N.I. Bukharin: Imperialism and World Economy


Chapter 7: World Movement of Capital, and Change in the Economic Forms of International Connections


The international movement of capital may be looked upon from the point of view of the country that exports, or from the point of view of the country that imports capital.

The export of capital from a country presupposes an overproduction of capital in that country, an overaccumulation of capital. The overproduction would be absolute were the increment of capital to yield nothing from the capitalist point of view, namely, if capital, C, having increased to C+ΔC, were to yield as much profit as it would without the increment ΔC.1) For the export of capital, however, it is not necessary that overproduction should have reached that limit. "If capital is sent to foreign countries, it is not done because there is absolutely no employment to be had for it at home. It is done because it can be employed at a higher rate of profit in a foreign country."2) It is therefore easy to understand why we observe capital export almost throughout the history of the development of capitalism. However, it is only in the last decades that capital export has acquired an extraordinary significance, the like of which it never had before. The specific weight of this form of international economic intercourse has so increased, that to a certain degree we may even speak of a new type of economic interrelationship between countries.

Two sets of causes have been and are operating here. In the first place, the accumulation of capital proceeds with an unusually rapid tempo, due to large-scale capitalist production accompanied by incessant technical progress which makes gigantic strides and increases the productive power of labour, and to the unusual increase in the means of transportation and the perfection of means of circulation in general, which also hastens the turn-over of capital. The volumes of capital that seek employment have reached unheard of dimensions. On the other hand, the cartels and trusts, as the modern organisation of capital, tend to put certain limits to the employment of capital by fixing the volume of production. As to the non-trustified sections of industry, it becomes ever more unprofitable to invest capital in them. For monopoly organisations can overcome the tendency towards lowering the rate of profit by receiving monopoly superprofits at the expense of the non-trustified industries. Out of the surplus value created every year, one portion, that which has been created in the nontrustified branches of industry, is being transferred to the coowners of capitalist monopolies, whereas the share of the outsiders continually decreases. Thus the entire process drives capital beyond the frontiers of the country.

In the second place, high tariffs put tremendous obstacles in the way of commodities seeking to enter a foreign country. Mass production and mass overproduction make the growth of foreign trade necessary, but foreign trade meets with a barrier in the form of high tariffs. It is true that foreign trade keeps on developing, foreign sales grow, but this is taking place notwithstanding the difficulties and in spite of them. This does not mean, however, that the tariffs do not make themselves felt. Their influence is, first of all, expressed in the rate of profit. Tariff barriers, making the export of commodities very difficult, do not interfere in any way with the export of capital. Obviously, the higher the wave of duties, the larger, other conditions being equal, is the flight of capital from its home country.

The protection of industry [!] does not stimulate foreigners to establish a factory inside the tariff frontiers. Only when the foreign manufacturer and importer has lost part or all of his sales, does a moment arrive when he resorts to the establishment of factories in foreign countries-an undertaking always connected with great expense and risks. Prohibitive tariffs bringing about such consequences are contained in the McKinley and Dingley Bills of the U. S. (1890 and i897); in the Russian legislation of 1877, 1881, 1885, and 1891; also in the French laws of 1881 and 1892.3)

Tariff duties influence capital export also in another way. They themselves become an attraction for a capitalist. In so far as capital has been imported and begins to function in a "foreign" country as capital, it receives as much "protection" from the tariff as the capital of native businessmen.4) This in turn causes a tremendous increase in capital export.

Capital export, however, must not be taken per se, without any connection with other highly important economic and political phenomena accompanying it. Let us glance at a few of the most significant of those phenomena.

In case of state or municipal loans, the creditor country receives more than interest on the sums advanced. The transaction is usually accompanied by a number of stipulations, in the first place that which imposes upon the borrowing country the duty to place orders with the creditor country (purchase of arms, ammunition, dreadnaughts, railroad equipment, etc.). and the duty to grant concessions for the construction of railways, tramways, telegraph and telephone lines, harbours, exploitation of mines, timberlands, etc. Such transactions are either included in the loan contract as one of its conditions, or they are an inevitable consequence of the entire "course of events." As an example we quote here a description of one of the concessions granted by the Persian government to the (Russian) Discount and Loan Bank of Persia for the construction of the railway line Julfa-Tabriz (1913):

