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International Socialism, December 1975


John Ure

Marxist Economics: Primitive Accumulation


From International Socialism, No. 84, December 1975, pp. 29–31.
Transcribed by Christian Høgsbjerg, with thanks to Sally Kincaid.
Marked up by Einde O’Callaghan for ETOL.


THE PRIME distinction between the early period of capitalist development in countries like Britain and France, and the later periods known by Marx, then Lenin, and finally us today, lies in the source from which the system draws its capital. From the time of the industrial revolution onwards – the eighteenth century in Britain – the major source of capital has been the exploitation of the industrial workers in the production process. But in the early period there was little industrial production, few industrial workers and very low productivity.

Since capital was scarce any source was drained of surplus-drained, that is, of output which could be sold somewhere and the revenue ploughed back into the pockets of capitalist merchants – and that included pre-capitalist sources, sources outside the capitalist system as such. This Marx called primitive accumulation. Primitive because it was not a stable or viable long-run basis to sustain the expansion of capitalism. But we could also add that it was often most primitive in the methods used to force the extraction of surplus. The horrific methods used by Stalin during the nineteen thirties in Russia to collectivise the peasants on to State farms is a modern example of primitive accumulation under conditions of State Capitalism.

The most important source of primitive accumulation, other than the exploitation of the peasantry, lay overseas in the exploitation of pre-capitalist societies. The process took a number of forms, principally trade, plunder and slavery. Since naval supremacy was crucial to these, this was a period of wars, with merchants on all sides clamouring to influence their respective rulers and demand military protection against their competitors. But the real sufferers were the peoples being colonised as a result. The savagery shown towards the peoples of Latin America by the Spanish, English, Dutch, Portuguese, French alike, the massacres and decimation in pursuit of gold, diamonds and other pieces of coloured rock is well documented, if perhaps often conveniently forgotten. The wholesale slaughter of North American Indians just because they were there occupying rivers, hills and valleys is part of a long and bloody history. But what a profitable one!

The slave trade was one of the most profitable – and bestial-lines of commerce. Slaves costing £5 in West Africa could fetch between £20 and £30 in the West Indies. As many as twenty per cent died on the journey across the Atlantic. About three million were transported in British ships alone in the eighteenth century, producing enormous profits and anything up to 300,000 deaths! Many systems before capitalism have been born with blood on their hands. None have bathed in it quite so much.

But the madness had both system and logic to it, which was expressed by colonial trade theory of the day. This conveniently insisted that the economic and social position of the colonies should serve the interests of the mother country first and foremost. Effectively this meant destroying colonial industry which might compete with England’s – or France’s or Holland’s, etc. For example, in 1667 the Irish cattle trade was killed off by banning exports under the notorious Navigation Acts. In 1698 the Irish woollen industry was similarly destroyed. During the next one hundred years £750,000 each year was sucked out of the desperately poor Irish peasantry in the form of rent and tribute. By destroying the economic base of Ireland, her ability to withstand disasters such as famine was undermined. The social structure of powerful, rich and often absentee landlords imposed upon Ireland by conquest put paid to any possibility that Ireland’s produce would be used first and foremost to protect her common people. So between 1845 and 1849, during the years of the potato famine, over one million Irish died and at the same time between two and three million quarters of wheat were being exported in each of those years! No wonder an historian of the period claims that ‘after negro slaves, Ireland was the principal victim of the navigation system which gave England her world hegemony’. (C. Hill, Reformation to Revolution)

India ran Ireland a close third. From 1757 onwards Bengal was drained of £15 million a year as tribute to England (mainly through the East India Company). An incredible seventy-five per cent tariff was imposed against her products which dealt a death blow to her industries – including high-grade steel-making. As with Ireland, this process totally undermined Bengal ability to cope with feeding and clothing her population. Not by accident therefore the first of the great famines began in 1770, famines and droughts which have taken their toll in millions of deaths over the years to the present day.

Industrialisation and Free Trade Imperialism

BY THE nineteenth century Britain was an industrialised nation. No longer was the primary source of wealth and profits located in trade or plunder, but in home manufacturing and the exploitation of the home labour force. This was the classical capitalism Marx studied. Foreign trade was still very important, but now principally as a means of selling home manufactured products, and as a means of supplying home industries with raw materials, and, after 1846, as a means of keeping down wages by importing cheaper food. And being the first in the field Britain could out-compete all comers. With mechanisation she cut costs and dominated world markets. But in order to do this successfully British capitalists had to secure free access to those markets, and this was done through a combination of diplomatic negotiations – e.g. the free trade treaty with France in 1860 which set the pattern for many more – and gunboat policy. At the same time Britain abolished almost all tariffs on imports, declaring free trade for, without the British market to export to, other countries would have had no revenue with which to buy the exports from Britain. In this situation Britain was the Goliath and most other countries David – but without any stones.

