The Political Economy of Declining Capitalism

By Hillel Ticktin
 

PART1: THE TRANSITIONAL EPOCH, FINANCE CAPITAL AND BRITAIN

The purpose of this article is to place the decline of capitalism in Britain within a general
theoretical framework. Its essential argument is that all capitalism must proceed through a
process of formation, maturity and decline, and that Britain is effectively leading that decline.

Britain is not to be understood as that unfortunate country which is now having to cope for the
first time without an empire, as so many people see it, rather it is to be understood as a country
which evolved a particular form of the class relationship with consequent specific forms of
accumulation, which are now of a declining nature. Resurrection or a return to its mature form, is
just as impossible as it is for the human corpse. The declining form of capital is finance capital.
The corresponding form of labour which is also specific, though only in the generalized nature of
that form, has been the degree of collective control over the labour process. This in turn has led to
a particular politics: that of a non-political Labour Party, with non-political unions.

This article will discuss finance capital in the context both of a declining capitalism and of a
capitalism in transition. First we discuss the former concept and thereafter the latter, and from
there we proceed to a discussion of finance capital itself. The discussion on the national and
global views of political economy is still alive; there are those who still insist that the laws of
world capitalism are the only proper subject of political economy, and for that reason it becomes
necessary to introduce the discussion with an examination of what a Marxist political economy
should really be. This naturally leads into a discussion of the interaction of the above concepts
and the reasons for the absence of an adequate Marxism.

NATURE OF POLITICAL ECONOMY

Political economy has received a series of definitions from various Marxists depending on their
school of thought, always remaining at the level of definition. Thus to "lay bare the laws of
motion of modern society" may have been clear enough to Marx and his friends but it is not as
clear to modern political economists1 What is a law? If we use The New Left Review as a guide to
Marxist thought then it would appear as if the concept of law has been abandoned 2 But even for
those who continue to use the term, muddle is the commonest result. The most usual
understanding of law is the non-marxist one of a constant ('regularity or pattern of events) 3 This
classical empiricist conception would make a nonsense of "laws of motion". Simply to describe a
pattern of efficient causes cannot give the reason or driving force behind the motion; it can only
describe a sequence of events in which there is no necessity. This is the current conception of the
political economy of development or the sociology of change, but it is not Marxist political
economy. What is required to describe the necessary cause and development of that motion. Why
is the reserve army of labour necessary for capitalism, for instance? Why does it necessarily tend
to grow? What consequences follow if it does not grow or is indeed greatly diminished? The
source of this motion (to unemployment) must be found in the contradictions of capitalist society,
which give rise to the general law of capital accumulation.

Since the source of the movement lies in contradiction, and the unfolding of that contradiction
constitutes the content of that law, we have some understanding of law. We may say that a law
describes the unfolding of the contradiction or the unfolding of the process of interpenetration of
the polar opposites of that contradiction. It is thus the task of political economy to discuss and
describe this process both in its particularity and in general. In other words, the particular
categories of concrete and abstract labour, must find specific mediations (as temporary solutions)
unless the system is to proceed to its supersession, which it has not, of course, done. Since
capitalism has not succumbed to its contradictions it becomes the particular task of modern
political economy to describe the full evolution of these laws in all their concrete richness.

The category of motion is also unclear to many people. To some it would seem that motion
simply means onwards and upwards. Thus there are many in Italy and some in Britain who see
the present as nothing but a yet more mature and developed capitalism. This has led Panzieri 4, for
example, to speak of planning as the highest form of capitalism, and indeed it has led the state-
capitalist school to deduce all laws from a necessary global state-capitalism. Yet it was none
other than a certain Karl Marx who quoted with approval the view that: "There are special laws
which govern the origin, existence, development, death of a given social organism and its
replacement"5 Unfortunately, the same Karl Marx could not have expected that many of his
modern followers would have succumbed to these self-same laws of decay and produce theories
without concrete factual analysis or genuine thought. The laws of a mature capitalism are the laws
of the system itself, but there are special laws applying to its decay or decline as well to its
process of transition. It must follow that it becomes particularly important to distinguish between
mature capitalism and its forms of decay, as well as forms of transition of "the invading socialist
society" to use the phrase of Engels. These three different forms of motion require concrete
analysis both in time and place.
It follows that only concrete analysis will yield the particular contradictions and so the particular
forms existing at any one time or place. Disentangling these particular forms of the present
becomes particularly complex precisely because one is dealing with three different sets of forms,
or laws. This complexity, due to the fact that laws are contradicting one another, (contradictions
contradicting one another), is characteristic of any mode of production in the process of decline
and supersession. It is this that enables one to speak of there being a higher level of contradiction
in the present than in the mature phase of capitalism.

A clear distinction has to be drawn between this form of complexity and the empiricist form,
where reality is reduced to an accidental plurality of causes, none of which plays a driving role.
Such empiricist complexity renders the history or sociology inexplicable. Marxist complexity is
quite different. Ultimately, all the forms and laws can be traced back to the process of
overcoming the capital-labour contradiction, and in a sense they are necessary consequences of
the law of value, since decline and supersession must follow maturity. In any period of transition
there has to be both the old and new orders and hence not just the contradiction within the old
form of extraction of the surplus product but also between the old form and the new form, which
in turn has its contradictions. However, it is particularly complex under conditions where both
capitalism and socialism can only really exist as world orders. Thus socialism cannot come into
existence, as socialism, as opposed to surrogate forms, usually monstrous forms, until (capitalism
has effectively been defeated on a world scale. As a result, all sorts of combinations of the old
order and limited forms of its negation must first exist before the new order can in fact be born.
Capitalism contains and employs its own negations such as the welfare state and nationalisations
so that it appeared to flourish for a time. But, the necessary contradictions showed themselves and
the new policy of monetarism has attempted a rollback.

Just as Marx adduced a law of early capitalism: the more developed merchant capital the less
developed is capitalism; so we may state that the further developed is the process of the
socialisation of labour the more limited is the operation of the law of value. The problem is that
since each system can only exist as a total system any partial form tends to negate both itself and
the other form. Under feudalism the bourgeoisie could come into being like a chrysalis in the old
order, but even the partial forms of nationalisation, control over the work-process, right to work
etc., tend to reduce the efficiency of capitalism without bringing into being socialism. It is this
peculiarity of the transitional epoch that makes it so opaque, permitting the bourgeoisie to turn
the masses against both nationalisation and the concept of socialism by pointing to their obvious
failure in the social democracies and under Stalinism.

Since the processes are necessarily uneven in time and space many different combinations can
come into existence and each one has to be analysed concretely in order to produce any
theoretical analysis. The short cut of deductive reasoning from an assumed posture has produced
much rubbish, which has given Marxism a bad name6 The reasons for this decadent Marxism
have much to do with the isolation of the writers and their groups in an environment of almost
total intellectual decadence. It is most unfortunate that so many Marxists have succumbed. That
the USSR and its external supporters should write apologetics is to be expected, but that those
critical of Stalinism should have degenerated in the same way, though nowhere to the same
degree, is testimony to both the complexity of the task and the harshness of the atmosphere for
the genuine Marxist.
CAPITALISM IN DECLINE

Concretely, modern political economy has to deal with the forms by which the extraction of the
surplus product from the direct producers is systematically reproduced. This accumulation of
capital under capitalism in the past century has changed by acquiring the specific form of finance
capital, analysed by Lenin as parasitic capital. On the other hand a large sector of the surplus
product now goes through a form of centralised economic administration. It still operates within
the law of value but in contradictory ways. Education, health, the arms industry, heavily
subsidized industries, all testify to negations of the law of value.

We put forward the view that the natural form of a declining capitalism is that of finance
capitalism and that its natural tendency is to separate itself off from productive capital to
constitute a free-floating abstract capital. But its natural tendency is to extract a maximum return
from its investment at the same time as it is dependent on those investments for the source of
surplus value. On the one hand it would reduce productive capital, industry, transport,
construction, mining etc., to shadows through the redeployment of its investment in more
profitable places inside and outside the country of origin not to speak of the high rate of interest,
which would squeeze these sources of surplus value. On the other hand, it would cease to exist in
the absence of productive labour so that finance capital is both parasitic and like any parasite
dependent on its host. It is thus a weakened form of capital in that it has to vacillate between pure
parasitism and a retreat to enable productive capital to rebuild itself. It is also weak in that it must
exercise its control at a distance, often in opposition to its partner, industrial capital.

The Comintern consistently used the term finance capital to denote modern capitalism, not
monopoly capitalism, and for good reason. Thus we read in the Manifesto of the Communist
International: "If the complete subjection of the state power to the power of finance capital had
led mankind into the imperialist slaughter, then through this slaughter finance capital has
succeeded in completely militarizing not only the state but also itself; and it is no longer capable
of fulfilling its basic economic functions otherwise than by means of blood and iron 7 " It is clear
that the term used is 'finance capital' but the statement is also being made that finance capital has
gone beyond the stage of monopolies and trusts to "state-ized production". This statement is
explicitly made further on in the same manifesto. That such a capitalism, which had to resort to
direct force, war and physical controls over a disrupted economy was in decline was obvious and
stated in that form by both the author of the manifesto, Trotsky, and by Lenin.

What has made all talk of a decline of capitalism look silly has been both the long post-war boom
and Stalinist publications. The latter emanating from the USSR stated unequivocally that
capitalism was still declining as witness the decline in the standard of living following from the
law of increasing misery. That is still the official doctrine in the USSR 8 Western Communist
Parties could not churn out such rubbish after the death of Stalin but then bereft of an alternative
they repudiated what they saw as Marxism: a theory of absolute decline of the productive forces,
and were left with a sanguine view of the development of capitalism. The influence of Soviet
style Marxism cannot be underrated, but independent Marxists also succumbed once the
anticipated world depression failed to appear. The contemporary situation was fetishized to the
point where we were told that capitalism could always get out of its own crisis or that the basic
contradiction of capitalism lay in the difference between expectations and performance 9. It is a
sign of health when such as Mandel and Cliff can reach theoretical agreement and adapt theory to
actuality, but it is unfortunate that the agreement is on something mistaken.
Worse was the case of Colletti and his followers who traced all troubles to the mechanical nature
of Second International Marxism if not to that author who in the post World War II period has
become the greatest failure, Frederick Engels 10 The expectation of an end to capitalism was
certainly the view of the centre-left of the Second International and they were not wrong in the
actual evolution of capitalism in the period from 1914-1940, when capitalism was unable to avoid
war, revolution and permanent depression. They would have been wrong if they saw capitalist
evolution in the mechanical form of a declining standard of living leading to its overthrow, but
this was then a discredited viewpoint held only by opponents of Marxism. Capitalism would last
as long as it was not overthrown. This was the view of Kautsky, Lenin and Trotsky, of course, but
also of Luxemburg11 That did not mean that capitalism as a mode of production did not have a
limited life. In decline, it had fewer possibilities for manoeuvre.

