The Left Wing: 3. Economic Causes of Imperialism

S. J. Rutgers

Published: International Socialist Review, vol. 17, no. 1. July 1916. Pages 29-32.
Transcription/Markup: Micah Muer, 2021.

In analyzing Imperialism in its broader sense, as the term is understood by the Left Wing of the European Socialists, we found[01] that this kind of Imperialism is quite familiar to American workers in their every-day class struggle, also that Imperialism is at the bottom of the failure of parliamentary action, and of the temporary set-back in the class struggle of the wage-workers of the United States.

This important issue (Imperialism) makes it necessary for us to consider closely the economic facts, which go to show, that the aggressive foreign policy, to protect the investments of capital for the exploitation of undeveloped foreign countries, and the aggressive, brutal, home policy take their origin from the same special economic causes.

Given the elementary economic fact, that the share of labor in its product is determined by the cost of its reproduction, that is, the cost of living, according to historical standards, influenced within certain limits by the fighting power of the workers; given also the all important tendency under capitalism of an ever-growing productivity of labor; the result is, an increasing tendency for expansion of the markets. That the products should be disposed of by increasing the purchasing power of labor is not likely to happen, unless labor should get into power, which means the end of the Capitalist system. For the capitalist class to consume the growing product in unlimited luxury is against the most essential characteristic of capitalism, which demands that the surplus value be invested in new and bigger industries, more highly developed machinery, etc., bringing certain ruin to those capitalists that fall behind in the race. To invest the surplus value in more productive machinery means increasing the difficulty of finding a market, unless there is expansion at the same time.

To a certain extent the means of production may create their own market, which strengthens the present characteristic of the supremacy of iron and steel and basic industries, as compared with textiles and other similar commodities in an earlier period of capitalism, but the rapid growth of modern machinery at the same time tends to stimulate the output on all fields of capitalistic production. So we can easily understand that expansion is one of the most fundamental characteristics of capitalism.

Now since all this is a normal feature of capitalism, it does not, even tho it is at the bottom of imperialism, account in itself for the advent of what we have called a new phase of capitalism. We might say, that this new development into Imperialism is an example of a dialectic development, in which a quantitative change turns at a certain point into a qualitative one — but such a statement will appeal only to a few of the more philosophic socialists.

Keeping, however, to every-day facts, it will be easy to understand how this fundamental change came about.

The ever-growing concentration and the technical development did not affect all branches of production to the same degree. On the contrary, this concentration and trustification did affect first of all some of the basic industries: steel, coal, copper, oil, etc. In most of these basic industries, there developed a tendency toward monopoly, while at the same time other industries were far behind in their development, and continued along the old lines of capitalistic production.

Now we all know, that "free competition" is one of the fundamentals of capitalist economics; that in the early days of capitalism this free competition was the all-important slogan from which developed the ideology of "freedom," which played so important a part in the French Revolution, as well as in the policy of the bourgeois at a time when they still believed in bringing in a better world.

Free competition forms a most important element in the capitalist economy. Although it does not affect directly the problems of surplus value and exploitation of the wage workers, it constitutes the regulating factor in the division of the surplus value among the different groups of capitalists, assuring each an equal return upon an equal sum of money invested. The capitalist, being "free" to invest his money where he thinks it most profitable, will shift it from industries with smaller profits to such as offer higher returns. Investors, however, are only interested in the total returns on their investments, regardless of whether this is in fixed capital, machinery, etc., yielding no surplus value, or in labor, which produces all of the surplus value. This brings about a shifting of capital and of surplus value from the less-developed to the more highly developed industries—automatically regulated by the price of commodities; these selling above or below their values in a way to keep the profit in each industry at about the average rate.

Within the limit of an article, it is only possible to mention these fundamental problems, which are treated in the third volume of Marx's "Capital." Those who are not familiar with these theories will nevertheless be able to understand the general meaning and to compare the results derived from the application of the theory with the every-day facts. So they are invited to proceed.

Given monopolistic tendencies in some of the basic industries, it follows that the capitalist law, regulating the price of the basis of free competition, becomes fallacious, and is partly superseded by what the monopolists call "price policy" — a policy well described by a typical phrase derived from American railroad methods as "all the traffic will bear."