To a greater or lesser extent most other industrialised or industrialising nations liberalised their trade policies as well to gain the same benefits Britain sought. But for them it was a more cautious policy, to be reversed before the turn of the century, as their development continually threatened Britain’s leadership and was continually threatened by it. So long as expansion of world markets allowed relatively peaceful coexistence among rival capitalist countries to take place there was a possibility that world-wide capitalist expansion would create in its own image wherever it went, would build and construct at the same time as it was destroying and dismantling the communities it came into contact with. There was a possibility that the almost entirely negative ravages of early colonialism would be replaced by the positive encouragement of capitalist development in pre-capitalist societies. This would imply the breaking down of feudal, despotic, and other forms of social structures. It would also imply the creation of a working class in those societies, the introduction of basic literacy and numeracy which capitalism demands of a workforce if it is to be at all efficiently productive. Marx speculated as much. He had no illusions about the way in which capitalism might tackle its task, about the brutal efficiency it could employ: after all the same process had already occurred in Europe. To repeat the process in Asia, Africa and Latin America would undoubtedly be more sadistic still. Nevertheless, had that process taken place there would have been brought into being both a working class capable of the struggle for socialism, and industry and industrialised agriculture which would provide the material basis for socialism.

But that did not happen. Capital investment overseas, as we shall see below, was certainly increasing, but so far as the undeveloped nations were concerned, it was in no way helping the development of their industry other than in those sectors such as certain foods – often semi-luxuries – and mining which were of direct consequence as imports to the industrial nations. On the other hand, where settlement by European migrants took place, capital investment and markets were encouraged, and countries such as Australia, Canada, South Africa were able to import industrialisation. A series of worldwide economic depressions starting in the 1870s, and the imperialist scramble for Africa, Asia, everywhere in the last quarter of the nineteenth century, put paid once and for all to any idea of peaceful co-existence between capitalist nations. And a process which Marx had hoped might transform pre-capitalist societies worldwide turned instead into a new phase of capitalist degeneration climaxed by two world wars.

Monopoly Capitalism

MARX DID most of his writing before 1880, when industrial capitalism was still in the process of conquering countries like France, Germany and Japan. Being the first, the British picture of small-scale independent competitive capitalism was accepted as the classic model. Capitalist development in America seemed to confirm this, although it was already apparent by the 1880s that monopolies and giant corporations like Rockefeller’s infamous Standard Oil – SO or Esso – and Carnegie’s Steel Company – which alone produced eighty per cent as much steel as the entire British industry by 1900 (he sold it to J.P. Morgan the following year for a cool 450 million dollars) were far more common in America than in Britain. Another American feature, which became even more prominent in Germany, was the very close links forged between the big banks and industry (Morgan’s 450 million dollars came from his banking interests). In Japan it became clear that the State itself played a major role in helping industry get off the ground – again a feature to be seen in Germany and to a lesser extent in America.

Marx was not unaware of these developments, indeed his stress upon the tendency for the organic composition of capital to rise (i.e. c to increase relative to v) was really a forecast that small capitalist businesses, employing a higher proportion of labour, would give way to larger concentrations of capital, using much higher proportions of machines, buildings and so forth. However this development was still only a tendency in his day. By Lenin’s and Rosa Luxemburg’s time at the turn of the century, the tendency had already become fact. These writers called this the period of monopoly capitalism. By this they did not mean that all aspects of capitalist business everywhere were under monopoly control. What they meant was that monopoly-type development was increasingly the dominant pattern and scale of organisation. It set the pace. It reflected the future; small-scale independent capitalist producers reflected the past.

Monopoly capitalism was, then, a stage in the development of the capitalist system. But new phases of development do not arise without posing serious problems, and where these problems are solvable only by weakening or threatening the system itself we can call them contradictions. The growth of monopoly capitalism presented two such contradictions. Firstly, in countries like Britain, monopolies could only grow at the expense of small independent capitalists. Bankruptcies became a common feature of nineteenth century Britain as one trade crisis after another destroyed the small while the large survived. In particular, from 1873 until 1896 there was a series of internationally severe crises, known collectively as the Great Depression. But, as one marxist historian has written, ‘The Great Depression was, alas, not great enough to frighten British industry into a fundamental change.’ (E. Hobsbawm, Industry and Empire)

Secondly, the sheer size of monopoly capitalism presented a major problem – the problem of profitability. In order to cut costs industry replaced men by machines on a scale never before witnessed, which automatically increased their output capacity at the same time. In value terms, the organic composition of capital rose, thereby putting pressure upon the rate of profit. In price (market) terms, the supply of goods and services was so great compared to the purchasing power of society that in order to sell off all the products, prices were forced downwards, thereby squeezing profit-margins. Crises of profitability, and crises of overproduction, therefore reappeared on a new scale with the advent of monopoly capitalism. The table below illustrates the decline of home profits setting in from the middle 1870s.