In effect, the whole theory of the outmoded nature of the capitalist form was abandoned in favour
of a voluntarism which co-habited with the most unlikely bed-fellows. The boldest spirits have
taken the logical step of abandoning the concept of the working-class as the universal class in
favour of partial movements such as feminism, disarmament, civil rights, ecology etc. The
working-class is dethroned and confusion reigns in the guise of concepts which are unintelligible
because there is nothing to understand in them. That is often the best case, for the common
solution is to abandon all theory and utter the platitudes first so clearly expressed by Bernstein
almost a century ago, of the wrongness of a "caricatured Marxist theory" 12

The theory of the decline of capitalism involves a number of elements. The first is that the
productive forces are being progressively less developed in relation to their potential. This is
emphatically not a statement of absolute decline in the productive forces although this might take
place on a cyclical basis, as it has, in certain aspects, in Britain in the last three years, with the
absolute decline of manufacturing industry. In the second place, the relative underdevelopment of
the productive forces exists in more than one dimension. Thus, the presence of powerful
computers in the United States may not be generalised to all parts of capitalism. This is the spatial
aspect. We may add limited use of these same productive forces to supply human needs in the
same country becoming relatively more limited in relation to its potential over time. The growth
of excess capacity bears witness to this point. Then there is the growth of irrational spending or
waste on advertising, the military etc. This whole field is well documented and discussed, though
not usually under this title. A declining capitalism increasingly creates the potential for man's
emancipation while at the same time employing a decreasing fraction of the potential.

The third point is that capitalism is finite. Even if it continues to exist as long as it is not
overthrown, its fundamental contradictions can only grow. While we discuss their nature below,
the essential argument is that the strength of labour tends to grow for objective reasons, whatever
the subjective intent of the ruling class. Under these conditions the room for manoeuvre for the
ruling class becomes progressively more limited. In the absence of such alternatives as
Imperialism, Wars, Fascism and a rapidly rising standard of living for the workers they are left
only with the traditional depression. However, the very strength of labour makes the depression
necessarily protracted. Furthermore it is wrong to look at crises taking the form of depressions as
functional to the system. Rather they are the expression of the breakdown of the system, which
may or may not lead to its recovery. Each of the downturns in the longwave has been deeper than
the last and we may say that it was the combination of Stalinism, Fascism, War and the long
depression which tamed the working-class last time. This time only the last aspect appears on the
horizon. Massive unemployment for a long period would appear as essential for the recovery of
the capitalist system.
In other words, the survival of the system requires progressively more contradictory solutions of
the immediate crisis. There is only a limited choice available. When the traditional economic
mode of control breaks down, involving, as it does, atomisation and unemployment, then there
remains only direct force and/or concessions. Imperialism was both a method of forcible
extraction of the surplus product as well as one of concessions to the metropolitan working-class
in whole or in part.

Fascism and war are similar mixtures of force and concessions. The problem with these measures
is that they simultaneously politicise the whole population and create the means for their
rejection, whether they be internal or external. Thus, today, imperialism is everywhere on the
retreat, while war is ever more unacceptable. The development of capitalism has made the
conditions for Fascism, the existence of a mass petite bourgeoisie and a Stalinised workers'
movement, less and less propitious. The welfare state in turn has broken down.

It is not accidental, therefore, that the system has returned to its traditional mode of control:
unemployment. Under conditions of high levels of socialisation of production: nationalisation,
concentration and integration of production, not to speak of the effects of the welfare state in
terms of education, health and limited forms of factory level control etc., the defeat required
would have to be epochal. The only solution does appear to be unemployment, but to achieve the
objective it would have to be at enormous levels. Such a depression is already showing its
character: with the alternatives of the destruction of industry and/or large scale nationalisations
particularly of the finance sector, as in Mexico. With such alternatives it seems that the solution
for capital is the destruction of the capitalist class.

Our concern was to show the progressively more contradictory solutions required to maintain the
system. The effects of these solutions are two-fold. Either they show themselves as part of a
decline in that there is a growing divergence of actual and potential production, i.e., the system
patently declines as a mode of utilisation of social labour, or the measures adopted contradict
their essences as capitalist. Measures such as nationalisation may shore up the system but only at
considerable cost to the capitalist class itself. There is no advance to socialism involved but the
law of value is increasingly circumscribed.

Control over investments becomes itself an arena of struggle. The direction of investment in
nationalised industries, the investment policy of pension funds all become the subject of political
debate. That is why we argue that finance capital is, in fact, the final form of private capital and
hence of capital.

THE QUESTION OF TRANSITION

Thus Karl Marx: "As soon as it (capital - HHT) begins to sense itself and become conscious of
itself as a barrier to development it seeks refuge in forms which, by restricting competition, seem
to make the rule of capital more complete, but which are at the same time, the heralds of its
dissolution and that of the mode of production resting on it."13 Thus the decline of capitalism is
indissolubly linked to its transition to the new society. The history of capital is one of movement
from competition to concentration of capital and thence to finance capital, from which we have
statised capital. Each of these three forms apparently strengthens the capitalist class against the
working-class, but in fact does two new things. It increases the degree of socialisation of
production and hence the potential for planning the society on the basis of need, as well as the
power of the working-class over production. This we may regard as the aspect of transition. It
also, however, necessarily progressively negates the nature of the law of value, which is the
essence of capitalism. We will discuss these aspects in turn. Before doing so, however, we must
turn to the new aspect of the last sixty or so years: that of the overthrow of capitalism itself. Areas
of the world today no longer have the market at all, or if they do it is in a subordinate aspect of
the economy. It is this above all which has made the whole epoch different from the classical
period of finance capital and given rise to what is better termed a transitional epoch rather than
the further development of capitalism.

The 1848 Revolutions, the Paris Commune of 1871 and the Russian Revolution of October 1917
proved to the bourgeoisie that it could lose power. The problem that developed for it was that
although the Soviet revolution was, in effect, defeated, the bourgeoisie did not itself regain
power. It was forced to accept a series of forms which either abolished or greatly limited the
market. This obviously applied to certain countries but also to particular aspects of the developed
countries. The stabilisation achieved after 1921 in Europe, was only rendered more permanent
through the welfare states fully established after the Second World War. The economy then
established is regarded by some as the Keynesian-Fordist-Taylorist strategy of the bourgeoisie 14
There is no need to invoke such a conspiracy or conscious strategy, since historically it is clear
that the bourgeoisie had no alternative but to make substantial concessions in order to maintain
itself in power. Nor are these concessions functional to the regime in the sense of simply allowing
its inner expansion. On the contrary, they are highly contradictory to the nature of the system.

In a similar way, the USSR permits the continued existence of capitalism by controlling its
workers, preventing revolutions elsewhere, and acting as a market for industrial goods, but it is
also contradictory to capitalism in withdrawing a sector of the world from the world market.

To the extent that money cannot function as world money it is not fully money. In other words, to
the extent that the world market is broken up and the law of value is limited in its applications,
neither the market nor the law of value have their full nature. We thus return to the point
mentioned above of the progressive negation of the law of value.

The transitional epoch may be defined as the epoch in which the bourgeoisie cannot re-assert
itself in the manner in which it requires and in which it ruled before the twenties of this century,
but the working-class cannot itself take power. The tendencies to which Marx referred are
reinforced, indeed greatly reinforced, by the partial loss of power suffered by the ruling class so
that a number of processes are occurring at the same time. On the one hand there is the objective
tendency to increased socialisation of production, reinforced as a result of necessary concessions
in the transitional epoch; on the other hand the forms of capital continue progressively to decline.
The interaction of these two processes has limited and changed the forms of existence of finance
capital. In other words, while Lenin saw finance capital as the final form of capital, in the
transitional epoch the need to maintain full employment and a rising standard of living
necessarily limited the sphere of action of finance capital. Whereas before the First World War
industrial capital was subordinate to finance capital everywhere, Britain included, the situation
changed thereafter, most particularly after the Second World War. Thus Lenin is not wrong in his
argument on finance capital. It would have been the final form of capital had there not been such
a prolonged period of transition, with the existence of a permanent war between the law of value
or market forms as against the protoplanning forms, which necessarily have to relate to physical
forms, which in turn ultimately go back to needs.

Thus the Keynesian epoch is one in which the need to concede to the working-class necessarily
required a high industrial growth rate, and consequently a rapid rise in the production of
consumer goods, including agricultural goods. This reversed the relation of consumer goods
growth to that of producer goods and so changed the nature of accumulation in that it became
dependent on direct demand for consumer goods, rather than on the expansion of fixed capital.
Thus the industrial capitalist became directly dependent on demand for consumer goods, and
hence on permanent expansion. Finance capital, on the other hand, which was based originally on
the need to finance fixed capital requirements, has found itself the guardian of funds which are no
longer private capital and which relate to consumption rather than production. In origin, finance
capital was either privately owned capital or in the form of trusts, banks etc., which received
money from private capitalists. Today, increasingly it takes the form of merchant banks taking
care of pension fund, insurance or charitable trust monies, all of which relate to consumption,
even if deferred, and which are ultimately for the benefit of pensioners. This is surely the
declining form of a declining form.

FINANCE CAPITAL AND CONSCIOUSNESS

There is another aspect of the present which is crucial in understanding the nature of finance
capital today. That is the increasingly important role of consciousness. It arises in two ways. In
the first place, as pointed out above, the bourgeoisie as it is threatened with loss of power,
becomes increasingly conscious. In the second place the increasing socialisation of production
demands planning, which can only be performed consciously. As the economy has developed, the
areas affected have increased, both at the level of the whole economy as well as within the huge
firms or cartels, and trusts etc., that come into existence.

