Louis C. Fraina

Revolutionary Socialism

Class Divisions Under Imperialism

THE epoch of Imperialism expresses a readjustment in the concentration of capital and industry, and the radical alteration of class relations and the form of expression of class interests.

The accumulation of capital produces the concentration of industry, and the concentration of industry accelerates the accumulation of capital. The development of technology requires larger and larger industrial units; the battle of competition, waged through the cheapening of commodities, places the small producer at a disadvantage and encourages concentrated industrial enterprises. A simple industry becomes complex: the steel industry not only manufactures steel, but by-products, and acquires mines and railways. In this process of concentration, the smaller capitalists are either driven to the wall, compelled to unite their capitals, or forced into new lines of industrial endeavor, where the development of technology and the battle of competition again produce concentration. The consequences of this activity are the decay of the industrial middle class and a development toward monoply.

The process of concentration of industry is accompanied by the centralization of capital. Normally, the centralization of capital is a consequence of concentration of industry; actually, it may be and often is its cause. Centralization [1] is financial, the unity of many small or large capitals used co-operatively and not competitively. Centralization may precede concentration of industry, accelerate concentration, and plays an important part in capitalist development. “The world would still be without railroads if it had been obliged to wait until accumulation should have enabled a few individual capitalists to undertake the construction of a railroad. Centralization, on the other hand, accomplished this by a turn of the hand through stock companies.” [2] Centralization strips capital of the fetters of its isolation and unites it into a formidable instrument of development and exploitatation, reproducing many-fold the value of the totality of its individual components; through this unity, centralization makes possible enterprises before which the individual capitals would shrink in terror or impotence; it accelerates economic expansion, breaks new ground, and paves the way for systematic, intensive exploitation and development. Centralization in the United States built great railway systems, the tentacles of which, so to say, smothered the barbaric isolation and virility of the great West, opening a new continent to the civilizing beneficence of capitalist industry, profit and religion. Centralization forged the tools which tapped the great natural resources, drawing the whole of our continent into the circle of capitalist exploitation; it gave impetus to new industries and provided the means with which to build up new industries. If this process was accompanied by concentration of industry and economic efficiency, that was partial and incidental – technically inevitable, but subjectively incidental.

In the capitalist order of things, accordingly, centralization performed a mighty work. Speculative centralization accomplished with almost lightning rapidly what planful, systematic effort would have by now barely started. The process of speculative centralization, however, becomes a fetter upon the systematic, co-ordinated concentration of industry; produces a large amount of waste, makes dominantly the speculative capitalist instead of the industrial capitalist the arbiter of industry, and converts industry into an expression of finance instead of finance into an expression of industry. Necessary at an earlier epoch, centralization becomes a fetter upon the industrial process, and industry re-adjusts itself, standardizes and specializes itself in accord with the integration of production. The extensive or expansive exploitation of the epoch of centralization is succeeded by re-adjustment and intensive development. The ultimate aim of centralization is monopoly, and for a time monopoly prevails. But while competition produces monopoly, monopoly produces competition on a higher plane and within narrower limits, between million-capitals. However, the attempt at the monopolistic management of industry is seen as unwieldy, inefficient, wasteful, and as defeating its own purpose. There is a revolt [3] at the attempt of monopolistic finance to direct the technic of industry. Monopolistic industry does not succeed in maintaining its ascendancy, but monopolistic finance becomes dominant. Financial capital does not direct the technic of industry, but it controls the industrial forces.

The attempt at indiscriminate monopoly, moreover, acts as a fetter upon the concentration and integration of industry. Competition cannot be wiped out completely through struggle and rivalry; this may be accomplished through co-operation. Under these conditions, the typical industry of concentrated capital becomes the steel industry, as in the United States.

The Steel Trust did not attempt to crush all its rivals and secure a complete monopoly. This trust and the independents maintain friendly relations and co-operate, although, of course, the trust dominates, and all are still further dominated by finance-capital. The policy becomes general. It becomes general because of the compulsion of industrial necessity; and it becomes general, moreover, because the development of the home market no longer allows indiscriminate competition, and because the unity of capitalist interests is necessary in the struggles of Imperialism for investment markets and new spheres of development. The accumulation of capital has up to this point proceeded, in a measure, through the expropriation of one capitalist by another within the nation; it now becomes dominantly a process of one national group of capitalists expropriating a rival group through control of industrial development in undeveloped countries, and by successful competition in the other markets of the world. The unity of a national Capitalism is indispensable under these conditions.

