the developed economies; the overwhelming share of FDI flows is between developed countries’. 
There was a rise from 25 to 30 percent in the share of FDI going to ‘developing’ countries between 1980 and 1990, but ‘within the developing countries themselves these stocks are highly concentrated among a handful of countries ... If China is excluded the share of inward stock held by the developing world has been more or less stagnant over the last 20 years ... Ten developing countries received 80 percent of the total FDI flows to the developing countries’.  Europe alone accounted for around half of US direct investment overseas in the mid 1990s, 50 times more than Indonesia and nearly 400 times as much as India, even though India’s population is around four times larger than Europe’s. 
Such flows of investment are an indication of where capitalists think profits are to be made, and they suggest that it is overwhelmingly within the advanced countries, and a handful of ‘newly industrialising’ countries and regions (of which coastal China is now the most important). This means that, whatever may have been the case a century ago, it makes no sense to see the advanced countries as ‘parasitic’, living off the former colonial world. Nor does it make sense to see workers in the West gaining from ‘super-exploitation’ in the Third World. Those who run the system do not miss any opportunity to exploit workers anywhere, however poor they are. But the centres of exploitation, as indicated by the FDI figures, are where industry already exists.
The rise in the figures for FDI reflects very much the rise of the multinational corporations. Multinational firms (e.g. ITT, Ford, Coca-Cola) had existed in the pre-war period. But they were not generally based upon integrated international research and production. The British subsidiary of a US car firm would in general develop and market its own models independently of what happened in Detroit. It was this that began to change in the 1960s and 1970s. The successful firms began to be those who operated international development, production and marketing strategies. Already by the late 1950s IBM (bolstered by huge contracts for the US military) was able to dominate the new mainframe computer industry worldwide. Boeing (again bolstered by US military contracts) began to drive rival ‘national’ civil aviation firms into the ground, forcing European firms to pool their resources in the Airbus consortium. Petrochemical production ceased to be confined within individual European countries and came to involve elaborate pipelines carrying materials from plant in one country to plant in others. A new stage of capitalist production, based upon multinational enterprises, had arrived.
Once the process of internationalisation of production was under way, there was no stopping it. By the late 1980s there was hardly an industry in which firms in one country did not have to work out international strategies, based upon buying up, merging with or establishing strategic alliances with firms in other countries. Not all these mergers and alliances survived the ups and downs of the world economy over the next two decades. Some de-merged or divorced, only then to link up with other rivals. But the overall pattern was set. Firms which wanted to survive growing international competition had to embark on buying up affiliates abroad. By 2001 European companies were spending $126 billion buying companies in the US, and US firms $42 billion buying companies in Europe.  Some 80 percent of FDI in 1999 was on buying up foreign firms, as opposed to starting up new production facilities (so much for the neo-liberal myth that foreign investment always means increased output and jobs). 
The internationalisation of finance, markets and production led, in the mid-1990s, to many people making a simple judgement. The state was disappearing as an economic actor. A new multinational world capitalist class was emerging which had no need for this relic of half a century ago. The judgement was wrong. It failed to recognise the continued interconnectedness of the biggest multinationals and the most powerful states.
A big portion of the sales and the bulk of the investments of the major multinationals remain concentrated in their home country (or, for small countries, in that and adjacent countries). A detailed survey showed this ten years ago.
Percentage of Business for Multinationals
The extreme concentration of assets in the home country for Japan and the US was apparent. Of the Fortune 100 largest firms, 40 did half or more of their sales in foreign markets, but only 18 maintained the majority of their assets abroad, and only 19 at least half their workforce.  The picture was slightly less clear cut in the case of the European multinationals, because many have begun investing in neighbouring European countries, but if the European Union was treated as a ‘home region’, degrees of concentration comparable to those in the US and Japan were found. British multinationals were an exception, in that over 20 percent of their assets were in the US, a similar figure to that for continental Europe. Both figures were, however, much higher than for assets located in the whole of the rest of the world combined (including the much-hyped Asian ‘Tigers’). The internationalisation of the system has proceeded apace over the last decade. But the changes have been quantitative, not qualitative. So in 1998 inward foreign investment was only equivalent to 10.9 percent of private domestic capital formation in the developed countries – leaving local investors responsible for nearly 90 percent. A survey of 498 top Japanese firms shows that just over a quarter of their profits come from overseas – which means they still depend for nearly three quarters on the domestic market. 
At the same time, most major multinational firms remain firmly controlled by capitalists from a particular country. Again, the most thorough figures come from ten or a dozen years ago. Of 30 US ‘core’ firms, only five had a foreigner on their executive board in 1991, and only 2 percent of board members of big American companies were foreigners. Only two of 20 big Japanese companies and four of 15 ‘core’ German firms had a foreigner on their board.  Recent studies suggest that most top multinational corporations will now have a couple of non-nationals on their boards. But these remain a small minority. So only ten of the top 35 Swedish companies had any foreign directors in 1999, and these only accounted for about 10 percent of all directors, while nearly three quarters of the top Dutch companies had no foreign directors, even though 60 percent of the sales of the top companies were outside Holland. Researchers concluded, ‘The national diversity of top management teams has not progressed at the same rate as the internationalisation of the companies at large’.  Firms with a global reach like Exxon-Mobil and Microsoft can operate with no non-US directors.  Renault-Nissan refers to itself as a ‘binational group’ (French-Japanese), rather than multinational , and the US business media have been screaming that the merger of Daimler-Benz and Chrysler, instead of living up to promises of a global corporation, has in fact resulted in a German-run one.
Regardless of the nationality of its directors, what the national state does can still have an enormous impact on the profitability of a company operating from its territory. It controls taxation and government expenditure, both of which influence both the general level of economic activity and the possibilities open to particular firms. Through its influence on the national bank, it influences the liquidity available to firms and the rates of interest they have to pay on any borrowing. It is responsible for company laws and labour laws which affect the balance between different companies, and between them all and their workers. It negotiates trade agreements which can open up markets in other countries. It ensures that other states make sure firms get paid for ‘intellectual copyright’ on new inventions and discoveries – increasingly important when it comes to pharmaceuticals, agroindustry and software – at a time when ‘piracy’ costs firms an estimated total of $200 billion a year , and continually threatens to eat into home markets. It has the capacity to intervene to protect firms against going bust if their profitability calculations go wildly wrong. And last, but by no means least, it exercises a monopoly of armed force which can be used against other states.
These functions do not disappear or become less important with the internationalisation of the system. The last 30 years have seen three major international crises and the beginning of a fourth. The actions of states have been very important in determining the survival of certain major firms and the profitability of many others.
Decisions had to be made on whether to influence currency levels, whether to raise or lower short term interest rates, whether to enter into the trade agreements under the auspices of the General Agreement on Tariffs and Trade and then the World Trade Organisation (WTO), how to allocate government contracts, the level of military expenditure. And on top of these there was the question of what should be done with the direct state intervention into the economy though nationalised industries, currency controls, tariffs and so on inherited from the previous period. Even the neo-liberal decision to scrap all these things was still a decision to be made. Multinationals with over 35 percent of their investments (the minimum in our list above) in one ‘home’ country could not afford to neglect trying to have an impact on any of these choices.
So it was that negotiations between states played a key role in the interrelations between the firms based within them at certain points in the 1980s and 1990s: the ‘Plaza Accord’ agreement between the US and Japanese governments to shift the value of the yen compared to the dollar so as to make life easier and more profitable for US firms in the mid-1980s;  the decision of the European governments to form the European Exchange Rate Mechanism (ERM) and then the euro – and of the British government to escape from the devastating impact of the ERM on the exports of British firms in 1992; the haggling between the European Union and the United States over barriers to trade in agricultural products and over ‘intellectual copyright’ (essential to raising the profitability of software and pharmaceutical companies); the discussions within the framework of the International Monetary Fund (IMF) over the treatment of indebted countries; agreements over landing rights at international airports; and the sorts of weapons supposedly integrated military pacts were going to use.
How important state decisions could be for very big firms can be seen by looking at the Fortune 100 list of the world’s biggest firms: ‘All formerly or currently leading US computers, semiconductors and electronic makers in 1993 Fortune 100 benefited enormously from preferential defence contracts’, another 23 were ‘directly engaged in the oil industry’ and so very dependent upon the ability of their ‘home’ government to protect their concessions, while at least 20 companies would not have survived at all as independent companies if they had not been saved by their respective governments in the previous decade and a half.  On top of this, all the key telecoms firms depended for major contracts and operating licences on governments, and bargaining between governments and international consortia.
The world biggest companies have both expanded beyond national boundaries on a scale that now exceeds the internationalisation of the system before the First World War and remain dependent to a high degree on their ability to influence ‘their’ national government. This is because, at the end of the day, they need a state to protect their web of international interests, and the only states that exist are national states.
As Dick Ryan has recently noted with respect to the most internationalised aspect of the system:
International finance provides a clear illustration of the centrality of nationality within global accumulation. The combination of satellite and computer technology has provided ...all the technical preconditions for the neoclassical ‘perfect market’ of financial flows to equalise rates of return across financial frontiers and locations, transcending national boundaries. Yet ...it is well recognised that finance maintains national characteristics. It does not move systematically so as to equalise savings and investment in each nation ... A global financial system comprised of nationally-designated currencies signals that globalisation cannot be devoid of a national dimension. Because nation-states are deemed responsible for the global commensurability of ‘their’ currency, globalisation, as it actually appears, even in the advanced form of finance, is not about eradicating the national dimension of accumulation. Indeed, globalisation is not even about the national dimension ‘hanging on’ in a process of slow dissolution. Global accumulation is actually reproducing the national dimension, albeit in ways different to past eras. 
It does not matter how much governments may avow their ideological commitment to ‘neo-liberalism’ and leaving the economy to the market. They can no more avoid making decisions on things that can have such a dramatic effect on the market than they can jump over their own shadow. And the great multinationals cannot avoid influencing and being influenced by this decision making.
This never consists of the politicians simply responding in a mechanical manner to an agreed policy laid down by capital. For capital is made up of rival firms, each jostling for its own positions – and often of rival bosses within those firms each trying to get one up on the others. There are limits which capitalist governments cannot step outside of without doing immense damage to the economy and to themselves. But within this framework coalitions of capitalist politicians and business interests push divergent policies, each trying to show it can shape out the best policy for the ruling class as a whole. Such coalitions typically combine those motivated by short term profit, those with the big money to dominate the media, the simply corrupt, and those with an ideological vision that gives a section of the capitalist class a sense of historic purpose. The various factions that battle for control of the Republican and Democratic parties in the US are such coalitions. So too are the rival pro-euro and anti-euro groups within the Tory and New Labour wings of the British political establishment. What they are battling over is the use of state power for capitalist ends. It is this which creates the potential for imperialism in the sense of the use of coercion as a form of inter-capitalist competition on an international scale.