These two aspects then merge with the feature of the transitional epoch: the accession to power of
governments nominally dedicated to changing the society in the direction of socialism. Whether
the governments are social-democratic or Stalinist, they construct either a society or parts of a
society to which the working-class attaches importance. Thus the USSR unfortunately is today
associated with socialism, and the industrial nationalisation of social-democracy is associated
with failure. These specific conscious attempts to organise the economy have generated disbelief
and cynicism about the project of conscious organisation of the economy in general. Since these
latter call themselves socialists, Marxists and communists, the failure of these institutions is
associated with socialism. The subjective attempts of a group in power to 'plan' are objectified in
a society or institution, which acts as a barrier to change in working-class consciousness. The
subjective becomes objective, which, in turn, is subjective. On the one hand the very existence of
these institutions depends today on political decisions and working-class consciousness, while on
the other, any further change is barred because the failure of those institutions seems to prove the
impossibility of further change.

Under socialism it is clear that consciousness will play a much bigger role since it is a planned
and therefore consciously directed society. The closer society comes to that stage the greater must
be the role of consciousness. In our present epoch that consciousness must be highly complex. In
the first place the bourgeoisie becomes both highly class conscious and able to organise itself on
a grander scale than any ruling class in history. The very instruments potentially usable by the
working-class can be employed by the ruling-class against the working-class.

The state apparatus, the economic administration, the nature of industry and of social life can all
be so arranged that change becomes increasingly difficult. In contrast, the workers are subject to
this form of change and have a much lower level of understanding of the operations of the
society. The increasingly possible change becomes less possible because the very instruments
brought into being to facilitate this change are turned into their opposite by the bourgeoisie.
Unfortunately, this applies as much to the left as it does to the workers, as the left is as fetishized
by the system as everyone else outside the bourgeoisie itself.

Finance capital unites in itself both the need to control the working-class consciously and the
ability to act as the organiser of capital. It is precisely as abstract capital, capital without specific
commitments to concrete production, that is is able to shift itself rapidly on an organised basis.
To do so, however, it must have organised sources of information and the possibility of
organisation itself. Hilferding correctly noted its nature as abstract capital, but he failed to see its
contradictions as capital. He saw it as the ultimate organiser of production, without seeing that it
was not in fact interested in production perse or that it could only exist in a form of competing
capitals15 It is only with the development of nationalisation and increasing involvement of
government with economic administration that centralised economic organisation becomes
possible. Nonetheless, the role of finance capital is not to organise production but capital. In this
role it is able to defend the interests of capital against the working-class on an international basis
and to ensure that the long-term development of the particular national capital is in its interests.

It is finance capital, and not so-called 'multi-national' capital, which is truly international. The
multi-nationals are always based on particular countries with a particular headquarters country;
and this is of necessity since production requires physical space. The same is not true of finance
capital, though its international dimensions are constantly limited by exchange controls, controls
over investment etc., which ultimately are an expression of the importance of the local industrial
bourgeoisie and the particular arrangements made with the working-class.

In the present time, finance capital is clearly playing an increasing international role through
international banking and various organisations of an international character. Still, it is clear that
its potential international role has been curtailed by the existence of local industrial or other
bourgeoisies. Britain, however, was and is different. Its imperial network was based on finance
capital and its present situation is still far more international than any other country.

The important point, however, is that finance capital is the only section of capital which could act
as the organiser of capital and hence as its tactical and strategic planner but, limited as it was
before, it is even more limited today. It is far more conscious than before, but it's room for action
is more confined. It will be argued that it acts through the government, but only in countries
without bourgeois democracy is it able to do so unhindered and directly. Long ago, Engels,
speaking of Bismarck, concluded that the bourgeoisie did not have the stomach for governing
directly16 It preferred a bonapartist form in his judgement.

FINANCE CAPITAL, THE TRANSITIONAL EPOCH AND THE STATE

The conclusion to be drawn is necessarily complex. Greater mobility, more international and
informed understanding of the workings of the system, and more integrated forms of control give
finance capital possibilities of planning capitalism in its own favour. On the one hand, it can
attempt to reduce the nature of the socialisation of production by reducing the size of factories,
maintain uneconomic agriculture, transfer capital to industries, regions and countries which are
more pliable, divide workers by nationality or race, separate mental and manual workers by a
conscious strategy of investment and investment control.

While it seldom implements these actions directly, it can compel customers to do so. It naturally
tends therefore to become the brains of the system. It is abstract capital opposing abstract labour.
As abstract capital, therefore, it is able consciously to perceive the failure of the USSR and of
social-democracy and take advantage of it. It can control countries with centralised production
through its policies on lending, and it can ensure that they are led back into the world market. It
can control social-democracies like Mitterand's France or the Labour Party's Britain, not simply
because it controls the money flows, but because it is able consciously to outmanoeuvre the
governments involved. It is already international in a way the working-class can only aspire to
become, and has research and information systems far beyond what is required for purposes of
control. It is not just bodies like the IMF or the World Bank, but rather the research organisations
and secret files kept by large firms and employers organisations, which in turn can be made
available to the financial institutions. They thus have knowledge, global forms of action and
speed on their side. Against them social democracy appears as clumsy peasants attached to one
nation and with the horizon of village idiots.

On the other hand, abstract capital possesses the abstract possibility of controlling production in
its own interests. Here, however, it stands mute before social-democracy, for the more it attempts
to plan the more it must plan production for growth with the growth in consumption, welfare-
state and low unemployment levels. Abstract capital like abstract labour can only exist in and
through its concrete forms. When finance capital tries to elevate itself into an independent entity,
it loses its connection with its source, which is of course abstract labour, which can only exist in
production, concretely. It is thus always brought back to ground normally through the traditional
method of crisis. As a result finance capital is bound within transitional forms of proto-planning
of production normally of a centralised character. lt is hemmed in all sides through
nationalisations, exchange control, and the direction of investment required for growth in
production. The end result is to reinforce the earlier point that the bourgeoisie cannot ensure its
own preeminence. For the finance capitalist can only prevent the working-class taking power, but
he cannot restore the dictatorship of the capitalist class. The state has thus a particular role to
play.

We have pointed out that capital and surplus value take on forms specific to the epoch of decline
and transition, and that the same is true of labour and the state. For Lenin the state had become a
national imperialist state dedicated to war. This aspect had amply displayed itself, but it had been
checked by the pressing need to survive, given the modern contradictions of war both in the sense
of causing revolution and in the direct sense of the technical obsolescence of total war.

Fearing the charge of reformism, many have refused to face the obvious fact that universal
suffrage (only granted in Britain in 1927 for men and women, and effectively operative for men
only from 1918) has had important consequences. It has meant that the bourgeoisie has had to
permit various forms of indirect rule with the concessions that are entailed. Three entities have
come into existence, the state, government and centralised economic administration.

It is clear that the state has remained exclusively, and without any sharing, in the hands of the
bourgeoisie. Thus the present actions of the police have shown that they are not accountable to
their supposed employers, the local authorities in Britain. Harold Wilson has recounted his shock
at the actions of the army in its wargames around Heathrow airport. The government has more
leeway, often acting against the immediate interests of the industrial or financial bourgeoisie, in
its taxation policy, direction of investment, protection of labour or the terrorisation of labour. Fear
is a necessary instrument of the state, but under modern conditions of production it is
counterproductive if the purpose of production is to produce reliable, technologically advanced
products. The instability of the bourgeoisie forces it to permit, and indeed to support,
governments not of its own choosing. Thus the financial bourgeoisie can probably never ensure a
government of its own kind, even in coalition with its industrial partner. A dictatorship simply
would not work. (That does not mean that it may not be tried, for as finance capital declines it
will be forced to try whatever means are to hand, even if that same means is no more than a
palliative, and even if that palliative may turn into a poison.) We consider that the economic
administration performed by the central government should be understood as a separate entity in
its own right. To regard it as part of the state is to imply the ludicrous statements that it is an
apparatus of force and that the state will always exist, since centralised economic administration
is a necessary feature of socialist society, but the state is not. The important point, in relation to
finance capital, is that the economic administration of nationalised industries, banking, taxation
and subsidisation, stands in inherent contradiction to the interests of finance capital, however
favourable the government.

This apparatus does the planning, and twist and turn as any government might, it can only seek to
increase its own economic power. Education, health, social services, utilities, transport all have
an inherent and necessary tendency to be communally based. Where they are not actually
administered centrally, they have to be regulated. Health and safety inspectorates, pollution
control and the general support required to maintain production under conditions of
unprofitability, or alternatively price and volume regulation, ensure a rising level of government
interference.

Only an economy based on gold could be said to operate independently, for as long as
government has a nationalised form of money it necessarily has a measure of control and
intervention in the economy. The Thatcher government has actually been more interventionist
than its predecessors precisely because it can only achieve its goals through intervention, even if
in a different direction and using monetary instruments more than previously. It is precisely this
control over money which puts the economic administration in competition with finance capital.
The flows of money under the law of value are not under the control of any centre, for firms with
large amounts of money can always arrange lending to whomsoever they prefer at favourable
rates of interest. The large institutionalised forms of finance capital, however, like banks, have, as
the Comintern pointed out, been "statised"17, meaning here not that they are part of the coercive
apparatus or state proper, but that they have to report and respond to the directions of
governments or the central economic organs. In Britain they are not nationalised, but the
extensive system of controls over interest rates, however liberalised, the volume controls over
lending, checks on solvency and government-guaranteed loans, have ensured that the banks are
compelled to be an arm of policy. Finance capital thus finds itself dichotomised between sectors
of finance which cannot be controlled, such as the merchant banks or large companies with
enormous liquid assets, and the controls over its essential nerve centres. It has then to operate in a
climate which is not of its own choosing. It accepts the system as long as it continues to be
defended against the ultimate enemy, which threatens to eliminate the law of value.

This dichotomisation means that finance capital is compelled to act in devious ways to ensure its
expansion and hence is driven to increasingly risky adventures. It also means that finance capital
has to arrange a partnership with the government of the day. The economic administration
necessarily has to maintain levels of employment and to base itself at least in part on levels of
need and not effective demand.

Finance capital is necessarily a form of money capital and hence it is of its nature necessarily in
competition with the development of the central economic administration both in terms of control
over the surplus product produced and in terms of the size of each sector. Clearly the partial
privatisation of nationalised industries allows finance capital greater levels of control over the
surplus value produced through its supply of loans, purchase of shares and consequent direct
placement of reliable persons on the board. At the same time, finance capital can then expand
itself through the former nationalised industry. On the other hand, greater nationalisation limits its
freedom to control and expand.

However, all this is relatively unimportant to industrial capital which requires a developed infra-
structure and a suitably qualified and healthy workforce. Since this is best developed centrally
under nationalised forms there is a necessary conflict, or contradiction with the interests of
finance capital. On the other hand finance capital needs to preserve itself both by making
concessions to the working-class and by obtaining greater productivity from industry. Thus it is
both torn at all times and brought back to earth at crucial periods. It is itself the damaged brain of
capital, constantly acting in schizophrenic forms.

