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The Political Economy of Declining Capitalism By Hillel Ticktin

PART1: THE TRANSITIONAL EPOCH, FINANCE CAPITAL AND BRITAIN The purpose of this article is to place the decline of capitalism in Britain within a general theoretical framework. Its essential argument is that all capitalism must proceed through a process of formation, maturity and decline, and that Britain is effectively leading that decline. Britain is not to be understood as that unfortunate country which is now having to cope for the first time without an empire, as so many people see it, rather it is to be understood as a country which evolved a particular form of the class relationship with consequent specific forms of accumulation, which are now of a declining nature. Resurrection or a return to its mature form, is just as impossible as it is for the human corpse. The declining form of capital is finance capital. The corresponding form of labour which is also specific, though only in the generalized nature of that form, has been the degree of collective control over the labour process. This in turn has led to a particular politics: that of a non-political Labour Party, with non-political unions. This article will discuss finance capital in the context both of a declining capitalism and of a capitalism in transition. First we discuss the former concept and thereafter the latter, and from there we proceed to a discussion of finance capital itself. The discussion on the national and global views of political economy is still alive; there are those who still insist that the laws of

world capitalism are the only proper subject of political economy, and for that reason it becomes necessary to introduce the discussion with an examination of what a Marxist political economy should really be. This naturally leads into a discussion of the interaction of the above concepts and the reasons for the absence of an adequate Marxism. NATURE OF POLITICAL ECONOMY Political economy has received a series of definitions from various Marxists depending on their school of thought, always remaining at the level of definition. Thus to "lay bare the laws of motion of modern society" may have been clear enough to Marx and his friends but it is not as clear to modern political economists1 What is a law? If we use The New Left Review as a guide to Marxist thought then it would appear as if the concept of law has been abandoned2 But even for those who continue to use the term, muddle is the commonest result. The most usual understanding of law is the non-marxist one of a constant ('regularity or pattern of events)3 This classical empiricist conception would make a nonsense of "laws of motion". Simply to describe a pattern of efficient causes cannot give the reason or driving force behind the motion; it can only describe a sequence of events in which there is no necessity. This is the current conception of the political economy of development or the sociology of change, but it is not Marxist political economy. What is required to describe the necessary cause and development of that motion. Why is the reserve army of labour necessary for capitalism, for instance? Why does it necessarily tend to grow? What consequences follow if it does not grow or is indeed greatly diminished? The source of this motion (to unemployment) must be found in the contradictions of capitalist society, which give rise to the general law of capital accumulation. Since the source of the movement lies in contradiction, and the unfolding of that contradiction constitutes the content of that law, we have some understanding of law. We may say that a law describes the unfolding of the contradiction or the unfolding of the process of interpenetration of the polar opposites of that contradiction. It is thus the task of political economy to discuss and describe this process both in its particularity and in general. In other words, the particular categories of concrete and abstract labour, must find specific mediations (as temporary solutions) unless the system is to proceed to its supersession, which it has not, of course, done. Since capitalism has not succumbed to its contradictions it becomes the particular task of modern political economy to describe the full evolution of these laws in all their concrete richness. The category of motion is also unclear to many people. To some it would seem that motion simply means onwards and upwards. Thus there are many in Italy and some in Britain who see the present as nothing but a yet more mature and developed capitalism. This has led Panzieri4, for example, to speak of planning as the highest form of capitalism, and indeed it has led the statecapitalist school to deduce all laws from a necessary global state-capitalism. Yet it was none other than a certain Karl Marx who quoted with approval the view that: "There are special laws which govern the origin, existence, development, death of a given social organism and its replacement"5 Unfortunately, the same Karl Marx could not have expected that many of his modern followers would have succumbed to these self-same laws of decay and produce theories without concrete factual analysis or genuine thought. The laws of a mature capitalism are the laws of the system itself, but there are special laws applying to its decay or decline as well to its process of transition. It must follow that it becomes particularly important to distinguish between mature capitalism and its forms of decay, as well as forms of transition of "the invading socialist society" to use the phrase of Engels. These three different forms of motion require concrete analysis both in time and place.