The trend towards ‘globalisation’ began just as the US was suffering its most important military setback of the 20th century – its failure to subdue Vietnam. The US began the war believing it was facing a simple policing operation which its economic and military might would make easy. ‘We have 30 Vietnams,’ declared Robert Kennedy, shrugging off warnings about potential problems.  But as it was forced to double and double again the forces it deployed, it faced not just resistance from those horrified by the war, but also growing opposition to the cost from within the ruling class, with Wall Street beginning to turn against continuation of the war,  even though it was no higher than that of the Korean War 15 years before. The change in the world balance of economic forces was hitting at the US’s ability to maintain its global hegemony. By the time the war eventually ended there were deep splits in the US political establishment that culminated in Nixon’s attempts to spy on the Democratic Party, the Watergate affair and the forced abdication of the president. In the meantime, it had been forced to abandon the Bretton Woods international monetary system which enshrined US financial hegemony, and to begin cutting military spending, which fell in real terms by about 38 percent between the late 1960s and the late 1970s, and as a proportion of GNP by nearly half. 
It had lost its old ability to maintain easy dominance over two thirds of the world, just as the internationalisation of the economic system increased the importance of such dominance to its corporations.
For a time it seemed able to cope with a mixture of diplomacy, force and murderous thuggery, doled out by Kissinger, as adviser to Republican administrations, and Brzezinski for the Democrats. The US was able to turn to China as a counterweight to Russia, to use its arms to prevent an Arab victory in the 1973 war with Israel, to pull Egypt fully into the US camp, to help the local ruling class mercilessly crush the left in Chile in 1973 and Argentina in 1976, and to work with European social democracy to contain the Portuguese Revolution of 1974. But then came a triple shock to US hegemony. The revolutionary overthrow of the Iranian monarchy in 1979 suddenly destroyed one bastion of US strategy in the Middle East (the other was, and remains, the Israeli settler state) as Islamic militants seized the US embassy and held its officials hostage. Sandinista insurgents drove out the pro-US dictator of Nicaragua, established an anti-imperialist regime and inspired guerrilla movements in neighbouring El Salvador and Guatemala. And Russian troops moved into Afghanistan to keep a pro-Russian government in power in face of rising popular resistance.
These shocks preceded another, on the economic front – the second international recession in five years and, with it, increasing success by Japanese companies challenging US capitalism on its home ground. Japanese car firms began to take sales from the US giants Ford and General Motors, while the third US car giant, Chrysler, was only saved from bankruptcy by a government bail-out (and the selling off of its European subsidiaries).
Such events emphasised the degree to which the US hegemony had not been able to recover from the defeat in Vietnam, and pushed its leaders to embrace a new strategy – at first tentatively under Carter and then with relish under Reagan. It represented a return to the ‘Cold War imperialism’ strategy of confrontation with the USSR – and of using this to try to force the other Western powers to accept the US agenda on other strategic, political and economic fronts.
There were a number of elements to the strategy:
This ‘New Cold War’ was a new phase of militarised capitalism – of imperialism – drawing together different political and economic elements. It was not simply driven by profits from foreign investment or trade – these never exceeded the cost of the military expenditure, and the markets it opened up were usually marginal from the point of view of US capital as a whole. Nor was it driven simply by the bonus it provided for the arms contractors (as the Fortune table above shows, something beneficial to a high proportion of big companies). Rather the different factors formed a synergy, a virtuous circle in which the economy as a whole grew, boosted by arms spending (economists wrote at the time of ‘military Keynesianism’), key companies developed new technologies financed by the military, there was an opening up of useful if not central new markets and increased control over economic assets overseas, and the manipulation of the international financial system in US interests.
The synergy enabled the US economy to grow from about 1982 onwards, and to keep growing, with assistance from the Federal Reserve Bank’s cut in interest rates, even after the great fall in the world stockmarket in October 1987. As industry began to restructure and real wages fell, profit rates recovered – although to the level of the early 1970s, not to the much higher level of the 1950s. And economic progress was matched by victory on the strategic front. The cost of keeping up with the US cracked the USSR apart. It had to abandon its hold on Eastern Europe in 1989 in the face of popular unrest, and itself disintegrated in 1991. The Cold War had, it seemed, been won, and the economy had been revitalised.
That, at least, was the way the new wave of neo-conservative ideologues holding middling positions in the Reagan administrations (1983-1988) saw it. As far as they were concerned, the US should be much more prepared than hitherto to use force, nuclear force if necessary, to achieve its goals. Nixon’s mistake had been not to do this in Vietnam. They were able to play a role in pushing forward the new imperialism, especially in Central America where they were involved in building up the Contras and the death squads in defiance of Congressional decisions, getting funds to do so through arms and drug smuggling. But their time had not yet come.
Despite the belligerence of the Reagan administrations, US troops were rarely directly in battle. They were used against the small Caribbean island of Grenada in 1983, without success in Lebanon in 1986 (when they withdrew after two bomb attacks) and, under Bush, to overthrow the government of a former CIA protégé, Noriega, in Panama in 1989. But the memory of Vietnam still ruled out their wider use. The US ruling class relied on others to do the dirty work for it – the local ruling classes in Latin America, the dictator Suharto in Indonesia, the white South Africans and the dictator Mobutu in Africa, Israel and the Saudis in the Middle East. The approach meant backing the dictator Saddam Hussein as a battering ram against Iran, and it emphasised co-operation with France and Germany as well as Britain in Europe, seeing the European Union as a way of stabilising the region under US hegemony. 
What is more, there was a tendency to shift away from the aggressive strategy even before the collapse of the Eastern Bloc. The famous ‘walk in the woods’ between Reagan and the new Russian leader Gorbachev in 1987 led to new proposals for arms limitation, the removal of the missiles from Europe and a new spell of reduction in arms spending, both in real money terms and as a proportion of GDP. The tendency became more pronounced under Bush Sr and the first Clinton administration (1989-1992 and 1993-1996).
This was no accidental U-turn. The approach of the Second Cold War had a central flaw from the point of view of US capitalism. It was directed at breaking apart the USSR and seeing off threats in the Third World. But doing these things did not go very far in dealing with the problems in the most important parts of the world for capitalism – the ‘triad’ of Europe, Japan and North America, where the great bulk of surplus value was created.
The ‘military Keynesianism’ produced growth in the US economy, but not as rapidly as in the other capitalist powers that benefited from the US market. By 1992 a committee of the US Congress could fearfully predict Japan overtaking the US economically within a dozen years. Whatever the successes of US foreign policy, the domestic US economy was increasingly dependent upon borrowing abroad to deal with its ‘double deficits’ – on the government budget and on the balance of payments. George Bush Sr was forced to break his ‘Read my lips, no new taxes’ electoral pledge in order to try to deal with the budget deficit – and lost the election in 1992 to Bill Clinton, partly as a result. Clinton’s more serious tackling of the deficit necessarily involved lowering the proportion of national resources going to arms.
At the same time, the collapse of the Eastern Bloc in 1989 and the disintegration of the USSR in 1991 created new areas of instability and shifts in the global balance of power that did not always automatically benefit US interests. In Europe most commentators at the time believed that West Germany would be the great beneficiary. Already the dominant manufacturing presence on mainland Europe, it was expected to expand economically and achieve greater strategic influence when it absorbed East Germany. Meanwhile, at the other end of Eurasia, China, with an economy enjoying annual economic growth close to 10 percent, stood to gain from the immense weakening of its rival to the north, giving it greater freedom to play a more assertive role internationally.
In these circumstances US governments followed policies based on doing deals with allies and rivals: building coalitions for the 1991 Gulf War against Saddam Hussein – and ensuring he remained in control of Iraq as a bulwark against instability and Iranian influence in the region; putting up no obstacle to German unification and stressing the role of NATO in Western Europe; pushing the Israelis to make token concessions to the Palestinians and then using the CIA to train the Palestinian security forces; working through United Nations auspices to intervene (disastrously, as it turned out) in Somalia; and giving moral and financial backing to the Yeltsin governments in Russia.
The policy was certainly not one of peace. A decline in military spending in real terms did not mean a loss in military strength compared to the rest of the world – by the end of the decade its spending had risen from 30 to 35 percent of the world total. Nor did it mean a loss of interest in new and even deadlier weapons systems: the ‘capital intensity’ of arms spending continued to rise in the mid-1990s after a brief drop at the turn of the decade. And there were more military interventions in the 1990s than there had been in the 1980s. There was the Gulf War of 1991, the military adventure in Somalia in 1993, the bombing of Serbia in 1995 to enforce a US plan for Bosnia, the pumping of military aid to the Colombian government, and then the full-scale war against Serbia in 1999.
There was also the beginnings of a switch from coalition building with the European powers and Russia to a policy that could be interpreted as, in part, against them. This was especially true after Brzezinski’s protege Madeleine Albright took charge of foreign policy in Clinton’s second term. The US pushed to expand NATO so as to take in the Eastern Europe states, it made the first moves to draw former Soviet republics like Georgia and Azerbaijan into its orbit, and it played a much more activist role in the former Yugoslavia. These were moves that could be read as undermining Russian influence, but also as trying to pen in the European powers and counter Chinese influence at the other end of Eurasia. Brzezinski himself said that ‘the absorption of three Central European nations into NATO resolved a problem that was considered “impolite” to mention: the “disproportionate power” of Germany’. 
Yet the very fact that these moves were made indicated a growing unease about the US’s ability to dominate in the post Cold War era as it had for the half-century before. Those who had guided US imperialism through the Vietnam years and after recognised the difficulties, but believed the US had no choice but to accept a certain loss of its old strength. Kissinger was absolutely blunt about this:
In the post Cold War world the US is the only remaining superpower with the capacity to intervene in every part of the globe. Yet power has become more diffuse and issues to which military force are relevant have diminished ... The end of the Cold War has created what some observers have called a ‘unipolar’ or ‘one superpower’ world. But the US is actually in no better position to dictate the global agenda unilaterally than it was at the beginning of the Cold War ... The United States will face economic competition of a kind it never experienced during the Cold War. 
The US, he argued, could only achieve its goals by diplomacy aimed at keeping a ‘balance of power’ on the Eurasian land masses: ‘The domination of a single power of either Europe or Asia ...remains a good definition of strategic danger to America ... Such a grouping would have the capacity to outstrip America economically and, in the end, militarily ... The danger would have to be resisted even were the dominant power apparently benevolent’.  Problems would arise because ‘in the years ahead Europe will not feel the need for American protection and will pursue its economic self interest much more aggressively’.  Finally, he noted, ‘China is on the road to superpower status. At a growth rate of 8 percent, which is less than it maintained over the 1980s, China’s GNP will approach that of the US’s by the end of second decade of the 21st century. Long before that China’s shadow will fall over Asia’. 
