Three Books on Marxist Political Economy (Pt 16)

Lenin on the defining features of imperialism

V.I. Lenin in his famous from 1915 pamphlet “Imperialism the Highest Stage of Capitalism” lists the following five features of what was then the new, imperialist stage of capitalism.

(1) The concentration of production and capital has developed to such a high stage that it has created monopolies which play a decisive role in economic life;

(2) The merging of bank capital with industrial capital, and the creation, on the basis of this “finance capital,” of a financial oligarchy:

(3) The export of capital as distinguished from the export of commodities acquires exceptional importance;

(4) The formation of international monopolist capitalist associations which share the world among themselves;

(5) The territorial division of the whole world among the biggest capitalist powers is completed.

How Lenin’s defining features of imperialism have held up a century later

Virtually all Marxist and indeed all serious students of economics accept feature No. 1—the concentration of production and capital—as a fact of life of present-day capitalism. Indeed, the concentration of capital and production is much higher than it was on the eve of World War I, the period Lenin analyzed.

Feature no. 4—the formation of monopolist capitalist associations which share the world among themselves—is accepted by Marxists and indeed many non-Marxists as even more descriptive of today’s conditions, when all large corporations operate on a multinational scale.

Feature no. 5—the territorial division of whole world among capitalist powers—was completed around the turn of the 20th century and is a statement of historical fact accepted by all.

The division of the world among the imperialist powers meant that further expansion of the colonial empires and “spheres of influence” could not occur without the various powers colliding. There was, however, on the eve of the “great war” a school of thought that held that a major war between the imperialist states was unlikely. This was based on the notion that economies had become so intertwined that the capitalist ruling classes would oppose any move toward war. Related to this, a view held that a major war among the imperialist powers was unlikely because it would be financially ruinous.  (1) These arguments, answered by the events of August 1914 and subsequently, are more than a historical curiosity, since occasionally we still run into them today.

Thanks to the Russian Revolution of 1917, a major part of the globe was largely withdrawn from the sphere of capitalist exploitation. (2) However, since the 1990s, as the result of the Russian bourgeois counterrevolution that restored capitalism but not the czarist feudal military empire, combined with the powerful upsurge of capitalist development in China and Vietnam, the world now looks more like that on the eve of World War I than the situation that prevailed during most of the rest of the 20th century.

However, the rest of the 20th century proved to be richer in world wars and revolutions and counterrevolutions than any preceding century in recorded history. As a result of these titanic developments, along with the inevitably uneven nature of capitalist development, the division of the world among the imperialist and other countries engaged in capitalist production has taken quite different forms than those that prevailed on the eve of World War I.

More serious criticisms

Features 2 and 3 listed by Lenin have been subjected to criticism not only by numerous bourgeois authors but by many Marxists. The first criticism revolves around the role of the banks and Lenin’s claim that under monopoly capitalism finance capital dominates capital as a whole.

Some Marxists have also suggested that Lenin exaggerated the importance of the export of capital as opposed to the export of commodities. The last point is extremely significant, because the export of industrial commodities during the era of industrial capitalism based on free competition consolidated Britain’s monopoly position of modern industrial production. However, the rising export of capital from Britain from the 1860s on progressively undermined and then decisively ended Britain’s industrial monopoly by the turn of the 20th century.

Lenin’s critics, including some Marxists, claim that the prominent German-Austrian Marxist economist Rudolf Hilferding (1877-1941), who exercised the most influence on Lenin’s “Imperialism,” greatly exaggerated the power of the leading German banks over German industry in the years leading up to World War I.

A variant of this criticism recognized the considerable power that banks in Germany as well as the U.S. and other imperialist countries had over industry at the end of the 19th century and the early 20th century. However, these critics say, the banks’ power proved to be a temporary phenomenon. By the end of World War II, many Marxist, as well as bourgeois, economists claimed that the dominant influence of banking over industry had largely disappeared.

As regards the situation in the U.S., it is often claimed that the passage of the Glass-Steagall Act in 1933 as part of Roosevelt’s “New Deal,” which separated investment and commercial banking, largely broke the power of the House of Morgan (3) and other banking combines over industry. Therefore, Hilferding and Lenin’s concept of finance capital to the extent it ever was valid ceased to be so in the 1930s.

The role of the banks

The question of the role of banks during the monopoly/imperialist phase of imperialism is an important question and deserves a closer look. Near the very end of the final chapter of his “Imperialism,” entitled “The Place of Imperialism in History,” Lenin quotes the German pro-imperialist economist Gerhart von Schulze-Gaevernitz (1864-1943) as follows:

“Once the supreme management of the German banks has been entrusted to the hands of a dozen persons, their activity is even today more significant for the public good than that of the majority of the Ministers of State. … [Lenin adds, “The ‘interlocking’ of bankers, ministers, magnates of industry and rentiers is here conveniently forgotten.”—SW] If we imagine the development of those tendencies we have noted carried to their logical conclusion, we will have: the money capital of the nation united in the banks; the banks themselves combined into cartels; and the investment capital of the nation cast in the shape of securities. Then, the forecast of that genius Saint-Simon will be fulfilled: ‘The present anarchy of production, which corresponds to the fact that economic relations are developing without uniform regulation, must make way for organization in production. Production will no longer be directed by isolated manufacturers, independent of each other and ignorant of man’s economic needs; that will be done by a certain public institution. A central committee of management, being able to survey the large field of social economy from a more elevated point of view, will regulate it for the benefit of the whole of society, will put the means of production into suitable hands, and above all will take care that there be constant harmony between production and consumption. Institutions already exist which have assumed as part of their functions a certain organization of economic labour, the banks.’ We are still a long way from the fulfillment of Saint-Simon’s forecast, but we are on the way towards it: Marxism, different from what Marx imagined, but different only in form.”

Lenin concludes: “A crushing ‘refutation’ of Marx indeed, which retreats a step from Marx’s precise, scientific analysis to Saint-Simon’s guess-work, the guess-work of a genius, but guess-work all the same.”

In the quote I reproduced, Schulze-Gaevenitz refers to French utopian socialist Henri de Saint-Simon (1760-1825), who was perhaps the first thinker to foresee that capitalist free competition ruled by the profit motive was not the final stage in the evolution of human society, as the liberal economists claimed then and still do. Saint Simon, like Marx, later believed that free competition was merely a passing phase of human society destined to give way to a higher stage—a planned economy where production would be ruled by human need and not private profit. (4) And Saint-Simon expected that the influence of the banking system with its “universal bookkeeping” over industry, as Marx later put it, would play a crucial role in the transition to a planned economy.

It is interesting to compare Saint-Simon’s attitude toward the banking system with the program of “democratic socialist” Bernie Sanders, supported by many other U.S. progressives, calling for “breaking up the banks.” Saint Simon, who wrote in the early years of the 19th century, already foresaw the replacement of free competition by a consciously planned economy. Nearly a century later, the pro-imperialist German economist Schulze-Gaevernitz also looked forward to a peaceful evolution of German imperialism into some sort of planned economy.

However, after another century has passed, Sanders and many other U.S. progressives look backward with nostalgia to the return of the good old days of small-scale private production regulated by “free competition.” This shows the powerful influence populist ideology rooted in the vanished world of family farming—on land stolen from Native Americans—and other small-scale private enterprises still exercises on the U.S. left. In this sense, U.S progressives lag far behind Saint Simon and even in a certain sense Schulze-Gaevenitz.