Share of Profits in (net) Domestic Income
(i.e. excluding income from abroad)
(5-yearly averages)





























(figures from Feinstein, Economic Journal, June 1961)

How then was the crisis to be eased? How was the capitalist system to survive? The answer was to be found in the search for profitable investments overseas, in the export of capital. As water always seeks the lowest levels, so money capital always seeks the highest returns. Until the late nineteenth century there were plenty of investment opportunities at home, although there had always been some export of capital. Most trade had been concerned with the export of goods (e.g. ships for sale) or services (e.g. the carriage of foreign products by the British merchant marine) in return for food and raw material imports – and considerable luxuries for the upper classes. But as the figures below indicate, the total amounts of money British capitalism invested abroad grew rapidly after 1880.

Total British Overseas Investments










And the income from these investments was enormous, estimated at over £100 million per year by the end of the century in the form of profits, dividends and interest.

This process was not limited to Britain, although British capitalists were the most involved because Britain, being the dominant world economic power, had most at stake, and was already showing greatest signs of ageing. Every monopoly capitalist country took part to a greater or lesser extent. None wished to be left out. None could afford to be. And as these vast amounts of money went abroad, so those capitalists directly concerned demanded of their respective governments political and military protection for these funds – which once given soon escalated into military annexations for purely strategic reasons. In Britain’s case most of these funds at the time were being exported by bankers and financial insurance companies, merchant banks, and so forth (finance capital), and this sector of the capitalist class in particular in Britain enjoyed considerable influence upon government circles.


THE PERIOD from 1880, therefore, was one of intensive economic, political and military carve-up of the world map into different ‘spheres of influence’. Lenin described this age of imperialism as the ‘highest stage of capitalism’ by which he meant that it was qualitatively different from previous periods of imperialism, that it was a special stage in the growth of capitalism itself – the monopoly stage. ‘If it were necessary to give the briefest definition of imperialism we should say that imperialism is the monopoly stage of capitalism.’ And being the ‘highest stage of capitalism’ implied that there was every prospect of it being the last.

The significance of Lenin’s pamphlet on Imperialism cannot be fully appreciated, nor can its importance for us today, unless we see it in the context of its time. Many writers had had something to say about imperialism, some seeing it purely as a military affair, others as a purely political affair to be written up in diplomatic histories. One very radical view which attracted much popular support subsequently, was expressed by J.A. Hobson, a freelance English journalist. Hobson argued that the cause of imperialism was a lack of a sufficiently large home market. The export of capital was really a way of opening up markets overseas for British – and French, American, etc. – goods. This was, then, an under-consumptionist argument. A lack of consumption = a lack of a market = a lack of profits. As we saw in part two, under-consumption always accompanies, and increases a crisis, but the fundamental cause is actually overproduction because profits are generated through production, not through the consumption – or circulation – of commodities. Hobson’s argument was wrong; so were its political implications, namely that the reform of capitalism was possible by the kind of redistribution of wealth that would put greater purchasing power in the hands of the masses.

The focal point of European socialist debate was to be found inside the largest quasi-marxist party, the German Social-Democrat Party. Since the end of the century some of its leading theoreticians had been revising Marx’s analysis of capitalism and the political conclusions that flowed from it. While Eduard Bernstein went the whole hog, abandoned the labour theory of value and embraced reformism as the way forward, Karl Kautsky developed a view of imperialism which drew heavily upon a two-fold distinction. Firstly, he believed that the industrial nations were unable to develop their agriculture sufficiently to provide for rising living standards at home. This held back the profitable development of industry itself. Consequently imperialism was really the annexation of agricultural lands overseas by industrial nations. Secondly, the added to this picture a distinction he borrowed from Rudolf Hilferding, which differentiated between industrial capital (e.g. manufacturing) and finance (i.e. bank) capital. According to Kautsky the former was progressive and liberal; the latter reactionary and imperialist. It followed that war was not the consequence of capitalism as a whole but only of its most reactionary part, which could, under socialist direction, be tamed. This would leave the way open for progressive industrial capitalism to spread to countries like Russia and, as a long-term vision only, would pave the way to socialism. These political conclusions found ready echoes in Russia from Plekhanov – the ‘father of Russian marxism’ – and the Menshevik (minority) members of the Russian Social-Democratic Labour Party – which split in 1903 with the Bolshevik (majority) members.