In effect, Kissinger was describing a world of several rival imperialisms, marked by cross-cutting economic and military rivalries, and much more difficult to deal with than the old ‘bipolar’ model that had characterised the Cold War.
For Brzezinski the problem was similar, although his conclusions not always the same. There was a ‘geostrategic triad’ made up of the US, Europe and China. Sustaining US influence meant co-operating with the other two powers, but also keeping them in check: ‘China is already a major regional player, though not yet strong enough to contest America’s global primacy or even its predominance in the Far Eastern region ... China is capable of imposing on America unacceptable costs in the event that a local conflict in the Far East engages vital Chinese interests but only peripheral American ones’. 
The European Union, he pointed out, now had a population more than a third greater than the US’s and a GDP virtually the same. It also had a key strategic position in relation to Russia and China on the Eurasian continent:
The transatlantic alliance is America’s most important global relationship. It is the springboard for US global involvement, enabling America to play the decisive role of arbiter in Eurasia – the world’s central area of power ... In the longer run ... a truly politically united Europe would entail a basic shift in the distribution of global power, with consequences as far-reaching as those generated by the collapse of the Soviet Empire ... The impact of such a Europe on America’s own position in the world and the Eurasian power balance would be enormous ... inevitably generating severe two-way transatlantic tensions. 
From such a diagnosis, the expansion of NATO and the moves into the Soviet republics made sense by tying to the US a belt of territory and interests occupying the land mass between the European Union, Russia and China. But Brzezinski was careful to stress the positive angles from a US point of view. A united Europe was still far from existing because of the contradictory interests of its constituent states, and their interests tied some of those states quite closely to the US: ‘Currently, Europe ... is a de facto military protectorate of the US ... It is unlikely Europe will be able to close the military gap with the US in the near future’. 
The conclusion to be drawn from these analyses was that the US should be more assertive in its diplomacy, laying down the line to the other powers but not breaking off relations with them. This was the approach which the Clinton administration increasingly followed with Madeleine Albright in charge of foreign policy. The policy in former Yugoslavia typified the approach. Germany, newly emboldened to follow an independent foreign policy in the aftermath of reunification, had taken the decisive step that destroyed the old Yugoslav federation by recognising Croatian independence at a time when the US and Britain were still trying to keep it intact. But the European powers then proved completely incapable of stabilising the situation on their own doorstep. Two moves by the US military – the bombing of the Serbs and the Dayton agreement in 1995, and then the war against Serbia in 1999 – were needed to bring back some degree of order to the area. As the US administration saw things, it had proved definitively to the European powers that they needed US military force to keep their own house in order.
Yet this was hardly going to make the Europeans bow down to the US in every set of negotiations over trade, investment or intellectual copyright. The US had still not found a way to cash in on its military power in economic terms. There was continued unease among sections of the its ruling class as to where its policies were leading.
As John J. Hamre wrote in an introduction to one of Brzezinski’s writings:
A national consensus about how the US as a ‘hyperpower’ should navigate the world is as illusive as ever ... The lack of a broad consensus has provided a great opportunity for special interest groups to impose their priorities on the policy making process ... [with] increasingly segmented analyses of developments across the world ... No overarching theory has emerged, no comprehensive strategy has succeeded in attracting political consensus. 
The ground was ready for the neo-conservatives from the first Reagan administration of 15 years before to make a move. 
The group had an overarching theory, and they began to organise to win key sections of the US political, economic and military establishment to it through think-tanks like the Project for the New American Century and the Heritage Foundation, their paper, the Weekly Standard, and innumerable speeches and articles by their key ideologues, William Kristol and Richard Perle. Their starting point was the insistence that the policy pursued under the Bush Sr and Clinton administrations was ‘in tatters’, in ‘meltdown’, and that the only thing to stop ‘a decline in American power’ was a return to a ‘Reaganite’ policy based on large increases in defence spending, the building of a ‘missile defence’ system, and action to deal with ‘threats’ from ‘dictatorships’ in China, Serbia, Iraq, Iran and North Korea.  ‘Having led the West to victory in the Cold War, America faces an opportunity and a challenge. We are in danger of squandering the opportunity and failing the challenge’.  So went a statement signed, among others, by Donald Rumsfeld, Paul Wolfowitz, Elliott Abrams, Jeb Bush, Dick Cheney, Donald Kagan, Zalmay Khalilzad and Dan Quayle. Another statement in 1998 emphasised the strategic need to take action against Iraq in particular, because otherwise ‘our friends and allies in the Middle East and Europe will soon be subject to forms of intimidation by an Iraqi government bent on dominating the Middle East and its oil reserves’. 
The signatories of these statements took leading positions in the US government when the Supreme Court handed George W Bush victory in the 2000 election. As economic boom turned to recession and panic about ‘terrorism’ swept the US in the wake of 11 September 2001, they found very little resistance to their agenda within the administration and Congress. They were able to push through massive increases in military spending, both in terms of real spending and as a share of GDP, to go full speed ahead with the Son of Star Wars programme, and to unleash war against Afghanistan – and all while providing massive tax cuts for the rich. There was even some discussion within the Bush administration of going for Iraq straight after 11 September, but it was decided that it would be tactically better to go for the easy, less costly target first. It would show the scale of US power, climatise public opinion inside the US to the idea of war, and increase US strategic influence in Central Asia.
These actions amounted to a very sharp turn in US policy. There was some continuity with the latter part of the Clinton presidency,  but after 11 September quantity turned into quality. Some opponents of the neo-conservatives regard what took place as virtually a coup by a ‘cabal’ with ‘insane’ policies. But their bombastic rhetoric and aggressive wars are an attempt by ardent supporters of the US-based section of world capitalism to solve real problems – just as the colonialist fantasies and racist rhetoric of those like Rhodes who spearheaded the carve-up of Africa in the 1890s expressed the needs of their capitalist class.
The scale of the problems facing the US economy became clear just as the neo-conservatives were installing themselves in the White House. It had recovered from the recession of the early 1990s and grown some 40 percent by the end of the decade, barely affected by the 1997 recession that began in Asia and swept through Russia and Latin America. By 1999 most mainstream economists were talking of a ‘new economic paradigm’ which would mean an end to boom-bust cycles, contrasting the US position to that of Japan, which was in virtually permanent recession, and Germany, which was growing slowly.
But the boom collapsed suddenly in the months before 11 September and US companies were found to have been exaggerating their profits by up to 50 percent. Central to the problems was a growing dependence on the rest of the world. The deficit on international trade had not gone away. Advances the US had made in certain important industries (particularly computers and software) had not restored the overwhelming competitive lead it had once enjoyed. Capital expenditure per employee and productivity per hour worked was actually behind France and Germany. Productivity per person employed only remained higher because the working year was over 25 percent longer. The US domestic economy relied on an inflow of funds from abroad, which reached around $300 billion annually by 1999. The cumulative total was a massive $2,500 billion.
Foreign funds continued to flow into the US even when the recession finally came in 2001 and the share prices began a long fall to around half their old level. The US seemed a safer venue for investment than elsewhere, despite low profits, during the period of international instability associated with 11 September and the Afghan and Iraq wars.  But there was an ever present risk of a sudden reversal of the trend which might throw the US economy into desperate straits. A quarter of a century of growing international movements of finance, investment, trade and production made US capitalism vulnerable to events beyond its border. Its great multinational corporations needed some policy which would enable the might of the US state to exercise control over such events. The new imperialism of the neo-conservative ‘cabal’ tried to provide it.
There was one important thing going for the policy. US arms expenditure in 2002 of $396 billion was more than that of Europe, Japan and Russia combined. But it was considerably less than the annual inflow of funds from abroad, now around $500 billion. As Martin Wolf of the Financial Times has put it, ‘The US current account deficit is 50 percent bigger than its defence spending ... Indirectly the rest of the world pays for the exercise of US power’. 
The biggest single source of funds flowing into the US is Asia, which accounts for about 40 percent of them (half from Japan). Next comes Europe with over a fifth (less than half from the euro zone).  Effectively, although they did not notice it, investors in Japan and to a lesser extent Europe were lending the US the money which enabled it to maintain its global military superiority. This superiority was one factor making the US seem a ‘safe’ haven for investors in East Asia and elsewhere in turbulent times, encouraging their governments to hold very large amounts in dollars (or dollar-denominated bonds), and so providing the wherewithal for US firms and consumers to buy more from the rest of the world. It was a virtuous circle allowing US capitalism to keep coping, for the time being at any rate.
The policies of the neo-conservatives consisted of upping the military dimension in an attempt to make the circle even more beneficial. Increased arms spending and massive cuts for the rich were meant to pull the US out of recession, just as the ‘military Keynesianism’ of Reagan had two decades ago. And increased military capacity would ensure the rest of the world accepted policies beneficial to US corporations – acceptance of US rules on patents and ‘intellectual copyright’ which are so important to the software and pharmaceutical companies, the setting of global oil prices to suit US interests, the continued domination by US firms of the international arms trade and the opening up of foreign markets to US goods. The US Space Command document ‘Vision for 2020’ had, after all, compared the US military effort to the way ‘centuries ago nations built navies to protect and enhance their commerce’. 
The returns of trade alone would not make increased arms spending rational for the US ruling class as a whole, as opposed to minority sectors of it. The total foreign income of US companies in 1991 was only $281 billion – around $100 billion less than the arms budget. Even if you added in the profits made on the US’s $900 billion of exports, the sums did not justify paying out nearly $400 billion on arms, let alone raising that total considerably over the next few years. The figures could make sense, however, if increased arms spending led to recovery from recession, further military handouts to finance technical advance for computer, software or aviation corporations, and to an increased capacity to dictate policies to other ruling classes – and all paid for by even bigger investment flows into the US as it demonstrated its overriding power. The strategy amounted to believing the US could more than compensate for losing its old lead in terms of market competition by using the one thing it has that the other powers do not – military might.
The war against Iraq fitted into this by providing a chance to demonstrate the sheer level of US military power and to increase control over the world’s number one raw material. As A.J. Chien noted:
The oil interest is ...multi-faceted, not amounting simply to maximising oil companies’ profits. The larger issue is maximising US control, which has a variety of benefits including non-oil profits and geopolitical advantages ... One should not fall into the common misconception that the overriding US concern is to keep oil prices low. Sometimes we want them high. In the early 1970s the Nixon administration favoured higher prices ... The reason was the perception that Japan and Europe, more dependent on imported energy than the US, would suffer more from higher prices ... Higher crude prices were also supported by the Reagan administration in 1986 ... The issue isn’t price but control. The Saudi dictatorship does what we want, but the Iraqi dictatorship does not. That’s the problem. 