The line gage is Russian. The time of concession is 75 years. The Persian government has the option of redeeming the railroad after the expiration of 35 years; in this case it pays back all the capital that has been spent plus 5 per cent interest, provided the concession has yielded so much. The concession grants the bank the right to exploit coal and oil deposits within 6o versts on either side of the railroad, and also to construct branch lines leading to the mines. The bank also obtains the preference right to construct the railway line Tabriz-Kazoin, and the exclusive right to construct a turnpike between the same points within eight years, also the right to exploit coal and oil deposits within 6o versts on either side of the road. After deducting from the profits of the railroad in favour of the concessionaire 7 per cent on all capital spent on its construction, the remaining net income is divided equally between the concessionaire and the Persian government. As to the oil and coal mines, the concessionaire pays to the Persian government 5 per cent of the net profits obtained from them. All the concessionaire's enterprises are free of taxes and other duties for all times.5)

Among the "measures" intended to restrict foreign capital we find the right of the governmental power to prohibit the quotation of foreign loans and securities in general. Thus by a special law dated February 6, 1880, the French Ministry of Finance was empowered to prohibit the traffic in foreign securities, also to refuse foreign loans to be quoted in the French stock exchanges (in 1909 the French government refused to grant a loan to Argentina because in 1908 the latter had placed an order with Krupp and not with Schneider in Creuzot; in 1909, the same government refused to grant a loan to Bulgaria for lack of sufficient guarantees-the loan was secured by an Austro-German bank syndicate; for four decades German securities were not allowed to be quoted in France; in September, 1910, a loan was refused to Hungary; a loan was granted Serbia under the condition of placing orders with Schneider; after the Revolution, the Russian Government ordered cruisers to be constructed in France in return for loans, etc.).6)

Aside from orders and concessions, definite advantages in regard to trade treaties may be secured together with the loan contract. (See, for instance, the RussoFrench trade treaty of September 16-29, 1905, which was prolonged to 1917; the treaty of December 2, 1908, between Sweden and France; the treaty of 1908 between Sweden and Denmark; the tariff treaty of August 19, 1911, between France and Japan; compare also the refusal of France to allow the shares of the United States Steel Corporation to be quoted on the Paris exchange in retaliation for duties imposed on wine, silk, and automobiles by the Payne Tariff of America in 1909.7)

When capital is exported by private persons or by industrial and banking companies, this again increases the export of commodities from the motherland, for the enterprises thus created abroad represent a certain demand by themselves, and besides, they widen by their very activities the market that is mostly dependent upon them. One must bear in mind that "foreign" enterprises are, as we have seen in the first section, financed by the largest banks or bank trusts and are possessed of a, colossal economic power.8) Here is one example. Onethird of the land in the German colony of Cameroon is private property, but a very considerable part of this land belongs to two companies only: the South Cameroon Company holds 7,700,000 hectares, the Southwestern Cameroon Company, 8,800,000 hectares, an area six times the size of the kingdom of Saxony (1,500,000 hectares) and larger than Bavaria (7,600,000 hectares).9) Wherever the capitalists do not possess territory, they possess other forms of financial power. In constructing the Bagdad railroad, the Deutsche Bank not only uses German material in Turkey, but it also creates a whole network of market relations, making it easy for German goods to penetrate Turkey. Thus capital export creates favourable conditions also for the industry of its home country.

Capital export unusually sharpens the relations between the great powers. Already the struggle for opportunities to invest capital, i.e., the struggle for concessions, etc., is always reinforced by military pressure. A government or a "country" subjected to the manipulations of the financiers of the great powers ordinarily yields to that party which appears to be the strongest militarily. When some pacifists (particularly their English brand) try to influence the ruling classes by logical reasons, when they try to persuade them to disarm on the ground that commodities are supposed to find a market independently of the number of dreadnaughts, they will be cruelly disappointed. For the "peaceful" policies that were pursued before the war, and will be pursued after it, were always and everywhere reinforced by the threats of military power. To use a correct expression of the Englishman Brailsford, "the continuous war of steel and gold never ceases for a minute even in peace time." More graphically is this atmosphere of obdurate competition described by an eminent theoretician of German imperialism, Sartorius:

The growing industrialisation of the world is a fact to be reckoned with by every policy of world economy [jede Weltwirtschaftspolitik]. ...It is given to nobody to stop the course of development, and if a state would prohibit its subjects from establishing enterprises in other countries, this would only bring advantages to the businessmen of a third state. It is therefore best of all to have your finger in the pie in due time [die Hand rechtzeitig im Spiele haben].... The economic world does not stand still. One change precipitates another. There is always an opportunity for a strong nation to mix in. Here, too, the slogan "Carpe diem" is to be applied.10)