What the genius—this is what Lenin called him—Saint Simon could not yet foresee, but what Marx was to prove scientifically, was that the growth of centralized production reflected in an increasingly centralized banking system created the material basis for the future planned economy and that a breakthrough to a planned economy could not be achieved without the transfer of political power from the exploiting capitalist class to the working class.

In his famous but much criticized work “Finance Capital,” first published in 1910, Hilferding claimed that a handful of Berlin banks effectively controlled German industry. As Hilferding saw it, the Berlin banks had therefore emerged not only as the most powerful financial capitalists but also as the most powerful industrial capitalists in Germany.

In light of the further political evolution of Hilferding, much of which occurred after Lenin wrote “Imperialism,” it now seems as though Hilferding’s position represented to some extent a retreat backward from the views of Marx to those of Saint Simon and Schulze-Gavevenitz. Though considered a left radical within the German SPD, Hilferding opposed the Bolshevik Revolution and supported the Second International over the Third, Communist International (Comintern). On two occasions, he served as minister of finance in the bourgeois liberal Wiemar Republic.

However, it was to take the titanic events of World War I, the Russian Revolution and then the aborted German revolution of 1918 to demonstrate that though Hilferding was, much like Karl Kautsky, who made many important contributions to Marxism, not a person of revolutionary temperament. Under the conditions of world war and workers’ revolution, the non-revolutionary wing of the Social Democracy, including Hilferding, was inevitably transformed into the counterrevolutionary bourgeois liberal wing of the workers’ movement.

Non-revolutionary but left Social Democrats like Hilferding differed from the likes of Schulze-Gavevenitz insomuch as they believed that the establishment of a planned economy required a Social Democratic majority in the German Reichstag. Once this was achieved, according to social democrats like Hilferding, it would be possible to take control of the Reichstag functioning as the supreme organ of democracy over the German government.

Once this was achieved, the rest would be easy, since the apparatus necessary for a planned economy was already at hand. The banks would be socialized, and since according to Hilferding they already ruled over German industry, a socialist planned economy and society would be almost automatically realized. However, instead of a peaceful transition to socialism that left Social Democrats such has Hilferding had expected, there came the fascist dictatorship of Adolf Hitler. Still, the sad story of Rudolf Hilferding does not end here.

After the establishment of fascist rule in Germany in 1933, Hilferding fled to France, which was still an imperialist bourgeois democracy. But then, in 1940, Germany conquered France. Germany occupied parts of France, including Paris, but an “independent” French government under Marshal Henri Philippe Petain (1856-1951) and the slimy politician Pierre Laval (1883-1945) was established in southern France with Vichy as its capital. Hilferding found himself an “illegal immigrant” in Vichy France.

Rudolf Hilferding, who in addition to being famous as the Marxist theorist who wrote “Finance Capital” also faced a death sentence simply because he was Jewish. He was expelled as an illegal immigrant from Vichy France and was handed over to the German authorities in occupied Paris. Hilferding died of “unknown” causes while in the custody of the Gestapo in 1941.

Let this be a warning! If we don’t defeat the vicious anti-immigrant campaign of racist U.S. President Donald Trump and his European counterparts, we could all share Hilferding’s fate.

Lenin’s analysis of finance capital was more subtle than Hilferding’s, stressing the merger of industrial monopolies with the banking monopolies in the formation of modern finance capital and the financial oligarchy. However, it is true that Lenin did put great emphasis on the role of the banks in monopoly capitalism. And Lenin gave no indication that he saw the leading role of the banks in the monopoly/imperialist stage as a mere passing phase that more recent writers, both bourgeois and Marxist, have claimed it was.

Among the numerous Marxist economists who claimed that the dominant role of the banks was only a passing phase was the celebrated U.S. Marxist economist Paul Sweezy (1910-2004). In “Monopoly Capital,” first published in 1966, Baran (who unfortunately died in 1964 before the work was published) and Sweezy expressed the view that the giant corporations were dominated by managers and that the role of bankers, financiers and stockholders during the mature stage of monopoly capitalism had waned to such an extent that it could effectively be ignored.

To emphasize this change, Sweezy and Baran decided to title their book “Monopoly Capital,” while Hilferding’s book published 56 years earlier was titled “Finance Capital.” During the 1930s, Paul Sweezy evolved from a young bourgeois economist—he briefly supported the Austrian school—into a Marxist economist. Politically, however, Sweezy remained a left-wing New Dealer who hoped the continuation of New Deal reforms would eventually lead to a socialist society in the U.S. Left-wing New Dealers believed the Glass-Steagall law, though hardly socialist, was a step toward breaking the power of bankers and therefore a move toward a more democratic and—left-wing New Dealers like Sweezy hoped—a socialist USA.

At first, Sweezy continued to stress the importance of interest groups defined as powerful capitalist families controlling crucial sections of the U.S. economy. For example, the Rockefeller interest group along with the interest group centered on the J.P. Morgan bank were seen as the most powerful among leading capitalist families. These included the family controlling the oil industry in the case of the Rockefeller interest group and the family controlling the steel industry and many railroads in the case of the Morgan interest group.

But by the time Sweezy and Baran wrote “Monopoly Capital,” Sweezy had become convinced that without the commanding personalities such as John D. Rockefeller Sr. and J.P. Morgan the elder the interest groups were largely leaderless and their influence in the economy was fading away. Instead of being dominated by the descendants of 19th-century “robber barons,” as the “interest group” theory held, the corporate monopolies were now dominated by professional managers who had emerged as the natural leaders of the capitalist class.

Sweezy, Galbraith and Burnham and the role of the managers

Sweezy’s views in “Monopoly Capital” were obviously influenced by his friend the left bourgeois economist John Kenneth Galbraith (1908-2006), the father of present-day economist James Galbraith. In his “The New Industrial State,” published in 1967, Galbraith claimed that large U.S. corporations were dominated by managers no longer interested in profit maximization and that stockholders had become irrelevant. This now largely forgotten book enjoyed considerable influence for awhile. On a personal note, this was the first book on economics that I read, and for a brief time I was greatly influenced by it.

In “The New Industrial State,” Galbraith claimed that corporate managers were pushing aside idle stockholders and were establishing a kind of quasi-planned socialist economy no longer dominated by the profit motive. Galbraith’s views bear some resemblance to those of Schulze-Gaevenitz. According to Galbraith, free competition and the profit motive now only dominated the backward sectors of economy where small enterprises and old-fashioned capitalist free competition still prevailed.

Galbraith admitted that his “new industrial state” was greatly influenced by the ideas of another writer—the U.S. philosopher James Burnham (1905-1987). In 1941, Burnham had published “The Managerial Revolution,” where he expressed the idea that a new class of managers was replacing the capitalists as the ruling class on a world scale.

Burnham was born, like Sweezy, into a wealthy capitalist family. Much like Sweezy, Burnham had became radicalized by the Depression. While Sweezy was a left New Dealer and a sympathizer—but never a member—of the U.S. Communist Party and thus a supporter and admirer of the Soviet Union, Burnham joined the U.S. Trotskyist movement.