Ian S. Lustick from the University of Pennsylvania, an analyst and consultant on Middle East policy for previous administrations, put a somewhat similar argument:
This cabal of neo-conservative warriors [is] ... fully committed to an American military enforced new order in the Middle East with pretensions and fantasies of democratisation of the region ... domination of the oil wealth, establishment of large, semi-permanent military bases in the heart of the region, and the elimination of all pressures on Israel to withdraw from the West Bank and Gaza ... This fantasy, this vision ... required ... war to overthrow Saddam and to gain control of Iraq, and the oilfields and the geopolitical assets it represents. To rebuild Iraq is emblematic ... of the overwhelming power ... of the United States in the post Cold War world ... the irrefutable sign of the possibility and rewards of grand-scale unilateralism. 
The war, then, was part of a wider strategy of using US military power to compensate for relative economic decline over many years. The aim was to so reinforce US global hegemony as to make other countries accept US policies when it comes to the IMF, the World Bank, trade negotiations though the WTO – and by accepting those polices, to enable the US to continue to get the rest of the world’s ruling classes to pay for deficits caused, in part at least, by its level of arms spending.
But merely to pose the issue like this is also to bring out the degree to which it was a gamble.
The logic of relying on increased spending on military power to get hegemony in other spheres is to create situations where military power – and the fact that you have it and others don’t – matters. It is a scenario of ‘war without end’, justified by talk of the fight against ‘terror’ and ‘rogue states’. But that confronts the US with the problem of having to take on any challenge to its hegemony, however much it might be tactically inadvisable to do so, for fear of being seen to display global weakness. Just as the logic of fighting in Afghanistan was to force war upon Iraq, so the logic of military success in Iraq is to threaten Iran, Syria and North Korea today, perhaps Venezuela or Cuba tomorrow, and eventually even China if they do not submit to US demands.
Yet the gamble cannot do away with the central problem – the degree to which dependence on flows of foreign finance into the US creates potentially immense instability. It is not difficult to imagine scenarios in which investors in other countries started withdrawing their funds from the US, creating a vicious circle in which the falling value of the dollar led still others to move their funds to apparently safer havens. As that ardent defender of capitalism, Martin Wolf, has correctly observed, ‘In military affairs, the US can be unilateralist. But the world of economics is intrinsically multilateral. Those running the world’s sole superpower would do well to remember this potentially painful fact’.  In the meantime it is by no means certain that Europe, Japan or China will bow to the US at the IMF or the WTO just because it has conquered Iraq.
The ‘cabal’ is caught, in just the same ways as those who guided US policy before it, between the need for US capital to control the world beyond its borders and the difficulties of doing so by military means alone.
US policy, whether as propounded by Kissinger and Brzezinski or the Project, has long rested upon recognition of diverging and often conflicting interests between the capitals based in different countries. The more the capitals operate internationally and try to control things beyond their borders, the more important the divergences and conflicts become. It was his failure to see this 90 years ago that led Kautsky to embrace the theory of ultra-imperialism. It is the same failure that marks the writing of those who claim that free trade and neo-liberalism rule out conflict today – and of those who speak of ‘empire’ in the singular rather than of imperialisms in the plural.
Conflicting interests which can be blurred over during periods of boom suddenly re-emerge in a sharpened form during periods of crisis. When market growth is slow and profits rates are falling worldwide, the attempt of any one nationally-based bloc of multinationals to use the state to protect their interests internationally crashes into the attempts of other blocs to do the same.
The interpenetration of nationally-based capitals has reached a point much more advanced than during the period described by the classic writers on imperialism. The World Investment Report 2000 states that for the world as a whole FDI reached ‘a record $1.3 trillion in the year 2000 ... The global expansion was driven by more than 60,000 transnational corporations with over 800,000 affiliates abroad ... The top 30 host countries account for 95 percent of total world flows of FDI and 90 percent of stocks’.  In the mid-1990s it was possible for some commentators to point out that major economies were still less internationalised than before 1914. That is no longer so. FDI today is equal to 15.9 percent of world GDP, as against 9 percent in 1913, and exports are 22 percent of GDP as against 8.7 percent. 
But the movements of goods and capital from country to country are not evenly distributed across the globe. They mainly go through a relatively small number of distinct channels (see figure 1).
The United States
To this picture must be added:
These facts show that as well as the tendency to globalisation of finance, there is a tendency towards the concentration of complexes of industrial production in the three advanced regions of the world – the so called ‘triad’ of North America, Europe and East Asia. The capitals based in each of these tend to have concentrations of interests in certain other regions of the world. This leads to differing – and often conflicting – international strategies by the great powers.
Western Europe: The European Union (EU) is an attempt to turn the interpenetration of its different national capitalisms into full-blooded integration, and to create a single European capitalist class with a proto-state to protect its interests worldwide. It has involved trying to harmonise the divergent interests of the old national capitalist classes, especially France and Germany.
German capitalism’s central concern is with its powerful manufacturing interests, whose spread beyond national borders has mainly been to other parts of the European mainland. This has led to it reaching out to Eastern Europe as a location for modern industrial plant with relatively cheap, already skilled, labour close to its existing investments and markets. French capitalism has a wider range of concerns. It has a politically important agricultural sector, interests in its former colonies in North and West Africa, oil contracts in the Middle East (Iran and, at least until recently, Iraq), and growing service sector investments in Latin America. While the pattern of German development pushes it towards the east, France is pushed to assert itself in the region running from the Atlantic to the Arabian Sea – and both are regions which the US sees as central to its own geostrategic interests. And success for a French-German axis in imposing greater unity on European capitalism would represent a potential challenge to US domination of the world financial system – for instance, the turning of the euro into an international reserve currency on a par with the dollar.
These contradictory interests find expression elsewhere. Part of the US strategy of cementing its global hegemony is to increase its penetration of Latin America through establishment of the Free Trade Area of the Americas (FTAA or ALCA). But although Latin America is the world’s most important single region for US exports, an EU document states of the Mercosur countries (Brazil, Argentina, Paraguay and Uruguay), ‘The EU is the first trade and investor partner in the region. EU-Mercosur bilateral trade amounted to €48,498 million. The EU is the first investor with €83 billion in the period 1998-2000. The US is the second trade and investor partner with Mercosur ... US-Mercosur bilateral trade in the year 2000 amounted to €44 billion.’ Not surprisingly, the document adds, ‘The recent establishment of the North American Free Trade Area illustrates the significant risks which the creation of the FTAA in 2005 could entail if not preceded by a free trade agreement between the EU and Mercosur’. 
Such clashes of interest explain the diplomatic manoeuvring in the United Nations and elsewhere in the run-up to the Iraq war. The US refusal to make concessions to France was seen by conservative French politicians to carve France out of a region where it saw itself as having ‘legitimate interests’. And the marshalling by the US of support from the rulers of Eastern Europe, Italy and Spain as well as Britain was a trampling on areas traditionally under a degree of German influence.
Certain mainstream European politicians are drawing the conclusion expressed by former French prime minister Laurent Fabius: ‘Europe was unable to make its voice heard in the US because it was divided and lacked a unified defence force’.  Andrew Moravcsik reports in the Financial Times, ‘For some years politicians have found’ the arguments for higher European arms spending convincing: ‘The logic is irresistible: if the US respects only military power, then a European army will surely command respect’. 
Figure 1: Foreign Direct Investment Stocks:
All figures are in billions of dollars and are approximate, depending on changes in the currency exchange and the different calculating methods of different governments.
Figure 2: Changes in the Relative Significance
*Eastern Europe includes Central and Eastern Europe, Baltic States, CIS.
Figure 3: United States Military Spending Before Bush’s Increases
Source: US Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts
But attempts to fuse the European capitalisms together in this way have always faced inbuilt obstacles. The companies of each European country value their links to their national states, and fear losing out to rivals from other countries in a transnational European state. What is more, many of them have valued investments inside the US which they do not want to put at risk. As a result, the French-German axis has always been unstable. In the aftermath of the Iraq war German business has been putting pressure on the German government to back off from continued diplomatic confrontation with the US. And, as Moravcsik points out, no government in Europe is likely to accept the cost of creating ‘a co-ordinated military force with global capacities to fight a high-technology, low-casualty war’. That would require Europeans to increase military spending, currently at 2 percent of domestic product, to more than the US rate of 4 percent. 
There is a capitalist dream of constructing a powerful new European imperialism in place of the competing petty imperialisms. But it will be very difficult to achieve. And, were it achieved, it would be just as barbaric as US imperialism (you only have to look at, say, French interventions in Africa to see why). This is why it is mistaken for people like George Monbiot to suggest the left should back the euro against the dollar. 
Japan: For more than half a century its rulers have been content to operate in the US’s shadow, allowing the US to occupy one of their islands, Okinawa, as a base, and paying much of the cost of the US’s 1991 war against Iraq. The worry Japan has caused the US has been economic, not military. The worries were much reduced in the course of the 1990s. The Japanese economy has stagnated while the US economy has grown, and the industrial restructuring (encouraged by the Pentagon) means US firms again lead in the world computing industry. Japan gave wholehearted diplomatic support to this year’s war against Iraq. But the potential for tension remains. Japanese industry has continued to invest heavily through its long recession and could be placed to mount a new economic challenge to the US in the future. And there are sections of the Japanese political establishment who believe it needs to develop its military power to play an independent role internationally – especially in East Asia, where it has important investments and where it could face serious problems if faced with military crises over the Koreas or over China and Taiwan.
Russia: It is an imperialism that has been almost completely on the defensive for more than a dozen years. When they ran the country as heads of the old Communist Party, its rulers regarded themselves as on a par with the US in terms of global influence, and competed with it strategically in areas like South Asia, the Middle East, the Horn of Africa and West Africa. Today it is very much the same class which runs the giant privatised corporations and, through the former KGB secret policeman Putin, the state. And so they too are resentful as they see the US invade a semi-ally, Iraq, and carve out bases (and oil concessions) for itself in Central Asia, in what was once part of their empire.
But they have been cut down in size economically twice – first by losing half of the USSR with the breakaway of the non-Russian republics, and then by the economic crisis which reduced the economic output of what remained by half. An economy that used to be between 30 and 50 percent of the size of the US’s is now at most 10 per cent of the size.
They still possess considerable military power. But most of their equipment seems to be at least a technical generation older, and so would not fare very well in conventional battlefield conflicts. They can sell arms to weak countries which want to fight other weak countries, but dare not use it to directly confront those armed with modern US weaponry. And they themselves can only threaten the US with the ultimate suicide weapon, the nuclear warheads of their ageing missile system.
China: The country’s coastal provinces have been by far the most successful section of the global system over the last decade and a half, growing somewhere close to 10 percent a year.