Industrial concentration does not cease at this point; on the contrary, it is given a new impetus, assumes a new form and becomes more systematic and co-ordinated, more strictly industrial and technological in character. The energy of industry is freed to specialize and standardize its process and production, increasing output and decreasing costs. It is precisely this specialization and standardization that make American Capitalism a most successful competitor in the markets of the world. Moreover, through the integrating activity of State Capitalism, industry acquires a new and more complete form of concentration, the control of the state imposing adaptation and unity, and regulating the relations of industry to industry. The control of the state means the climax of industrial concentration, precisely as State Capitalism and Imperialism mean the climax of Capitalism itself. This development proceeds under the sway of finance-capital: the whole of industry comes under the domination of monopolistic finance, and subservient to its policy, – including the state itself, openly and unashamed. The ventures of Imperialism are carried on through finance-capital; these ventures are indispensable to the life of capitalist industry at the climax of its development; and finance-capital, accordingly, becomes the dictator of the industrial forces of a nation.

The monopoly and domination of finance-capital are not disputed, since the export of capital is now the nerve-center of capitalist production and expansion. The industrial capitalist becomes subservient to the financial capitalist because exports are necessary to him, and under the conditions of trade today the export of products must be financed by the export of capital. James A. Farrell, president of the United States Steel Corporation, recently emphasized the necessity of the export of capital, of foreign investments, as “a commercial preparedness measure,” as the means of increasing trade and exports by financing the needs of the growing countries “which are America’s best customers.” Great Britain’s $20,000,000,000 of foreign investments, according to Farrell, “retain and strengthen its hold on the neutral markets of the world.” Through the development of technology and the increased productivity of labor, the mass of surplus products steadily accumulates; the industrial capitalist must dispose of these products through export trade; the demand for these products must be stimulated through the development of the internal markets of undeveloped countries, which is accomplished through investments and the export of means of production; and, accordingly, the export of products becomes in large measure dependent upon the export of capital. This being the situation, capitalist industry rallies to Imperialism as necessary to its existence, prosperity and expansion.

The investments which are the animating factor of Imperialism are, as stated previously, an industrial as much as a financial transaction. The capital invested in an undeveloped country is used to build railways, factories, docks, irrigation systems, to exploit mines, etc.; all this requires steel, machinery and other products, including skilled labor; and when American finance-capital, say, invests in Mexico to build railways, it is tacitly or openly agreed that the bulk of the necessary materials shall be purchased in the United States. This is the rule in all such enterprises. There is here a double profit, a profit on the investment, directly, which goes to finance-capital; and a profit on the export of materials, indirectly, which goes to the industrial capitalist. This is a circumstance which converts Imperialism, essentially a mechanism of finance-capital, into the concern of all capitalist groups, the export of capital being the purveyor, stabilizer and guarantor of profit generally [4]; and this results in a unity of capitalist interests that is a distinguishing feature of the era of Imperialism. The domination of finance-capital is assured because it becomes the typical expression of Capitalism.

In this process, the industrial middle-class, the small and middle-sized producer, disappears as an independent factor. Turned into an anachronism through the concentration of industry, the small producer fights desperately against the process; but concentration becomes steadily ascendant. The industrial middle class may use its electoral strength, in conjunction with workers whom it has cajoled, to strike at concentrated industry by means of legislative action. But, gradually, the fight ends. It ends not only because concentrated capital is supreme, but because the new era of Imperialism cannot tolerate this division of energy within the capitalist class. A compromise is struck – the remnants of the industrial middle class, together with the producers in between the middle class and big industry, are allowed to exist and to participate in the profits of Imperialism, in return for which this class ceases its struggles for independence. It straggles along dependent upon finance-capital, its miserable petty bourgeois soul bought and paid for by the master. And under these conditions, the remnants of the industrial petite bourgeoise become a repulsively reactionary factor, more imperialistic than imperialistic finance itself, where formerly pluming itself in the colors of freedom, democracy, and even revolution! This compromise is equally struck between trust and independent competitors – concerns of million-capital, which are not part of the industrial middle class, but which previously acted against big capital through competition; a situation, moreover, which is in itself partly determined by the circumstance that there are certain historical limits to industrial concentration and the expropriation of one capitalist by another under the technological, social and political conditions of Capitalism. Harmony, as much as is possible in a system where dog eats dog, prevails, and all seek recompense for the concessions of compromise in the fabulous profits of Imperialism.