The exiled Leon Trotsky (1879-1940) (5) maintained that the Soviet Union under Stalin’s leadership was a “degenerated workers’ state” that had to be defended against capitalist attempts to overthrow it. Trotsky held that Stalin’s repressive regime represented a caste—but not a class—of totalitarian bureaucrats. Trotsky advocated a “political revolution” to overthrow the “bureaucratic caste,” which would regenerate the Soviet workers’ state. But he stressed the revolution he advocated would be a political not a social revolution because it would preserve—not overthrow—state ownership of industry, the planned economy, and the state monopoly of foreign trade.

Burnham, while he was a Trotskyist leader during the late 1930s, developed the view that the Soviet Union under Stalin’s leadership was a state ruled neither by the working class nor the capitalist class. Instead, Burnham held that the Soviet Union was a new type of class society, which he later called a managerial society, that was destined to supplant capitalism within a few years due to capitalism’s inability to solve the problem of unemployment or further develop the productive forces. (6)

Galbraith took a benign view of “managerial society,” believing that this emerging new society represented a mix of the best features of democratic capitalism and socialism. Along these lines, he expected that the U.S. and Soviet societies would converge, with the U.S. becoming more socialist and the Soviet Union more democratic.

Burnham, in contrast, saw the emerging managerial society as a totalitarian nightmare that would suppress all personal freedom and would be far worse than the democratic capitalist society it was replacing. When a brief war broke out between Finland and the Soviet Union in 1939, Trotsky supported the Soviet Union as a workers’ state against capitalist Finland. However, Burnham and some other leaders of the U.S. Trotskyist movement supported Finland against the “Soviet aggression.”

Shortly thereafter, the anti-Soviet wing of the U.S. Trotskyist movement, including Burnham, broke with Trotsky and his U.S. supporters and formed a new U.S. socialist group they called the Workers Party. The Workers Party was thoroughly anti-Soviet and refused to defend the Soviet Union in any sense whatsoever. The most important descendant of the Workers Party on the U.S. left today is the International Socialist Organization (ISO). (7)

Burnham almost immediately left the Workers Party and repudiated socialism altogether as a utopia. He then went on to write “The Managerial Revolution: What Is Happening in the World.” (8) In later years, Burnham supported Senator Joseph McCarthy’s anti-communist witch hunt, joined the right wing of the Republican Party, and became editor of William F. Buckley’s National Review, the organ of the right-wing Republicans. There he advocated “preventive war” against the Soviet Union. Shortly before his death, he received the Medal of Freedom from U.S. President Ronald Reagan.

In “The Managerial Revolution,” Burnham considered Nazi Germany, along with the Soviet Union, to be an example of the emerging managerial society. Not only were the Soviet Union and Nazi Germany both one-party dictatorships that did not tolerate any political opposition, they had both, unlike the “still capitalist” United States, eliminated mass unemployment. Burnham claimed that the German capitalists, though still the official owners of the means of production, were now powerless, and it would only be a matter of time before the Nazis made it official and nationalized industry.

In the United States, Burnham conceded that the capitalists still ruled but viewed the New Deal as representing a growing managerial influence that was destined soon to sweep the capitalist class aside and replace it with a dictatorship of totalitarian managers along German lines. During the 1930s, Burnham had opposed the New Deal from the left, but in the years following the publication of “The Managerial Revolution,” Burnham opposed the New Deal from the right as an extremely reactionary Republican. Today, the once trendy Burnham is largely forgotten and with good reason.

Sweezy clearly was influenced by the views of Burnham and Galbraith. However, Sweezy differed from them by pointing out that the managers of the giant corporations were themselves capitalists—not some sort of new class of managers as Burnham and Galbraith claimed. (9) Also unlike Burnham and Galbraith, Sweezy upheld the view that the managers were very much driven by the profit motive. Therefore, “managerial capitalism” was not a new society but simply mature monopoly capitalism.

What Sweezy’s analysis tended to overlook, however, was that the managers were not simply working for themselves but for stockholders, bondholders, and other creditors including the banks. In other words, the managers are obliged to work, by the very nature of capitalist society, for the “financial oligarchy”—the 1 percent and especially the .001 percent—with the aim of joining the upper levels of the financial oligarchy if they are not already full-fledged members—which they often are.

The managers, Burnham notwithstanding, have no interest in expropriating the capitalist class they seek to join—assuming they are not already members. The “managers” of Germany, the United States, and other capitalist countries did not overthrow capitalism, as Burnham predicted they would. Some of the “managers” in the Soviet Union joined the capitalists of the United States, Germany, and other capitalist countries by overthrowing the Soviet Communist Party in close alliance with world imperialism and mobsters operating in the illegal “second economy” in order to restore private property. They emerged as today’s Russian capitalist “oligarchs”—the Russian and other nations of the former Soviet Union .001 percent.

These former Soviet managers, though divided along more nationalist and more pro-imperialist lines, therefore represent a new section of the global capitalist class. They are not a new class. Managerial society, whether in Burnham’s nightmare version or Galbraith’s benign version, has proved a phantom.

This is not to deny that managers do manage, or as Marx put it, perform the “labor of superintendence.” The really big capitalists—the large stockholders—have better things to do with their precious time than perform managerial labor. For example, enjoying a game of golf on one of the golf courses owned by Donald Trump, perhaps golfing with the U.S. president himself.

The real question is not whether or not the managers manage but in whose class interest do they carry out their managerial labor? The very nature of the capitalist economy obliges the managers to manage in the interest of the 1 percent and even more in the interest of the .001 percent, the richest layer of the capitalist class.

In his later years, Sweezy came to view the failure to analyze the role of banking and finance—along with the failure to analyze the labor process—to be the main weaknesses of “Monopoly Capital,” which he along with Baran had hoped to be their magnum opus. (10) Sweezy, like many great thinkers, was often his own greatest critic.

Behind the failure of Sweezy (and Baran) to deal with money and money capital, which in monopoly capital evolves into finance capital, lies a greater problem that is hardly confined to them. That is the failure of modern Marxism as a whole to understand money as the form of the value of the commodity, combined with the belief that “modern money”—money since the end of the gold standard—does not represent a special money commodity like gold, and as long as there are commodities to buy, or idle labor and factory capacity, “the monetary authority” can always if necessary create additional money to bring these idle resources into motion.

Such a view blocks any understanding of periodic capitalist crises as crises of overproduction—the term overproduction does not even appear in “Monopoly Capital,” a book that attempts to analyze capitalist stagnation. It also makes it impossible to properly understand the special power of money capital whose developed form is finance capital.

John Smith also slips into the error of overlooking the role of money capital when he uses the formula C—C’, leaving out the M’s as though they are a mere technicality that can be disposed of. But C—C’ is not the formula for industrial capital. This formula begins with M, not C, and ends with M’, not C’.

Marx pointed out that industrial capitalists insomuch as they are owners of money are also money capitalists, or we could say financial capitalists. Industrial capitalists who work only with their own capital are in effect their own financiers. Without that initial M, no workers can be hired and no raw materials or auxiliary materials can be purchased. Therefore, in the absence of capital in the form of money the most important elements of capital are just potential capital. This includes the labor power of the workers who actually produce the surplus value. If there is not money to pay wages, the labor power of the workers is just potential capital in the form of unemployed workers who produce not an atom of surplus value.