But economic successes have also bred important tensions. Hundreds of millions of peasants are witnessing the economic growth without gaining anything from it, as they flood into the cities each year looking for work that is not available. While the coastal areas linked into the world market industrialise at great speed, restructuring leads to massive job losses in the old heavy industrial sectors (which provide important inputs for the new industries). And the unevenness between different regions grows ever greater. Those running the regime fear a recurrence of the Tiananmen Square events of 1989, when protests by students linked up with discontent among workers to produce near-rebellion in most Chinese cities. They also fear fragmentation of the country as those ruling in the regions tied most closely into the world market ignore the demands on resources of the impoverished inland provinces – in some cases provinces inhabited by ethnic and religious minorities who have never fully accepted Chinese rule. Against such centrifugal tendencies, the regime has one card to play – Chinese nationalism. But this leads to tensions with the US over the island of Taiwan, seen by Chinese nationalists as part of their national heritage and by the US neo-conservatives as an integral part of the US sphere of influence.
For the Chinese rulers to concede to the attitude of the US right would, as far as they are concerned, be to concede that they are going to give up part of the historic Chinese Empire. And if Taiwan in the east, why not the extensive non-Han provinces in the north and west? Would it not be a sign to the US right that China could be stripped of its empire and be reduced to a minor power, just as happened to Russia?
A recent Financial Times article states:
Many analysts argue that it is only a matter of time before Chinese economic power is translated into military muscle ... East Asia is a likely theatre for a major war, they argue. A recent report from a US Congressional committee concluded, ‘The combination of Chinese leaders’ perceptions of America as an adversarial hegemon and the lack of solid bilateral institutions for crisis management response is potentially explosive. In the worst case, this could lead to military conflict.’ Hisaiko Okazaki, a conservative Japanese foreign policy commentator and former ambassador, fears that China’s growing strength will eventually lead it to take control of Taiwan, thus threatening Japan’s strategic supply routes. About 80 percent of Japan’s oil supplies come from the Middle East; most of that passes through the Taiwan Strait. 
For some at least of the neo-conservatives in the White House, the Son of Star Wars strategy is directed to cutting China down to size. Paul Rogers of Bradford University has explained their logic:
Many on the Republican right think the only threats to US dominance will come from China if it develops into an economic giant. One way to curb its growth is to force it to commit more money to defence, and the National Missile Defence system is one way of doing this. That may stimulate a dangerous nuclear arms race but, after all, the Soviet giant was successfully ‘spent into an early grave’, and perhaps the same strategy can be applied to China. 
Britain: New Labour prime minister Tony Blair is commonly referred to as George Bush’s ‘poodle’. This sums up the subordinate position Britain plays in relation to US imperialism. But it also underestimates the degree to which British capitalism has its own imperialist interests. Its investments around the world are second only to those of the US, it is the base of some the bigger multinationals, and it still possesses nuclear weapons. Its problem is that it discovered nearly half a century ago with the Suez adventure that its state is not able to play an independent world role to match the international spread of its investments. Since then Tory and right wing Labour leaders alike have seen the only way to protect its interests as by a ‘special relationship’ with the US. They could not have won the Falklands/Malvinas War without US assistance, and they have turned to US presidents in the attempt to clear up the mess created by their past actions in Northern Ireland.
The Blair policy during the Iraq war was the logical follow-up to these things. But Blair is finding things are not quite so easy. The decline in the economic importance of the empire in the 1950s and 1960s led sections of British industry to turn increasingly to Europe for markets and investment. And so today British capitalism is pulled in two directions – towards the old alliance with the US and towards those who dream of a new European superstate. Blair would like to reconcile the two pressures by acting as an advocate for the US-oriented sections of British business within Europe. But the recriminations between France and Germany on the one hand and the US on the other over the war are making life difficult for him.
The interaction between the great powers is not the peaceful concert of nations dreamt of by certain apostles of neo-liberalism and free trade, and interpreted as a single entity – ’empire’ – by Hardt and Negri. There are a set of contradictory interests, with military force a weapon of last resort for dealing with them. The US attacks on Afghanistan and Iraq have shown us that force in action. But there is still a difference with the first four decades of the 20th century. These culminated in wars which ravaged their heartlands. The tensions since 1945 have led to massive accumulations of arms that could potentially be unleashed against the heartlands. But hot wars have been fought outside them, usually in the Third World.
One reason for this has been the ‘deterrent’ effect, the fear that waging war on a nuclear power will lead to destruction of the whole domestic economy as well as most of its people. Even today, the rulers of Russia, China, India, Pakistan and North Korea – and for that matter Britain and France – see possession of nuclear weapons as the ultimate defence against enemies.
Another has been the very interpenetration of the advanced capitalist economies that puts pressure on states to exercise power outside their own boundaries. Few capitalists want their national state to destroy huge chunks of their property in other states – and most of that property will be in other advanced capitalist countries. This does not rule out war completely. The capitalist economy was highly internationalised in 1914, but this did not prevent all-out war. Again, in 1941, the presence of Ford factories and Coca-Cola outlets in Germany did not stop a US declaration of war after Pearl Harbour. But it does provide them with an incentive to avoid such conflicts if they can – and to settle their differences in less industrialised parts of the world. Hence the years since 1945 have been marked by war after war, but away from Western Europe, North America and Japan. And often the wars have been ‘proxy wars’ involving local regimes to a greater or lesser extent beholden to, but not completely dependent on, particular great powers.
This has been especially true in Africa. During the last decade and a half of the Cold War the US and the USSR backed rival sides in wars and civil wars as part of their attempts to gain a strategic advantage over each other. Similarly, in South Asia, India was loosely aligned with the USSR and Pakistan more tightly tied to the US (and allied with China). More recently the US and France vied for influence in Central Africa in the early and mid-1990s. They backed rival sides in the war cum civil war that broke out in the border regions of Tanzania, Rwanda, Burundi and Congo-Zaire. They helped set in motion a catastrophe, resulting overall in 3 or 4 million dead. In the same years, the different big powers each developed different approaches for trying to gain advantage from the collapse of Yugoslavia, giving open or tacit support to the different armies that were engaged in mutual ethnic cleansing. In such situations, freelance armies emerged whose commanders emulated on a small scale the great imperial powers by waging war in order to enrich themselves, and enriching themselves in order further to wage war. Imperialism meant encouragement for local rulers to engage in the bloodiest of wars and civil wars – and then, occasionally, the sending in of Western troops to enforce ‘peacekeeping’ when the disorder reached such a scale as to threaten to damage Western interests. Contradictions which arise from the inter-imperialist antagonisms of the advanced capitalist states in this way make the worst impact in the poorer parts of the world.
If the conflicts between the great capitalist powers find expression in horrific death tolls in wars waged in the Third World, here too the dire economic consequences of their policies for the mass of people are most marked.
Governments throughout the Third World had abandoned attempts at ‘independent’ economic development from the mid-1970s onwards. Former liberation fighters, supposed ‘Communists’ and right wing nationalists alike opened up their economies to foreign capital and embraced the ‘Washington consensus’ of neo-liberalism. This was not just a matter of pressure by the advanced capitalist states, blackmail by the IMF or conspiracies by the multinationals (though much blackmail and some conspiring did take place). The real problem was that the resources available for capital accumulation within the boundaries of any one state, however much protected from outside intrusion, were limited.
Those who had tried to accumulate at home now set out to advance their technology and find wider markets by deals with the world’s great multinationals, and to get funds for further development by massive borrowing from the Western banks. As far as they were concerned, they were not surrendering to foreign capital but using it as a lever to raise themselves up. Political parties which had preached the unity of all classes in order to achieve independent economic development now became ardent proponents of collaboration with the multinationals and the world banking system – Fianna Fail in Ireland, the Peronists in Argentina, APRA in Peru, Congress in India, the Communist parties in China and Vietnam.
Collaboration enabled a few sections of local capital to join the multinational league themselves. It enabled others to liquidate their local holdings, and to use the proceeds to invest in more profitable undertakings abroad, making themselves shareholders and bondholders in the advanced economies.
Argentina, Brazil and Mexico were typical. Their industrial bases had been established in the 1940s, 1950s and 1960s by the state intervening to direct investment in industry, often into state-owned companies. But by the 1970s it became clear to the more farsighted industrialists – whether in the state or private sectors – that they could not get the resources and the access to the most modern technologies needed to keep up with worldwide productivity levels unless they found ways of breaking out of the confines of the national economy. They began increasingly to turn to foreign multinationals for licensing agreements, joint production projects and funds – and they began themselves to operate as multinationals in other countries. So the Argentinian steel maker TechNet took control of the Mexican steel tube maker Tamsa in 1993, acquired the Italian steel tube maker Dalmikne in 1996, and then went on to expand into Brazil, Venezuela, Japan and Canada, adopting the name Tenaris. It boasts, ‘With an annual production capacity of over 3 million tons of seamless pipes and 850,000 tons of welded pipes, the Tenaris Group is the world leader in the seamless pipe market’.  There is a similar pattern with some Mexican companies. In the late 1980s Alfa, the largest industrial group in Mexico, with 109 subsidiaries spanning automotive components, food, petrochemicals and steel, embarked on a growing number of joint operations with foreign firms. Its director of finance said, ‘Three quarters of our non-steel business involves joint ventures. We have the culture of joint ventures.’ The glass maker Vitro, which had bought two American companies, became ‘the world’s leading glass container manufacturer, with its market almost equally split between the US and Mexico’.  The logical outcome of this in Mexico was for its ruling class to forget its old nationalism, to join the North American Free Trade Area and increasingly operate as a subordinate component of US capitalism.
Occasionally the collaboration produced positive results for wider sections of local capital, provided some job opportunities for the aspirant middle classes (Ireland, South Korea, Singapore, Taiwan, coastal China), and even created conditions under which workers could boost their living standards through industrial action. Usually, however, it created increased indebtedness to foreign banks which the national states had to cope with. In such cases, a narrow stratum of people gained a taste of the fleshpots of multinational capital while the conditions of the mass of people deteriorated, or at best remained unchanged. A yuppie class lived in protected enclaves as if it were in the wealthiest parts of the industrialised world (and often went a step further and lived part of the year there), while much of the population festered in ever proliferating slums and shantytowns.
The results can be seen today in Latin America, where national income per head fell in the 1980s, in the Middle East, where it is lower now than 20 years ago, and above all in sub-Saharan Africa, where absolute poverty has become endemic as the share of world trade has fallen from 3 percent half a century ago to a mere 1 percent today.
