Karl Kautsky

The Capitalist Class

Chapter VII
The Growth of Large Production-Syndicates and Trusts

Side by side with the competitive struggle between individual and capitalist production, rages the competitive struggle between large and small capitalists. Every day brings forth a new invention, a new discovery, whose application increases considerably the productivity of labor. Each of these renders useless, to a smaller or larger extent, former machines, and compels the introduction of new ones, often also of enlarging existing establishments. The capitalist who at such a pinch has not the requisite capital at his command, is sooner or later unable to hold his own in the competitive struggle, and goes down, or is forced with considerable loss to invest his capital in some smaller industry, not yet seized upon by more powerful capitalists than himself. In this way competition in large production causes the overstocking of capital in small production, and thereby renders the competition between the small capitalists all the more fierce, and their ruin all the more rapid.

The industries carried on by large production expand ever more; the large establishments which once counted their workmen by the hundreds, become giant concerns that employ thousands of hands; day by day the smaller business establishments go by the board. After reaching a certain point – a point that was reached in the United States at least ten years ago – the industrial development, instead of increasing, steadily decreases the number of individual enterprises. As agriculture has become an industry, the same phenomenon is noticeable there: the number of small farms decreases, the holders of large farms increase.

Nor is this all. The industrial development leads steadily to the concentration of more and more capitalist undertakings into a single hand, be that the hand of a single capitalist, or of a combination of capitalists who legally constitute one person – the syndicate, the trust.

The paths that lead to these are manifold.

The Paths that Lead to the Trust

The one is opened by the anxiety of capitalists to exclude competition. Competition has been shown to be the mainspring of the modern system of production; indeed, it is the mainspring of the production of merchandise, that is to say, of production for sale Nevertheless, however necessary competition is for the production of merchandise in general, there is no capitalist but is anxious to see his own goods free from competition in the market. It he is the sole possessor of goods for which there is a demand, he has a monopoly of them; he can send their prices away above their actual value; those who need his goods will be wholly dependent upon him. Where several sellers of the same goods appear in the market, they can establish a monopoly only by combining in such way that they virtually become one seller. Such combines – rings, syndicates, trusts – are the sooner and more easily brought about the smaller the number of the competitors whose conflicting interests are to be brought under one hat.

In so far as the capitalist system expands the market, and increases the number of competitors in it, it makes difficult the formation of monopolies in production and commerce. But in every branch of capitalist industry the moment arrives, sooner or later, when its further development implies the lessening of the establishments engaged in it. From that moment on, the march is rapid toward the syndicate and the trust. The time when in a given country an industry can ripen into a trust may be hastened through the protection of its domestic market against foreign competitors by a high tariff. In such a case the number of competitors is diminished, and the domestic producers can come together all the easier, establish a monopoly, and, thanks to “Protection to Home Industry,” skin the national consumer to their hearts’ content.

During the last twenty years the number of trusts intended to “regulate” the price of their products has grown greatly, especially in “protected” countries, such as the United States, France, and Germany. The trust being once formed, the several concerns that have combined constitute virtually only one concern, under the guidance of a single head.

The articles most necessary for the development of production, such as coal and iron, are the ones that become the first subjects or syndicates and trusts. The largest combinations extend their influence far beyond the monopolized industries themselves; they render the whole machinery of production dependent upon a few monopolists.

Side by side with the eagerness of the several establishments of one industry to run together into a single hand, there also develops the eagerness of the several establishments engaged in different branches of industry, but one of which furnishes either raw material or the machinery needed by the others, to come under one management. It is a common thing to see railroad lines owning their own coal mines and locomotive works; sugar manufacturers try to raise their own cane; the Standard Oil Company manufactures its own tanks and cans, etc.

There is still a third way, and that the simplest, in which several establishments are merged into one.