Housing for the workers was always inferior and administered by the system through its
bureaucratic hierarchy. Inevitably, the tenants came into conflict with the administration both
over the poor quality of their flats and over their lack of control over their lives. Social
democracy then stood condemned and the Conservatives put forward the logical value alternative
of commoditising the housing stock. Tenants constantly pushed for better provision based on
need as well as devolution of power to themselves, but these aspects could only be provided by a
noncapitalist system. Similarly, the educational system had to ensure that the children of the
ruling class received the correct education in order to rule, while the rest learnt discipline. There
is an inevitable conflict in which compromise is nonsense, for it has only led back to the old
system with a deterioration of standards and the conversion of many teachers into part-time
policemen keeping the unemployable youth off the streets. It is no different in industry, for the
provision of public housing leads naturally to direct labour departments and the diminution of the
private construction sector. It is no accident that the large construction firms are Thatcher's
strongest supporters. The awarding of contracts by the public sector, especially in local
government, is corrupt the world over, because the interface of public and private property can
only take the form of the use of money to ensure the diversion of public resources to private
interests. Since the Labour Party has most often been the party of metropolitan city government,
corruption of this kind is particularly associated with it. The natural form of ruling class
corruption, the old boy network, is untraceable in economic terms. When civil servants retire
from public service into private firms to advise them on how to obtain what they require from the
public sector, this is regarded as the perfectly natural commoditisation of knowledge. Either way,
there occurs a constant conflict between the sectors, only temporarily overcome by official or
unofficial corruption.

Above all the incentive system must break down when there is little unemployment and when
shop stewards control the production line. Management cannot manage and the inefficiency of the
system can only grow. Since new technique disrupts the full employment situation it can be
introduced only in certain industries and often only very slowly, particularly in the nationalised
industries where control rests with unions to a greater degree than elsewhere. The dynamism of
capital peters out, and for a welfare state in a world of more limited welfare states the possibility
of competing internationally approaches vanishing point.

These contradictions, the contradictions of the transitional epoch, have to be added to the
functioning contradictions of the capitalist economy. This is not the place to go into the particular
importance of the rise in the organic composition of capital or of disproportionality and the
particular solutions adopted. Suffice it to say that these solutions have now failed, ultimately
because the working-class could no longer be disciplined to accept its subordinate position either
in relation to control or in relation to the determination of wages. The new post war generation
was inevitably going to challenge the system, since it had not had to experience the horrors of
war, fascism etc.

How does this relate to finance capital? Simply put, finance capital had to accept a retreat as
industry was made the driving force of the economy and investments were directed to production.
It was itself controlled, in the manner already described, either through exchange controls or
though direction of investment. Keynes was its clear enemy. However, once the danger of the
working-class passed and the malfunctioning of the British economy resumed its natural course
(supplemented by the above contradictions), the controls were relaxed and property speculators,
the exchange speculators and the exporters of capital were able to resume their business. It is
certainly true that they accelerated the decline of British industry, but to blame them alone is to
blame the dung-beetle for the dung. As long as more money could be made in ways other than
productive investment, capital would take those ways. As we will show finance capital amounts
to little more than an outflanking operation in relation to the working-class. The problem,
however, as we have argued, is that the new forms of finance capital are weaker and more
parasitic than ever, while finance capital is more international than ever. Concretely, it has to base
itself on the new forms of the welfare state: pension funds or insurance companies providing
pensions; third world indigenous elites and capitalist classes. It is thus forced both to support the
welfare state and to oppose it, in so far as the above contradictions limit its sources of surplus
value. We are led back to the previous conclusion but at a deeper level; finance capital has
become a parody of itself. Superficially, its separation from industrial capital appears ever more
complete and its power appears greater than ever on a global scale, but it is threatened today with
collapse through crisis and constant nationalisations. (From Critique No.16)

PART2 ON FINANCE CAPITAL CONTINUES

AFTER THE NOTES
NOTES

1. E. Mandel: Marxist Economic Theory: Merlin, London, 1968. Mandel has no definition of political economy in his 797 pages. The
only conclusion that one can draw from his introduction and his final chapter on the history of economic thought is that Marxist
economics is the economics of Karl Marx.

P. Sweezy: The Theory of Capitalist Development quotes Marx in the above terms, taken from the Preface to the German edition, of
Capital Vol. 1. , Moscow, 1961. p.10, but reduces them to the class relations, with no clear link.

E. Mandel: Introduction to the Penguin translation of Capital, 1976 Vol. 1. , p.12 uses the same quote paraphrased put in the context
of origin, growth and decline and then concentrates on the historical nature of laws. Nowhere does he explain the nature of law,
category or contradiction although the terms are extensively used.

M. Dobb's considerable body of work is best passed over in silence as the highest point of scholasticism. In his On Economic Theory
and Socialism: A Lecture on Karl Marx, RKP, London, p.186, he virtually reduces the laws of capitalism to the law of value. He
conveniently found a bridge between the concerns of orthodox economics and the need to maintain the socialist character of the
USSR. In his later work: Theories of Value and Distribution since Adam Smith, Cambridge, pp137ff., 1973, the institutional aspect
particularly ownership, p.144, are stressed. Ben Fine in his Marx's Capital, Macmillan, London, 1975 has no reference to his subject
except on page 19, where he refers sagely to the social science nature of Marxist economics. What is required is a discussion of the
nature of the subject in relation to the present. Mandel who is like a colossus in comparison to the rest as usual never gets to grips with
the question even indirectly in his Late Capitalism.

2. See for instance P. Anderson's catalogue of Marx's errors in Considerations On Western Marxism, NLB, London 1976. p115. Once
the concept of essence is abandoned so must 'law' and hence the Althusserians logically have to drop the law of value. Anderson is just
responsible for importing Althusser not for his ideas. Anderson appears to agree on an empiricist basis.
3. G. Hodgson: NLR 84: The Falling Rate of Profit, p.79: "laws are real social facts." Raniero Panzieri: Surplus Value and Planning,
p.22: "Marxist thought has failed to grasp the fundamental characteristic of modern-day capitalism, which lies in its capacity for
salvaging the fundamental expression of the law of surplus value, i.e. planning, both at the level of the factory and at the social level."
CSE: Labour Process and Class Strategies, Stage 1, London, 1976.

5. Karl Marx, Capital: Vol. 1, p.19 (Moscow 1961) L. Trotsky: The First Five Years of the Comintern, Vol. 1, p. 272, New Park, 1973
has a similar formulation. Mandel has another referred to in footnote 1.

6. The most ridiculous example of starting with the result is given by modern state capitalism. Thus in International Socialism 19,
Peter Binns explicitly starts from a world capitalist economy in order to explain the present cold war. Mike Hayes follows arguing
effectively that world capitalism develops ever new developed and complex forms. Since Marx did not foresee state capitalism he is
found lacking in knowledge of what was to come. "He was therefore ignorant... of the forms that these tendencies would take after his
death" (p.56). Poor Marx who argued: Capital "posits itself only in its adequate forms, insofar as and to the extent that free
competition develops." Grundrisse, p.65, Penguin 1973. Marx failed to foresee that the development of the world state-capitalist
economy was a further development of the laws which he said could not adequately express themselves in such forms, according to
the modern state-capitalist theorists. If they were honest they would just state that Marx was wrong. The circularity of the argument:
arguing that the world is state capitalist because states compete through war and thereafter that war arises because capitalist states
compete escapes its authors. It has to be said that the authors named have done a heroic job with a silly theory.

7. L. Trotsky: The First Five Years of the Comintern, Vol. 1. p 22-3. Pioneer Press, 1945. and pp46-7 of the edition earlier quoted.

8. The view that the West has a continuous impoverishment is held by all Soviet writers, although lately questioned in specialist
journals. Thus Dragilev and Rudenko: Monopolisticheskii Kapital, Sotsekrig, Moscow, 1961, p.363. Kurs Politicheskol Ekonomii,
Vol. 1, Tsagolov (ed.) Moscow, 1963, p.251. These two examples are actually better as they were printed in the relatively progressive
Khrushchev period, and the authors were able to make modifications to explain reality. The Soviet Union holds that capitalism is in a
process of decay and hence the law of absolute impoverishment holds. They see the forces of production being retarded though not
simply held in check. The Ekonomicheskaya Entsiklopediya: Politicheskaya Ekonomiya, Moscow 1972, has an extensive entry on this
subject in the first volume pp10-12. To deal with reality the argument is that there is an intensification of work, increase in accidents,
more women working, mass unemployment etc.

9. T. Cliff: Economic Roots of Reformism, in A Socialist Review p. 67, International Socialism, London, 1965, originally published,
June 1957 in the journal of that name.

"To the extent that past reforms are accepted as necessities, a series of new reforms becomes the expected course of events. With the
eating comes the appetite. When capitalism, however, decays to the extent that any serious demands of the working-class reach
beyond its limits, the bell will toll for Reformism." Mandel's discussion of crisis is functionalist, as in the above cited work: Marxist
Economic Theory, p. 343 ff.

10. L. Colletti: From Rousseau to Lenin, NLB, London, 1972, pp.45ff.

11. Karl Kautsky: The Class Struggle, Norton, New York, 1971, p.185: "The economic struggle demands political rights and these
will not fall from heaven. To secure and maintain them the most vigourous political action is necessary." The problem with the
Colletti type interpretation of Kautsky is that it oversimplifies the ambiguities in Kautsky. To make the issue clearer here again is
Kautsky, p.90: "Patiently to yield to what may seem unavoidable is not to allow the social revolution to take its course, but to bring it
to a standstill." L. Trotsky: In his report to the Third World Congress of the Comintern: "Capitalism thus possesses a dynamic
equilibrium, one which is always in the process of either disruption or restoration." The First Five Years, New Park edition, p.226. In a
less rigid way he is stressing the same inter-relation of the finiteness of capitalism with the necessity for its overthrow.

Rosa Luxemburg put it differently: "But even before this natural economic impasse of capital's own creating is properly reached it
becomes a necessity for the international working-class to revolt against the rule of capital." The Accumulation of Capital, London,
RKP, 1951, p.467. Lenin argued both aspects by pointing to the decay of capitalism in its last stage, but at the same demanding the
existence of a party, which would act as the instrument of change. It is this balance of a decaying capitalism and the need for a
subjective overthrow of the system which has been obscured. Colletti is really projecting backwards the Stalinist interpretation of an
absolute decline which is furthered by a controlled party, controlled from Moscow.