Those who run the state face immense problems even when the developmentalist strategy is successful in its own capitalist or state capitalist terms. Its success depends upon a high level of domestic accumulation – and the other side of that, a high level of exploitation that can only be achieved by holding down workers’ and peasants’ living standards. But even when it succeeds in getting high levels of accumulation (which is the exception rather than the rule), it remains weak in its bargaining with the multinationals. As multinationals take over local firms, their proportion of local capital investment can rise to 40 or even 50 percent of the total, increasing their leverage over local decision making. But states in the poorer parts of the world do not have anything like the same leverage over multinationals, since the small size of their domestic economies mean they probably account for no more than 1 or 2 percent of the multinationals’ worldwide investments and sales. As Burke and Epstein have put it, ‘Even though foreign investment as a whole is of enormous importance to multinational corporations, it is generally the case that any particular investment in a developing country, with one or two exceptions, is relatively unimportant to them. As result, the bargaining power of political jurisdictions relative to multinational corporations is often very low’.  A huge gap begins to open up between what those who run the state have promised the mass of people and what they can deliver. High levels of repression and corruption become the norm rather than the exception. When the developmentalist strategy runs into problems, something else accompanies the repression – the hollowing out of the mass organisations that used to tie sections of the middle class to the state and, via them, some of the working class and peasantry. The oppressive state becomes a weak state and looks to foreign backing to reinforce its hold.
This happens as profitability problems in the advanced countries drive them to look for any opportunity, however limited, to grab surplus value from elsewhere. There is not much to be got from the poorest of the poor anywhere in the world, but what there is they are determined to get. Imperialism means at the top level that the rival capitalist powers argue vehemently with each other on how to satisfy their different interests. At a lower level, it means constraining the local ruling classes of the Third World to act as collectors of debt repayments for the Western banks, royalty payments for the multinationals and profits for Western investors as well as for their own domestic capitalists. Debt servicing alone transfers $300 billion a year from the ‘developing countries’ to the wealthy in the advanced world.  A website dedicated to defending US overseas investment boasts:
Most new overseas investments are paid for by profits made overseas. Foreign direct investment by US companies was only $86 billion in 1996 ... If you subtract out the reinvested earnings of foreign operations, the result was only $22 billion ... US companies’ overseas operations also generate income that returns to the US ... In 1995, this flow of income – defined as direct investment income, royalty and licence fees, and charges and services – back into the US amounted to $117 billion. 
There can be no end to the squeezing. The share of foreign investors in the total amount traded on the Brazilian stock exchange rose from 6.5 percent in 1991 to 29.4 percent in 1995,  and the share of new Mexican government debt held by non-residents grew from 8 percent at the end of 1990 to 55 percent at the end of 1993.  French and Spanish capital has been highly active in Latin America in this respect. The two big Spanish banks, the Bank of Bilbao and Vizcaya and the Bank of Santander, have bought up a very large proportion of the banking systems of many Latin American countries: ‘At present, the biggest Spanish institutions own almost one third of the assets of the 20 biggest foreign banks, which means that they alone exceed the share of the United States banks, which have historically been the leader in this sector in the region’. 
The base in banking has been used to branch out into other types of business, ‘investment banking, insurance and in particular participation in pension fund management’, and to acquire ‘minority shares in some non-financial enterprises, basically in sectors where other Spanish investors are very active (telecommunications and energy)’.  ‘Aggressive strategies adopted by Spanish banks, and also by the Hong Kong and Shanghai Banking Corporation, forced the foreign banks which had already been established in the region for a long time to take defensive measures ... Bankers Trust in Argentina and Lloyds Bank, Chase Manhattan and ABN-Anro in Brazil decided to buy local banks or shares in their equity’.  The Spanish expansion has been paralleled by the strategy of French firms like Suez and Vivendi of buying up public utilities.
This trend towards taking over the provision of services as a way of guaranteeing a fixed return on capital is, as François Chesnais has pointed out, a growing trend worldwide. The share of services in foreign investment which ‘represented only a quarter of the world stock of direct foreign investment in the 1960s amounted to about half by the end of the 1980s and made up 55 to 60 percent of new flows’.  Hence the attempts through the WTO to impose TRIPS and GATS measures (relating to payment for patents and to the opening up of public services to the multinationals).
The economies of the Third World are too small a part of the world system for these new forms of financial capitalism to play the same role in solving the problems of the capitalists in the advanced countries that the old forms did in Hobson’s time. Argentina’s economy, for instance, is no larger than the US state of Ohio’s, and even the biggest economy in Latin America, Brazil’s, is 20 percent smaller than California.  But such squeezing can force people to revolt. The governments of Bolivia and Peru have been shaken by revolts against the selling off of water and electricity supply. Bitterness against the foreign-owned banks and public utilities played a part in the near uprising that overthrew the De La Rua government in Argentina in December 2001. And the resistance can hurt individual companies. The Spanish banks and the French multinational utility companies Suez and Vivendi are now licking their wounds.
The suffering of the Third World and the revolts against that suffering have been very important in breeding the new wave of anti-capitalism that has been sweeping the world since Seattle. This in turn provided an important part of the impetus for the huge anti-war and anti-imperialist demonstrations at the time of the Iraq war. There is deepening consciousness of those involved in fighting capitalism in the West that they have to solidarise with those resisting oppression in the poorest parts of the world. This is immensely important in helping to undercut the racism and nationalism that has in the past so often bound workers in the advanced countries to their rulers.
At the same time, in the Third World and newly industrialising countries, the nationalism which was the ideology of the developmentalist section of local capital now becomes increasingly double edged. Those suffering from exploitation, repression and political corruption begin to turn it against the most hated local ruling class figures. They are seen as betraying the nationalist agenda, their attacks on the conditions of the mass of the population as a surrender to imperialist pressures. People who were led to believe the state represented the whole nation, rich and poor alike, in the past, now come to see its ignoring of the interests of the mass of people as proving it is a foreign body, a ‘new colonial’ or ‘semi-colonial’ state imposed on them from outside. Left nationalism emerges as a current that holds the present state has to be reformed – and can be reformed – so as to remove the foreign influences and re-establish it as a repository of the common, national, interest.
Left nationalism often encourages people to begin to fight against sections of the local ruling class. But its belief that there is some common ‘national’ interest binding exploiters and exploited together also opens it up to manipulation by the same local capitalist politicians who are working hand in hand with the great capitalist powers. They try to blame policies which suit their interests – like privatisation of utilities or repayment of debt – simply on the pressure of big brother outside. Unfortunately they can often expect some representatives of the popular opposition to such policies to go along with this. So it is common in the Middle East to blame the toleration of the local capitalist classes for Israeli policies in Palestine purely on US pressure (or on ‘non-Islamic’ behaviour), or in Latin America to see the coups in Chile in 1973 and Argentina in 1976 (or, for that matter, the attempted coup in Venezuela in 2002) as a result just of US plots against ‘national independence’ rather than as driven by the determination of the local ruling class to crush any challenge to its position, knowing that the US ruling class would back it. Yet almost all the of the wars of the US against insurgent movements since Vietnam have been proxy wars, in which it has been able to rely on local ruling classes to wage on their own behalf as well as on its. This was true in Central America for much of the 1980s, when it trained and armed the forces of the right wing governments in Guatemala, El Salvador and Honduras, and the Contras in Nicaragua, with the deployment of only a handful of its own troops as ‘advisers’ to them. It has more recently been the case with its massive military aid to the governments of Colombia and its encouragement of the coup attempt in Venezuela. 
Talk of the state as ‘semi-colonial’ or ‘neo-colonial’ reinforces such a misperception. Imperialism is an enemy anywhere. But most of the time the immediate agent of exploitation and oppression is the local ruling class and the national state. These collaborate with one or other of the dominant imperialisms and impose the horrors of the world system on the local population. But they do so in the interests of the local ruling class as well as its imperial ally, not because the local rich have temporarily forgotten some ‘national interest’ they share with those they exploit.
The failure to see this means that left nationalism, as well as providing a certain focus for the bitterness of the mass of workers, peasants and the lower middle classes, also tends to direct this bitterness towards reformist solutions. At the domestic level, this means fighting for more nationalist as against less nationalist solutions within the framework of the existing capitalist state. A current example of this arises in the struggle against the Free Trade Area of the Americas. Instead of seeking to give an anti-capitalist impetus to this, the non-revolutionary left in Latin America is counterposing Mercosur as some sort of alternative to it. But Mercosur is an attempt by sections of Brazilian big business to hegemonise the other economies of the region and strengthen investment and trade links with the European Union, and does not rule out negotiations over terms of access to the Free Trade Area of the Americas.
At the international level left nationalism means focusing upon issues like the terms of trade or the preference for one trading bloc over another, as if simply improving the terms on which national capitalists sell their commodities on the world market will solve the problems of the mass of people they exploit and oppress. This goes hand in hand with the view that the population of the advanced world as a whole exploit the population of the Third World as a whole, either through ‘unequal exchange’ or through ‘super-profits’ made from foreign investment in the Third World. In doing so, it deflects attention from the central dynamics of the world system, which depend to a very large extent on what happens in the most important locations of accumulation, foreign investment and trade – the established industrialised countries, a small number of the newly industrialising countries and, to an increasing extent, the Chinese coastal region. And it undermines the development of real international solidarity.
When Lenin wrote, he called for the workers’ movement in the West to see anti-imperialist movements in the colonial world as its ally, but argued strongly against revolutionary socialists in the colonies giving a ‘communist colouring’ to the ‘bourgeois-democratic liberation trends in the backward countries’.  The argument needs to be repeated and reinforced today. ‘Left nationalist’ ideas in the ‘developing’ and ‘newly industrialising’ countries can spur people to confront local ruling classes that are tied to imperialism and give rise to near-revolutionary upsurges. But they also, inevitably, misdirect those involved in those upsurges in a reformist direction. This does not matter much for those of us who are active in the West building international activity against imperialism and war. We are on the side of Third World movements against imperialism, however confused their ideas may be. But it is of fundamental importance for Third World revolutionaries. If it was necessary to be critical of such ideas in Lenin’s day, when real colonial oppression was directed against sections of the bourgeoisie and petty bourgeoisie in vast areas of the world, it is a hundred times more important today, when the bourgeoisie proper is a fully fledged partner, even if a junior one, of the most powerful sections of world capitalism. It is necessary to be part of the upsurges, but to build independently within them.
US imperialism looked immensely strong in the aftermath of the Iraq war. But none of its central problems have been solved.
Its victory will frighten other governments in the Third World to jump to its orders. It will be that much easier for the IMF to impose its will on countries whose rulers might otherwise be tempted to cave in to opposition from their own people. That is why it was completely wrong for Bernard Cassen of ATTAC France to counterpose opposition to war to opposition to the measures that harm the world’s poor.
But the increased exploitation and impoverishment of much of the Third World will not overcome the pressures on profitability and the competitiveness of US capitalism. The fundamental fact that permitted decolonisation without economic disaster for the advanced capitalisms half a century ago remains unchanged. Most investment from advanced capitalist countries is directed to other advanced capitalist countries and the small minority of newly industrialised countries for the simple reason that that is where most profit is to be obtained. Most of the Third World, including nearly all of Africa and much of Latin America outside Brazil and Mexico, is of diminishing economic importance for the dynamic of the system as a whole. Profits and interest payments from such regions are the lettering on the icing on the cake for world capital, not even a slice of the cake itself.