If the pressure of military power yields concessions and various privileges, the further functioning of capital abroad also demands specific "protection." Formerly the centre of gravity lay in commodity export, whereby the exporters risked only their goods, i.e., their circulating capital. Now the situation is totally different. What we have in a "foreign" country are large sums of money, particularly of fixed capital, invested in gigantic constructions: railroads stretching over thousands of miles, very costly electric plants, large plantations, etc., etc. The capitalists of the exporting country are materially interested in "guarding" their wealth. They are therefore ready to go the limit in order that they may retain the freedom of further accumulation.11)

Where the exploited country is weak also militarily, "peaceful penetration" of capital very quickly turns into "peaceful occupation" or division, or else it entails an armed struggle between countries competing for capital investment spheres. The fate of Turkey in the light of Franco-German competition is very typical in this respect. We wish to quote, in illustration, the writings of one French and one German imperialist published long before the war. "The Turkish Empire has been overrun by German hordes" (hordes germaniques) "of traders and salesmen," says the Frenchman.

Thus the network of German banks gradually spreads over the entire Ottoman Empire, supporting industry, seizing transport facilities, competing with foreign financial institutions...in brief, those banks, with powerful political support [italics ours - N.B.] strive financially to establish German influence over the entire Levant.12)

Thus a French bourgeois expresses indignation over the "German hordes." But a German bourgeois is indignant in the very same way:

The French are systematically striving to make Turkey their slave debtor; up to the present they have advanced her two billion two hundred million francs. Of this sum, one-half billion was invested in railroads alone, France having constructed more railroads than any other nation. The most important Turkish harbours, like Constantinople, Salonika, Smyrna, Beirut, are in French hands. The lighthouses along the Turkish coast are in French hands. Last but not least, the most important bank of Turkey, the Ottoman Bank, operates in Constantinople entirely under French influence. Who then can escape the political consequences of such a powerful pressure of capital! French diplomacy very intensively utilises its privileged position in Turkey, particularly in recent times!13)

Obviously, capital export in its present volume and importance is caused by the peculiarities of economic development in recent years. Looked upon from the point of view of the spreading of the organisational forms of modern capital, capitalexport is nothing but a seizure and a monopolisation of new spheres of capital investment by the monopoly enterprises of a great nation or-taking the process as a whole-by the organised "national" industry, by "national" finance capital. Capital export is the most convenient method for the economic policy of finance groups; it subjugates new territories with the greatest ease. This is why the sharpening of competition between various states is most salient here. The internationalisation of economic life here, too, makes it necessary to settle controversial questions by fire and sword.


1) Capital, Vol. III, p. 295.

2) Ibid., p. 300.

3) Sartorius von Waltershausen, l.c., p. 179.

4) Ibid., p. 180.

5) M. P. Pavlovich: The Great Railway and Maritime Lines of the Future, St. Petersburg, 1913, p. 143.

6) S. Schilder, l.c., p. 343 ff.

7) Ibid., p. 353

8) Pavlovich cites a number of examples of how the banks act in the realm of railway construction; they actually allow entire countries to be swallowed by capitalist sharks.

9) Compare with a highly curious book entitled, Deutsche Colonialpolitik, 2nd, part, Staatsstreich doer Reformen. The author hides under the pseudonym Ein Ausland-Deutscher, Zurich, 1905, p. 1318.

10) Sartorius von Waltershausen, l.c., pp. 190-191.

11) "Capital is said by a Quarterly Reviewer to fly turbulence and strife, and to be timid, which is very true; but this is very incompletely stating the question. Capital eschews no profit, or very small profit, just as nature was formerly said to abhor a vacuum. With adequate profit, capital is very bold. A certain 10 per cent will ensure its employment anywhere; 20 per cent certain will produce eagerness; 50 per cent, positive audacity; zoo per cent will make it ready to trample on all human law; 300 per cent, and there is not a crime at which it will scruple, nor a risk it will not run, even to the chance of its owner being hanged." P. J. Dunning, quoted by Marx, Capital, Vol. I, note to p. 843.

12) Dubief: "Le chemin de fer de Bagdad," in Revue économique internationale, 1912, Vol. 2, p. 7 ff.

13) Deutsche Kolonialreform, pp. 1396-7397. One must not forget that the book was written in 1905. Since then the interrelation of forces, and the map of the world, haw undergone material change.