None of the persons mentioned had such a silly interpretation but they all held to a view of the finiteness of capitalism, bound only in
Cliff's psychological contradictions, it has no reason to be superceded. That it may hang on, as did the Roman Empire or feudalism
until it is physically overthrown is another matter.

12. E. Bernstein, Evolutionary Socialism, Schocken, New York, 1961. There is no superior anti-Marxist text, containing as it does all
the usual criticisms although written in 1896. Perry Anderson's attack in terms of the law of value, polarisation of classes and
declining rate of profit is there. Given that he wrote in 1896 it is now obvious that his predictions, not that of Marx, are falsified. Thus
he dismissively quotes Engels' perceptive comment that crises are extending in time and that it might be expected that the next crisis
would be a "new world crash of unheard of violence", (p.79) Engels was right and Bernstein wrong. Given the prediction on the
expansion of the middle class we should all now be middle class, instead of the white collar group being proletarianised as it is,
however lacking in consciousness some people may find them. There is almost not a word new against Marx, since Bernstein.

13. Karl Marx: Grundrisse, p. 651.

14. Michael Aglietta: A Theory of Capitalist Regulation, NLB, London, 1976, p.111 ff.

15. Hilferding: Finance Capital.

16. Engels to Marx, Letter 86, p.205-6, Marx-Engels Selected Correspondence, LW, London, 1936.

17. See note 7.

PART 2: TOWARDS A THEORY OF FINANCE

CAPITAL / THE ORIGINS AND NATURE OF
FINANCE CAPITAL
By Hillel Ticktin

The argument in the first section which appeared in Critique 16, has been that finance capital has
to be seen as the declining and parasitic form of capital, which, however, has been partially
negated by the nature of the transitional epoch. In this section finance capital is discussed as a
concept in its own right.

THE CONTRADICTIONS OF HILFERDING & LENIN

Thus far although finance capital has been referred to, it has not been defined or explained. In
order to do so we will briefly refer to its history as a concept and then attempt to provide a
theoretical definition. It will be seen that in order to do so a discussion of Britain is inevitable. A
discussion of the decline of Britain goes back to finance capital but an explanation of finance
capital has to begin with the experience of Britain or else become a parochial discussion of a
particular country, or still worse a vacuous description of global concepts with no context.

The word is associated in particular with Hilferding's work Finance Capital, and thereafter with
Lenin. As already indicated it became the orthodoxy of the Comintern theorists. Since then it has
been employed in a variety of meanings, though the theorists have always claimed orthodoxy
deriving from Lenin. Since, as we will show, Lenin was not at all clear in his definition,
description or theory, present day theory may be described as simply muddled.

Three definitions can be isolated. Finance capital is in the first instance identified with banking
capital as a separate entity, and indeed both Hilferding and Lenin effectively do so. To the extent
that such capital acts independently then according to them it is banking capital that we are
dealing with. Thus we have such as Sam Aaronowitch referring to finance capital as money
capital.1 The recent article in the CSE journal, Capital and Class, virtually brings out the same
point.2 The essential point is that a form of separation between finance capital and industrial
capital has to be assumed. Lenin and Hilferding appear not to do so but Lenin is too astute to
assume an identity of the two forms of capital and hence precisely points to the fact that there is a
tendency to separation or independence.3 If there is such a tendency, finance capital according to
Lenin would be identified largely with banking capital. Hilferding takes it for granted that there is
no separation and puts the primacy on finance capital, most particularly the banks.

The second definition speaks of a unity of finance capital and industrial capital in the form of a
merger of banking capital and monopoly capital. This is the way it is put by Lenin, and derived
from Hilferding. It has to be said that this is effectively a vulgarisation of Hilferding. Hilferding
is much more complicated since he regards finance capital as abstract capital constituting a new
synthesis of the old usurious capital with banking capital to form a new entity, finance capital,
based on industrial capital. Lenin it has to be said does not put it this way but rather sees it in an
entirely opposed light. He sees it rather as a return to the old usurious capital but in a new epoch:
that of capitalist decay.

There are effectively here two more definitions to add to the first. For the theory, the institutional
forms are really secondary, in Hilferding. 4 He is arguing that monopoly capital leads to the
formation of abstract capital, which necessarily comes to govern capitalism. It thereby acquires
the possibility of planning capitalism in its own interests. It thus lays the foundation of both a
higher form of capitalism and the transition to socialism. Lenin totally opposed this view as
effectively reformist, taking the view that finance capital was a declining, parasitic form. He does
not, however, do more than cite examples of retardation of technology and the reversion of
productive land to forms of consumption in order to explicate his theory. He brings out the
inherent waste involved in monopoly production but he does not do more than referto the
usurious nature of finance capital. In other words, he does not provide an alternative theory.
Instead he effectively rejects the theory of finance capital as such and turns to an institutional
description of the merger of banking and monopoly capital. This leads to the export of capital and
hence imperialism. This, of course, is a theory of imperialism of unparalleled power, but it is not
a theory of finance capital. Indeed he makes it clear that he identifies finance capital with
monopoly capital. Not surprisingly some of his followers have taken him at his word and
concluded that the term finance capital is redundant. 5

Thus in institutional terms finance capital may be regarded as identified with money capital or
banking capital on the one side, and with monopoly industrial capital on the other. But it can also
be regarded as a merger of banking and industrial capital in which the banking capital plays the
major role. Looking at it in another way, banking capital may be regarded as independent of
industrial capital possibly in contradiction with it, or it may be regarded as subservient to
monopoly industrial capital, or yet again it (banking capital) may be regarded as merged with
monopoly industrial capital but controlling it. Lenin can be interpreted in any way the reader
requires. This has only made for permanent muddle. The reason is that it is not possible to
determine which of the three forms is a correct description without developing a theory of the
origin and development of the form of finance capital. Clearly, Hilferding attempted it but ended
up with a most dubious result rejected by Lenin and indeed by history. Obviously, abstract capital
does not plan modern capitalism, nor could it do so without overcoming its own contradictions as
capital. That does not, however, invalidate his discussion entirely. To say that finance capital is a
declining form is the reverse of Hilferding but it is not a rejection of his starting point of
perceiving it as abstract capital. Rather it requires a different explication of both the terms
abstract and capital.
A NEW THEORY OF FINANCE CAPITAL

Capital cannot be identified simply with money, since the whole nature of capital is that it is
capable of extracting surplus value from labour. Thus capital necessarily requires the concrete
form of labour, through the production process. Money in itself, or exchange value which has
become independent, will necessarily attempt to increase itself in quantity. Money which makes
more money, usury or M-M, is indeed money capital, but in so far as it increases itself through
trade it can only have the ultimate meaning of greed or simple consumption. The whole point of
exchange value independent of use-value is its abstract character and therefore its easy
deployment across spheres, industries and countries. That is the nature of money itself, but for
Marx money-as-money can only exist effectively when it is in world form for otherwise it cannot
be exchanged for all goods. But it cannot be in world form without assuming the self-
reproduction of exchange, which can only occur under conditions of accumulation, or the
extraction of surplus value. Thus money can only exist as money if the conditions for money to
become capital exist. Yet the two drives are contradictory. On the one hand money is the
universal equivalent and therefore wholly abstract with a tendency to expand in abstract form. On
the other hand capital must dive back into a concrete form simply to obtain surplus value. Thus
capital as money and capital as the form of the use-value of labour-power are in contradiction.
Historically, the contradiction has been solved first through forms of extraction of surplus value
which involved a rapid turnover, like mining, use of unfree or semi-free labour in primitive
accumulation and later through the extraction of surplus value in increasing quantity through the
acquisition of relative surplus value.

In other words the drive to self-expansion of the abstract form of capital, money as money, could
be harnessed to a concrete form of labour as long as the concrete capital, the fixed capital
required was limited. Once it grew above a certain level a contradiction necessarily established
itself between the requirements of capital that it be fluid in order to take advantage of every
profitable opportunity and the necessity to extract the surplus value through a concrete production
process. Every attempt that capital made to free itself of this contradiction through increasing its
rate of profit, by raising its relative surplus value only brought it back to the same contradiction
of increasing fixed capital to increase its profit, while immobilising itself and so decreasing its
profit.

The contradictions of money capital are legion. In its long existence over many epochs, it can
only exist through the destruction of the modes of production over which it obtains dominance, as
long as they are not commoditised. But if money capital destroys its host, it destroys itself. On the
other hand, once labour power becomes a commodity and the labour process is harnessed to the
making of money, money capital expands the mode of production to the point, however, where it
is subordinated to capital as a totality. Money capital and mercantile capital then become
moments in the unity of the production and circulation process of capital. This must mean that
they are subordinated to industrial capital, which is the only form of capital capable of bringing
into being the means for the objectification of labour, abstract labour. Money capital appears as a
moment in the existence of capital but also as its form. Herein lies the contradiction. As money,
capital tries to have a rapid turnover and the maximum immediate profit, but it is subordinated to
the total need for capital to go through the process of production and so a reduced turnover and
lower rate of profit.6 The huge rates of interest of early capitalism are replaced by huge masses of
profit, based on ever greater masses of fixed capital.
MARX & THE CONTRADICTORY NATURE OF CAPITAL

Marx was quite clear on this contradiction. "Fixed capital appears as the most adequate form of
capital as such". By using the term 'as such' Marx makes clear that he is referring to "capital's
relations to itself'.7 The problem, however, is that fixed capital is attached to a specific use-value
whereas capital as value cannot be attached to any specific form of use-value. This general form
of capital "as regards capital's external relations... is circulating capital, which appears as the
adequate form of capital, and not fixed capital". 8 Thus we have a contradiction between fixed
capital and circulating capital. At first sight it might be asked why capital does not simply transfer
in its entirety to its circulating form and so ensure the easy convertibility of its use-value form
into exchange value. The answer is that it can no more do so than the intellectual could convert
entirely to a senseless brain. The reason is that "The increase of the productive force of labour
and the greatest possible negation of necessary labour is the necessary tendency of labour. . . The
transformation of the means of labour into machinery, is the realisation of this tendency". 9 "The
productive force of society is measured in fixed capital". 10 In other words in so far as capital is
performing its necessary tendency to expand itself it will expand the productive forces of the
society through the expansion of fixed capital. Its aim is the production of relative surplus value,
which is achieved by improving the fixed capital of the firm. Thus the source of its expansion,
dynamism and mature existence lies with the reduction of circulating capital in relation to fixed
capital. The more it does so however, the more confined it is to a particular capital and so to a
particular firm and location, thereby contradicting its immanent drive to universality. The higher
the consequent organic composition of capital, the greater the socialisation of labour, and the
lower the rate of profit, both because of the strength of labour and the progressive devalorisation
of capital. In other words the more successful is the rise in productivity, the lower the value of
products including fixed capital itself, to the point where ultimately both extra value and value
itself cease to have meaning. Before the ultimate result is attained the tendency manifests itself as
it did in the last century. A capital's having to exist in a specific location permits and compels the
worker to exercise pressure, while the capitalist cannot take advantage of higher rates of profit in
other locations. Logically, he ought to transfer to circulating capital and further down the line to
circulation itself. Thus he invests in the extractive industries in the colonies, in construction type
industries such as the railways all of which imply large circulating capitals.