It follows that only concrete analysis will yield the particular contradictions and so the particular forms existing at any one time or place. Disentangling these particular forms of the present becomes particularly complex precisely because one is dealing with three different sets of forms, or laws. This complexity, due to the fact that laws are contradicting one another, (contradictions contradicting one another), is characteristic of any mode of production in the process of decline and supersession. It is this that enables one to speak of there being a higher level of contradiction in the present than in the mature phase of capitalism. A clear distinction has to be drawn between this form of complexity and the empiricist form, where reality is reduced to an accidental plurality of causes, none of which plays a driving role. Such empiricist complexity renders the history or sociology inexplicable. Marxist complexity is quite different. Ultimately, all the forms and laws can be traced back to the process of overcoming the capital-labour contradiction, and in a sense they are necessary consequences of the law of value, since decline and supersession must follow maturity. In any period of transition there has to be both the old and new orders and hence not just the contradiction within the old form of extraction of the surplus product but also between the old form and the new form, which in turn has its contradictions. However, it is particularly complex under conditions where both capitalism and socialism can only really exist as world orders. Thus socialism cannot come into existence, as socialism, as opposed to surrogate forms, usually monstrous forms, until (capitalism has effectively been defeated on a world scale. As a result, all sorts of combinations of the old order and limited forms of its negation must first exist before the new order can in fact be born. Capitalism contains and employs its own negations such as the welfare state and nationalisations so that it appeared to flourish for a time. But, the necessary contradictions showed themselves and the new policy of monetarism has attempted a rollback. Just as Marx adduced a law of early capitalism: the more developed merchant capital the less developed is capitalism; so we may state that the further developed is the process of the socialisation of labour the more limited is the operation of the law of value. The problem is that since each system can only exist as a total system any partial form tends to negate both itself and the other form. Under feudalism the bourgeoisie could come into being like a chrysalis in the old order, but even the partial forms of nationalisation, control over the work-process, right to work etc., tend to reduce the efficiency of capitalism without bringing into being socialism. It is this peculiarity of the transitional epoch that makes it so opaque, permitting the bourgeoisie to turn the masses against both nationalisation and the concept of socialism by pointing to their obvious failure in the social democracies and under Stalinism. Since the processes are necessarily uneven in time and space many different combinations can come into existence and each one has to be analysed concretely in order to produce any theoretical analysis. The short cut of deductive reasoning from an assumed posture has produced much rubbish, which has given Marxism a bad name6 The reasons for this decadent Marxism have much to do with the isolation of the writers and their groups in an environment of almost total intellectual decadence. It is most unfortunate that so many Marxists have succumbed. That the USSR and its external supporters should write apologetics is to be expected, but that those critical of Stalinism should have degenerated in the same way, though nowhere to the same degree, is testimony to both the complexity of the task and the harshness of the atmosphere for the genuine Marxist.

CAPITALISM IN DECLINE Concretely, modern political economy has to deal with the forms by which the extraction of the surplus product from the direct producers is systematically reproduced. This accumulation of capital under capitalism in the past century has changed by acquiring the specific form of finance capital, analysed by Lenin as parasitic capital. On the other hand a large sector of the surplus product now goes through a form of centralised economic administration. It still operates within the law of value but in contradictory ways. Education, health, the arms industry, heavily subsidized industries, all testify to negations of the law of value. We put forward the view that the natural form of a declining capitalism is that of finance capitalism and that its natural tendency is to separate itself off from productive capital to constitute a free-floating abstract capital. But its natural tendency is to extract a maximum return from its investment at the same time as it is dependent on those investments for the source of surplus value. On the one hand it would reduce productive capital, industry, transport, construction, mining etc., to shadows through the redeployment of its investment in more profitable places inside and outside the country of origin not to speak of the high rate of interest, which would squeeze these sources of surplus value. On the other hand, it would cease to exist in the absence of productive labour so that finance capital is both parasitic and like any parasite dependent on its host. It is thus a weakened form of capital in that it has to vacillate between pure parasitism and a retreat to enable productive capital to rebuild itself. It is also weak in that it must exercise its control at a distance, often in opposition to its partner, industrial capital. The Comintern consistently used the term finance capital to denote modern capitalism, not monopoly capitalism, and for good reason. Thus we read in the Manifesto of the Communist International: "If the complete subjection of the state power to the power of finance capital had led mankind into the imperialist slaughter, then through this slaughter finance capital has succeeded in completely militarizing not only the state but also itself; and it is no longer capable of fulfilling its basic economic functions otherwise than by means of blood and iron7 " It is clear that the term used is 'finance capital' but the statement is also being made that finance capital has gone beyond the stage of monopolies and trusts to "state-ized production". This statement is explicitly made further on in the same manifesto. That such a capitalism, which had to resort to direct force, war and physical controls over a disrupted economy was in decline was obvious and stated in that form by both the author of the manifesto, Trotsky, and by Lenin. What has made all talk of a decline of capitalism look silly has been both the long post-war boom and Stalinist publications. The latter emanating from the USSR stated unequivocally that capitalism was still declining as witness the decline in the standard of living following from the law of increasing misery. That is still the official doctrine in the USSR8 Western Communist Parties could not churn out such rubbish after the death of Stalin but then bereft of an alternative they repudiated what they saw as Marxism: a theory of absolute decline of the productive forces, and were left with a sanguine view of the development of capitalism. The influence of Soviet style Marxism cannot be underrated, but independent Marxists also succumbed once the anticipated world depression failed to appear. The contemporary situation was fetishized to the point where we were told that capitalism could always get out of its own crisis or that the basic contradiction of capitalism lay in the difference between expectations and performance9. It is a sign of health when such as Mandel and Cliff can reach theoretical agreement and adapt theory to actuality, but it is unfortunate that the agreement is on something mistaken.