The same analysis can be extended to the state power. Without money to purchase the labor power of soldiers, police, and intelligence agents—spies—along with the associated weaponry from police nightsticks to nuclear weapons, the state power cannot be set into motion. As a result, finance capital rules supreme over the state.

If finance capitalists lack confidence in the government of a particular capitalist state, they react by dumping that state’s bonds and currency onto the market. This inevitably throws the government into crisis and the government soon collapses. Therefore, as long as the workers do not take power, capital led by finance capital will inevitably rule, however varied these forms of rule are. The only power potentially more powerful than the power of finance capital is the organized power of the working class. If the workers do not rule, finance capital will.

The evolution of U.S. finance capital since the time of Lenin

On the eve of World War I, two of the most powerful capitalist “interest groups” in the U.S. were centered on the private banking house of J.P. Morgan and Company and the Rockefeller Standard Oil monopoly and its associated banks. Around these two were a series of lesser interest groups.

A century later, the Morgan and Rockefeller groups were merged, not into another informal interest group but a single centralized corporation, the J.P. Morgan Chase universal bank. Let’s examine some of the steps in the evolution of the interest groups of a century ago into today’s gigantic banking companies.

In 1940, J.P. Morgan Company, then a private commercial bank—it was largely barred from investment banking due to the Glass-Steagall Act—transitioned to become a corporation in its own right. Later, in 1959, it merged with the Guarantee Trust Company, a bank long considered to be in the “Morgan orbit” but not officially part of the J.P. Morgan Bank proper. Then, in 2000, the Chase Manhattan Bank, associated with the descendants of John D. Rockefeller Sr., itself the result of an earlier merger of Bank of Manhattan and Chase National Bank, merged with J.P. Morgan to form today’s J.P. Morgan-Chase universal bank.

With the Glass-Steagall Act repealed under the Clinton administration, J.P. Morgan Chase is free to engage in any type of financial “service” it wishes, including but not limited to investment and commercial banking. Nor has the growing centralization of bank capital represented by J.P. Morgan Chase ended. It swallowed up Washington Mutual savings bank, which failed during the 2008 panic.

Other banks absorbed by J.P. Morgan Chase in recent years include Great Western Financial, H.F. Ahmanson, Dime Bancorp, First Chicago, Banc One, First Commerce, Chemical Banking, and finally Bear Stearns, a powerful Wall Street investment bank that like Washington Mutual avoided bankruptcy in 2008 only by merging with J.P. Morgan Chase.

J.P. Morgan Chase’s lines of business are:

Asset allocation, asset management, bank underwriting, bond trading, brokerage services, capital market services, commercial banking, commodity trading, conglomeration services, consumer banking, consumer finance, corporate banking, credit cards, credit default swap, credit derivative trading, custody services, debt resolution, equities trading, financial analysis, finance and insurance, financial market utilities, foreign currency exchange, foreign exchange trading, futures and options trading, global banking, global wealth management, hedge fund management, home finance, intermediation and advisory services, investment banking, investment capital, investment management, investment portfolios, money market trading, mortgages, mortgage loans, mortgage–backed securities, mortgage underwriting, prime brokerage, private banking, private equity, remittance, retail banking, retail brokerage, risk management, stock portfolios, securities underwriting, stock trading, subprime mortgages, treasury and security services, underwriting, venture capital, wealth management, wire transfers

In 2017, J.P. Morgan Chase had total assets of $2.789 trillion and reported a $24.441 billion net profit. It employed 252,539 employees around the world.

Today’s Citigroup can be traced back to the 19th-century City Bank, a New York bank that played a crucial role in financing the trade in commodities produced by slave labor in the southern U.S. Later, “The City” became known as the Standard Oil Bank. When John D. Rockefeller fell out with his brother William, he withdrew his money from City Bank. However, brother William was also a major stockholder in Standard Oil, so the Standard Oil influence persisted in City Bank. William Rockefeller and City Bank President John Stillman then controlled “The City.”

The William Rockefeller-James Stillman partnership worked out so well that their families intermarried to form the Stillman-Rockefeller capitalist family. At the end of the 20th century, National City Bank corporate descendant Citicorp had along the way swallowed up the powerful First National Bank, where Paul Sweezy’s father once worked.

At the end of the 20th century and in brazen violation of what was left of the New Deal-era Glass-Steagall Act, City announced that it was merging with the huge financial company Travelers Group, which combined insurance and investment banking. But this was against the law. No problem. The Democratic President Clinton duly obliged and signed into law the bill that repealed Glass-Steagall. Shortly thereafter, the merger became perfectly legal. After that, Citicorp absorbed European American Bank and Bannex, as well.

In 2017 Citigroup at total assets of $1.792 trillion dollars and report a net profit of $14.91 billion. It lines of business include:

Credit cards
Retail banking
Commercial banking
Investment banking
Private banking
Financial analysis

In 2017, Citigroup employed 219,000 people worldwide.

During the 20th century, the Bank of America, which began as a small commercial bank servicing Italian immigrants in San Jose, Calif.—the future capital of Silicon Valley but then a small agricultural city whose biggest industry was fruit canning—mushroomed into the largest commercial bank in the U.S. As the 2008 crisis reached its climax, Merrill Lynch, the brokerage and investment bank famous for being “bullish on America,” merged with Bank of America to avoid bankruptcy. In addition to Merrill Lynch, Bank of America has swallowed up U.S. Trust, MBNA, Continental Bank, Security Pacific Corp, NationsBank, Fleet Financial Group, BancBoston Holdings, Bay Banks, Summit Bankcorp, UJP Financial, and Countrywide Financial.

Its activites include:

Consumer banking, corporate banking, insurance, investment banking, mortgage loans, private banking, private equity, wealth management, credit cards,

In 2017, Bank of America had 2.281 trillion in assets and net income of $18.232 billion in 2017. In that year, Bank of America employed 208,000 world wide.

Before the 2008 crisis, the once obscure North Carolina-based Wachovia emerged as one of the most successful U.S. banks. Unfortunately for Wachovia, the 2008 crisis blew up its “business model,” which specialized in home mortgages. In order to avoid collapse, this large—and until then successful bank—merged with San Francisco-based Wells Fargo.

Recently, Wells Fargo ran into difficulties when it was revealed that it had opened dummy accounts for customers without them being informed. In addition to swallowing up the failed Wachovia Bank, Wells Fargo has merged with First Interstate Bancorp, Norwest Corp, South Trust, Central Fidelity National Bank, CoreStates Financial, First Union, and the Money Store.

It businesses include asset management, brokerage services, commercial banking, commodities, consumer banking, corporate banking, credit cards, consumer finance, equities trading, finance and insurance, foreign currency exchange, foreign exchange trading, futures and options trading, insurance, investment banking, investment management, money market trading, mortgage loans, prime brokerage, private banking, retail banking, retail brokerage, risk management, treasury and security services, underwriting, and wealth management.

Wells Fargo had of 2016 total assets of 1.930 trillion dollars in assets. However do to its scandals it reported a net loss of $21.93 in 2016. Perhaps its troubles will make it a target for merger into an even bigger bank when the next banking panic strikes. As of 2016, Wells Fargo employed 268,800 world wide.