However superfluous the functions of the capitalist would be under a rational system of production, under the present system these functions are highly important; under the system or private property in the instruments of production, large production is possible only as capitalist production. Under this system it is necessary, in order that production be carried on smoothly, that the capitalist take the field with his capital and apply it properly. Accordingly, although the capitalist produces nothing, although he brings forth no values, yet through his capital he plays an important role in the economic life of society.

The Capitalist Becomes a Coupon-Clipper

At the same time, the larger a capitalist becomes, the more necessary it is for the capitalist to relieve himself of a part of his increasing duties, either by passing them over to other capitalist concerns, or to some employee whom he engages to attend to his business. Of course, it makes no difference in the industrial process whether these functions are performed by some employee or by the capitalist himself; these functions produce no values when performed by the capitalist, and they produce no values when performed by an employee. The capitalist, consequently, must now pay for them out of his surplus. This is another means by which the surplus of the capitalist, and, accordingly, his profits, are lowered. Of course, the capitalist charges the wages he pays to these employees – officials, directors, superintendents, etc. – to the costs of production and enters them under the head of wages to labor.

While the growth of an enterprise forces the capitalist to relieve himself by the employment of lieutenants, it at the same, through the increasing surplus it yields, makes the thing easy for him. The larger the surplus the more functions can the capitalist transfer to employees, until finally he relieves himself of all his functions and reserves only the care of how to invest profitably that portion of his profits that he does not need for personal consumption.

Stock Companies Appear, and the Usefulness of the Capitalist Ends

The number of concerns in which this final stage has been reached grows from year to year. This is shown clearly by the prodigious increase of stock companies in which even the dullest intellect can see that the person of the capitalist cuts no longer any figure, and the only thing of importance is his capital.

There have been people silly enough to imagine that they saw in the rise of stock companies a means whereby to render accessible to the small holders the benefits of large production. This is a fallacy equal to that entertained by uncritical minds with regard to credit. The stock company, the same as credit, of which it is but another manifestation, is, on the contrary, a means of placing at the disposal of the large capitalist the property of small holders.

Just as soon as a branch of industry can dispense with the person of the capitalist every one can engage in it whether or not he knows anything of the business, provided only he possesses the necessary funds to buy stock. Owing to this fact a capitalist is enabled to unite in his own hands industries that are wholly disconnected. Stock companies are the easiest to acquire by a large capitalist; all he needs to do is to put himself into possession of the majority of stock, and the concern becomes dependent upon him, and subject to his interests.

Finally, it must be observed that the large capitalists grow faster than the small ones: the larger the capital, the larger also, other things being equal, will be the size of the profits, namely, the revenues which it yields, the smaller proportionally will be the quantity which the capitalist will use up personally, and the larger the portion which he can add to his previous investments as fresh capital. The capitalist whose business yields him a yearly income of $10,000, will be able to live but modestly according to capitalist ideas. He may esteem himself happy if he succeeds in laying by annually, say, $2,000 – a fifth of his profits. On the other hand, the capitalist whose business is large enough to yield him $100,000 annually, may, even though he were to spend upon himself five times as much as the previous one, add annually $60,000 – three-fifths of his profits – to his previous capital. And so on increasingly. While the small capitalists are compelled to struggle harder and harder for their existence, the large accumulations in the hands of the large capitalists swell ever faster and faster until they reach immense proportions.

To sum up: The growth of large establishments, the rapid increase of large fortunes, the steady decrease in the number of small establishments, the steady concentration of several concerns in one hand – all these make it evident that the tendency of the capitalist system of production is to concentrate in the hands of an ever smaller number the instruments of production which have become the monopoly of the capitalist class; that the final result must be the concentration of all the instruments of production in the hands of a few persons or stock companies, who use them as private property and dispose of them at their will; and that the whole machinery of production will be turned into a gigantic concern, subject to a single master. The private ownership of the means of production leads, under the capitalist system, to the pass where, with a single exception, all are propertiless. In other words, the capitalist system leads to its own destruction; its development takes the ground from under itself; the contradictions inherent in it grow more and more glaring in proportion as it expands. The moment the wage-workers, the exploited, constitute the bulk of the consumers, the products, in which the surplus lies locked up, become unsalable; the surplus itself becomes valueless.