Worse was the case of Colletti and his followers who traced all troubles to the mechanical nature of Second International Marxism if not to that author who in the post World War II period has become the greatest failure, Frederick Engels10 The expectation of an end to capitalism was certainly the view of the centre-left of the Second International and they were not wrong in the actual evolution of capitalism in the period from 1914-1940, when capitalism was unable to avoid war, revolution and permanent depression. They would have been wrong if they saw capitalist evolution in the mechanical form of a declining standard of living leading to its overthrow, but this was then a discredited viewpoint held only by opponents of Marxism. Capitalism would last as long as it was not overthrown. This was the view of Kautsky, Lenin and Trotsky, of course, but also of Luxemburg11 That did not mean that capitalism as a mode of production did not have a limited life. In decline, it had fewer possibilities for manoeuvre. In effect, the whole theory of the outmoded nature of the capitalist form was abandoned in favour of a voluntarism which co-habited with the most unlikely bed-fellows. The boldest spirits have taken the logical step of abandoning the concept of the working-class as the universal class in favour of partial movements such as feminism, disarmament, civil rights, ecology etc. The working-class is dethroned and confusion reigns in the guise of concepts which are unintelligible because there is nothing to understand in them. That is often the best case, for the common solution is to abandon all theory and utter the platitudes first so clearly expressed by Bernstein almost a century ago, of the wrongness of a "caricatured Marxist theory"12 The theory of the decline of capitalism involves a number of elements. The first is that the productive forces are being progressively less developed in relation to their potential. This is emphatically not a statement of absolute decline in the productive forces although this might take place on a cyclical basis, as it has, in certain aspects, in Britain in the last three years, with the absolute decline of manufacturing industry. In the second place, the relative underdevelopment of the productive forces exists in more than one dimension. Thus, the presence of powerful computers in the United States may not be generalised to all parts of capitalism. This is the spatial aspect. We may add limited use of these same productive forces to supply human needs in the same country becoming relatively more limited in relation to its potential over time. The growth of excess capacity bears witness to this point. Then there is the growth of irrational spending or waste on advertising, the military etc. This whole field is well documented and discussed, though not usually under this title. A declining capitalism increasingly creates the potential for man's emancipation while at the same time employing a decreasing fraction of the potential. The third point is that capitalism is finite. Even if it continues to exist as long as it is not overthrown, its fundamental contradictions can only grow. While we discuss their nature below, the essential argument is that the strength of labour tends to grow for objective reasons, whatever the subjective intent of the ruling class. Under these conditions the room for manoeuvre for the ruling class becomes progressively more limited. In the absence of such alternatives as Imperialism, Wars, Fascism and a rapidly rising standard of living for the workers they are left only with the traditional depression. However, the very strength of labour makes the depression necessarily protracted. Furthermore it is wrong to look at crises taking the form of depressions as functional to the system. Rather they are the expression of the breakdown of the system, which may or may not lead to its recovery. Each of the downturns in the longwave has been deeper than the last and we may say that it was the combination of Stalinism, Fascism, War and the long depression which tamed the working-class last time. This time only the last aspect appears on the horizon. Massive unemployment for a long period would appear as essential for the recovery of the capitalist system.

In other words, the survival of the system requires progressively more contradictory solutions of the immediate crisis. There is only a limited choice available. When the traditional economic mode of control breaks down, involving, as it does, atomisation and unemployment, then there remains only direct force and/or concessions. Imperialism was both a method of forcible extraction of the surplus product as well as one of concessions to the metropolitan working-class in whole or in part. Fascism and war are similar mixtures of force and concessions. The problem with these measures is that they simultaneously politicise the whole population and create the means for their rejection, whether they be internal or external. Thus, today, imperialism is everywhere on the retreat, while war is ever more unacceptable. The development of capitalism has made the conditions for Fascism, the existence of a mass petite bourgeoisie and a Stalinised workers' movement, less and less propitious. The welfare state in turn has broken down. It is not accidental, therefore, that the system has returned to its traditional mode of control: unemployment. Under conditions of high levels of socialisation of production: nationalisation, concentration and integration of production, not to speak of the effects of the welfare state in terms of education, health and limited forms of factory level control etc., the defeat required would have to be epochal. The only solution does appear to be unemployment, but to achieve the objective it would have to be at enormous levels. Such a depression is already showing its character: with the alternatives of the destruction of industry and/or large scale nationalisations particularly of the finance sector, as in Mexico. With such alternatives it seems that the solution for capital is the destruction of the capitalist class. Our concern was to show the progressively more contradictory solutions required to maintain the system. The effects of these solutions are two-fold. Either they show themselves as part of a decline in that there is a growing divergence of actual and potential production, i.e., the system patently declines as a mode of utilisation of social labour, or the measures adopted contradict their essences as capitalist. Measures such as nationalisation may shore up the system but only at considerable cost to the capitalist class itself. There is no advance to socialism involved but the law of value is increasingly circumscribed. Control over investments becomes itself an arena of struggle. The direction of investment in nationalised industries, the investment policy of pension funds all become the subject of political debate. That is why we argue that finance capital is, in fact, the final form of private capital and hence of capital. THE QUESTION OF TRANSITION Thus Karl Marx: "As soon as it (capital - HHT) begins to sense itself and become conscious of itself as a barrier to development it seeks refuge in forms which, by restricting competition, seem to make the rule of capital more complete, but which are at the same time, the heralds of its dissolution and that of the mode of production resting on it."13 Thus the decline of capitalism is indissolubly linked to its transition to the new society. The history of capital is one of movement from competition to concentration of capital and thence to finance capital, from which we have statised capital. Each of these three forms apparently strengthens the capitalist class against the working-class, but in fact does two new things. It increases the degree of socialisation of production and hence the potential for planning the society on the basis of need, as well as the power of the working-class over production. This we may regard as the aspect of transition. It also, however, necessarily progressively negates the nature of the law of value, which is the