Let us suppose that there is a perfect monopoly in one of the basic industries, such as the production of steel. Then the price of steel to a certain extent can be fixed arbitrarily by the monopolist. What will be the limit under these circumstances?

The monopolist cannot escape the laws of value, and he does not increase the amount of surplus value by his price policy. He may be in a position to reduce the standard of living of the wageworkers to a certain degree, not, however, as a monopolist, but as a powerful master. For even if the monopolist reduces the standard of living by means of high prices, it will depend upon the relative power of labor whether it is compensated by an increase in wages. The economic struggle of labor has always been for an actual (or a desired) standard of living, not for a certain money wage, regardless of what can be bought with it. And although, as a general rule, a monopolist will be at the same time a powerful master, the worker will always have to receive a wage on which he can live, so that his exploitation can continue.

But where, if not from labor, does the monopolist get his extra profit, when he increases the price of his products? The answer is that he pumps a greater part of the general surplus value into his own barrel, by reducing the share of his fellow-capitalists, and he can go on pumping until — until the profits of the other capitalists are reduced to a certain standard of income, more or less according to historic conditions, that allows them to carry on those industries that are not yet ripe for being controlled directly by Big Capital.

So we find a new element entering the capitalist economy, which influences the profits of the independent capitalists in a way which greatly resembles that in which the salaries of employees and the wages of laborers are fixed, and although the "standard of living" is higher, there is the same tendency to reduce this standard gradually.

There remains, of course, a competition among the smaller capitalists themselves, to get a greater share of what is left by Big Capital, and besides, we must not forget that there is no such thing as a complete monopoly. But the tendency to increase the profits of Big Capital at the expense of the other capitalist groups is indisputable, and has most important results.

Monopolistic Big Capital getting an extra profit as compared with other capitalists, it is logical that the big interests want to invest their profits in some equally profitable way. This means that they will use their enormous profits principally in two ways: in industries that will soon be ripe for combining with other highly developed industries; or in extending the highly developed industries that have already monopolistic tendencies. The development of industries of lower organization into a higher capitalist form is a process that cannot be forced in a given situation, beyond certain technical and social limits. Thus the second possibility, that of extending the existing monopolistic enterprises, becomes of first importance. And here we are at the bottom of imperialism in its foreign aggression, with steel and oil interests and the extractive industries in control, preferably in their generalized form of financing banking capital.

In the United States, until very recently, conditions have been such as to induce Big Capital to pay more attention to the first form of investment, by subjugating less developed industries, under its own control. At the same time, there were opportunities for developing the western part of the United States, which gave room for quantitative expansion, without foreign aggression. Now that this possibility has, relatively speaking, come to a standstill, foreign aggression is decided upon by Financial Capital, and you may be sure that this will be carried out with efficiency and without the slightest scruples.

We have thus shown very briefly the results of economic developments as affecting big monopolistic capital. But how about the rest of the capitalist class?

Since Big Capital pumps its extra profits out of less developed capitalistic enterprises, some of us might expect that the majority of capitalists would combine to fight Big Capital. And indeed there has been some fighting of this kind. The United States has witnessed several attempts to fight monopolies, and an equal number of failures to accomplish anything. The anti-trust laws have been used against labor unions, but have had no visible effect upon the Rockefeller interests. There is unconscious humor in the big signs posted in some of the smaller New York lunch rooms, printed on paper from the paper trust, in which the appetite of customers is stimulated by the legend: "We Buy No Products from Any Trust." As this assumes that they have oil fields, anthracite mines and steel mills of their own, the only solution of the statement seems to be that these lunch-rooms must themselves be part of a gigantic trust.

It is highly interesting to realize, why it is that this fight against Big Capital is such a failure. On one side we find a small number of interested individuals, on the other side the great majority of capitalists, in a country with so-called "democratic institutions," and without even so much as militarism to protect the interests of the few. We observe the majority making up their minds to attack the few, and failing, failing lamentably and giving it up, to become the obedient servants of Big Capital. Is not this mysterious, and can labor maintain any hope in its own victory in view of such facts?

Here is a brilliant example of the all-importance of economic facts, of economic power, when backed by historical tendencies.