Small Capitalists are Dependent on the Large Ones

In point of fact, a state of things such as here outlined would be as preposterous as it would be impossible. It will not, nor can it ever, quite come to that. The mere approach to such conditions would increase to such an extent the sufferings, antagonisms, and contradictions in society that they would become unbearable, and society would fall to pieces, unless a different turn were timely given to the development. But although such a condition of things will never be completely reached, we are steadily steering in that direction. At the same time that, on the one hand, the concentration of separate capitalist undertakings in few hands is progressing rapidly, on the other hand the interdependence of seemingly independent concerns increases as the inevitable result of the division of labor. This mutual dependence becomes, however, ever more one-sided in that the small capitalists grow ever more dependent upon the big ones. The same as most of those workers who are now engaged in home industries and who seem to be independent are in fact wage-workers under some capitalist, so also is many a small capitalist, who apparently enjoys independence, tributary to other capitalists; and many a seemingly independent capitalist concern is in fact but an appendage of some gigantic capitalist establishment. This dependence of the small upon the large capitalist proceeds probably at a much more rapid pace than the actual concentration or several concerns into one. Already our industrial mechanism is in the last analysis virtually controlled by a few giant capitalists; the combination of these under a few firms is but a question of time.

At the same time that the economic dependence of the bulk of our population upon the capitalist class is on the increase, there is also an increasing dependence within the capitalist class itself of a majority of its members upon a small set, whose numbers become smaller, but whose power, through its wealth, becomes ever greater.

But, the same as with the proletarians, the small traders and producers, and the small farmers, the dependence of one capitalist upon another intensifies the uncertainty of livelihood. The experience of the former is that of the latter. With their dependence increases also the uncertainty of their situation. Of course, the smaller capitalists suffer most, but even the largest accumulations of capital afford no absolute certainty.

Result Of Competition among Capitalists for the Market

The increasing sensitiveness of the mechanism of production to the slightest disturbing influences has already been mentioned as one of the causes or uncertainty in the capitalist system. There is still another that should be noticed. In proportion as it draws sharper the antagonisms between the classes; in proportion as it swells ever more the masses which it arraigns against each other; in proportion as it places in the hands of each more and more powerful, though different weapons – the capitalist system of production increases the opportunities for disturbances, and increases the damages which these disturbances occasion. It is not only the surplus, withheld by the capitalist, that the growing productivity of labor increases: it also increases the quantity of goods that are thrown upon the market, and of which the capitalist must rid himself. Hand in hand with the exploitation of labor grows the competition among capitalists, and this competition is turned into a bitter contest by each producer against all. Furthermore, a steady revolution is going on in the technical methods of production; new inventions and discoveries are incessantly made which render valueless existing machinery, and which render superfluous not only individual workers, not only individual machines, but often whole establishments, yea, even whole branches of industry.

No capitalist can build upon the future; none can say with certainty whether he will be able to keep what he has, or to leave it to his children.

The capitalist class itself is splitting up into two sets. The one, which increases steadily, is wholly superfluous to industrial life; it has nothing to do but to squander and spend in riotous living the growing quantity of surplus which flows into its hands; differently from the idle class under the previous systems of production, it cultivates neither the sciences nor the arts; the objects upon which it lavishes its wealth are either immoral or stupid. The other set, which consists of those who have not yet become superfluous in their establishments, decreases steadily, but in proportion to this decrease the cares and burdens or their situation grow heavier upon them. While the former set is rotting in moral and intellectual idleness, the latter is wearing itself out in the competitive struggle.

To both the spectre of uncertainty is a growing menace. The modern system of production does not allow even the exploiters, even those who monopolize all its tremendous advantages, to enjoy their booty in peace.


Last updated on 25.12.2003