essence of capitalism. We will discuss these aspects in turn. Before doing so, however, we must turn to the new aspect of the last sixty or so years: that of the overthrow of capitalism itself. Areas of the world today no longer have the market at all, or if they do it is in a subordinate aspect of the economy. It is this above all which has made the whole epoch different from the classical period of finance capital and given rise to what is better termed a transitional epoch rather than the further development of capitalism. The 1848 Revolutions, the Paris Commune of 1871 and the Russian Revolution of October 1917 proved to the bourgeoisie that it could lose power. The problem that developed for it was that although the Soviet revolution was, in effect, defeated, the bourgeoisie did not itself regain power. It was forced to accept a series of forms which either abolished or greatly limited the market. This obviously applied to certain countries but also to particular aspects of the developed countries. The stabilisation achieved after 1921 in Europe, was only rendered more permanent through the welfare states fully established after the Second World War. The economy then established is regarded by some as the Keynesian-Fordist-Taylorist strategy of the bourgeoisie14 There is no need to invoke such a conspiracy or conscious strategy, since historically it is clear that the bourgeoisie had no alternative but to make substantial concessions in order to maintain itself in power. Nor are these concessions functional to the regime in the sense of simply allowing its inner expansion. On the contrary, they are highly contradictory to the nature of the system. In a similar way, the USSR permits the continued existence of capitalism by controlling its workers, preventing revolutions elsewhere, and acting as a market for industrial goods, but it is also contradictory to capitalism in withdrawing a sector of the world from the world market. To the extent that money cannot function as world money it is not fully money. In other words, to the extent that the world market is broken up and the law of value is limited in its applications, neither the market nor the law of value have their full nature. We thus return to the point mentioned above of the progressive negation of the law of value. The transitional epoch may be defined as the epoch in which the bourgeoisie cannot re-assert itself in the manner in which it requires and in which it ruled before the twenties of this century, but the working-class cannot itself take power. The tendencies to which Marx referred are reinforced, indeed greatly reinforced, by the partial loss of power suffered by the ruling class so that a number of processes are occurring at the same time. On the one hand there is the objective tendency to increased socialisation of production, reinforced as a result of necessary concessions in the transitional epoch; on the other hand the forms of capital continue progressively to decline. The interaction of these two processes has limited and changed the forms of existence of finance capital. In other words, while Lenin saw finance capital as the final form of capital, in the transitional epoch the need to maintain full employment and a rising standard of living necessarily limited the sphere of action of finance capital. Whereas before the First World War industrial capital was subordinate to finance capital everywhere, Britain included, the situation changed thereafter, most particularly after the Second World War. Thus Lenin is not wrong in his argument on finance capital. It would have been the final form of capital had there not been such a prolonged period of transition, with the existence of a permanent war between the law of value or market forms as against the protoplanning forms, which necessarily have to relate to physical forms, which in turn ultimately go back to needs. Thus the Keynesian epoch is one in which the need to concede to the working-class necessarily required a high industrial growth rate, and consequently a rapid rise in the production of consumer goods, including agricultural goods. This reversed the relation of consumer goods

