Finance Capital, Hilferding 1910


The proletariat and imperialism

The economic policy of the proletariat is fundamentally opposed to that of the capitalists, and the position adopted on every particular issue is marked by this antagonism. The struggle of wage labour against capital is first of all a struggle for that part of the new value in the annual product created by the working class (including the productive salaried employees and the managers of production). The immediate occasion for this struggle is the labour contract, and it then prolongs itself in the conflicts over the economic policy of the state. In commercial policy, the interests of the workers require, first and foremost, an expansion of the domestic market. The higher their wages, the larger is that part of the new value which constitutes a direct demand for commodities, and more particularly for consumer goods. But the expansion of the consumer goods industries, and of the finished goods industries in general, means an enlargement of those spheres which have generally a lower organic composition of capital, or in other words, of industries which are able to employ large numbers of workers. This brings about a rapid increase in the demand for labour and hence a more favourable position for the worker on the labour market, strengthens trade union organizations, and improves their prospects of victory in any new wage struggles. The interests of the employers are just the reverse. An enlargement of the domestic market through wage increases means a fall in their rate of profit, with the prospect of further reductions, and this in turn slows down accumulation. At the same time their capital is forced into the finished goods industries where competition is keenest and the possibilities of cartelization most limited. It is true, of course, that they have an interest in expanding the market, but not at the expense of the rate of profit; and they can attain their end by expanding the external market, while the domestic market remains the same. A part of the new product does not then go into the incomes of workers, and does not increase the demand for domestic products, but is invested as capital employed in production for the foreign market. In that case the rate of profit is higher and accumulation more rapid. The commercial policy of the entrepreneurs is accordingly directed primarily to the foreign market, that of the workers to the domestic market, manifesting itself particularly in the form of a wage policy.

As long as protective tariffs are 'educational' tariffs, mainly for the finished goods industries, they do not conflict with the interests of wage labour. Of course, they hurt the worker as a consumer, but they also promote industrial development and can therefore recompense him as a producer, if the trade unions are sufficiently developed to take advantage of the situation. Those who suffer most in this period are the artisans, those engaged in domestic production, and peasants, rather than factory workers. It is a different matter, however, when the protective tariff becomes a tariff for cartels. We know that cartels emerge principally in those branches of production which have the highest organic composition of capital, and the generation of extra profit in these spheres hinders the development of the finished goods and consumer goods industries. At the same time the increase in food prices which is caused by the unavoidable combination of agricultural tariffs with the industrial tariffs involves a decline in real wages and therefore a contraction of the domestic market in so far as it is determined by the demand of workers for industrial products. Thus the worker suffers both as consumer and as producer through the damage done to those industries which are labour-intensive. Cartelization also strengthens the employers' position on the labour market and weakens that of the trade unions. Furthermore, the cartel tariff provides the strongest incentive to increase capital exports, and it necessarily leads to the expansionist policy of imperialism.

We have seen that the export of capital is a condition for the rapid expansion of capitalism. In social terms, this expansion is an essential condition for the perpetuation of capitalist society as a whole, while economically it is a condition for maintaining, and at times increasing, the rate of profit. The policy of expansion unites all strata of the propertied classes in the service of finance capital. Protective tariffs and expansion thus become the common demand of the ruling class. The abandonment of the free trade policy by the capitalist classes makes it a lost cause. For free trade is not a positive demand of the proletariat, only a means of defence against a protectionist policy which involves more rapid and thorough cartelization, accompanied by an increase in the strength of employers' organizations, intensification of national antagonisms, increasing armaments, a growing burden of taxes, a rise in, the cost of living, a growth in the power of the state, the weakening of democracy, and the emergence of an ideology which glorifies force and is hostile to labour. Once the bourgeoisie has abandoned free trade the struggle for it becomes quite futile, for the proletariat alone is certainly too weak to impose its policy upon the rulers.

But this does not mean at all that the proletariat must now become converted to the modern protectionist policy which is indissolubly bound up with imperialism. The fact that it has recognized the necessity of this policy for the capitalist class, and therefore its ascendancy so long as the capitalist class wields power, is no reason for the proletariat to forego a policy of its own and capitulate to the policy of its enemies, or to succumb to any illusions about the alleged benefits which the generalization and intensification of exploitation would mean for its situation as a class. But this does not prevent the proletariat from perceiving that imperialist policy spreads the revolution which capitalism entails, and along with it the conditions for the victory of socialism. Nevertheless, however strong its conviction that the policy of finance capital is bound to lead towards war, and hence to the unleashing of revolutionary storms, it cannot abandon its implacable hostility to militarism and the war policy, nor can it in any way support capital's policy of expansion on the ground that this policy may prove to be, in the end, the most powerful factor in its own eventual triumph. On the contrary, victory can come only from an unremitting struggle against that policy, for only then will the proletariat be the beneficiary of the collapse to which it must lead, a collapse which will be political and social, not economic; for the idea of a purely economic collapse makes no sense.

