Zombie Capitalism Global Crisis and the Relevance of Marx

There is a continual tendency for cartelisation to be extended. The individual industries become increasingly dependent upon the cartelised industries until they are finally annexed by them. The ultimate outcome of this process would be the formation of a general cartel. The whole of capitalist production would then be consciously regulated by a single body which would determine the volume of production in all the branches of industry.10

Hilferding did not see competition as disappearing completely. He emphasised the importance of international competition, pointing to the way the merger of finance and industry inside a country led to pressure on its state to use protectionist tax duties to aid its capitalists in their struggle against rivals in the world market. "It is not free trade England, but the protectionist countries, Germany and the United States, which become the models of capitalist development", wrote Hilferding." Far from continuing with the traditional liberal notion of a minimal "night-watchman state" the great trusts wanted it to have the power to widen its boundaries so as to enlarge the market in which they could gain monopoly profits: "While free trade was indifferent to colonies, protectionism leads directly to a more active colonial policy, and to conflicts of interest between different states" ,12 Hilferding argued. "The policy of finance capital is bound to lead towards war" .13

This analysis went beyond anything in Marx. He had witnessed the wars of his lifetime and written about them: the opium wars of Britain against China, the Crimean War, the American Civil War and the Franco-Prussian War. But these were wars, as he saw it, resulting from the drive of capitalism to impose itself on the remnants of the pre-capitalist world around it. Capitalism had come into the world "mired in blood'', but Marx's model contained no more than a few hints as to why fully established capitalist countries would be driven to war with each other. Hilferding had taken a first step towards a Marxism for the 20th century that explained what had changed since Marx's time in this all-important respect.

There were, however, ambiguities in Hilferding's approach. The main trend in his book was to argue that the growth of monopolies did not do away with the tendency of capitalism to crisis, and their growing reliance on the state would lead to intensified international competition, imperialism and the drive to war. But at points there were suggestions that pointed to a very different conclusion-that the monopolies and the state could work together to dampen the tendency towards crisis: "The specific character of capital is obliterated in finance capital" which was able to resolve "more successfully the problems of the organisation of the social economy", even though it was still a class society, with "property concentrated in the hands of a few giant capitalist groups" .14 This meant the mitigation of the old style economic crisis:

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As capitalist production develops, there is therefore an increase . . . in the part of production that can be carried on under all circumstances. Hence the disruption of credit need not be as complete as in crises in the earlier period of capitalism. Furthermore, the development of the credit crisis into a banking crisis on the one side and a monetary crisis on the other is made more difficult . . . 15

The mass psychoses which speculation generated at the beginning of the capitalist era . . . seem gone for ever.16

Hilferding did not carry his argument through to its logical conclusion in Finance Capital, and still wrote that the system could not do away with "the cyclical alternation of prosperity and depression" .17 But by the 1 920s, when he served as a minister in two Weimar Republic governments, he veered towards Bernstein's approach with a theory of "organised capitalism" in which the anarchy of the market and the trend towards crisis disappear.18 One corollary was to deny that there was anything in capitalism inevitably leading to war, since the "organised capitalisms" in different countries would want to cooperate with each other.

A similar conclusion had already been reached in 1914 by Karl Kautsky, leading him too to a position that barely differed in practice from Bernstein's. But where Hilferding pointed to the merger of finance and productive capitalism, Kautsky's argument rested on seeing a fundamental distinction and antagonism of interests between them:

The finance capitalists . . . had a direct interest in transforming each national state into an apparatus of support for their own expansion. Imperialism was therefore directly linked to finance capitalism. But the interests of finance capital were not identical to those of industrial capital, which could expand only by broadening its markets through free trade. It was from the industrial sector that impulses towards international concord arose in the bourgeois camp . . . Imperialism, the expression of one phase of capitalist development and the cause of armed conflicts, was not the only possible form of development of capitalism.19

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Kautsky stressed the role of arms firms in particular as having an interest in imperialism and war. But he maintained that the economic costs of rearmament, while they favoured the development of some sectors of industry, were detrimental to others. Capital in the industrial countries needed to dominate the "agricultural" countries in order to get raw materials. But there was no reason why capitalists should not be able to cooperate to do this through a "sort of super-imperialism" .20

In holding that the drive to war was something that happened despite the interests of most capitalists, Hilferding and Kautsky were articulating a view very similar to that of some liberals. One was the influential economist Hobson, who had produced his own theory of imperialism some eight years before Hilferding. He saw imperialism as the product of one interest group, those connected with certain financial institutions.21 These opted for guaranteed returns of interest on overseas loans rather than taking the risks involved in industrial investment at home, and welcomed colonial expansion as a way of making sure their state guaranteed the safety of their investments. So for Hobson the root of imperialism lay not with capitalism as such but with finance capital and those he saw as benefitting directly from it-the bond-holding rentiers who received their dividends regularly without ever having to worry themselves with productive or commercial activity of any sort.