growth to that of producer goods and so changed the nature of accumulation in that it became dependent on direct demand for consumer goods, rather than on the expansion of fixed capital. Thus the industrial capitalist became directly dependent on demand for consumer goods, and hence on permanent expansion. Finance capital, on the other hand, which was based originally on the need to finance fixed capital requirements, has found itself the guardian of funds which are no longer private capital and which relate to consumption rather than production. In origin, finance capital was either privately owned capital or in the form of trusts, banks etc., which received money from private capitalists. Today, increasingly it takes the form of merchant banks taking care of pension fund, insurance or charitable trust monies, all of which relate to consumption, even if deferred, and which are ultimately for the benefit of pensioners. This is surely the declining form of a declining form. FINANCE CAPITAL AND CONSCIOUSNESS There is another aspect of the present which is crucial in understanding the nature of finance capital today. That is the increasingly important role of consciousness. It arises in two ways. In the first place, as pointed out above, the bourgeoisie as it is threatened with loss of power, becomes increasingly conscious. In the second place the increasing socialisation of production demands planning, which can only be performed consciously. As the economy has developed, the areas affected have increased, both at the level of the whole economy as well as within the huge firms or cartels, and trusts etc., that come into existence. These two aspects then merge with the feature of the transitional epoch: the accession to power of governments nominally dedicated to changing the society in the direction of socialism. Whether the governments are social-democratic or Stalinist, they construct either a society or parts of a society to which the working-class attaches importance. Thus the USSR unfortunately is today associated with socialism, and the industrial nationalisation of social-democracy is associated with failure. These specific conscious attempts to organise the economy have generated disbelief and cynicism about the project of conscious organisation of the economy in general. Since these latter call themselves socialists, Marxists and communists, the failure of these institutions is associated with socialism. The subjective attempts of a group in power to 'plan' are objectified in a society or institution, which acts as a barrier to change in working-class consciousness. The subjective becomes objective, which, in turn, is subjective. On the one hand the very existence of these institutions depends today on political decisions and working-class consciousness, while on the other, any further change is barred because the failure of those institutions seems to prove the impossibility of further change. Under socialism it is clear that consciousness will play a much bigger role since it is a planned and therefore consciously directed society. The closer society comes to that stage the greater must be the role of consciousness. In our present epoch that consciousness must be highly complex. In the first place the bourgeoisie becomes both highly class conscious and able to organise itself on a grander scale than any ruling class in history. The very instruments potentially usable by the working-class can be employed by the ruling-class against the working-class. The state apparatus, the economic administration, the nature of industry and of social life can all be so arranged that change becomes increasingly difficult. In contrast, the workers are subject to this form of change and have a much lower level of understanding of the operations of the society. The increasingly possible change becomes less possible because the very instruments brought into being to facilitate this change are turned into their opposite by the bourgeoisie.

Unfortunately, this applies as much to the left as it does to the workers, as the left is as fetishized by the system as everyone else outside the bourgeoisie itself. Finance capital unites in itself both the need to control the working-class consciously and the ability to act as the organiser of capital. It is precisely as abstract capital, capital without specific commitments to concrete production, that is is able to shift itself rapidly on an organised basis. To do so, however, it must have organised sources of information and the possibility of organisation itself. Hilferding correctly noted its nature as abstract capital, but he failed to see its contradictions as capital. He saw it as the ultimate organiser of production, without seeing that it was not in fact interested in production perse or that it could only exist in a form of competing capitals15 It is only with the development of nationalisation and increasing involvement of government with economic administration that centralised economic organisation becomes possible. Nonetheless, the role of finance capital is not to organise production but capital. In this role it is able to defend the interests of capital against the working-class on an international basis and to ensure that the long-term development of the particular national capital is in its interests. It is finance capital, and not so-called 'multi-national' capital, which is truly international. The multi-nationals are always based on particular countries with a particular headquarters country; and this is of necessity since production requires physical space. The same is not true of finance capital, though its international dimensions are constantly limited by exchange controls, controls over investment etc., which ultimately are an expression of the importance of the local industrial bourgeoisie and the particular arrangements made with the working-class. In the present time, finance capital is clearly playing an increasing international role through international banking and various organisations of an international character. Still, it is clear that its potential international role has been curtailed by the existence of local industrial or other bourgeoisies. Britain, however, was and is different. Its imperial network was based on finance capital and its present situation is still far more international than any other country. The important point, however, is that finance capital is the only section of capital which could act as the organiser of capital and hence as its tactical and strategic planner but, limited as it was before, it is even more limited today. It is far more conscious than before, but it's room for action is more confined. It will be argued that it acts through the government, but only in countries without bourgeois democracy is it able to do so unhindered and directly. Long ago, Engels, speaking of Bismarck, concluded that the bourgeoisie did not have the stomach for governing directly16 It preferred a bonapartist form in his judgement. FINANCE CAPITAL, THE TRANSITIONAL EPOCH AND THE STATE The conclusion to be drawn is necessarily complex. Greater mobility, more international and informed understanding of the workings of the system, and more integrated forms of control give finance capital possibilities of planning capitalism in its own favour. On the one hand, it can attempt to reduce the nature of the socialisation of production by reducing the size of factories, maintain uneconomic agriculture, transfer capital to industries, regions and countries which are more pliable, divide workers by nationality or race, separate mental and manual workers by a conscious strategy of investment and investment control. While it seldom implements these actions directly, it can compel customers to do so. It naturally tends therefore to become the brains of the system. It is abstract capital opposing abstract labour. As abstract capital, therefore, it is able consciously to perceive the failure of the USSR and of