Protective tariffs and cartels mean a rise in the cost of living. Employers' organizations increase capital's power to resist the onslaught of the trade unions. Armaments and colonial policy lead to a rapid growth in the burden of taxes imposed on the proletariat. The inevitable outcome of this policy, a violent collision between capitalist states, will bring an unparalleled increase in misery. All these forces which revolutionize the mass of the people can only be made to serve a reconstruction of the economy if the class which is destined to become the creator of a new society anticipates in thought the policy as a whole and its necessary outcome. This can only happen if the inevitable consequences of such a policy, inimical to the interests of the mass of the people, are explained to the people again and again ; and this, in turn, can only be achieved through a steadfast, relentless struggle against the policy of imperialism.

While capital can pursue no other policy than that of imperialism, the proletariat cannot oppose to it a policy derived from the period when industrial capital was sovereign; it is no use for the proletariat to oppose the policy of advanced capitalism with an antiquated policy from the era of free trade and of hostility to the state. The response of the proletariat to the economic policy of finance capital - imperialism - cannot be free trade, but only socialism. The objective of proletarian policy cannot possibly be the now reactionary ideal of reinstating free competition by the overthrow of capitalism. The proletariat avoids the bourgeois dilemma - protectionism or free trade - with a solution of its own; neither protectionism nor free trade, but socialism, the organization of production, the conscious control of the economy not by and for the benefit of capitalist magnates but by and for society as a whole, which will then at last subordinate the economy to itself as it has been able to subordinate nature ever since it discovered the laws of motion of the natural world. Socialism ceases to be a remote ideal, an 'ultimate aim' which serves only as a guiding principle for 'immediate demands',[1] and becomes an essential component of the immediate practical policy of the proletariat. It is precisely in those countries where the policy of the bourgeoisie has been put into effect most fully, and where the most important social aspects of the democratic political demands of the working class have been realized, that socialism must be given the most prominent place in propaganda, as the only alternative to imperialism, in order to ensure the independence of working class politics and to demonstrate its superiority in the defence of proletarian interests.

Finance capital puts control over social production increasingly into the hands of a small number of large capitalist associations, separates the management of production from ownership, and socializes production to the extent that this is possible under capitalism. The limits of capitalist socialization are constituted, in the first place, by the division of the world market into national economic territories of individual states, a division which can only be overcome partially and with great difficulty through international cartelization, and which also prolongs the duration of the competitive struggle which the cartels and trusts wage against one another with the aid of state power. Socialization is also limited by another factor which should be mentioned here for the sake of completeness; namely, the formation of ground rent, which is an obstacle to concentration in agriculture; and finally, by measures of economic policy intended to prolong the life of medium and small enterprises.

The tendency of finance capital is to establish social control of production, but it is an antagonistic form of socialization, since the control of social production remains vested in an oligarchy. The struggle to dispossess this oligarchy constitutes the ultimate phase of the class struggle between bourgeoisie and proletariat.

The socializing function of finance capital facilitates enormously the task of overcoming capitalism. Once finance capital has brought the most importance branches of production under its control, it is enough for society, through its conscious executive organ - the state conquered by the working class - to seize finance capital in order to gain immediate control of these branches of production. Since all other branches of production depend upon these, control of large-scale industry already provides the most effective form of social control even without any further socialization. A society which has control over coal mining, the iron and steel industry, the machine tool, electricity, and chemical industries, and runs the transport system, is able, by virtue of its control of these most important spheres of production, to determine the distribution of raw materials to other industries and the transport of their products. Even today, taking possession of six large Berlin banks would mean taking possession of the most important spheres of large-scale industry, and would greatly facilitate the initial phases of socialist policy during the transition period, when capitalist accounting might still prove useful. There is no need at all to extend the process of expropriation to the great bulk of peasant farms and small businesses, because as a result of the seizure of large-scale industry, upon which they have long been dependent, they would be indirectly socialized just as industry is directly socialized. It is therefore possible to allow the process of expropriation to mature slowly, precisely in those spheres of decentralized production where it would be a long drawn out and politically dangerous process. In other words, since finance capital has already achieved expropriation to the extent required by socialism, it is possible to dispense with a sudden act of expropriation by the state, and to substitute a gradual process of socialization through the economic benefits which society will confer.

While thus creating the final organizational prerequisites for socialism, finance capital ;also makes the transition easier in a political sense. The action of the capitalist class itself, as revealed in the policy of imperialism, necessarily directs the proletariat into the path of independent class politics, which can only end in the final overthrow of capitalism. As long as the principles of laissez-faire were dominant, and state intervention in economic affairs, as well as the character of the state as an organization of class domination, were concealed, it required a comparatively mature level of understanding to appreciate the necessity for political struggle, and above all the necessity for the ultimate political goal, the conquest of state power. It is no accident, then, that in England, the classical country of nonintervention, the emergence of independent working class political action was so difficult. But this is now changing. The capitalist class seizes possession of the state apparatus in a direct, undisguised and palpable way, and makes it the instrument of its exploitative interests in a manner which is apparent to every worker, who must now recognize that the conquest of political power by the proletariat is his own most immediate personal interest. The blatant seizure of the state by the capitalist class directly compels every proletarian to strive for the conquest of political power as the only means of putting an end to his own exploitation.[2]