Oil is the strategic commodity of the 21st century, and the US has shown by two full-scale wars in a dozen years how keen it is to be in control of it. As I have argued earlier, what matters is not primarily the profitability of its oil companies – giants like Microsoft, Boeing or General Motors are not keen to take the risks inherent in war just for the sake of Exxon. The real concern is controlling the price and availability of oil to provide a stable and beneficial framework, inside the US as well as outside, for profit making and accumulation by US capitalism as a whole. It is also to provide enhanced power when it comes to bargaining with the other advanced capitalist states.
But this cannot resolve the fundamental issue – long term downward pressure on profit rates which had been exacerbated by vast unprofitable investments during the speculative boom at the end of the 1990s.  Control of Iraqi oil may be able to help prop up the present precarious domination the US exercises over the world financial system (although, as I write, the dollar is falling) and, with that, allow the US to continue consuming more than it produces. But it cannot add decisively to the proportion of worldwide surplus value controlled by US capitalists. Experts believe it may take up to five years before Iraqi oil comes to flow in sufficient quantities to pay the costs of rebuilding what US bombs and tanks have knocked down. And even then there will be difficult choices to be made. Increasing output on such a scale as to lower the international price of oil substantially, so helping the US capitalist class as a whole may lead to a collapse of the oil revenues needed to pay the construction companies and keep up oil company profits.
Apologists for the war tried to use such calculations to claim the war was not about oil.  Their argument was wrong, because oil is an important weapon in the struggle for global hegemony. But some of their calculations were right. Control of oil will not in itself make the tens of billions of dollars spent on the war into a profitable investment for US capitalism.  It will certainly not cover the costs of a long term colonial occupation of Iraq – especially if instability as a result of the occupation leads to social upheavals and military intervention elsewhere in the region. Yet the very nature of the US victory in Iraq is likely to make long term military occupation inevitable.
The determination of the Bush gang to hammer home the US’s global military strategy by going to war without allies (apart from Britain) ensured they blitzkrieged their way to Baghdad without establishing the prerequisites for the quick establishment of a stable new pro-US regime. In the aftermath they are faced with the choice between staying for a very long period of time or putting in Iraqi clients who may not be able to keep control of the country as a whole – and who may eventually be tempted to use the oil revenues for their own ends (as the Ba’athists did after the US helped bring them to power in 1963 and 1968).
This choice was causing splits within the Bush administration’s ‘unilateralist’ war camp the very day after the conquest of Baghdad. On the one side stood ‘liberal imperialists’, with their dream of overturning the whole Middle East and running it through supposedly stable capitalist democracies which could provide long term legitimacy for the protection of imperial interests – an Arab version of the settlement imposed in Central America at the end of the 1980s. On the other were ‘realist imperialists’, eager like Kissinger before them to do deals with any dictator in order to exercise control at minimal cost to the US itself and without US troops getting involved in long term commitments. And in the background is the possibility of a deal with Europe, Russia and China for ‘multilateral’ or ‘United Nations’ efforts to bring stability. But such a deal would eliminate direct US control and cancel out some of the gains made by it in the war.
The probability is that the US will fall between all three stalls. It will be compelled to stay in occupation for a long time, logging up the budgetary costs at home and stoking the fires of resistance throughout the Middle East. It will play with local politicians who, lacking any real base, would only be able to stabilise their rule by resorting to the dictatorial methods carried to such heights by Saddam during and after his period as a US protégé. And it will find it is having to do deals with its international rivals so as to keep the damage to its wider interests to a minimum.
It is difficult to see how it could be otherwise. The European powers abandoned colonialism in the 1950s and 1960s not out of benevolence, but because it did not pay economically in the face of insurgent nationalist movements and changes in the structure of the world economy. European empires had been self financing at the high point of the old imperialism a century ago, with India and Ireland always paying a surplus into the British Treasury – imperial possessions were a drain on budgets by the 1950s. A decade later the US found the costs of trying to hold on to Vietnam through massive physical occupation far too excessive. This was why the Nixon administration eventually retreated from waging an all-out land war to a policy of trying to subdue the country by air strikes – and withdrew from the country when that did not work.
If the major sources of surplus value in the world are in the advanced countries, then the only real way to begin seriously to defray the costs of a high level of military expenditure would be to do what Germany did during the Second World War, and to establish occupation regimes in advanced countries which squeezed them dry. However arrogant they feel after Iraq, the apostles of the New American Century are not yet ready to do that – and mainstream US capital would put up serious opposition if they tried.
The US state cannot retreat from its occupation of Iraq, or even from its wider ‘unilateralist’ posturing against France, Germany and Russia. To do so would be to abandon the gains from its military gamble at the moment it seems to be winning, and to risk a cumulative loss of influence over other states and other capitalisms. Under the leadership of Cheney, Rumsfeld, Bush, Perle, Wolfowitz and the rest, it has set out on a journey from which it cannot easily turn back. Having raised the level of military expenditure, it will try to get a return on its investment by further military actions designed to increase still more its leverage over the other major players in the international system. But the outcome will never be satisfactory for US capitalism. It cannot make enough out of imperialism in crude cash terms to compensate for its expenditures in the way that the European capitalisms did a century ago. Nor can it rely, as it could during the Second World War and the early years of the Cold War, on military spending allowing it to prosper with a prolonged boom. The level of spending required to push the economy back into such a boom would, even more than in the Reagan years, damage US market competitiveness. As John K Galbraith has pointed out, the US dependence on huge imports means its position ‘much more closely resembles the great powers in Europe in 1914 that that of America in 1939 ... To finance either a major military or a major domestic economic effort or both on world capital markets could very well unhinge the dollar and shift the balance of financial power – presumably to Europe’.  But it cannot abandon its military commitments without damaging the hegemony which its multinational corporations need to protect their interests in an increasingly tumultuous world.
For these reasons, the US triumphant remains the US weak. The splits with the other powers will continue, even though they will alternate between defiant gestures and grovelling actions. There will also be recurrent splits within the US political establishment and ruling class as the Bush magic fails to transmute military self glorification into the humdrum business of making bigger profits.
None of this will make the world less barbarous. Those who have tasted blood will want more, and we can expect further aggressive wars. But it will make it easier to build the forces of resistance to them worldwide. They won a war in which they enjoyed a 30 or 40 to one military superiority. We were part of the biggest anti-imperialist mobilisations that the world has ever seen. And that experience will be there, as underlying weakness shows.
1. M. Hardt, The Guardian, 18 December 2002.
2. B. Cassen, On the Attack, New Left Review, January/February 2003, pp.52-53.
3. V.I. Lenin, Imperialism: The Highest Stage of Capitalism (London 1933), pp.10-11.
4. Ibid., p.108.
5. Ibid., pp.20-21.
6. Ibid., pp.24-25.
7. Ibid., p.26.
8. Ibid., p.60.
9. Ibid., pp.68-69.
10. Ibid., p.69.
11. K. Kautsky, quoted ibid., section 7: Imperialism, as a Special Stage of Capitalism.
13. N.I. Bukharin, Imperialism and World Economy, ch 10: Reproduction of the Processes of Concentration and Centralisation of Capital on a World Scale, available on www.marxists.org
14. His major work, Imperialism and World Economy, did not appear in any English edition between the 1920s and 1970, while the first English edition of his subsequent Economics of the Transformation Period (with marginal notes by Lenin) was not published until 50 years after it was written. See Economics of the Transformation Period (New York 1971).
15. Figures from H. Feis, Europe: The World’s Banker, 1879-1914, quoted in M. Kidron, Imperialism: The Highest Stage but One, in International Socialism 9 (first series), p.18.
16. The argument and the figures for this are provided by M. Barratt Brown, The Economics of Imperialism (Harmondsworth 1974), p.195.
17. For a longer discussion of the economic connections between the two changes, see C. Harman, Explaining the Crisis (London 1984), pp.52-53.
18. C. Harman, A People’s History of the World (London 1999), p.397.
19. J.A. Hobson, Imperialism: A Study (New York 1902), www.econlib.org
20. Ibid., part 1, ch 4.
21. M. Salvadori, Karl Kautsky and the Socialist Revolution, 1880-1938 (London, 1979), p.171.
22. Ibid., p.172.
24. All quotes are from K. Kautsky, Imperialism and the War, International Socialist Review (November 1914), available on www.marxists.org
25. See Kautsky’s review of Hilferding’s Finance Capital: K. Kautsky, Finance-Capital and Crises, Social Democrat, London, vol 15, 1911, available on www.marxists.org
26. R. Hilferding, Finance Capital (London 1981), p.225.
27. Ibid., p.225.
28. Ibid., p.304.
29. Ibid., p.325.
30. Ibid., p.226.
31. K. Kautsky, Finance-Capital and Crises, op. cit.
32. R. Hilferding, op. cit., p.294.
33. W. Smaldone, Rudolf Hilferding: The Tragedy of a German Social Democrat (Illinois 1996).
34. V.I. Lenin, introduction to Imperialism: The Highest Stage of Capitalism, op. cit.
35. Ibid., ch 3, Finance Capital and the Financial Oligarchy.
37. T. Cliff, The Nature of Stalinist Russia, in T. Cliff, Marxist Theory after Trotsky (London, 2003), pp.116-120.
38. Ibid., p.117.
39. N.I. Bukharin, Imperialism and World Economy, op. cit., p.114.
40. Ibid., p.118.
41. Ibid., p.104.
42. N.I. Bukharin, Economics of the Transformation Period (New York 1971), p.36.
43. N.I. Bukharin, Imperialism and World Economy, op. cit., pp.124-127.
44. N.I. Bukharin, Address to the Fourth Congress of the Comintern, in Bulletin of Fourth Congress, vol.1, Moscow, 24 November 1922, p.7.
45. V-I. Lenin, The Discussion On Self-Determination Summed Up, Collected Works (Moscow 1964), vol.22, section 10: The Irish Rebellion of 1916.
46. For the impact in China see, for instance, Chesnais’ magnificent The Chinese Labor Movement.
47. V.I. Lenin, Imperialism: The Highest Stage of Capitalism, op. cit., ch 4, Export of Capital.
48. Leon Trotsky spelt out the argument about industrial development in 1928: ‘Capitalism ... equalises the economic and cultural levels of the most advanced and most backward countries. Without this main process, it would be impossible to conceive ... the diminishing gap between India and Britain’ (Leon Trotsky, The Third International After Lenin (New York 1957), p.209).
49. J. Degras (ed.), The Comintern, 1939-43, Documents, vol.2 (London 1971), p.527.
50. Ibid., p.528.
51. Ibid., p.529.
52. Ibid., p.534.
53. R. Debray, Problems of Revolutionary Strategy in Latin America, New Left Review 45, September-October 1967.
54. Michael Barratt Brown concludes, after a detailed examination of the evidence, ‘The important point in that the underdeveloped lands gained in volume terms and in unit values from 1900 right up to 1930’ (M. Barratt Brown, The Economics of Imperialism (Harmondsworth 1974), p.248).