social-democracy and take advantage of it. It can control countries with centralised production through its policies on lending, and it can ensure that they are led back into the world market. It can control social-democracies like Mitterand's France or the Labour Party's Britain, not simply because it controls the money flows, but because it is able consciously to outmanoeuvre the governments involved. It is already international in a way the working-class can only aspire to become, and has research and information systems far beyond what is required for purposes of control. It is not just bodies like the IMF or the World Bank, but rather the research organisations and secret files kept by large firms and employers organisations, which in turn can be made available to the financial institutions. They thus have knowledge, global forms of action and speed on their side. Against them social democracy appears as clumsy peasants attached to one nation and with the horizon of village idiots. On the other hand, abstract capital possesses the abstract possibility of controlling production in its own interests. Here, however, it stands mute before social-democracy, for the more it attempts to plan the more it must plan production for growth with the growth in consumption, welfare-state and low unemployment levels. Abstract capital like abstract labour can only exist in and through its concrete forms. When finance capital tries to elevate itself into an independent entity, it loses its connection with its source, which is of course abstract labour, which can only exist in production, concretely. It is thus always brought back to ground normally through the traditional method of crisis. As a result finance capital is bound within transitional forms of proto-planning of production normally of a centralised character. lt is hemmed in all sides through nationalisations, exchange control, and the direction of investment required for growth in production. The end result is to reinforce the earlier point that the bourgeoisie cannot ensure its own preeminence. For the finance capitalist can only prevent the working-class taking power, but he cannot restore the dictatorship of the capitalist class. The state has thus a particular role to play. We have pointed out that capital and surplus value take on forms specific to the epoch of decline and transition, and that the same is true of labour and the state. For Lenin the state had become a national imperialist state dedicated to war. This aspect had amply displayed itself, but it had been checked by the pressing need to survive, given the modern contradictions of war both in the sense of causing revolution and in the direct sense of the technical obsolescence of total war. Fearing the charge of reformism, many have refused to face the obvious fact that universal suffrage (only granted in Britain in 1927 for men and women, and effectively operative for men only from 1918) has had important consequences. It has meant that the bourgeoisie has had to permit various forms of indirect rule with the concessions that are entailed. Three entities have come into existence, the state, government and centralised economic administration. It is clear that the state has remained exclusively, and without any sharing, in the hands of the bourgeoisie. Thus the present actions of the police have shown that they are not accountable to their supposed employers, the local authorities in Britain. Harold Wilson has recounted his shock at the actions of the army in its wargames around Heathrow airport. The government has more leeway, often acting against the immediate interests of the industrial or financial bourgeoisie, in its taxation policy, direction of investment, protection of labour or the terrorisation of labour. Fear is a necessary instrument of the state, but under modern conditions of production it is counterproductive if the purpose of production is to produce reliable, technologically advanced products. The instability of the bourgeoisie forces it to permit, and indeed to support, governments not of its own choosing. Thus the financial bourgeoisie can probably never ensure a government of its own kind, even in coalition with its industrial partner. A dictatorship simply

would not work. (That does not mean that it may not be tried, for as finance capital declines it will be forced to try whatever means are to hand, even if that same means is no more than a palliative, and even if that palliative may turn into a poison.) We consider that the economic administration performed by the central government should be understood as a separate entity in its own right. To regard it as part of the state is to imply the ludicrous statements that it is an apparatus of force and that the state will always exist, since centralised economic administration is a necessary feature of socialist society, but the state is not. The important point, in relation to finance capital, is that the economic administration of nationalised industries, banking, taxation and subsidisation, stands in inherent contradiction to the interests of finance capital, however favourable the government. This apparatus does the planning, and twist and turn as any government might, it can only seek to increase its own economic power. Education, health, social services, utilities, transport all have an inherent and necessary tendency to be communally based. Where they are not actually administered centrally, they have to be regulated. Health and safety inspectorates, pollution control and the general support required to maintain production under conditions of unprofitability, or alternatively price and volume regulation, ensure a rising level of government interference. Only an economy based on gold could be said to operate independently, for as long as government has a nationalised form of money it necessarily has a measure of control and intervention in the economy. The Thatcher government has actually been more interventionist than its predecessors precisely because it can only achieve its goals through intervention, even if in a different direction and using monetary instruments more than previously. It is precisely this control over money which puts the economic administration in competition with finance capital. The flows of money under the law of value are not under the control of any centre, for firms with large amounts of money can always arrange lending to whomsoever they prefer at favourable rates of interest. The large institutionalised forms of finance capital, however, like banks, have, as the Comintern pointed out, been "statised"17, meaning here not that they are part of the coercive apparatus or state proper, but that they have to report and respond to the directions of governments or the central economic organs. In Britain they are not nationalised, but the extensive system of controls over interest rates, however liberalised, the volume controls over lending, checks on solvency and government-guaranteed loans, have ensured that the banks are compelled to be an arm of policy. Finance capital thus finds itself dichotomised between sectors of finance which cannot be controlled, such as the merchant banks or large companies with enormous liquid assets, and the controls over its essential nerve centres. It has then to operate in a climate which is not of its own choosing. It accepts the system as long as it continues to be defended against the ultimate enemy, which threatens to eliminate the law of value. This dichotomisation means that finance capital is compelled to act in devious ways to ensure its expansion and hence is driven to increasingly risky adventures. It also means that finance capital has to arrange a partnership with the government of the day. The economic administration necessarily has to maintain levels of employment and to base itself at least in part on levels of need and not effective demand. Finance capital is necessarily a form of money capital and hence it is of its nature necessarily in competition with the development of the central economic administration both in terms of control over the surplus product produced and in terms of the size of each sector. Clearly the partial privatisation of nationalised industries allows finance capital greater levels of control over the surplus value produced through its supply of loans, purchase of shares and consequent direct