Another British liberal, Norman Angell, argued a similar position, identifying an essentially peaceful dynamic in capitalism, although ascribing a more benign role to finance-no doubt influenced by the unhesitating way the central banks of France and Germany had sent gold to help Britain, and Russia had then sent gold to help Germany, during the major financial crisis of 1907.22 "In no department of human activity", he wrote, "is internationalisation so complete as in finance. The capitalist has no country, and he knows, if he be of the modern type, that arms and conquests and jugglery with frontiers serve no ends of his . . . "23

Such arguments have percolated down through the years to the present day. So the former revolutionary Marxist Nigel Harris argues that "business has in general no more power over governments than populations" and the threat to the world comes not from untrammelled capitalism but from the states which guard their own interests.24 Ellen Wood is still a militant Marxist, but her arguments are not that different. She has criticised what she calls "classical-Marxist theories of imperialism" of the First World War years for failing to see that the "'political' form of imperialism, in which exploitation of colonial peoples and resources depends on political domination and control of territory", is "the essence of pre-capitalist empires" .25 "Capitalist class exploitation'', she insists, is a "purely economic process which, like capitalist class relations, concerns the commodity market" .26 From this it follows that, while capitalism needs a state to exert control over society, it does not need states that enter into conflict with each other. Much the same argument is put by Michael Hardt and Toni Negri in their book Empire. Hardt wrote shortly before the US invasion of Iraq that the "elites" behind the decision to go to war "are incapable of understanding their own interests" .27

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The classical theory of imperialism

Writing in the middle of the First World War, Nicolai Bukharin28 and Vladimir Lenin29 drew very different conclusions. They began with Hilferding's description of the integration of banking capital, industrial capital and the state, but removed from it any sense of the result being harmonious by stressing the way in which the role of the state in international economic competition led to war.

This was the overriding theme of Lenin's pamphlet Imperialism. Its aim was to be a "popular outline", showing how the resort to war was a product of the "latest stage of capitalism"-the original subtitle to the work:

Half a century ago, when Marx was writing Capital, free competition appeared to the overwhelming majority of economists to be a "natural law" . . . Marx had proved that free competition gives rise to the concentration of production, which, in turn, at a certain stage of development, leads to monopoly . . .

This is something quite diferent from the old free competition between manufacturers . . . producing for an unknown market. Concentration has reached the point at which it is possible to make an approximate estimate of all sources of raw materials (for example, the iron ore deposits) of a country and even . . . of the whole world . . . These sources are captured by gigantic monopolist associations . . . The associations "divide" them up amongst themselves by agreement.30

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Once this stage is reached, competition between the giant corporations is no longer based simply-or even mainly-on the old purely market methods. Taking control of raw materials so that rivals cannot get them, blocking rivals' access to transport facilities, selling goods at a loss so as to drive rivals out of business denying them access to credit, are all methods used. "Monopolies bring with them everywhere monopolist principles: the utilisation of 'connections' for profitable deals takes the place of competition in the open market".31

The capitalist powers had partitioned the world between them, building rival colonial empires, on the basis of "a calculation of the strength of the participants, their general economic, financial, military and other strength. " But "the relative strength of these participants is not changing uniformly, for under capitalism there cannot be an equal development of different undertakings, trusts, branches of industry or countries" . A partition of the world that corresponded to the relative strength of the great powers at one point no longer did so a couple of decades later. The partitioning of the world gives way to struggles over the repartitioning of the world:

Peaceful alliances prepared the ground for wars and in their turn grow out of wars. One is the condition for the other, giving rise to alternating forms of peaceful and non-peaceful struggle on one and the same basis, that of imperialist connections and interrelations of world economics and world politics. 32

The epoch of the latest stage of capitalism shows us that certain relations between capitalist associations grow up, based on the economic division of the world; while parallel to and in connection with it, certain relations grow up between political alliances, between states, on the basis of the territorial division of the world, of the struggle for colonies, of the "struggle for spheres of influence" .33

Britain and France had been able to build great empires, dividing Africa and much of Asia between them. The Netherlands and

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Belgium controlled smaller but still enormous empires in Indonesia and the Congo. By contrast, Germany had only a few relatively small colonies, despite its economy beginning to overtake that of Britain. It was this discrepancy that lay behind the repeated clashes between the rival alliances of great power that culminated in the First World War.