But now a factor emerges of prime social importance – the creation of a new middle class. The differences between the old and the new middle class may be summarized, – the old was industrial, an owning class, the new is social, an income class; the old was independent, the new dependent; the old was determined by the conditions of its existence in a struggle against the concentration of industry, the new is the product of concentrated industry and its obedient vassal. The upper layer of this new middle class consists of individuals owning shares in concentrated industry. It is not an industrial factor, having been expropriated from direct control of industry, and its financial interests in trusts and corporations are not of a character to insure domination. The lower layer consists of managers, superintendents, engineers, technicians, and professional men of specialized training for industrial pursuits. These various elements are wholly dependent upon concentrated capital and its imperialistic manifestations, – the upper layer, because of its dividends; the lower, because it occupies a privileged status in industry, and because a feature of Imperialism is the export of technical skill to undeveloped countries to manage and superintend the industries created there by the investment of capital. This new middle class is thoroughly reactionary, although it develops a peculiar type of “liberal ideas.”

An adjunct of this new middle class, and trying to force itself within its ranks, is a certain category of ordinary skilled labor. In the development of the internal market of an undeveloped country, skilled labor is necessary, and this skilled labor, clearly, cannot be secured in the country being developed. There occurs, accordingly, the export of a mass of skilled workers – clerks, stenographers, mechanics, etc. – all of whom are dependent directly upon Imperialism and become its prophets in more or less conscious degree.

The character of strength and danger inherent in Imperialism flows from precisely this circumstance, that it seduces hitherto liberal and oppositional elements, organizes them into the social and psychological army of Imperialism. By means of innumerable visible and invisible threads of interest and dependency, finance-capital bends to its will and purpose the whole of capitalist society. It reigns supreme. Imperialism accomplishes that which never prevailed hitherto, the complete domination of capitalist autocracy in its most revolting form; and it manages, moreover, at least temporarily, to scatter the opposition to chaff, – except the potential opposition of the revolutionary industrial proletariat.

Imperialism accomplishes another determining thing: it brings the “labor movement” into its service. At this stage, Imperialism becomes specially interested in the psychology and action of the working class. In the struggles of Imperialism, a national Capitalism must present a united front. The unity of capitalist interests becomes imperative, as any material division of energy through unbridled rivalry of interests weakens the economic, political and military power of the nation. The unity of the various layers of the capitalist class has been secured partly through compromise, largely through their subordination to and dependence upon monopolistic finance-capital. But this unity is incomplete unless it includes the workers. Industrial regularity and efficiency are indispensable in the international competition of Imperialism, equally during peace and war, and a discontented class of workers becomes exceedingly unpleasant and perhaps dangerous. Monopolistic finance-capital secures support for its imperialistic adventures among the other layers of the capitalist class by a “distribution” of the profits of Imperialism; and this policy is extended to groups of skilled labor, their support being secured by means of higher wages, steady employment, better hours and conditions of work generally, and legislative measures conferring status upon skilled labor. The tendency is to create a homogeneity of interests, which is largely, if temporarily, successful. Skilled labor, sensing its importance and opportunity, makes the attempt through its unions to secure even larger concessions, and establish for itself a place in the governing system of the nation. It rejects the general class struggle against Capitalism, and acts as a caste the psychology and action of which are determined by the aspiration to absorb itself in the ruling system of things. The general process creates a reactionary mass whose interests are promoted by the more intense exploitation of the proletariat of average, unskilled labor, the overwhelming mass of the workers, and by imperialistic adventures.

The governmental form of expression of this development is State Capitalism. [5] The unity of class and group interests must be and is maintained and conserved by the authority of the state. The end of economic individualism is symbolized by governmental control of industry and conditions of labor; the state, moreover, acts directly to intensify the concentration of industry and “regulate” the revolts of labor.

The industrial units in the nation under State Capitalism are no longer allowed to proceed without being co-ordinated to the general process of national industry and its international interests. Representative institutions become more and more incapable of coping with the new and vast industrial requirements; parliamentary government virtually breaks down; and governmental power becomes centralized in the control of administrative autocrats. The state becomes an actual factor in industry through control, regulation and direction. This represents, moreover, a new form of State Capitalism. The older and the newer State Capitalism differ in this, that while the two may merge into each other, the first is pre-imperialistic and consists simply in government ownership of certain industries, while the newer State Capitalism is imperialistic, may not actually own any industry, but exercises drastic and despotic control over the general industrial process.