placement of reliable persons on the board. At the same time, finance capital can then expand itself through the former nationalised industry. On the other hand, greater nationalisation limits its freedom to control and expand. However, all this is relatively unimportant to industrial capital which requires a developed infrastructure and a suitably qualified and healthy workforce. Since this is best developed centrally under nationalised forms there is a necessary conflict, or contradiction with the interests of finance capital. On the other hand finance capital needs to preserve itself both by making concessions to the working-class and by obtaining greater productivity from industry. Thus it is both torn at all times and brought back to earth at crucial periods. It is itself the damaged brain of capital, constantly acting in schizophrenic forms. Housing for the workers was always inferior and administered by the system through its bureaucratic hierarchy. Inevitably, the tenants came into conflict with the administration both over the poor quality of their flats and over their lack of control over their lives. Social democracy then stood condemned and the Conservatives put forward the logical value alternative of commoditising the housing stock. Tenants constantly pushed for better provision based on need as well as devolution of power to themselves, but these aspects could only be provided by a noncapitalist system. Similarly, the educational system had to ensure that the children of the ruling class received the correct education in order to rule, while the rest learnt discipline. There is an inevitable conflict in which compromise is nonsense, for it has only led back to the old system with a deterioration of standards and the conversion of many teachers into part-time policemen keeping the unemployable youth off the streets. It is no different in industry, for the provision of public housing leads naturally to direct labour departments and the diminution of the private construction sector. It is no accident that the large construction firms are Thatcher's strongest supporters. The awarding of contracts by the public sector, especially in local government, is corrupt the world over, because the interface of public and private property can only take the form of the use of money to ensure the diversion of public resources to private interests. Since the Labour Party has most often been the party of metropolitan city government, corruption of this kind is particularly associated with it. The natural form of ruling class corruption, the old boy network, is untraceable in economic terms. When civil servants retire from public service into private firms to advise them on how to obtain what they require from the public sector, this is regarded as the perfectly natural commoditisation of knowledge. Either way, there occurs a constant conflict between the sectors, only temporarily overcome by official or unofficial corruption. Above all the incentive system must break down when there is little unemployment and when shop stewards control the production line. Management cannot manage and the inefficiency of the system can only grow. Since new technique disrupts the full employment situation it can be introduced only in certain industries and often only very slowly, particularly in the nationalised industries where control rests with unions to a greater degree than elsewhere. The dynamism of capital peters out, and for a welfare state in a world of more limited welfare states the possibility of competing internationally approaches vanishing point. These contradictions, the contradictions of the transitional epoch, have to be added to the functioning contradictions of the capitalist economy. This is not the place to go into the particular importance of the rise in the organic composition of capital or of disproportionality and the particular solutions adopted. Suffice it to say that these solutions have now failed, ultimately because the working-class could no longer be disciplined to accept its subordinate position either in relation to control or in relation to the determination of wages. The new post war generation

was inevitably going to challenge the system, since it had not had to experience the horrors of war, fascism etc. How does this relate to finance capital? Simply put, finance capital had to accept a retreat as industry was made the driving force of the economy and investments were directed to production. It was itself controlled, in the manner already described, either through exchange controls or though direction of investment. Keynes was its clear enemy. However, once the danger of the working-class passed and the malfunctioning of the British economy resumed its natural course (supplemented by the above contradictions), the controls were relaxed and property speculators, the exchange speculators and the exporters of capital were able to resume their business. It is certainly true that they accelerated the decline of British industry, but to blame them alone is to blame the dung-beetle for the dung. As long as more money could be made in ways other than productive investment, capital would take those ways. As we will show finance capital amounts to little more than an outflanking operation in relation to the working-class. The problem, however, as we have argued, is that the new forms of finance capital are weaker and more parasitic than ever, while finance capital is more international than ever. Concretely, it has to base itself on the new forms of the welfare state: pension funds or insurance companies providing pensions; third world indigenous elites and capitalist classes. It is thus forced both to support the welfare state and to oppose it, in so far as the above contradictions limit its sources of surplus value. We are led back to the previous conclusion but at a deeper level; finance capital has become a parody of itself. Superficially, its separation from industrial capital appears ever more complete and its power appears greater than ever on a global scale, but it is threatened today with collapse through crisis and constant nationalisations. (From Critique No.16)