The steady shift towards reformism implicit in these revisions of Marx took place under the guise of condemning imperialism. By highlighting this Lenin was able to account for the otherwise inexplicable: the fact that as soon as the major imperialist war broke out – the First World War – each European social-democratic party in turn meekly agreed to support its respective reactionary government, and abandoned entirely in deeds any internationalist outlook. Lenin said of his own pamphlet that its purpose was to show ‘how imperialism is the eve of the socialist revolution; how social-chauvinism (socialism in words, chauvinism in deeds) is the complete betrayal of socialism, a complete desertion to the side of the bourgeoisie; how this split in the labour movement is connected with the objective conditions of imperialism’. (Preface to the Russian edition, 1917)

Lenin’s view of imperialism can be stated simply. It consists of accepting the important relationship Hobson drew between capital exports and the export of goods and services. It accepts Kautsky’s argument that the backward state of agriculture, by ensuring the continued impoverishment of the masses, was hindering profitable industrial development at home, and that this compounded the tendency for the rate of profit to fall. And like Kautsky, Lenin drew heavily upon Hilferding’s emphasis on the tendency for bank capital to merge with industrial capital to form finance capital. But he rejected both the under-consumptionism of Hobson, and Kautsky’s claims that imperialism was either limited to agricultural annexations or due to the reactionary nature of one sector – banks and finance capital. Instead Lenin emphasised the central element common to all sectors of capitalism, the key determining characteristic of the period – monopoly capitalism. It was this which brought whole capitalist nations into direct conflict with each other rather than simple competition between individual companies, because monopoly meant that the State itself was now becoming the chief administrator, the policeman and the great protector of the capitalist economy, and finally the structure of capitalism, the mergers, the growth of international companies all aided the process of capital export. The result was to buoy up the home rate of profit, which in turn enabled industrial capitalist ruling classes to buy off militancy from the best organised workers by financing minimal reforms. This was the real, material basis of reformism within European social-democratic parties. But since imperialist expansion was compulsory for each capitalist state, war was inevitable. Weak links in the chain would snap and socialist revolution would become a real possibility. Socialist internationalism would be vital in spreading that revolution.

It is important not to confuse the correct political position of Lenin and the force of his (marxist) method of analysis – his concentration upon the key determinant, monopoly capitalism – with the detail of the picture he sketched while being a political refugee in Switzerland in 1916 working ‘under conditions in which ... I naturally suffered a certain lack of French and English literature and from a very great lack of Russian literature.’ In other words, Lenin was far too reliant upon German writings and the German experience. Two things in particular require mention. Firstly, the degree to which bank capital dominated industrial capital was seriously overestimated. Secondly, and far more crucial, Lenin overestimated the relative importance of the underdeveloped countries to the industrial, especially as a long-term factor. For example, although some 46 per cent of Britain’s capital exports went to Empire countries by 1914, nearly three-quarters of this went to the Dominions of white settlement – e.g. Canada, South Africa – thereby aiding their industrialisation and profitability. And just under the remaining quarter went to India alone, such was the strategic importance of India to Britain’s total trade balance – in fact between one-third and one-half of Britain’s total trade debts were paid off through the surplus she extracted from India! In total, by 1914, 58 per cent of Britain’s capital exports went to the continents of North America, Europe and Australasia. Well over half the total capital exports went into constructional engineering projects and railway building, but this proportion was somewhat unique to Britain. The picture that increasingly emerges in the twentieth century is that the great bulk of capital exports from industrial nations go to other industrial nations. Like Marx, Lenin was over-optimistic about the chances of laying the foundations of economic growth in the underdeveloped economies.

But where does this leave Lenin’s theory of imperialism? If capital exports were due to declining profits at home, what good could result by investing in other mature industrial economies where profits squeeze might also be expected? Well, firstly not all industrial areas of the world economy were as ‘mature’ as British capitalism, and even within the mature economies not all sectors of industrial growth were retarded. In particular metal mining, light and electrical engineering industries, special steels and chemicals, oils and motors did well (ironically industries in which Britain lagged behind). Secondly cheap raw materials and food resulting from imperialist exploitation did play a significant role in reducing costs – but the role was a diminishing one in the twentieth century as industrial nations have increasingly used their own synthetic substitutes and developed their own highly industrialised farming techniques. Thirdly, the world was carved up between the imperialist powers, but with the overall effect of impoverishing rather than industrialising the underdeveloped countries. This prevented a continued expansion of world capitalism based upon these territories, forcing twentieth century growth back on to the narrower base of predominantly US and European capitalisms (obvious exception is Japan). Profit and overproduction crises, and wars were therefore the characteristics of the period 1880–1939.

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