There are still two leading old line Wall Street investment banks. These include Morgan Stanley and Goldman Sachs, which have begun on a relatively small scale so far to become involved in commercial banking as well at its traditional investment banking. Morgan Stanley, which was formed in the 1930s by partners who left J.P. Morgan and Company, then largely confined by law to commercial banking, to engage in investment banking. The other giant investment bank is Goldman Sachs, the sole survivor of a group of Wall Street investment banks once owned by partnerships made up of U.S. capitalist families of Jewish-German origin.

Morgan Stanley is engaged in Investment banking, sales and trading, commodities, prime brokerage, wealth management, and investment management. It has total assets of $814.95 billion. In 2016, the bank employed 55,331 people world wide.

Goldman-Sachs business activities include:

Asset management
Commercial banking
Investment banking
Investment management
Mutual funds
Prime brokerage

As of 2016, Goldman-Sachs had $860.1 billion in assets, had a net income of $7.40 billion, and employed 34,400 people worldwide.

Another large Wall Street investment bank, Lehman Brothers, collapsed in September 2008 after the U.S. government refused either to rescue it or arrange a merger with another bank. Therefore, of the five leading Wall Street investment banks that existed prior to 2008, only two—Morgan Stanley and Goldman Sachs—survived the crisis as independent entities.

In light of this truly monstrous centralization of bank capital, combined with the phenomena of “financialization” of the economy in the wake of the 1979-82 “Volcker shock,” the criticism of Lenin’s “Imperialism” that it overestimated the power of bank capital has been dying out. In 2006—even before the crisis of 2008—John Bellamy Foster, Paul Sweezy’s successor as editor of Monthly Review and unofficial leader of the Monthly Review school, had introduced the term “monopoly finance capital” to described the most powerful section of the capitalist class and has emphasized the increasing power of the banks. The current Monthly Review editor has thus continued the move begun by Sweezy himself away from the “managerialism” of “Monopoly Capital.”

Passing conjunctures versus permanent change

We must be on guard against the natural human tendency to confuse what are actually passing conjunctures with permanent changes in the capitalist economy. An earlier example of confusing a temporary conjuncture with what amounted to a passing quasi-cyclical phase was exhibited by N.I. Bukharin in his book “Imperialism and World Economy.” Bukharin made the mistake of seeing the rise in raw material prices relative to the prices of finished goods that prevailed during the years leading up to World War I as a permanent feature of monopoly capitalism/imperialism. But we shouldn’t be to hard on Bukharin. There are many other examples.

In the 1930s, the Great Depression was seen as permanent by many Marxists and some bourgeois economists. Indeed, the term “secular stagnation” was first coined in the late 1930s to describe what was viewed as a permanent condition.

Later, in the 1950s and 1960s, prosperity was seen as permanent due to the application of “Keynesian techniques” that allegedly had solved the problem of chronically inadequate monetarily effective demand. Therefore, it was claimed, instead of “permanent depression” we now had, thanks to Keynes, “permanent prosperity.”

In the 1970s, the stagnation and high inflation of the decade was widely seen as “permanent” due to the monopoly pricing power of the giant corporations, the power of the trade unions to drive up money wages—which according to Keynesian theory raises prices—combined with the alleged power of Arab oil sheiks and their OPEC cartel to drive up oil prices.

Then, in the years following the Volcker shock, the combination of “moderate” economic growth and inflation interrupted only by “mild recessions,” dubbed the “Great Moderation,” was seen as permanent. There is little doubt that many of the features of the economic situation seen as “permanent” today will prove to be less than permanent.

The “stable prices” and low interest rates, combined with low rates of economic growth (secular stagnation), that have prevailed since the end of the Great Recession are widely seen as permanent features of today’s capitalism. I think we can be pretty sure they are not. Changes in prices (inflation and deflation), interest rates, and varying rates of economic growth punctuated by crises/depressions will be seen in the coming years just as they have been in the past.

We can also expect the role of individual countries within the world capitalist economy to change due to the working of the law of uneven development, which favors the accelerated development of a given capitalist country in one period but works against it in the next. And not least, there will of course be the effects of great political and social revolutions still to come.

However, other changes in monopoly capitalism are likely to prove permanent. These changes, as opposed to those that are cyclical or transient, correspond to the long-term evolution of capitalism analyzed by Marx and Lenin. Since the Volcker shock ended the stagflation of the 1970s, the dependency of the imperialist countries on the workers of the oppressed countries—those free of colonial rule but still economically exploited and militarily threatened by the imperialist countries—has qualitatively increased. This change is likely to prove permanent—until it is overthrown by new revolutions that are sure to come—because it corresponds to the basic need of capital to find the cheapest sources of labor to exploit. Or to put it more precisely, it corresponds to the basic need to increase the ratio of unpaid to paid labor—the rate of surplus value.

This growing dependence of the imperialist countries on the labor of the exploited countries that John Smith and the Monthly Review school rightly emphasize, combined with the counterrevolutionary destruction of the Soviet bloc triggered by external imperialist pressure in the post-Volcker shock period—for example, the Reagan-era U.S. military buildup—along with a long postponed change in the Soviet leadership, has ushered in a new stage in the evolution of monopoly capitalism/imperialism.

This stage is at least as momentous as was the post-World War II stage of imperialism compared with the pre-World War II era. Indeed, I believe the current stage of imperialism, where the bulk of surplus value production has shifted from the imperialist countries to the oppressed nations—not merely the production of super-profits in the “global south”—is in my opinion the biggest single change in capitalism since the imperialist era began. These changes are now combined with the effects of the chaotic Trump administration with its incredibly reckless financial policies. I will look at the likely results of Trump’s financial policies and proposed budget in a special post next month.

The decay of British capitalism in the late 19th and early 20th centuries

Finally, we get to Lenin’s point about the influence of the export of capital as opposed to the export of commodities. Let’s see how this transformed capitalism in Lenin’s time and in our own.

In the 1860s, the British textile industry was violently disrupted by a shortage of cotton—its chief raw material—caused by the U.S. Civil War. As a result, the industrial capitalists in what was then Britain’s most important industry were unable to transform a portion of their money capital into real capital. Thus frustrated, they were encouraged to export a portion of their capital they would normally have invested at home. As a result, the export of British capital invested abroad exploded, growing more than 400 percent between 1862 and 1872, which includes the period of the cotton crisis. (Calculated from figures provided by a table in this chapter of Lenin’s “Imperialism.”)

While the cotton crisis was short term, other changes occurring in the global capitalist economy proved to be permanent. Among these was the growth of the export of capital from Great Britain, though the longer-term rate did not match the rate that prevailed during the cotton crisis.

The years that followed the cotton crisis but preceding the crisis of 1873 marked the high point of what Lenin called the old organization of industry based on “free competition.” By the eve of World War I, according to Lenin’s figures, British capital invested abroad had risen from 3.6 billion francs in 1862, when the cotton crisis struck, to between 75 billion and 100 billion francs in 1914. What were the consequences for the British economy of this tremendous export of capital on the British and world capitalist economy?

Lenin wrote: “The export of capital influences and greatly accelerates the development of capitalism in those countries to which it is exported. While, therefore, the export of capital may tend to a certain extent to arrest development in the capital-exporting countries, it can only do so by expanding and deepening the further development of capitalism throughout the world.”