The struggle against imperialism intensifies all the class contradictions within bourgeois society. The proletariat, as the most decisive enemy of imperialism, gains support from other classes. Imperialism, which was initially supported by all other classes, eventually repels its followers. The more monopolization progresses the greater is the burden which extra profit imposes upon all other classes. The rise in the cost of living brought about by the trusts reduces living standards, and all the more so because the upward trend in food prices increases the cost of the most essential necessities of life. At the same time the tax burden increases, and this also hits the middle classes, who are increasingly in revolt. The white collar employees see their career prospects fade, and begin to regard themselves more and more as exploited proletarians. Even the middle strata in commerce and industry become aware of their dependence upon the cartels, which transform them into mere agents working on commission. All these contradictions are bound to become unbearably acute at the moment when the expansion of capital enters a period of slower development. This is the case when the development of corporations and cartels no longer proceeds so rapidly, and when the emergence of new promoter's profits, together with the drive to export capital, slows down. And it is bound to slow down when the rapid opening up of foreign countries by the introduction of capitalism tapers off. The opening up of the Far East, and the rapid development of Canada, South Africa and South America, have made a major contribution to the dizzy pace of capitalist development, interrupted only by brief depressions, since 1895. Once this development begins to slow down, however, the domestic market is bound to feel the pressure of the cartels all the more acutely, for it is during periods of depression that concentration proceeds most rapidly. At the same time, as the expansion of the world market slows down, the conflicts between capitalist nations over their share in it will become more acute, and all the more so when large markets which were previously open to competition, such as England, for example, are closed to other countries by the spread of protective tariffs. The danger of war increases armaments and the tax burden, and finally drives the middle strata, whose living standards are increasingly threatened, into the ranks of the proletariat, which thus reaps the harvest of the decline in the power of the state, and of the collisions of war.[3]

It is a historical law that in all forms of society based upon class antagonisms the great social upheavals only occur when the ruling class has already attained the highest possible level of concentration of its power. The economic power of the ruling class always involves at the same time power over people, disposal over human labour power. But that itself makes the economic ruler dependent upon the power of the ruled, and in augmenting his own power he simultaneously increases the power of those who stand opposed to him as class enemies. As subjects, however, the latter appear to be powerless. Their power is only potential, and can only materialize in the struggle to overthrow the power of the ruling class, while the power of the ruler is self-evident. Only in a collision between the two powers, in revolutionary periods, does the power of the subjects prove to be a reality.

Economic power also means political power. Domination of the economy gives control of the instruments of state power. The greater the degree of concentration in the economic sphere, the more unbounded is the control of the state. The rigorous concentration of all the instruments of state power takes the form of an extreme deployment of the power of the state, which becomes the invincible instrument for maintaining economic domination; and at the same time the conquest of political power becomes a precondition of economic liberation. The bourgeois revolution only began when the absolutist state, having overcome the autonomous regional power of the large landowners, had concentrated in its own hands all the means of power; and the concentration of political power in the hands of a few of the largest landowners was itself a precondition for the victory of the absolute monarchy. In the same way the victory of the proletariat is bound up with the concentration of economic power in the hands of a few capitalist magnates, or associations of magnates, and with their domination of the state.

Finance capital, in its maturity, is the highest stage of the concentration of economic and political power in the hands of the capitalist oligarchy. It is the climax of the dictatorship of the magnates of capital. At the same time it makes the dictatorship of the capitalist lords of one country increasingly incompatible with the capitalist interests of other countries, and the internal domination of capital increasingly irreconcilable with the interests of the mass of the people, exploited by finance capital but also summoned into battle against it. In the violent clash of these hostile interests the dictatorship of the magnates of capital will finally be transformed into the dictatorship of the proletariat.


[1]The allusion is to Bernstein's argument in Evolutionary Socialism. [Ed.]

[2]'The modern system of protective tariffs - and this is its historical significance - ushers in the final phase of capitalism. In order to check the fall in the rate of profit which is the law of motion of capitalism, capital eliminates free competition, organizes itself, and, thanks to this organization, is able to seize state power in order to use it directly in promoting its exploitative interests. It is no longer the workers alone, but the entire population, who are subordinated to the desire for profit of the capitalist class. All the instruments of power available to society are consciously mobilized and converted into means by which capital can exploit society. It is the immediate precursor of socialist society because it is the complete negation of that society; a conscious socialization of all the economic potentialities of modern society, in a form which does not benefit society as a whole, but is intended to increase the rate of exploitation of the entire society to an unprecedented degree. But it is just the clarity and self-evidence of this situation which makes its continuance impossible. It arouses the proletariat to action against the activities of the capitalist class, which has concentrated its thought and action along with the concentration of the means of production, a proletariat which need only become conscious of its power to make it irresistible.' Rudolf Hilferding, 'Der Funktionswechsel des Schutzzolles', Die Neue Zeit, XXI, 2 (1902-3).

[3]See Karl Kautsky, The Road to Power, especially the concluding chapter, 'A New Age of Revolutions'.