The older State Capitalism was an expression of competitive Capitalism, an expression largely of a weakening industrial middle class that conceived government ownership as a means of destroying the trusts and certain of its industrial oppressors; while imperialistic State Capitalism is essentially an expression of industrial collectivism, finance-capital and Imperialism, – in short, of Capitalism at the climax of its development. It is not necessary, it is even undesirable, that imperialistic State Capitalism should have any actual government ownership of industry; it is sufficient that it co-ordinate, concentrate and control the process of industry, and express the unity of capitalist interests, compelling this unity by state force if necessary. Imperialism and State Capitalism [6], accordingly, represent a new epoch in Capitalism, and a radical alteration in the relations of classes and in the form of expression of their class interests.

A vital fact of State Capitalism is that skilled labor becomes a part of the governing system. The unions which comprise the aristocracy of labor gradually acquire an influence in State Capitalism, a concession that is offered them as a bribe, and which they accept, at least temporarily, uniting their forces with Imperialism. Skilled labor having been seduced, the proletariat of average, unskilled labor becomes the revolutionary force. The covert and overt clash between skilled and unskilled labor, which even hitherto has been a prime factor, now assumes a more definite and violent aspect. The two groups engage in an open, bitter struggle, as in order to secure and retain its privileges skilled labor completely abandons and betrays the unskilled; indeed, it is part of the tacit agreement implied in Laborism becoming a part of State Capitalism that it shall use its influence to maintain unskilled labor in subjection. During a war this function of Laborism becomes particularly necessary. In January, 1918, while the workers were engaging in revolutionary strikes and demonstrations in Germany, the unions of skilled labor acted in favor of the government. The great western strikes in this country, in the spring and summer of 1917, were an expression of unskilled labor, a spontaneous revolt acting through mass action equally against the employers and the “regular” unions. The bureaucracy of the American Federation of Labor acted against these strikes and generally betrayed them. The strikes coalesced around the Industrial Workers of the World, and the AF of L actively engaged in the fight against the IWW.

“Accumulation of capital,” says Marx, “is increase of the proletariat.” Imperialism increases the proletariat by bringing new regions and its human raw material within the circle of capitalist exploitation. This new proletariat, naturally, is expropriated and becomes the starting point of a new capitalist accumulation; it is, moreover, a proletariat of average, unskilled labor, the required skilled labor being largely, if not exclusively, imported. There occurs a repetition of the struggle between skilled and unskilled, with this difference, that the struggle is at the same time intensified and obscured by national and racial prejudice. The conditions of this newly-created proletariat are as abominable as in the initial period of the industrial revolution in England. Children are mercilessly driven and flogged if they lag; men and women are worked from 14 to 20 hours a day, generally seven days a week; wages are frightfully low; fraud is general, and when the workers rebel they usually demand the day’s wage in advance; and a sort of peonage is imposed that is vile and degrading. The untutored mind of these people must indeed consider the blessings of civilization as peculiar! The profits on investments are, naturally, very high. Capital recoups itself for the concessions made to skilled labor by an intensified national and international exploitation of the unskilled. This creates a class of average labor that is truly international in its misery and exploitation, and which develops the material conditions and ideology for international revolution.

Upon the misery and exploitation of unskilled labor, the overwhelming mass of the industrial proletariat, the new bloc of general reactionary interests thrives and becomes prosperous. But unskilled labor awakens to a consciousness of its misery and its strength. The revolts of the unskilled become more numerous and more general. It becomes the immediate and potential revolutionary force against Capitalism, and through its action the bloc of reactionary interests is broken. It is through the interests and action of the proletariat of average, unskilled labor, the dominant form of labor in modern industry, that the Social Revolution will come.


1. The word “centralization” throughout this discussion it used to indicate a financial category, the word “concentration” an industrial category, although in practice the two are not rigidly separable.

2. Karl Marx, Capital, Vol.1, Chapter XXV, Section 2.

3. Certain developments in railway history may illustrate this fact. The New Haven transportation system, under the control of President Mellen, adopted the policy of monopolizing New England’s transportation system. Mellen sacrificed and lowered dividends and efficiency, acquired control of competing water lines, bought up trolley systems, grasped railroad lines far beyond the New Haven’s field of operations, and paid exorbitant prices for virtually useless properties, all to develop a monopoly; a process that, as one financial paper put it, “can only be justified in the event of monopoly being established to an extent that will permit monopolistic rates to be charged.” In 1913 the Mellen regime was overthrown, without a murmur from its dominating influence, the Morgan financial empire. E.H. Harriman tried in a measure the same process, and after his death the railway systems he had united split apart. But the animating instinct of these men was right: the railway systems had to be integrated; it could not, however, be accomplished through private initiative alone, but it is now being accomplished through the medium of state control, which, by guaranteeing dividends, may eliminate wasteful competition and manage the railways as an integral system, in accord with industrial requirements.