Therefore, the growing export of capital should lead to at least a certain retardation of the further development of capitalism in Britain and later other nations exporting capital combined with the accelerated development of capitalism in the nations that Britain and later other imperialists countries have exported capital to.

Now let’s see what happened.


During the first phase of imperialism—the period analyzed by Lenin—the export of British capital was mostly to “white colonies,” or former white colonies such as the United States and Canada that retained many of the characteristics of white colonies. A smaller portion of British export capital was invested in other European countries, while only a minority of it was invested in the colonies of the “global south.” The same pattern can be observed in the export of capital of France and Germany.

The result was that the period of rapid growth of industrial capitalism based on free competition in Britain had definitely passed its peak, and the decline of British capitalism had begun. “ … in the last quarter of the nineteenth century,” Lenin notes,“ this monopoly was already undermined; [other] countries, sheltering themselves with ‘protective’ tariffs, developed into independent capitalist states.” In the new century, these new independent capitalist states were to develop into new imperialist states that challenged Britain’s economic, military, and political domination.

As Britain increasingly invested its capital abroad as opposed to at home, economic growth declined in Britain but accelerated in the countries importing British capital. This was particularly true of the United States, which protected its internal markets by imposing protective tariffs. Germany, newly unified by Bismark’s wars, did the same. These developments brought to an end Britain’s 19th-century industrial monopoly that had dominated the era of industrial capitalism proper.

The newly industrialized countries such as the United States—its unity confirmed by the U.S. success in putting down the British-backed slaveholder rebellion—and newly unified Germany had the advantage of new plant employing “best practice techniques” and the economies of scale that the new level of industrial development made possible. Britain, in contrast, was hindered by aging industrial plant and the older more decentralized methods of production appropriate for the early phase of industrial development.

As Britain’s relative industrial power declined, so did the the material basis of its military power—based above all on naval power. The world order with Britain at its center that had held since the end of the previous world war—the anti-Jacobin or Napoleonic wars in 1815—was progressively undermined. Once this process had reached a certain point, all it took was for the shots fired in Sarajevo—itself a relatively minor event—to bring the whole international order tumbling down.

While the bulk of the capital exported by the imperialist powers in the pre-Volcker shock stage of imperialism was to other imperialist powers, a portion of the capital exported was invested in the colonized and semi-colonial nations of the global south. However, there was relatively little industrialization—which is not to say there was none—of the global south countries. In part, this was because of the extreme political instability of the colonized countries and lack of infrastructure.

Capitalists—everything remaining equal in terms of profit—prefer to invest their capital at home where property rights are guaranteed by governments and military forces they control. They are especially reluctant to invest large amounts of capital in nations that are politically unstable, since the danger is too great that they will lose their capital in the event these countries are seized by rival capitalist states or, worst of all, in the event of revolution.

An important factor that slowed down the industrial development of the countries of the colonized global south was that they became dumping grounds for commodities produced in the imperialist states. As Lenin notes: “The capital-exporting countries are nearly always able to obtain certain ‘advantages’, the character of which throws light on the peculiarity of the epoch of finance capital and monopoly.”

Therefore, during the pre-Volcker shock stage of imperialism, the industrialization of the global south countries, including China, was largely though not completely confined to the development of railroads, seaports, and the extraction industries. However, Lenin was well aware—unlike many later Marxists—that imperialism had unleashed tendencies that if it was not overthrown in good time by the working classes of the imperialist countries would have dire consequences for these same working classes.

First—and this is a crucial point—the super-profits squeezed out of the working class—and also simple commodity producers, especially peasants—in the colonized countries enabled the capitalists to realize super-profits above and beyond the average rate of profit. In various ways—a point that will be examined in greater detail in later posts—the capitalists were able to share some of these super-profits with a portion of the working class of the imperialist countries. The upper layer of the workers who share in the super-profits of imperialism formed the base of the trade union and Social Democratic Party bureaucracies—and later the bourgeoisified bureaucracies of many of the Communist Parties that formed the backbone of the opportunist wing of the working-class movement.

The collapse of the Social Democratic leaders, above all the vote for war credits by members of the SPD fraction on August 4, 1914, in the German Reichstag symbolized the disastrous consequences of the victory of opportunism. Lenin realized that however much you denounced particular individuals like Karl Kautsky, the betrayal occurring on such a large scale could not be attributed to the weaknesses of particular individuals. Instead, real material interests ultimately rooted in the relations between the classes are decisive.

What are the interests of the great mass of industrial workers working in basic industry in the imperialist countries? Don’t they share, at least to some extent, in the prosperity of the imperialist nations that the exploitation of the workers in the global south has produced? What will be the consequences for the mass of industrial workers, especially those working in basic industry, if they allow themselves to be led by opportunist party and trade union leaders whose primary base is the skilled workers of the labor aristocracy?

One result was already clear when Lenin wrote “Imperialism” in 1916. The European industrial working classes were killing themselves by the millions in the trenches in order to enrich their bosses. But what about the long-term economic consequences for the industrial working classes? In 1916, Lenin hoped that the European working classes would soon rise up and bring the further development of imperialism, at least in Europe, to an end. Everything he did,including the writing of “Imperialism,” was subordinated to this goal.

But Lenin was also a realist. He had no idea, nor could he, when the European and global world revolution would bring imperialism and the capitalist system that breeds it to an end. What would be the consequences for the European—and the U.S.— industrial proletariat, which had grown rapidly in the decades leading up to the war, if capitalism were to succeed in hanging on for a prolonged historical period—like another century? Lenin deals with the question in Ch. 8 of “Imperialism,” entitled “Parasitism and the Decay of Capitalism.”

In this chapter, Lenin produces a table that shows the growth of the population of England and Wales compared to the growth of the working-class population engaged in basic industrial production during the years between 1851 and 1901, when the decline of British capitalism was just getting underway.

The table shows that the combined population of England and Wales during these crucial years rose from 17.9 million to 32.5 million. But the number of workers engaged in basic industry, which makes modern society possible, increased from 4.1 million to 4.9 million. This means that while the population of Wales and England increased by 82 percent, the industrial working class in basic industry increased by just under 20 percent. As a result, the percentage of the overall population of Wales and England consisting of workers engaged in basic industry fell from 23 to 15 percent.

On the other hand, the number of rentiers—persons living off interest and dividends and taking no part in the actual management of industrial or other businesses—had risen to a million people. So on one side, we see the growth in rentiers and on the other the slowdown—and after the Volcker shock of 1979-82 the absolute decline—in the number of workers engaged in basic industrial production. These were—and are—symptoms of the decay of British capitalism

Similar trends are observed in agriculture, which along with the products of basic industry form the material foundation that separates life today from life in the Middle Ages and all previous epochs. “An increasing proportion of land in England is being taken out of cultivation and used for sport, for the diversion of the rich.” As far as Scotland—the most aristocratic place for hunting and other sports—is concerned, it is said that “it lives on its past and on Mr. Carnegie (the American multimillionaire). On horse racing and fox hunting alone England annually spends £14,000,000 (nearly 130 million rubles). The number of rentiers in England is about one million.”

