Finance Capital, Hilferding 1910


In the following pages an attempt will be made to arrive at a scientific understanding of the economic characteristics of the latest phase of capitalist development. In other words, the object is to bring these characteristics within the theoretical system of classical political economy which begins with William Petty and finds its supreme expression in Marx. The most characteristic features of `modern' capitalism are those processes of concentration which, on the one hand, `eliminate free competition' through the formation of cartels and trusts, and on the other, bring hank and industrial capital into an ever more intimate relationship. Through this relationship – as will be demonstrated later – capital assumes the form of finance capital, its supreme and most abstract expression.

The mystery which always surrounds the position of capital becomes more inscrutable than ever in this case. The distinctive movement of finance capital, which seems to be independent, though in reality it is a reflection; the diverse forms which this movement assumes; the dissociation and relative independence of this movement from that of industrial and commercial capital – these are all processes which it becomes more urgent to analyse the more rapidly finance capital grows, and the greater the influence which it exercises on the current phase of capitalism. No understanding of present-day economic tendencies, and hence no kind of scientific economics or politics, is possible without a knowledge of the laws and functioning of finance capital.

The theoretical analysis of these processes must therefore deal with the interconnection of all these phenomena, and thus leads to an analysis of bank capital and its relation to other forms of capital. Our inquiry must seek to discover whether the legal forms in which industrial enterprises are established have a specific economic significance; and this is a problem to the solution of which the economic theory of the joint stock company may perhaps contribute. But in the relation of bank to industrial capital we only observe in their most mature form the same relationships that can be discerned in the more elementary forms of money and productive capital. Thus there emerges the problem of the nature and function of credit, which in turn can be dealt with only after the role of money has been clarified. This  task was all the more important because, since the formulation of the Marxian theory of money, many important problems have emerged, particularly in the monetary systems of Holland, Austria and India, which monetary theory up to now has apparently been incapable of resolving. It was this situation which led Knapp, acute though he was in his appreciation of the problems raised by modern monetary experience, to attempt to set aside any kind of economic explanation, and replace it by a terminology drawn from jurisprudence which can indeed provide no explanation, and hence no scientific understanding, but may at least offer the possibility of a neutral and unprejudiced description.[1] A more thorough treatment of the problem of money was all the more necessary because only in this way can we provide an empirical test of the validity of a theory of value, which is fundamental to any system of economics. Furthermore, only a valid analysis of money enables us to understand the role of credit and thereby the basic forms of the relations between bank and industrial capital.

The plan of this study thus took shape of its own accord. The analysis of money is followed by an inquiry into credit, and connected with these is the theory of the joint stock company and the analysis of bank capital in its relation to industrial capital. This leads in turn to an examination of the stock exchange in its role as a `capital market'. The commodity market, however, embracing as it does the activities of both money capital and commercial capital, requires separate treatment. The progress of industrial concentration has been accompanied by an increasing coalescence between bank and industrial capital. This makes it imperative to undertake a study of the processes of concentration and the direction of their development, and particularly their culmination in cartels and trusts. The hopes for the `regulation of production', and hence for the continuance of the capitalist system, to which the growth of monopolies has given rise, and to which some people attribute great significance in connection with the problem of the trade cycle, require an analysis of crises and their causes. With this, the theoretical part of the work is completed. But the developments studied at this theoretical level also exert a powerful influence on the class structure of society, and it seems desirable, therefore, in a concluding section of our study, to trace their principal influences on the policies of the major classes of bourgeois society.

Marxism has often been reproached with failing to advance economic theory, and there is some objective justification for this reproof. Nevertheless, it must be insisted that the failure is very easily explicable. Economic theory, by virtue of the infinite complexity of its subject matter, is among the most difficult of scientific enterprises. But the Marxist finds himself in a peculiar situation; excluded from the universities, which afford the time required for scientific research, he is obliged to defer his scientific work to those leisure hours which his political struggles may spare him. To demand of active participants in a struggle that their labours on the mansion of science should progress as rapidly as those of more peaceful builders would be quite unjust if it did not indicate at the same time a healthy respect for their creative capacity.