4. The organization of the American International Corporation was the sign and symbol of awakening to the opportunity of seizing world power, backed up by a vigorous propaganda for mightier armaments. This International Corporation represents the great interests of finance-capital, and of such powerful economic units as the steel industry. Its purpose is to seek out investment markets, exploit and control them. It is a definite expression of the new era in American trade an era of systematic export of products organized by the export of capital. Its capitalization of $50,000,000 is purely nominal, a mere bagatelle in comparison with the millons upon millons controlled by its sponsors. It is around the activity of this corporation, in China, in Chile, anywhere an opportunity offers, that American Imperialism is organizing itself ... What are the economic facts ... that lie at the roots of our developing Imperialism? The credit balance of American foreign trade from the outbreak of the war to January 31, 1917, represents a huge total of $5,574,000,000 ... The statistics are not significant because of what they express in foreign trade alone. Trade in itself is not a cause of belligerency between nations today ... The outstanding fact is that America, from a debtor nation, has become a creditor nation. Two years ago American Capitalism owed the world more than two billion dollars; today the world owes America nearly three billion dollars. Where this country previously imported masses of capital, today it is exporting capital, and is developing the power to export it in still larger masses. The loans to the belligerent governments, paying good interest, represent a financial reserve for the future. And these loans are steadily increasing – at present they amount to more than $2,500,000,000 ... The export of American capital to Mexico, and to Central and South America generally, has been the factor in the development of Imperialism in this country, with its menace to peace and freedom at home and abroad. How much more menacing will this Imperialism become when the export of capital assumes larger dimensions! – Louis C. Fraina, The War and America, in The Class Struggle, May-June 1917.

5. The belligerent nations are instituting State Capitalism by the absorption of economic activity within the control of the state. This was impossible in a society of isolated small-scale production; it is possible and practicable only in a society in which industry is highly-developed, in which that concentration of industry prevails which is a distinguishing feature of the accumulation of capital and imperialism. State and nation are no longer organized as competing military powers, but as basically competing economic groups. The vital significance of this State Capitalism is that it is not a temporary expedient of military necessity, but the culmination of a previous tendency toward State Capitalism as the inexorable expression of Imperialism, and of which war itself is a product. In previous wars the state simply taxed or seized property for its purposes; now it is compelled to seize upon the whole of industry and re-organize through State Capitalism the productive forces of a nation. The change is tremendous and fundamental.

6. The State Capitalism of Germany is a merging of the old and new, and is consequently not typical of imperialistic State Capitalism, being burdened with many of the evils of government ownership and operation. The countries adopting State Capitalism are aware of these evils, and try to avoid them. At a meeting of the Liverpool Section of the British Chemical Society, reported in The Journal of the Society of Chemical Industry, November 15, 1917, Mr. A.T. Smith lamented the “invasion of the official” incident to rigid State Capitalism: “... time is largely occupied in attempting to comply with the wishes of these various new departments. It may be that this condition of affairs is inseparable from the control of manufacturers by a central department or departments in London, but I venture to suggest that rites and ordinances have been multiplied to an unnecessary degree ... Centralization is all very well in its way, but I venture to suggest that too much centralization in a trade like ours is worse than useless.” In the discussion, a speaker emphasized the problem, and declared it was interesting to read in a report of the German Iron and Steel Institute a condemnation of the methods of “organization” in the industry – the writer complaining of a “superabundance of government departments.” The United States has not had the older forms of State Capitalism, consequently its imperialistic State Capitalism avoids its evils – it establishes government control of industry, but not operation or ownership. The state controls, concentrates and co-ordinates, but operation remains with private capitalist initiative. The New York Tribune, in its issue of December 28, 1917, editorializing on the government’s assumption of railroad control, aptly posed the problem: “If the government will stop there [state control] and leave the operation of the railroads in the hands of operating men, the effectiveness of the transportation machine will be increased. If, having taken control of the railroads out of the hands of the owners, it will hand them back to the operating people and say, ‘There they are; take them and run them as one system, without thought of dividends and interest payments, using every mile of track and locomotive in common, only to get the freight moved’ – if it will say that, the thing is done. The railroads will have been ‘unified.’ That is essential.” Imperialistic State Capitalism bends the state directly to its purposes; state control of industry is indirectly control of the state by industry.


Last updated on 14.10.2007