While Mr. Carnegie—a reference to the retired U.S. steel magnate Andrew Carnegie (1835-1919)—is gone, the current U.S. president’s golf courses provide entertainment for today’s idle rich.

Besides Rudolf Hilferding, the other big influence on Lenin’s “Imperialism,” was the British bourgeois economist J.A. Hobson (1858-1940). Hobson was a bourgeois critic of imperialism and influenced Keynes as well as Lenin. Hobson was alarmed that Britain’s vast colonial empire was making British capitalism dangerously dependent on “the natives.”

Lenin quotes Hobson: “Most of the fighting by which we have won our Indian Empire has been done by natives; in India, as more recently in Egypt, great standing armies are placed under British commanders; almost all the fighting associated with our African dominions, except in the southern part, has been done for us by natives.”

Don’t these words exactly describe U.S. operations—under both Obama and Trump—in the “Middle East,” as the imperialists call it today? For example, in the recent “liberation”—that is, destruction—of the Iraqi city of Mosul and the Syrian city of Raqqa, the U.S. used mostly Kurdish and to a lesser extent Arab soldiers commanded by U.S. military commanders, while massive air bombardment was provided by the U.S. Air Force. This way the number U.S. casualties was kept close to zero. However, the downside is that the U.S. empire—like the British empire in Hobson’s day—is becoming dangerously dependent on “the natives.”

But Hobson was above all an economist, and here he saw an even bigger danger. He feared that the “partitioning of China” by the imperialist powers would end with the shifting of industrial production to China. As it turned out, after decades of war and revolutionary struggle the capitalist industrialization of China has taken place under very different and—from imperialism’s point of view—far worse circumstances.

Keeping this in mind, here is the quote from Hobson that Lenin provides:

“The greater part of Western Europe might then assume the appearance and character already exhibited by tracts of country in the South of England, in the Riviera and in the tourist-ridden or residential parts of Italy and Switzerland, little clusters of wealthy aristocrats drawing dividends and pensions from the Far East, with a somewhat larger group of professional retainers and tradesmen and a larger body of personal servants and workers in the transport trade and in the final stages of production of the more perishable goods; all the main arterial industries would have disappeared, the staple foods and manufactures flowing in as tribute from Asia and Africa. … We have foreshadowed the possibility of even a larger alliance of Western states, a European federation of great powers which, so far from forwarding the cause of world civilization, might introduce the gigantic peril of a Western parasitism, a group of advanced industrial nations, whose upper classes drew vast tribute from Asia and Africa, with which they supported great tame masses of retainers, no longer engaged in the staple industries of agriculture and manufacture, but kept in the performance of personal or minor industrial services under the control of a new financial aristocracy. Let those who would scout such a theory (it would be better to say: prospect) as undeserving of consideration examine the economic and social condition of districts in Southern England today which are already reduced to this condition, and reflect upon the vast extension of such a system which might be rendered feasible by the subjection of China to the economic control of similar groups of financiers, investors, and political and business officials, draining the greatest potential reservoir of profit the world has ever known, in order to consume it in Europe. The situation is far too complex, the play of world forces far too incalculable, to render this or any other single interpretation of the future very probable; but the influences which govern the imperialism of Western Europe today are moving in this direction, and, unless counteracted or diverted, make towards some such consummation.”

Lenin remarks: “The author is quite right: if the forces of imperialism had not been counteracted they would have led precisely to what he has described. The significance of a ‘United States of Europe’ in the present imperialist situation is correctly appraised. He should have added, however, that, also within the working-class movement, the opportunists, who are for the moment victorious in most countries, are ‘working’ systematically and undeviatingly in this very direction.”

What were the forces that “counteracted” imperialism Lenin mentions? One was, of course, that the economic competition between the imperialist countries led to political and military competition that ended in World War I, still raging when Lenin wrote “Imperialism.” The second was the struggle of the Chinese nation against imperialism, which after decades of war and revolution led to China “standing up,” in the words of leader of the Chinese Revolution Mao-Zedong in 1949.

What a disaster that event has proven to be for imperialism! And finally, there was the force that Lenin was counting on above all to “throttle imperialism”: the socialist revolution in Europe—and ultimately the United States—which, however, was to be frustrated over the following century.

To a large extent, Hobson’s dreary prospect—especially considering that it was written in the year 1902!—has become a reality, above all in Britain but also in Western Europe, the United States, and now increasingly Japan as well. One of the consequences was the election of Donald Trump as U.S. president and the growth of powerful Trump-like far-right parties in Europe.

Hobson provides a striking picture of the “post-industrial” era, where the economy of the imperialist countries is dominated by “services” and finance but is dangerously dependent on the industry and the workers of China and other nations of the global south, whose largely non-white classes are being exploited by the finance capital of the U.S., Europe and Japan.

Later this spring/summer, I will deal with two important questions: One that Lenin raised in “Imperialism” in his polemic against Karl Kautsky was speculation that imperialism would give way to a new stage of “super-imperialism,” where a united “international finance capital” would exploit the world and nasty things like world wars between the capitalist nations would no longer occur. The second, which is taking on ever greater importance, is the role of immigration under imperialism.

However, another urgent issue has intervened. That is the evolution of the current industrial cycle, which began with the Great Recession and is now nearing its end, as well as the Trump/Republican—and to a considerable extent Democratic as well—reactionary and reckless financial policies. As I write these lines, Trump had just announced an imposition of a protective tariff on steel and aluminum, a move that threatens the whole consensus on which the U.S. empire is built. I will take a break in my extended review of Smith’s “Imperialism” next month to assess the current economic and political conjuncture in light of these developments.


1 The U.S. was more than willing to finance Great Britain, France, and Russia in World War I through the banking syndicate headed by the House of Morgan even before the U.S. government entered the war. This helped make it possible for the war to drag on for more than four years. On the eve of that war, market prices of most commodities were already above the prices of production and the war doubled these already high prices once again. The result was indeed disastrous, leading to the super-crisis of 1929-33 and the Great Depression. (back)

2 During the 1920s—and later in the eastern European socialist countries—the Soviet and later east European governments attempted to get capitalist corporations to invest in the Soviet Union and eastern Europe in the form of concessions. These concessions involved the exploitation of the Soviet and eastern European workers by foreign capital. To the extent foreign capital exploited workers in the Soviet Union and eastern Europe, these investments remained very limited. In addition to concessions, there were opportunities for global capital to exploit the Soviet Union and other socialist countries through “unequal exchange” and interest on loans. However, compared to what existed in the period analyzed by “Imperialism” and since 1989-91, the opportunities of capital to exploit the workers of the countries of the former Soviet Union and later eastern Europe were extremely limited.

However while it was true that the results were indeed disastrous and financial and political prudence would have strongly advised the “powers” not to engage in the folly of war, this didn’t prevent the war from breaking out anyway. Imperialism cannot be counted on to act in rational way.