Small capital is historically doomed; it is not an indispensable economic factor. And the more highly developed, the more powerful an industry is, the greater its chance of emerging into Big monopolistic capital. The feeling of dependence upon financial Capital is already so overwhelming in the capitalist class, that any serious opposition is impossible. In fact, if any capitalist were to venture a serious attack on the Big interests, he can be most easily ruined. The tendency of history is to do away with "independent" capital, and this makes the smaller capitalists powerless. The tendency of history can not do away with labor, however; on the contrary, Big Capital derives its power from labor. In this fact lies our power and our hope.

The failure of capitalist attacks upon monopoly implies, of course, the absolute dependency of the capitalist class upon Big Capital; it means the control of the latter over the whole field of social and political life. It means therefore, that the tendency of Big Capital toward Imperialism becomes a general policy of the whole capitalist class. Since the smaller capitalist can not resist Big Capital, their only possible policy is to try to make the best of the situation by supporting Big Capital, and seeking a share in the profits that result from foreign and home aggression. For as against Labor, all the capitalists have a common interest; they all live from surplus value, and they all try to keep labor cheap and submissive. Moreover, Big Capital is perfectly willing to grant a certain higher standard of living and some material advantages to those who are needed to keep labor down; this includes not only little "capitalists" but the higher salaried employees as well, and even some elements of the laboring class. Big Capital is able and willing to pay for services, but it will not allow any form of independent thought or action. Even the highest official of a corporation or the President of the United States will be "fired" if he acts counter to the fundamental interests of Big Capital.

This means the end of old style "politics," in which the conflicting interests of different capitalist groups might be skilfully used by brilliant labor leaders to further the interests of the working class (or of themselves). This means, that we have arrived at what Marx predicted in the Communist Manifesto, "the splitting up of society into two great hostile camps, into two great classes directly facing each other; Bourgeoisie and Proletariat." It means absolutism, brutality, reaction; it means in one word "Imperialism," not only as foreign aggression, but as a home policy of the ruling class as well. It means the justification of the European conception of Imperialism.

And it means even more. It means a tendency towards a more complete form of industrial concentration, in which the whole powerful organization of the capitalist State will be put into the direct service of the controlling Financial Interests, to exploit the workers more efficiently. State Capitalism is the logical outcome, because this means the highest form of capitalist organization of industries, and at the same time constitutes the political form best adapted to serve the interests of the various capitalist groups.

The large group of better-paid employees and officials, the so-called new middle class, who depend upon their salaries, may reasonably expect to be better protected in their standard of living by a state organization, with an official standardization of salaries, than under privately controlled monopolies. The so-called "independent" capitalists as a group are, as we have seen above, practically in the same position as the salaried employees. And Big Capital, which will control the organization of the new monopolistic state, will find it the most effective machine that can be devised to enslave the workers, and therefore will accept this form of imperialism.

State Capitalism will mean the most efficient form of organization in the struggle for foreign aggression and world power, as well as the strongest form of class organization against labor, making labor strikes a crime against the nation, and international solidarity high treason.

No great effort of the imagination is required to picture this aggressive form of future State Capitalism, in which the most brutal State, with the most effective militarism in the trenches as well as in the workshop, will have the best chances for world power.

But this is a conception of the future, with some uncertain elements, above all the uncertainty whether labor will continue to support the capitalist class in its "national" ambitions — whether labor will fail to recognize its duty to its own class under Imperialism.

But Imperialism as a class policy of modern financial capitalism under present conditions, for the exploitation of the world-proletariat, is no conception of the future; it is a living fact before our eyes.

This form of Imperialism is without doubt highly developed in the United States, and the fact that the workers have not realized it, and have kept to the old and obsolete forms of lifeless democracy, accounts for the scanty results accomplished by the socialist movement on this side of the ocean. There is a beginning of new life, a beginning of mass-democracy, but it lacks a clear understanding of its relation to the past and the future, as well as to the rest of the world. As soon as red-blooded, class-conscious workers get into their heads that the present-day form of capitalism is Imperialism, and that under Imperialism the only possible form of democracy is mass action, there will be the beginning of a new fighting period; there will be an end to the present stagnation.

This new democracy and its practical methods of action will be the subject matter of our next article.


[01]. See articles by S. J. Rutgers in the INTERNATIONAL SOCIALIST REVIEW for May and June.