Finally, where Kautsky focused simply on the control of the "agrarian" parts of the world (what today would be called the Third World or the Global South), Lenin was insistent that the imperialist division of the world was increasingly centred on industrial areas. "The characteristic feature of imperialism is precisely that it strives to annex not only agrarian territories, but even most highly industrialised regions (German appetite for Belgium; French appetite for Lorraine)". 34

Bukharin's Imperialism and World Economy, written shortly before Lenin's work, but appearing afterwards with an introduction by Lenin, made the argument just as forcefully as he draws of the consequences of the tendencies that Hilferding had described:

Combines . . .in industry and banking . . . unite the entire "national" production, which assumes the form of a company of companies, thus becoming a state capitalist trust. Competition . . . is now competition of the state capitalist trusts on the world market . . . Competition is reduced to a minimum within the boundaries of the "national" economies, only to flare up in colossal proportions, such as would not have been possible in any of the preceding historical epochs . . . The centre of gravity is shifted in the competition of gigantic, consolidated and organised economic bodies possessed of a colossal fighting capacity in the world tournament of "nations" . . . 35

Writing three years after the end of the war, he drew out the implications even more sharply:

The state organisation of the bourgeoisie concentrates within itself the entire power of this class. Consequently, all remaining organisations . . . must be subordinated to the state. All are "militarised" . . . Thus there arises a new model of state power, the classical model of the imperialist state, which relies on state capitalist relations of production. Here "economics" is organisationally fused with "politics"; the economic power of the bourgeoisie unites itself directly with the political power; the state ceases to be a simple protector of the process of exploitation and becomes a direct, capitalist collective exploiter . . . 36

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War now becomes central to the system, arising from the competition between the "state capitalist trusts", and also feeding back into and determining their internal organisation:

With the formation of state capitalist trusts, competition is being almost entirely shifted to foreign countries. The organs of the struggle waged abroad, primarily state power, must therefore grow tremendously . . . In "peaceful" times the military state apparatus is hidden behind the scenes where it never stops functioning; in war times it appears on the scene most directly . . . The struggle between state capitalist trusts is decided in the first place by the relation between their military forces, for the military power of the country is the last resort of the struggling "national" groups of capitalists . . . Every improvement in military technique entails a reorganisation and reconstruction of the military mechanism; every innovation, every expansion of the military power of one state, stimulates all the others.37

The logic of the argument presented by Lenin and Bukharin was that the period of peace that followed the First World War would, sooner rather than later, give way to a new world war unless capitalism was overthrown. "The possibility of a 'second round' of imperialist war is . . . quite obvious", wrote Bukharin.38 As we shall see later, the reaction of the great capitalist powers to the economic crisis that began in 1929 confirmed this prediction. That has not, however, stilled the argument against the Lenin-Bukharin account.

The economics of empire

This argument assumed-and still assumes39-that peaceful free trade rather than a militaristic struggle to control chunks of territory would have been the most profitable course for the majority of capitalists to pursue. This claim is easy to deal with. The great period of growth of the Western empires was the last quarter of the 19th century. In 1 876 no more than 10 percent of Africa was under European rule. By 1900 more than 90 percent was colonised. In the

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same period Britain, France, Russia and Germany each established colonial enclaves and wide spheres of influence in China; Japan took over Korea and Taiwan; France conquered all of Indochina; the US seized Puerto Rico and the Philippines from Spain; and Britain and Russia agreed to an informal partitioning of Iran.

At the same time there was a massive growth in the export of capital from Britain, still the biggest capitalist economy and the centre of the world financial system, even if the US and Germany were rapidly catching up in industrial output. Total British investment in foreign bonds rose from £95 million in 1883 to £393 million in 1 889. It soon equalled 8 percent of Britain's gross national product and absorbed 50 percent of savings.40 Not all exports of capital, let alone of goods, went to the colonies. Much went to the US and quite a lot went to Latin American countries like Argentina. But the colonies were important. Britain's biggest colony, India, alone accounted for 12 percent of exported goods and 1 1 percent of capital exports; it also provided a surplus to Britain's balance of payments that could help pay for investments elsewhere in the world; and it provided Britain, free of charge, with an army for conquering other places.41 The raw materials required for the most technologically advanced industries of the time came from colonial areas (vegetable oils for margarine and soap manufacture, copper for the electrical industry, rubber and oil for the fledgling automobile industry, nitrates for fertilisers and explosives). On top of this, there was the strategic importance of the colonies. What mattered for both politicians and industrial interests was that "Britain ruled the waves" and could use its bases in the colonies to punish states that threatened those interests.

It hardly seemed a coincidence to the theorists of imperialism that the decades which witnessed this massive expansion of colonisation, of exports of capital and of extraction of raw materials also saw the recovery of profitability and markets from the gloom of the Great Depression. They may not always have managed to theorise this clearly, but the coincidence of empire and capitalist boom was real enough.