He invests in other countries where the limits of fixed capital have not been reached such as
Germany, USA etc. Here he is aided by the rise of accumulations of money essential to pay for
the amortisation of the fixed capital. In this way the contradiction between circulating capital and
fixed capital is temporarily resolved. He does not replace his fixed capital but rather invests in the
manner described, with the highest profits going to the areas with the largest circulating capitals.
He is further aided by the fact that the high organic composition of capital ensures the decline of
competition and hence a decline in the tendency to invest in fixed capital. It is not eliminated but
only reduced in its intensity, and this permits the transfer of the funds and capital from fixed to
circulating capital, from productive capital to unproductive capital, or from capital with its own
barriers to capital in a less developed form.

FINANCE CAPITAL, IMPERIALISM AS THE DOMINANT FORM OF CAPITAL

We may summarise the results of this discussion as follows. In a mature form of capitalism, the
contradiction between money as a moment of capital and capital itself, between capital as
circulating capital and fixed capital, between abstract capital and capital attached to a use-value is
subordinated to the drive for relative surplus value and so the development of the productive
forces. Only in times of crisis would the contradiction show itself in open form.
Otherwise, the contradiction would not be such as to threaten the system. For the contradiction to
become deadly a new aspect had to enter. That was the simultaneous rise of two new aspects. The
growth of fixed capital could only lead to the growth of huge concentrations of production, which
themselves had particular consequences. The first was that the need to invest internally was
considerably weakened in the absence of the lower levels of concentration, i.e. competition. The
second was that huge sums of money came to be accumulated by those self-same firms with the
large fixed capitals.

Not requiring the same degree of re-investment the sums accumulated, essentially for
amortisation of those original investments, could serve the purpose of overcoming the inherent
contradiction of capital by investment in areas where the return was quick and relatively high. To
achieve this alchemist's dream the investment had to be made in areas of low fixed capital in the
first instance, as in extractive industries such as gold and diamond mining. The construction
industries and the railways are similar. This was of course the original nature of the export of
capital from Britain to the colonies or third world.

The investments in plantations were of a similar nature, as were the even more ruthless forms of
exploitation shown in Leopold's Congo. The contradiction of these forms of investment is that
they are based on earlier forms of capitalism and hence must rely on force direct and unvarnished
for their continuance. To the extent that the development of fixed capital does develop the
productive forces and establish the abstract labourer, it also controls the labourer. The colonial
form, however, which is its necessary antithesis, cannot do so. The costs of the state must then be
borne by the metropolitan country and so once again limit fixed capital formation, whether
through taxation or inflation. This is not to argue that there is no development of colonies or that
there is no benefit to metropolitan industry, but only to point out that there is a general
contradiction in the development of the form of finance capital. It necessarily tends towards the
form of abstract capital and hence the underdevelopment of fixed capital. This in turn tends to
choke off its sources of accumulation, so that it is forced to retreat at strategic periods.

NATIONALIST LABOUR, INTERNATIONALIST CAPITAL

Finance capital does not, however, invest only in circulating capital or only in trade etc.
Historically Britain invested extensively in such countries as Sweden, Germany and the United
States, assisting their process of industrialisation. Here the sums of money which would
otherwise have gone to the re-equipping of British industry or the expansion of British capitalism
were supplied to its competitors. No better example of the extra-ordinary contradictions of British
capitalism could be supplied. Capital as abstract capital is international and so assists in the
competitive destruction of its base.

When that was directly threatened it had to beat a retreat and use its political-military might to
defeat its own creation. The United States is today faced with the same problem in relation to
Germany and Japan. The parallel is instructive as the reason for the export of capital which has
hitherto been given was limited to only one of the two features mentioned. The first feature
which, we argued, caused the shift towards finance capital was the concentration of capital. The
second must lie in the growth of the power of labour. The two aspects are clearly closely
connected as the growth of fixed capital and concentration of production necessarily involves the
increasing socialisation of labour. The growth of the working-class as a class is inevitable. Under
these conditions in Britain the capitalist class was forced to concede first in limiting the working
day and the exploitation of women and children, and then more directly on the shop floor. With a
declining rate of profit, a more demanding working-class, which could only get more demanding,
could not be met head on. Apart from political measures of incorporation, the most effective
measure was to shift investment into areas of lower organic composition, where labour is
naturally less militant. This was done internally as well as externally. However, just as effective
is a shift of investment into areas where labour is less organised or at any rate is more
controllable even with a high fixed capital component. Ultimately, all labour subjected to the
control of capital would combine to oppose capital but the process started first in Britain and
hence the flight of capital began first in Britain.

The investment of capital in areas of the world where there are no unions or there is less labour
militancy is now taken as a standard tactic of capital, but it has always been such a tactic. The
great difference, however, in the Britain of pre-WW2 days was that the shift of investment was
not done directly but through financial institutions, in relation to other countries. The
consequence was that there was a direct movement of capital in the form of money to European
countries from Britain. The effect was that in Britain the separateness of finance capital was
reinforced while the reverse occurred in the capital importing countries. Since there was little
direct investment, the capital in the importing country could be handled only by financial
intermediaries, even if the ultimate destination was the purchase of shares.

This gave considerable power to the banks in countries developing in opposition to British
competition. It also gave enormous power to British financial institutions, which could use
sterling as the international currency next to gold. Britain did not develop its multinational
companies but rather its financial holdings and the requisite institutions. A particular form of
capital, finance capital, thus came into existence in opposition to a particular form of labour.

The particular form of labour is a local, even parochial, labour relating to its own regional or
national fixed capital which has been arbitrarily divided and reduced in stature through the
removal of its natural growth in an international and interregional form. Labour becomes
nationalist in opposition to internationalist capital, thus reversing the real relation of an
international division of labour. It naturally tends to combine with its own local industrial capital
against international finance capital and thus finance capital has created a backward working-
class, which is thereby the more easily contained and outmanoeuvred. This localism is cemented
with the privileges to which Lenin so graphically pointed, made possible through the profits
obtained from empire. In Britain it was not just privileges for the few workers that were made
possible by finance capital. In a certain sense finance capital had gone so far in its polarisation of
its contradiction with fixed capital that it all but left it to its own particularist devices. This meant
a degree of control and concession unprecedented in any country. This then confirmed the
economistic and collaborationist tendencies of labour bound within a backward fixed capital. In
the countries competing with Britain which received investment the situation was not the same,
since their fixed capital was over time increasingly competitive and international in character.

Nonetheless the close relation between a protective internal finance capital and the development
of industry produced a different form of nationalism. The form of control and ideology were
necessarily different. In Britain it was a question of concession on the basis of backwardness,
localism etc., whereas elsewhere it took a more directly national form.

The merger of banking and industrial capital in Germany produced a necessarily longer term and
national approach to industry itself. In Britain the separation of the two forms of capital
necessarily led to a particularistic and economistic labour movement, so that the basis for a
change in the social relations through the socialisation of labour was partially negated. Only in
times of economic and international crisis, such as war, did the particularist attachment to fixed
capital break down. This sounds paradoxical since it is precisely at such times that protectionism
and other forms of division of the working class show themselves. However, during wartime
industry has to be developed to its maximum with the greatest degree of fluidity of labour.

Although at first labour may stand opposed to the labour of other countries and may itself be
disunited domestically, that tends to change in the course of the war, as it did the first World War.
The unity of the class grows with its industrial power, and the potential for planning becomes
manifest. The senselessness of a war of conquest, when co-operation is the natural alternative can
only grow even more apparent. During times of crisis, the divisions must increase at first but the
very mass unemployment which causes the increase of that division becomes the basis of an
increased mobility and fluidity of labour so prized by the employers of labour. It thereby destroys
the very mechanisms which attaches the worker to his factory, his fixed capital or rather that of
his employer. At the same time the solution to his restored sense of insecurity or as Marx put it,
his absolute poverty, lies in a political change within the society. Then the regime must itself find
another political solution, usually this has been war. If it is short and sharp it can achieve the
object, but only in the form of a delaying mechanism. Of course this does not explain the course
of British history but simply points to certain of its peculiarities which arose from the particular
nature of its capital.

CONTRADICTIONS OF FINANCE CAPITAL

If this were all that there was 10 the question it might seem, the last paragraph notwithstanding,
that finance capital was the solution to all capitalism's ills. It has, however, three fundamental
contradictions. Firstly, and most obviously, the more it develops as a separate entity the less
developed must be its fixed capital and hence ultimately its own source of growth. This is why
Lenin ultimately was-able to see it as a form of decay.

Secondly, a separately developed finance capital must necessarily be in the form of the investing
country and the more dependent countries. The conflict between the different investing countries
themselves only really developed with the decline of the major financial power, Britain. In other
words, historically there has tended to be a dominant financial power, with lesser competitors.
This again is no accident. Historically, one country, Britain, developed to the point where it
established a world financial system in which it was dominant. Apart from the fact that it was
first, Britain established a world financial system because the very nature of capital is that it can
only exist in a world form, and since Britain was the world capitalist power it established the
form. Concretely, Britain established the financial markets, the international forms of government
and private lending and provided the state apparatus for their protection. France was the only
other major financial power and it concentrated its investments to an extra-ordinary degree in
Russia. Its relative industrial backwardness never gave it the resources to compete with Britain
and it was knocked out with its total loss of investments in Russia. Thus international money
came to mean sterling. Thus British capital has been international capital and other capitals have
been much more local or national. In the process British capital partially lost its national
character, permitting it to transfer out of its home base, if it required to do so. Its internationalism,
which is at base the attempt by capital to be universal, is contradicted by its particularist base. It
can transfer from a particular point but it always remains based on particular fixed capital in a
particular location.