55. I. Roxborough, Theories of Underdevelopment (London 1979), pp.27-32.
56. Leon Trotsky showed some confusion over these matters in an article he wrote about Latin America while in exile in Mexico. He refers to Brazil under the Vargas government as both ‘semi-fascist’ and a ‘semi-colony’. See L. Trotsky, Escritos Latinoamericanos (Buenos Aires 1999).
57. V.I. Lenin, Imperialism: The Highest Stage of Capitalism, op. cit., section 7, Imperialism, as a Special Stage of Capitalism.
58. C. Harman, Explaining the Crisis (London 1984), p.71.
59. For an account of these tensions, see G. Kolko, The Politics of War (New York 1968).
60. F. Sternberg, Capitalism and Socialism on Trial (London 1950), p.538.
61. Figures given in O.G. Wichel, Survey of Current Business (August 1980), p.18.
62. For details, see C. Harman, Class Struggles in Eastern Europe 1945-83 (London, 1988), pp.42-49.
63. Calculation by Alan Winters, contained in Financial Times, 16 November 1987.
64. New York Times, 5 July 1950, quoted in T.N. Vance, The Permanent War Economy, New International, January-February 1951.
65. For graphs showing levels of US arms expenditure, see www.albany.edu
66. See various calculations given in C Harman, Explaining the Crisis, op. cit., p.80.
67. For an explanation of this in terms of Marxist theory, see ibid., pp.81-82.
68. M. Kidron, Imperialism: The Highest Stage but One, in International Socialism, first series, no.9, 1962, available on www.marxists.de
69. J. Stopford and S. Strange, Rival States, Rival Firms (Cambridge, 1991), p.16.
70. All figures are from M.J. Twomey, Patterns of Foreign Investment, in J.H. Coastsworth and A.M. Taylor, Latin America and the World Economy since 1800, p.188.
71. As Roxborough points out, Gunder Frank ‘never claimed to be a Marxist’ (I. Roxborough, op. cit., p.49).
72. P. Baran, The Political Economy of Growth (Harmondsworth 1973), p.399.
73. Ibid., p.416.
74. A. Gunder Frank, Capitalism and Underdevelopment in Latin America (Harmondsworth 1971), pp.35-36.
75. Despite Baran’s preparedness to criticise certain features of Stalin’s rule, he quoted Stalin himself favourably and repeated Stalinist lies about the USSR’s agricultural performance and living standards. See, for example, P. Baran, op. cit., p.441. Contrast Baran’s treatment with the critical, scientific assessment of Soviet figures to be found in Tony Cliff’s writings of the 1940s and 1950s, for instance The Nature of Stalinist Russia (written in 1947), in T. Cliff, Marxist Theory after Trotsky, op. cit., pp.116-120.
76. For discussions of the role Britain played in Argentina see, for instance, R. Miller, Britain and Argentina in the Nineteenth Century (New York 1993); R. Gravil, The Anglo-Argentine Connection 1900-1939 (Boulder and London 1985); R. Hara, Landowning Bourgeoisie or Business Bourgeoisie, Journal of Latin American Studies, 34 (August 2002), pp.587-623; D.C.M. Platt and G. di Tella (eds.), Argentina, Australia and Canada: Studies in Comparative Development (London 1985); M.A. Garcia, Peronismo: desarrollo económico y lucha de clases en Argentina (Espluges de Llobregat, 1980) (the chapter on Peronism of this important work is available on the webpage humano.ya.com).
77. M. Kidron, Memories of development, New Society, 4 March 1971, reprinted in M. Kidron, Capitalism and Theory (London 1974), p.173.
78. See for instance E. Mandel, Europe Versus America (London 1970).
79. According to OECD calculations in the late 1970s.
80. Financial Times, World Banking Survey, 22 May 1986.
82. Financial Times, International Capital Markets Survey, 21 April 1987.
83. J. Burke and G. Epstein, Threat Effects of the Internationalisation of Production, Political Economy Research Institute working paper series, no.15 (University of Massachusetts, 2001).
84. UNCTAD, Overview, World Investment Report 2001, table 1.
85. J. Burke and G. Epstein, op. cit.
87. Figures from US Bureau of Economic Analysis website.
88. H. Skytta, The European Union and World Trade, Speakers Bureau, November 2002.
89. J. Burke and G. Epstein, op. cit.
90. Table based on figures in P. Hirst and G. Thompson, Globalisation in Question (London 1996), pp.91-94.
91. W. Ruigrok and R. van Tulder, The Logic of International Restructuring (London 1995), p.156.
92. Figures given in www.jil.go.jp
93. W. Ruigrok and R. van Tulder, op. cit., pp.157-158.
94. M.F. Hijtjes, R. Olie and U. Glunk, Board Internationalisation and the Multinational Company, (Amsterdam 2001).
95. See the Microsoft and Exxon-Mobil corporate websites.
96. Interview with Louis Schweitzer on www.renault.com
97. Estimate from Global Anti-Counterfeiting Group, in Financial Times, 30 April 2002.
98. For an account of the importance of this for US corporations’ exports, see R. Brenner, The Boom and the Bubble (London, 2002), pp.59-64.
99. W. Ruigrok and R. van Tulder, op. cit., p.219.
100. D. Bryan, Global Accumulation and Accounting for National Economic Identity, Review of Radical Political Economy 33 (2001), pp.57-77.
101. Quoted in D. Halberstam, The Best and the Brightest (London 1970), p.78.
102. For details, see C. Harman, The Fire Last Time (London 1987).
103. See the graphs available on www.albany.edu/~fordham/
104. This process is well described in the first part of P. Gowan, The Global Gamble (London and New York 1999), pp.3-240. But he has tendency to see the whole thing as planned by US governments, rather than as representing a response by them to unforeseen changes in the world system.
105. See, for instance, H. Kissinger, Diplomacy (New York 1994), and Z. Brzezinski, The Geostrategic Triangle (Washington 2001).
106. J. Perlez, Blunt Reason For Enlarging NATO: Curbs On Germany, New York Times, 7 December 1997.
107. H. Kissinger, op. cit., p.809.
108. Ibid., p.813.
109. Ibid., p.821.
110. Ibid., p.116.
111. Z. Brzezinski, op. cit., p.4.
112. Ibid., p.29.
113. Ibid., p.31.
114. Ibid., pviii.
115. On the continuity of this group and the development their approach in the 1990s, see A. Callinicos, The Grand Strategy of the American Empire, International Socialism 97 (Winter 2002).
116. Weekly Standard, 7 September 1997.
117. Project for the New American Century, Statement of Principle, 7 June 1997.
118. Project for the New American Century, letter of 29 May 1998.
119. The proportion of Democrats voting for increased arms spending doubled between 1993 and 1998, although it remained lower than for Republicans: see graph on www.albany.edu/~fordham/
120. See the graph for net lending by foreigners to US in Financial Times, 19 February 2003.
121. M. Wolf, Financial Times, 19 February 2003.
123. This available on scienceforpeace.sa.utoronto.ca
124. A.J. Chien, Iraq: Is It About Oil?, Znet, 13 October 2002.
125. Unedited transcript, Middle East Policy Council, Thirty-First Capitol Hill Conference on US Middle East Policy, In the Wake of War: Geo-strategy, Terrorism, Oil Markets, and Domestic Politics.
126. M. Wolf, Financial Times, 19 February 2003.
127. United Nations Conference on Trade and Development, World Investment Report 2001, p.10.
128. J. Burke and G. Epstein, op. cit., p.5.
129. European Union, Questions Related to Our Bi-regional Partnership with Latin America and the Caribbean, on www.delbnol.ced.eu.int
130. Quote in Financial Times, 3 April 2003.
131. A. Moravcsik, Financial Times, 3 April 2003.
133. G. Monbiot, The Bottom Dollar, The Guardian, 22 April 2003.
134. Financial Times, 1 December 2002.
135. P. Rogers, The Guardian, 13 January 2001.
136. Report by the Techint group of companies, June 2001, www.techintgroup.com
137. Financial Times, 13 July 1990.
138. J. Burke and G. Epstein, op. cit., p.2.
139. Figure given by Jubilee Research in HIPC: How the Poor are Financing the Rich. A report from Jubilee Research at the New Economics Foundation by Romilly Greenhill and Ann Pettifor, April 2002, on www.jubilee2000uk.org
140. Trade Makes US Strong, www.ustrade.org
141. M.C. Penido and D. Magalhaes Prates, Financial Openness: The Experience of Argentina, Brazil and Mexico, CEPAL Review 70 (April 2000), p.61.
142. Ibid., p.60.
143. A. Calderon and R. Casilda, The Spanish Banks Strategy in Latin America, CEPAL Review 70 (April 2000), pp.78-79.
144. Ibid., p.79.
145. M.C. Penido and D. Magalhaes Prates, op. cit., p.63.
146. F. Chesnais, La Mondialisation du Capital (Paris 1997), p.83.
147. Figures for relative sizes of GDPs of Latin American countries and US states given in IMF Staff Country Report 99/101, September 1999.
148. In the case of the Venezuelan stoppage of 2002-2003, a key section of the Venezuelan ruling class were so carried away with their hatred for the Chávez regime that they proceeded in a way which went against the immediately tactical interests of the US. The last thing it wanted was a cutback in supplies of Venezuelan oil (its third biggest source of oil imports) just as it was preparing for war against Iraq. This misinterpretation of US wishes was one reason that the attempt to remove Chávez failed, with pro-opposition newspaper columnists bemoaning the lack of greater US support from the summer of 2002 onwards.
149. Theses, Resolutions and Manifestos of the First Four Congresses of the Communist International (London 1980), p.80.
150. For details of the downward trend in profit rates, see R. Brenner, The Boom and the Bubble, op. cit., table 1.2, and figures 1.1, 1.2, 1.3, 1.4, 2.9, 2.10, 2.11, 10.1, 11.1. His evidence for the downward trend is all the more convincing given that he mistakenly rejects the classic Marxist ‘law of the tendency of the rate of profit to fall’.
151. For a serious attempt at this, see J. Tatom, Iraqi Oil is not America’s Objective, Financial Times, 14 February 2003.
152. At least one pro-capitalist economist argued well before the recent war that if the military and other costs of maintaining US influence in the Middle East were taken into account, the cost of Middle East oil to the US was ‘between two and five times higher than the spot price’. See N.A. Bailey, Venezuela and the United States, in L.W. Goodman et al. (eds.), Lessons of the Venezuelan Experience (Washington 1995), pp.391-392.
153. J.K. Galbraith, Thoughts on the War Economy, on utip.gov.utexas.edu
Last updated on 4.3.2012