In view of the numerous methodological controversies of recent times, my treatment of economic policy merits perhaps a brief word of explanation, if not of justification. It has been claimed that the study of policy is normative, and determined in the final analysis by valuations; and that, in as much as such value judgments do not belong to the realm of science, the study of policy questions lies outside the domain of scientific investigation. Naturally, it is impossible here to enter fully into the epistemological controversies about the relation of the normative disciplines to the explanatory sciences, of teleology to causality, and I omit such a discussion all the more readily since Max Adler has thoroughly investigated the problem of causality in the social sciences in the first volume of the Marx-Studien.[2] Here it is enough to say that so far as Marxism is concerned the sole aim of any inquiry – even into matters of policy – is the discovery of causal relationships. To know the laws of commodity-producing society is to be able, at the same time, to disclose the causal factors which determine the willed decisions of the various classes of this society. According to the Marxist conception, the explanation of how such class decisions are determined is the task of a scientific, that is to say a causal, analysis of policy. The practice of Marxism, as well as its theory, is free from value judgments.

It is therefore false to suppose, as is widely done intra et extra muros, that Marxism is simply identical with socialism. In logical terms Marxism, considered only as a scientific system, and disregarding its historical effects, is only a theory of the laws of motion of society. The Marxist conception of history formulates these laws in general terms, and Marxist economics then applies them to the period of commodity production. The socialist outcome is a result of tendencies which operate in the commodity producing society. But acceptance of the validity of Marxism, including a recognition of the necessity of socialism, is no more a matter of value judgment than it is a guide to practical action. For it is one thing to acknowledge a necessity, and quite another thing to work for that necessity. It is quite possible for someone who is convinced that socialism will triumph in the end to join in the fight against it. The insight into the laws of motion which Marxism gives, however, assures a continuing advantage to those who accept it, and among the opponents of socialism the most dangerous are certainly those who partake most of the fruits of its knowledge.

On the other hand, the identification of Marxism with socialism is easy to understand. The maintenance of class rule depends upon the condition that its victims believe in its necessity. Awareness of its transitory character itself becomes a cause of its overthrow. Hence the steadfast refusal of the ruling class to acknowledge the contribution of Marxism. Furthermore, the complexity of the Marxist system requires a difficult course of study which will he undertaken only by those who are not convinced in advance that it will prove either barren or pernicious. Thus Marxism, although it is logically an objective, value-free science, has necessarily become, in its historical context, the property of the spokesmen of that class to which its scientific conclusions promise victory. Only in this sense is it the science of the proletariat, in contradistinction to bourgeois economics, while at the same time it adheres faithfully to the requirements of every science in its insistence upon the objective and universal validity of its findings,

The present work was ready in its main outlines four years ago, but extraneous circumstances have repeatedly delayed its completion. However, I must permit myself the comment that the chapters dealing with monetary problems were finished before the appearance of Knapp's work, which led me to make only minor changes and to add some critical remarks. These chapters are also the most likely to present difficulties, for in monetary matters, unfortunately, not only pleasure but also theoretical understanding is soon exhausted, as Fullarton was well aware when he lamented

The truth is that this is a subject on which there can never be any efficient or immediate appeal to the public at large. It is a subject on which the progress of opinion has been and always must be exceeding slow.[3]

Matters have certainly not improved since then. I hasten to assure the impatient reader, therefore, that once the preliminary discussion has been mastered, the rest of the study should not give rise to any complaints about difficulties of comprehension.

Berlin-Friedenau. Christmas 1909 Rudolf Hilferding


[1]. The reference is to G.F. Knapp, The State Theory of Money. [Ed.]

[2]. The reference is to Max Adler, Kausalität und Teleologie im Streite um die Wissenschaft (1904). [Ed.]

[3]. J. Fullarton, On the Regulation of Currencies (1845), p. 5–[Ed.]