When the development of that particular fixed capital is retarded at the expense of the
development of finance capital the limitations of its internationalism become apparent. The larger
the original accumulation the longer can the international form maintain itself. The costs of the
form, however, both of direct maintenance, as in the apparatus of force and control in general,
and in diminishing the original base, must ultimately overtake it. Its competitors then come into
their own. Britain has been succeeded by the United States, which has in turn lost its dominance.

Its third contradiction lies in the fact that the international form can only be an. imperial form and
hence it must come into conflict both with-its colonial or neo-colonial labour and with its other
dependent or semi-independent clients. In this manner it must ultimately lose much of its original
investments either through nationalisation or compensatory acquisition.

Since its character as finance capital is as parasitic to its client as it is to its source, it naturally
tends towards the massive extraction of surplus value from these countries and hence to their
ultimate bankruptcy. If finance capital were not finance capital it would re-invest only internally
and so assist a rapid industrialisation at low cost. Instead, it ruins both itself and the
underdeveloped country through the attempt to gouge out maximum profits until it is too late to
save the original investment.

It is clear that all three forms of its necessary decline go back to its contradiction of expanding
itself beyond its retarded source: the extraction of surplus value from labour in the production
process. In its necessary decline, it has no alternative but to turn on its source and attempt to raise
its productivity and so destroy its compromise with labour. In the historical context this has
become immensely complicated with the rise of industrial capital in the context of the welfare
state. However, the essential point has been that the historical advantage of finance capital in
Britain has ensured the predominance of capital, although it may be said that the form itself is
exhausted today.

THE HISTORICAL FORMS OF FINANCE CAPITAL

At this point it is useful to turn to the history of finance capital in Britain. It will be shown that
the evolution of finance capital in Britain is the archetypal form and not that of Germany as
Hilferding argued. It will be argued that banking and industrial capital were merged in all
countries initially but, when the evolution of industry reached the point of being self-financing,
the separation of the two forms became possible. Whether potentiality became reality depended
on concrete history. Once the separation became real the issue becomes one of dominance. This
can take two forms: that the nature of the whole reproduction of capital is subordinated to finance
capital, or direct rather than indirect control is exercised by finance capital. The first form is that
of Britain, whereas the United States appears to be a mixture of the two.

Three forms of relations between finance and industrial capital have come into existence. The
first is that of the continued merger as in Japan and Germany. It is to be noted that it is precisely
Germany which was defeated twice in its imperial ambitions in two world wars, while Japan
which was considerably more backward before the first and second world wars was also defeated
in its imperial ambitions. The problem was not that they lost their overseas investments, but that
their indigenous industries had to be re-built in order to compete once again in the world market,
and they both had to extend welfare provisions to include a commitment to full employment and
industrial growth. It is also true, as we have argued, that history has shown that there can really be
only one national capital which becomes a world capital so that the frustration of imperial
ambitions has forced finance capital in their case to remain internal. Even so present day figures
show considerable outflows from these countries, indicating a certain change in relations which if
continued might go in the direction we have regarded as natural, that of an
independent finance capital separated from industrial capital. The commitment to industrial
growth has meant that internationally the flows of investment have been to a much greater degree
than before the last World War direct investment rather than investment in shares or loans. Thus
the separation is limited internationally but not removed.

The second is the obverse: that of an independent finance capital, as in the case of Britain. In its
case, it was the dominant industrial power whose imperial form permitted it to act fora time as
international capital itself and it won the necessary wars to maintain its dominance. Industrial
capital was stunted in relation to other countries such as the USA or Germany. Its enormous
returns from overseas investments as the well quoted figure of 10% of GNP in 1914
demonstrates, allowed its finance capital to be both independent and dominant. French finance
capital which was similar before the first world war had a much weaker industrial base and was
effectively eliminated as a finance capitalist power both by the expropriation of a large proportion
of its assets in Russia and by its enormous losses in that war. The nationalisation which is now
the fate of finance capital in that country is a natural consequence of the defeat which we
sketched above. Its source of surplus value had been so retarded through internal and external
losses and defeats that only the use of a strongly centralised bureaucracy could revive it.

The third case is that of the present day international financial power, that of the USA. There it is
clear that around the 1930s its industrial companies became self-financing. The six powerful
groups of finance capital identified by the TNEC and Sweezy have given way to a much more
amorphous form, which the debates in the USA have struggled to adapt to Lenin and Hilferding.

It is quite obvious that General Motors and AT&T are so large that the banks or other forms of
finance in the USA are dependent on their custom rather than the other way around. Nor is it
accidental that the state had to step in to assist Chrysler and not the banks alone. The tendency to
conglomeration has shown its limitations and the reverse is now occurring. Furthermore a glance
at Fortune's 50 largest mergers shows the tendency in practically all cases towards a merger of
similar interests in 1981.

The essential questions are the degree of control exercised and the source of the surplus value and
in these respects the tendency is towards separation. Where the firm is dependent on the bank for
the source of its funds for reinvestment and the bank then makes a long term commitment, they
are clearly merged with dependence on the bank. In the USA this was true until the thirties and
there clearly exists this kind of dependence for small and medium sized firms. Unless however,
the banks actually take equity in the firms the dependence is still more limited than the kind
described by Hilferding and still existing in Germany for instance. Where, however, the banks
might invest in government bonds, lend overseas and lend to a variety of institutions on a
basically short term basis, they are then independent of any industry and industry in general. Of
course, in the end, the source of surplus value goes back to the production process but its
extraction can be very indirect, operating, as indicated, through the government, on overseas
interests and on different sectors of industry, with the result that the financial interests develop a
firmer short-term interest towards industry. In turn, industry itself can obtain the bulk of its long-
term funds from internal sources.

In such a case, although ownership of the banks and the industry or firm might be the same they
operate independently. In fact, in so far as finance capital can obtain higher rates of profit the
tendency will be to transfer funds from the industry. To the degree that competition is limited this
tendency will be accelerated. In this case, the two aspects of capital operate independently but the
surplus value is transferred to finance capital and in this different sense it is dominant.
In a third case, where the firms are both large and within the world market, subject to
considerable competition, they will tend to be self-financing, generating huge sums of money
with the banks acting only as facilitating mechanisms. On the other hand, at certain crucial
junctures as during a crisis, or when expansion is critical, stock-market flotations become
important and hence the price of shares plays a crucial role. The price of the shares depends in the
end on the long term profitability of the firm, in the opinion of finance capital. Thus investment in
internally uncompetitive industries such as steel is frowned on, as opposed to so-called high
technology, the retail sector etc. A climate of investment opinion is established.

The existence of very large institutions like pension funds and insurance companies facilitates the
relative independence of finance capital in that its source of funds is ultimately wages rather than
surplus value, although control remains vested in fact with particular financial forms and
institutions, like the banks themselves. Nonetheless, the interest of pension funds lies with
maximizing short-term return in order to pay larger pensions not with longterm risky investment.
The effect is to dilute control over companies in which they might have important share-holdings.
This is both because the pension funds are nominally owned by the prospective pensioners and
because its requirements conflict with the interests of industry.

It may be objected that the holding company negates much of what has been just argued. 12 Thus it
can be said that the holding companies of Rockefeller Brothers or Du Pont are just
agglomerations of money capital shifting around where they can, to obtain the maximum return.
In fact, this is obviously not true and fails to account for the tendency to de-conglomeration.

A holding company which basically controls a large part of an industry is simply a more flexible
method of owning a company. The holding company is actually faced with a choice. It can either
buy and sell shares, lend money directly, invest in fixed securities - like any financial institution -
or it can invest on a long term basis in a firm or series of firms. In the first case it is no different
from the forms of finance capital described while in the second it would only be different from
actually owning a particular company if it was a conglomerate. The problem with being a
conglomerate, however, as the financial press points out ad nauseam, is that either the parts
function independently or the holding company has to have extra-ordinary managing ability.
Since, as we have pointed out, the tendency of capital is to try to overcome its problems with
fixed capital by shifting its investments into a more circulatory form the natural tendency of any
holding company is to sell its less successful sectors. It will then tend either to hold to the area
where it is successful or effectively become investment managers, buying and selling shares etc.
In fact, many holding companies tend to be a mixture of both solutions.

We may return to the British case by pointing to the differences with the USA. Although
concentration of capital is not low in the USA it is considerably higher in the UK both in industry
and in financial institutions and hence the separation appears in a starker form. The smaller size
means that the more limited market does not make for small and medium sized companies
dependent on banks. While they exist they play an almost insignificant role in the economy, so
that their dependence on banks is of secondary importance. The second major difference is that
the role of the pension funds and insurance companies, together with the relatively smaller stock
market has meant that the control over shares is much more concentrated. In Britain
nationalisation of the major merchant banks and two or three of the top insurance companies
would put effective control over quoted companies in the hands of the state.
BRITAIN

The independence of finance capital from its source is always relative, because of its ultimate
dependence. It is this contradiction which renders finance capital contradictory not just between
form and content but in its form itself. It is unstable because it must render itself independent of
industrial capital but it has to return to its origins with potentially disastrous consequences as we
have argued above. We can today trace its origins and notice that it is not cyclical but
evolutionary. It is subject to the cycles and waves of capitalist development but it has its own
evolution. Historically, British industrial development appeared different in relation to its forms
of finance because it evolved slowly. It has, however, been pointed out that although large banks
do not appear as financiers of the industrial revolution the smaller county banks were closely
connected with the development of industry. Then too in the earlier period when crises occurred
frequently lending short was converted by default into lending long, particularly when the banks
were relatively small. Thus Peter Mathias: "Banks, and the partnerships of banks, throughout the
country showed a very intimate connection with wealth made in trade and industry. Rich
industrialists not uncommonly became partners in banks . . . Where a merchant or an industrialist
or mineowner was a partner in a bank he felt he had special claims for accommodation." 13 He
argues that the bankers might finance industry with their private funds, or give long term credit
by propping up the merchant creditor. In any case, he points out in another connection, in relation
to the formation of large capitals a legal division existed in the partnership between those
supplying capital and those managing. While the commercial banks evolved as conservative
financial institutions their early history was re-written to conform to their stated intentions and
most particularly to their later form.

On reflection it is clear that the evolution of early industrial capital had tobe one in which the
merchant and money capital which had evolved merged itself with aspiring industrialists, who
would necessarily be undercapitalised. Thus the view that Britain was some freak which would
ultimately conform to the evolution of Germany, as Hilferding saw it, has to be revised. Germany
on the contrary travelled the same road as Britain with the important difference that it would be
more dependent on the banks because of its later development not in its need for money but in the
institutional form.