The Lenin-Bukharin theory therefore stands up as an account of the pre-World War One decades-and of the drive to war. Nevertheless, there was a weakness in Lenin's version of the theory. It generalised from the experience of British imperialism at the end of the 19th century to the whole of imperialism, and tended to make the entire theory rest upon the key role of the

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banks in exporting financial capital. But this did not fit with the picture even when Lenin was writing, let alone in the decades afterwards. The export of finance had indeed been a central feature of British imperialism, but the situation was rather different with its new competitors. In the German case it was the industrial combines, especially those in heavy industry, rather than finance as such, that sought to expand beyond national frontiers by the establishment of colonies and spheres of influence. And the characteristic feature of the US and Russian economies in the pre-First World War decades was not the export of capital but the inflow of funds from other capitalist countries (although there was some re-export of capital). The focus on finance became even more problematic in the quarter of a century after Lenin wrote. The quantity of capital invested abroad never rose above the level of 1914 and then declined.42 Yet the great capitalist powers remained intent on imperialist expansion during the interwar years, with Britain and France grabbing most of the Middle East and the former German colonies, Japan expanding into China, and German heavy industry looking to carve out a new empire in Europe.

The phraseology of certain parts of Lenin's pamphlet has led to some interpretations of it that see financial interests, rather as Hobson and Kautsky did, as mainly responsible for imperialism. This was especially so when, basing himself on Hobson, Lenin insisted on the "parasitic" character of finance capital, writing of:

the extraordinary growth of . . . a social stratum of rentiers, ie people who live by "clipping coupons", who take no part in any enterprise whatever, whose profession is idleness.43

This stress on the "parasitism" of finance capital has even led to some on the left embracing strategies based on anti-imperialist alliances with sections of industrial capital against finance capital-precisely the Kautsky policy that Lenin attacked so bitterly.

Bukharin's account of imperialism by and large avoids these faults. He uses the category of "finance capital" repeatedly. But he explicitly warns against seeing it as something distinct from industrial capital. "Finance capital. . . must not be confused with money capital, for finance capital is characterised by being simultaneously banking and industrial capital" .44 It is inseparable, for Bukharin, from the trend towards domination of the whole national economy by "state capitalist trusts" struggling globally against other "state capitalist trusts " .

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Such a struggle did not have to concentrate on investing in foreign countries. It could turn into something else: the effort to wrest from other countries already industrialised areas or sources of important raw materials by force. As Bukharin put it, "The further it [imperialism] develops the more it will become a struggle for the capitalist centres as well" .45

It was necessary, in other words, to turn vast amounts of value into means of destruction-not only in order to try to obtain more value but to hold onto that already possessed. This was the logic of the capitalist market applied to the relations between states. Each had to invest in preparations for war in order not to lose out as the other invested more, just as each capital had to invest in new means of production so as to hold its own in market competition. "Imperialist policies" were "nothing but the reproduction of the competitive struggle on a worldwide scale," with "state capitalist trusts", not individual firms, "the subjects of competition" . The "explosions of war" were a result of "the contradiction between the productive forces of the world economy and the 'nationally' limited methods of appropriation of the bourgeoisie separated by states" .46 In other words, just as competition between capitals (and with it the free operation of the law of value) was reduced within states, it operated on an ever more ferocious scale between them.

Rosa Luxemburg: imperialism and the collapse of capitalism

Lenin and Bukharin were not the only Marxist opponents of imperialism to attempt to prove that it was an essential stage of capitalism. Rosa Luxemburg also did so with a rather different theoretical analysis in her The Accumulation of Capital, published in 1913.47 It rested on what she believed to be a central contradiction within capitalism that had escaped Marx's notice.

Marx had produced tables in Volume Two of Capital showing the interrelation between accumulation and consumption. Each round of production involved using the products of the previous round, either as material inputs (machinery, raw materials, etc) or as means of consumption for the workforce. This required that the material products in one round corresponded to what was needed for production to proceed at the next round. It was not merely a question of the right amounts of value passing from one round to the next, but also of the right sorts of use values-such and such quantities of raw materials, new machinery, factory building, etc, and such and such quantities of food, clothing, etc, for the workforce {plus luxury goods for the capitalists themselves). Rosa Luxemburg, in examining Marx's tables, came to the conclusion that discrepancies were bound to arise between the distribution of value from one round to another and the distribution of the use values needed to expand production. More consumer goods would be produced than could be bought with the wages paid out to workers or more investment goods than could be paid for out of profits. In other words, the system inevitably produced an excess of goods for which there was no market within it. Overproduction was not just a phase in the boom-slump cycle, but endemic. Conceived of as a closed system, in which all the outputs of one round of production had to be absorbed as inputs in later rounds, capitalism was doomed to tend towards a complete breakdown.

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