U.S. finance capital was also more than willing to finance World War II, which lasted even longer than World War I. Thanks to the Depression, market prices were below the prices of production and there was considerably more idle loan capital available to finance the Second World War. Because of this, though WWII was far more destructive in terms of human lives and physical destruction, it was far less ruinous economically. (back)

3 The House of Morgan refers to the private banking partnership of J.P. Morgan and Company, whose leading figure was J.P. Morgan senior (1837-1913). During the late 19th and early 20th century, the Morgan bank acted as an intermediary between the British money capitalists eager to invest their money in the U.S. and rapidly expanding U.S. industry hungry for additional capital. The British capitalist investors in U.S. securities could not, of course, personally supervise the U.S. corporations their capital was invested in, so they relied on the Morgan bank to exercise control of the U.S. enterprises to make sure they were operated in the most profitable way possible. The House of Morgan gained a reputation for doing just that.

In 1903, Morgan organized a syndicate that merged Carnegie Steel with Federal Steel to form the U.S. Steel Company, then the world’s largest. Morgan considered this his greatest achievement. U.S. Steel still exists today, though it is now only the second largest steel company in the U.S. and the 24th largest steel company in the world. This reflects the dramatic decline of U.S. industrial power since the days of Morgan.

During the crisis of 1907, J.P. Morgan arranged the merger of Tennessee Coal, Iron and Railroad Company with U.S. Steel, giving U.S. Steel control of mines that produced coal, a vital raw material for steel production. At the height of the panic, Morgan “explained” to President Theodore Roosevelt that if the merger was blocked by the U.S. government the entire U.S. economy would collapse. Roosevelt capitulated to Morgan’s demand—after all, he didn’t want the U.S. economy to collapse any more than President George W. Bush wanted it to collapse a century later in 2008. In order to prevent the collapse and ensure the raw material supplies of U.S. Steel, Roosevelt signaled to his “boss” J.P. Morgan that and he would allow the merger to go through. Morgan then “rescued” the U.S. economy.

Earlier, in 1895, President Grover Cleveland had faced a run on the U.S. Treasury’s gold reserves. Cleveland agreed to have Mr. Morgan float a loan that saved the U.S. gold standard. Just like Roosevelt had earlier, Cleveland also did the bidding of Mr. Morgan. Of course, the rescue included hefty fees for Morgan’s efforts. J.P. Morgan was a great U.S. patriot, of course, but he didn’t’ work for free. Even bankers have to make a living! (back)

4 After the victory of “Perestroika,” the economists and other spokespeople for the capitalist ruling class insisted that the failure of the first experiment in planned economies proved decisively that “free market” capitalism was indeed the final stage in human evolution and history in the Hegelian sense and had reached its end. That is, U.S.-style monopoly capitalism was the final stage of the evolution of human society and would last as long as human society did. If the economies of the former countries of the Soviet Union and eastern Europe had thrived under restored capitalism, and “bourgeois democracy” was flourishing throughout the world, these claims would at least be worth discussing.

Instead, capitalism has up to now brought economic ruin to former Soviet nations and eastern Europe while global capitalism has experienced considerable economic stagnation in many countries and industries in addition to the violent crisis of 2007-09. Bourgeois democracy is everywhere in crisis, not least of all in the United States under the vile corrupt, racist administration of Donald Trump. As a result, socialist ideas that went into a deep eclipse following the counterrevolutionary developments between 1985 and 1991 in the Soviet Union and eastern Europe are now undergoing a major revival, including within the U.S. itself. (back)

5 Leon Trotsky (1879-1940) was expelled from the Soviet Union for “counterrevolutionary activities” in 1929 and spent his final years in Mexico, where he was assassinated by the Soviet intelligence operative Ramon Mercader in August 1940. Trotsky’s arguments against James Burnham and his supporters within the U.S. Trotskyist movement can be found in Trotsky’s final book, “In Defense of Marxism.” (back)

6 Burnham’s views were greatly influenced by the Italian ex-Communist Bruno Rizzi. In the late 1930s, Rizzi had concluded that monopoly capitalism was giving way to a new form of society that he called bureaucratic collectivism—what Burmham later was to call “the managerial society.”

Rizzi believed that bureaucratic collectivism, by eliminating private property in the means of production, was preparing the way for socialist society. He claimed that history was taking a kind of detour through this new exploitative form of society on its way to socialism. Rizzi claimed that the Soviet Union under Stalin’s leadership, Germany under Hitler, and Italy under Mussolini were all examples of the emerging bureaucratic collectivist society that was destined to replace capitalism and precede socialism. Under Stalin, private property in the means of production had already been abolished as a result of the October Revolution. Under Hitler and Mussolini, Rizzi thought, though private ownership still legally existed it was being rendered irrelevant and would soon be formally abolished.

As an example of the move away from private property in “bureaucratic collectivist” Germany, Rizzi pointed to Hitler’s anti-Semitic “aryanization of industry” as the first steps toward the formal abolition of private ownership. Rizzi was therefore arguing that fascism in general and Hitler’s anti-semitism in particular were progressive steps through “bureaucratic collectivism” toward socialism. The logic of such a position would be to support fascism in general and Nazism in particular. (back)

7 The International Socialist Organization originated in a split from the now defunct International Socialists during the 1970s. The International Socialists upheld the view they inherited from the old Workers Party that the post-Lenin Soviet Union—but not Nazi Germany or Fascist Italy—was a “bureaucratic collectivist” society. The Workers Party preferred Rizzi’s terminology to Burnham’s.

The ISO rejected “bureaucratic collectivism” and adopted the view that the Soviet Union was “state capitalist.” Trotsky during his fight against Burnham pointed out that if capitalism was giving way to a new form of exploiting society, this meant that Marx’s conclusion that capitalism was the last form of exploitative society had been refuted.

If that were the case, Trotsky pointed out, all that was left was to develop a new “minimum program” to defend the slaves of the “totalitarian bureaucratic collectivist” or “managerial society.” To replace the term “bureaucratic collectivist” society or “managerial society” with “state capitalism” was merely a terminological trick, which leaves the pessimistic conclusions of Rizzi-Burnham fully intact. (back)

8 Burnham’s “Managerial Revolution” is the main influence behind George Orwell’s highly pessimistic dystopian novel “1984.” Indeed, the character O’Brien, who interrogates the British hero Winston Smith, seems to be based on Burnham himself. (back)

9 However, it is worth noting that Sweezy, who was a defender of the Soviet Union for much of his life, under the influence of Maoism came to the view that the Soviet Union in the post-Lenin period was a new form of exploitative “post-revolutionary” society. But he rejected the claim of Mao that the Soviet Union was “state capitalist.” Sweezy was simply too good an economist to accept that the Soviet economy was any kind of capitalist society. Therefore, Sweezy came to the view that the Soviet Union was an exploitative “post-revolutionary society” that was ruled neither by the workers nor the capitalists. So, sadly, Sweezy ended up with a Burnham-like view of the nature of Soviet society in the end. John Bellamy Foster still defends a Burnham-like position that the Soviet Union was some kind of new exploitative post-revolutionary society unforeseen in Marxist theory. This accords well with the growing pessimism about the future of the working class, socialism, and human society in general that has marked the evolution of the whole Monthly Review tendency. (back)

10 By failing to analyze the labor process of monopoly capitalism, Baran and Sweezy in effect failed to analyze the role of the working class as the producers of surplus value. And by failing to analyze the stockholders and other rich money capitalists as appropriators of surplus value, they failed to analyze the role of the class the managers work for. In other words, Baran and Sweezy by allowing themselves to be influenced by the likes of Burnham and Galbraith overlooked the two main classes of modern society. (back)