The difference was thus more apparent than real. There was another crucial difference: that the
world monopoly possessed by Britain allowed a lower level of competition, in terms of finance
required than the later Germany. Thus Mathias: "Very often, too, profits in excess of the
requirements of investment in expansion would be invested in government securities, transport
stock or other non-industrial assets."14 This, of course, argues that there was no period of non-
monopolistic competition. It would actually appear as if the German cartels had more need to
invest in order to compete than the early British industrialists. It would also seem that a separate
finance capital began quite early in Britain. However, as we pointed out above there was in fact a
close connection between finance and industry in this period.

Perhaps the example of the breweries is most picturesque for they "became associated with banks
in over fifty cases".15 Marx long ago pointed out the importance of investment in government
stock. Nonetheless there is a difference between a tendency which is becoming a reality and the
establishment of that reality.

What lay behind the evolution in Britain was the growth of the self-financing aspect of capital at
the same time as three other tendencies. Firstly, although Britain did not develop the giant
monopolies of Germany it did have an increasing size of capital, both through concentration and
centralisation. The size of the fixed capital would have to rise over time. This is only a statement
of the rise in organic composition of capital, about which Marx was exercised as an evident
British reality. Its rise meant an equivalent rise in money capital requiring to be saved over time.
In the second place the rise in organic composition as Marx argued and Ricardo had earlier
argued on different grounds led to a decline in the rate of profit. This, however, would not have
been enough to either lead to a decline in the rate of profit or a movement of capital from
industry. It was the third which was crucial. The rise of the working-class movement made it
difficult to pass on declining profits to the workers. There is no need to argue this case since it is
well documented both in its rise and in the decline of the modes of control over labour power
earlier exercised. It should be noted that the three aspects mentioned are necessary forms arising
in logical order. The rise of the working-class movement re-enforced the tendency to replace
labour with capital and so caused increased concentration and centralisation of that capital but a
declining rate of profit which in turn required further attacks on the working-class. The struggle
over machinery and working-conditions has its limits when an alternative increasingly presents
itself.

The freeing of funds has two aspects. On the one hand, it seeks more profitable outlets in
productive labour outside its home but on the other it simply re-groups and extracts the same rate
of surplus value by other methods. Thus the extraction of surplus value through rent of property,
interest, insurance, and taxes paid over to the capitalist class through their ownership of
government bonds are just some of the forms in which the worker found himself at a
disadvantage. He could only re-coup his position relative to capital through acting on a national
scale and hence politically, before he was sufficiently political.

Finally, we may summarise the argument as follows: Britain was the first country to evolve
Finance capital as such. Money capital and industrial capital were originally merged in Britain
but the demerger created the new form of capital, which then partially transferred itself not just to
the colonies but also to what became its competitors. The latter, however, could not exist as
competitors as opposed to subordinates except through very close connections between banking
and industrial capital, not to speak of the importance of the government. Whereas in Britain
finance capital was able to achieve its aims through indirect means of control, the latter countries
had to do it directly. Concretely this means that in the case of Britain finance capital could obtain
its share of surplus value through the forms of interest, rent, insurance, management fees etc. with
overseas investment all existing in separate institutional forms from industrial capital.
Nonetheless, this meant that the flow of investment went through finance capital. The latter was
not self-sustaining but industrial capital tended not only to pay a considerable proportion of
surplus value in the above ways but also in the form of dividends and the direction of funds to
investment trusts. The result was that finance capital came to control the potential for growth and
the renewal of the existing capital stock. As long as it was simply a question of slow growth or no
growth, industrial capital could remain as it did operating along its own lines, fundamentally
supplying finance capital with its source of funds. Once that changed, although individual firms
might be able to raise their level of reinvestment, the system required both much higher levels of
investment than could be sustained by individual firms and also a more evenly higher level of
investment to allow inputs, spare parts, machine tools to be of the quality required rather than at
what might be a lower level. This flow was then regulated by finance capital to the point of
possibly not permitting much of a supply of funds at all. This again meant that the separation of
the two forms of capital was re-enforced.

In short the characteristic of finance capital is that it is capital which attempts to raise its own rate
of profit above an otherwise existing typical rate of profit by either using forms of unproductive
capital or less developed capitals with lower organic compositions and higher rates of surplus
value, which may or may not be in the same country. In its crudest form it amounts to an
outflanking operation in relation to the working-class. It tends to evolve to separation but this
process has been historically aborted and three forms have evolved, as in the examples discussed
of Britain, Japan, Germany and the USA.

We may conclude this second part by restating the nature of finance capital as an abstract capital
which has shifted away from its concrete form as fixed capital to one in which it becomes the
form only of realisation in the process of circulation. In so far as it does, so it is parasitic since
capital can only exist as a unity of its two aspects and any attempt to emphasize the one over the
other only leads to a seizure. In this case, the sucking dry of the fixed capital leads to the decline
of capital itself, but not before the forms by which it does so have exhausted themselves. In the
next part, I shall go into the concrete forms of finance capital and their nature. In the final part, I
shall consider the consequences for labour. The essential point is that Britain had a particular
social structure predicated on its head start in the industrial revolution, which outlasted its
industrial decline. Thus it had a particular form of capital and a particular form of labour. (From
Critique No.17)

NOTES

1. Sam Aaronowitch, Ron Smith, Jean Gardiner, Roger Moore, The Political Economy of British Capitalism, A Marxist Analysis,
McGraw Hill, 1981. A distinction is made between finance capital which they say is Lenin's concept of merger and financial capital
which is "concerned with the growth of credit by which money can be used as capital", p.61. Thus they have produced a semantic
difference to hide a real divergence of industrial and finance capital. The need to claim orthodoxy or continuity with one's past is no
doubt strong among those who canonize Lenin, along with Stalin. The distinction between the two terms (p.29) is no doubt essential to
recognise because of the obvious divergence of the two forms of capital, which can no longer be ignored. As a result they produce an
empirical work with a low theoretical level.

2. Jerry Coakley, 'Finance, Capital: A Study of the Latest Phase of Capitalist Development,' Capital and Claw 17, p. 134ff.

3. Lenin. Imperialism the Highest Stage of Capitalism, 'It is characteristic of capitalism in general that the ownership of capital is
separated from the application of capital to production, that money capital is separated from industrial or productive capital, and that
the rentier, who lives entirely on income obtained from money capital, is separated from the entrepreneur and from all who are
directly concerned in management of capital.

Imperialism or the domination of finance capital is the highest stage of capitalism in which this separation reaches vast proportions.' p.
132 of the Varga and Mendelsohn edition. New Data for Lenin's "Imperialism', or p.

118 of Vol 19 of the Third Russian edition of Lenin's Works: 'Either finance capital is separate or it is merged with monopoly
industrial capital.' Yet Lenin does not resolve the problem. 'The "personal union" between the banks and industry is completed by the
"personal union" between both and the "state".' p. 102. "The result is twofold: on the one hand the merging loan ev er greater extent, or
as N. Bukharin aptly calls it. the coalescence of banking and industrial capital: and on the other hand, a transformation of the banks
into institutions of a truly "universal character".' (p. 104) He then goes on to give instances of merger. Lenin appears torn between two
conceptions: one which is derived from the logic of capital and the other an empirical description of Germany.

Varga and Mendelsohn vulgarise the whole thing by ignoring the question of separation and providing detailed examples of the
merger.

4. Hilferding. Finance Capital. RKP, London 1981. The crucial theoretical chapter is translated also in Bottomore and Goode, Austro-
Marxism pp. 204-8. I have used the Russian translation by Stepanov, Moscow 1931. The Chapter involved is that on the Capitalist
Monopolies and the Banks.

5. The kind of muddle which theorists have got into is well illustrated by the Soviet view or rather one Soviet view. They argue that
finance capital is simply the merger of banking and monopoly capital. Which of the two is more important is an empirical question. 'In
actuality finance capital denotes the merger of banking and industrial monopolies'. After slating Hilferding in the usual ritual way for
being an idealist, the authors declare. 'Behind every bank, however big it might be, however independent in its actions it appears, there
stands a finance-oligarchic group, in whose hands the bank is one of the tools of monopoly control.' Readers may be forgiven for
concluding that the industrial monopoly is what is important and the banks a secondary phenomenon. Quotations are taken from M.
Dragilev and G. Rudenko. Monopolistuheskii kapital Sotsekrig. Moscow 1961. pp. 96-7. On this view Britain was not part of finance
capitalism. Hence Sam Aaronowitch's strenuous attempts to show the Soviet view correct in his books The Ruling Class and
Monopoly Capital. In his later incarnation he has dropped this nonsense. The reason for the Soviet problem is revealed on the same
page when it is pointed out that nationalisation of the banks does not necessarily change the system. Thus the French nationalisations
of the banks changes little according to them. Obviously if you have a system in the USSR where nationalisation is its chief feature, it
cannot be identified with such as France. As a result, finance capital can exist according to Soviet theorists even if all finance is
nationalised because the only thing that is important is the existence of monopoly industrial capital, with holding companies.
Logically, they ought to simply adopt Sweezy's terminology of monopoly capital, but they cannot without criticising Lenin, or
admitting that capitalism has developed new forms.

6. Marx, Grundrisse, pp. 620-3 goes into some detail on this issue.

7. Ibid., p. 694.

8. Ibid.

9. Op. cit., p. 964.

10. Op. cit., p. 695.

11. Fortune, January 24, 1983.

12. The debate around Sweezy, MR. November 1971. Fitch and Oppenheim. Socialist Revolution, Vol I. nos. 4, 5, 6, takes place on
different grounds. Sweezy curiously argues that there could not be two factions of capital. While his adversaries argue that
corporations are controlled by finance capital. Sweezy appears not to know of Marx's statement; 'As a particular form, interest bearing
capital stands opposite, not labour, but rather opposite profit-bearing capital.' Grundrisse p. 653. Earlier he speaks of 'monied
capitalists and industrial capitalists can form two particular classes only because profit is capable of separating off into two branches
of revenue.' The real problem is that there is a real separation existing in Britain and a tendency towards that fact elsewhere, rather
than a simple merger. But that separation is in lad predicated on a common source and consequently it is limited.

13. Peter Mathias. The Transformation of England, Methuen, London 1979, p. 106.

14. Op. cit., p. 105.

15. Op. cit., p. 106. of Oxford