1. E. Mandel: Marxist Economic Theory: Merlin, London, 1968. Mandel has no definition of political economy in his 797 pages. The only conclusion that one can draw from his introduction and his final chapter on the history of economic thought is that Marxist economics is the economics of Karl Marx. P. Sweezy: The Theory of Capitalist Development quotes Marx in the above terms, taken from the Preface to the German edition, of Capital Vol. 1. , Moscow, 1961. p.10, but reduces them to the class relations, with no clear link. E. Mandel: Introduction to the Penguin translation of Capital, 1976 Vol. 1. , p.12 uses the same quote paraphrased put in the context of origin, growth and decline and then concentrates on the historical nature of laws. Nowhere does he explain the nature of law, category or contradiction although the terms are extensively used. M. Dobb's considerable body of work is best passed over in silence as the highest point of scholasticism. In his On Economic Theory and Socialism: A Lecture on Karl Marx, RKP, London, p.186, he virtually reduces the laws of capitalism to the law of value. He conveniently found a bridge between the concerns of orthodox economics and the need to maintain the socialist character of the USSR. In his later work: Theories of Value and Distribution since Adam Smith, Cambridge, pp137ff., 1973, the institutional aspect particularly ownership, p.144, are stressed. Ben Fine in his Marx's Capital, Macmillan, London, 1975 has no reference to his subject except on page 19, where he refers sagely to the social science nature of Marxist economics. What is required is a discussion of the nature of the subject in relation to the present. Mandel who is like a colossus in comparison to the rest as usual never gets to grips with the question even indirectly in his Late Capitalism. 2. See for instance P. Anderson's catalogue of Marx's errors in Considerations On Western Marxism, NLB, London 1976. p115. Once the concept of essence is abandoned so must 'law' and hence the Althusserians logically have to drop the law of value. Anderson is just responsible for importing Althusser not for his ideas. Anderson appears to agree on an empiricist basis.

3. G. Hodgson: NLR 84: The Falling Rate of Profit, p.79: "laws are real social facts." Raniero Panzieri: Surplus Value and Planning, p.22: "Marxist thought has failed to grasp the fundamental characteristic of modern-day capitalism, which lies in its capacity for salvaging the fundamental expression of the law of surplus value, i.e. planning, both at the level of the factory and at the social level." CSE: Labour Process and Class Strategies, Stage 1, London, 1976. 5. Karl Marx, Capital: Vol. 1, p.19 (Moscow 1961) L. Trotsky: The First Five Years of the Comintern, Vol. 1, p. 272, New Park, 1973 has a similar formulation. Mandel has another referred to in footnote 1. 6. The most ridiculous example of starting with the result is given by modern state capitalism. Thus in International Socialism 19, Peter Binns explicitly starts from a world capitalist economy in order to explain the present cold war. Mike Hayes follows arguing effectively that world capitalism develops ever new developed and complex forms. Since Marx did not foresee state capitalism he is found lacking in knowledge of what was to come. "He was therefore ignorant... of the forms that these tendencies would take after his death" (p.56). Poor Marx who argued: Capital "posits itself only in its adequate forms, insofar as and to the extent that free competition develops." Grundrisse, p.65, Penguin 1973. Marx failed to foresee that the development of the world state-capitalist economy was a further development of the laws which he said could not adequately express themselves in such forms, according to the modern state-capitalist theorists. If they were honest they would just state that Marx was wrong. The circularity of the argument: arguing that the world is state capitalist because states compete through war and thereafter that war arises because capitalist states compete escapes its authors. It has to be said that the authors named have done a heroic job with a silly theory. 7. L. Trotsky: The First Five Years of the Comintern, Vol. 1. p 22-3. Pioneer Press, 1945. and pp46-7 of the edition earlier quoted. 8. The view that the West has a continuous impoverishment is held by all Soviet writers, although lately questioned in specialist journals. Thus Dragilev and Rudenko: Monopolisticheskii Kapital, Sotsekrig, Moscow, 1961, p.363. Kurs Politicheskol Ekonomii, Vol. 1, Tsagolov (ed.) Moscow, 1963, p.251. These two examples are actually better as they were printed in the relatively progressive Khrushchev period, and the authors were able to make modifications to explain reality. The Soviet Union holds that capitalism is in a process of decay and hence the law of absolute impoverishment holds. They see the forces of production being retarded though not simply held in check. The Ekonomicheskaya Entsiklopediya: Politicheskaya Ekonomiya, Moscow 1972, has an extensive entry on this subject in the first volume pp10-12. To deal with reality the argument is that there is an intensification of work, increase in accidents, more women working, mass unemployment etc. 9. T. Cliff: Economic Roots of Reformism, in A Socialist Review p. 67, International Socialism, London, 1965, originally published, June 1957 in the journal of that name. "To the extent that past reforms are accepted as necessities, a series of new reforms becomes the expected course of events. With the eating comes the appetite. When capitalism, however, decays to the extent that any serious demands of the working-class reach beyond its limits, the bell will toll for Reformism." Mandel's discussion of crisis is functionalist, as in the above cited work: Marxist Economic Theory, p. 343 ff. 10. L. Colletti: From Rousseau to Lenin, NLB, London, 1972, pp.45ff. 11. Karl Kautsky: The Class Struggle, Norton, New York, 1971, p.185: "The economic struggle demands political rights and these will not fall from heaven. To secure and maintain them the most vigourous political action is necessary." The problem with the Colletti type interpretation of Kautsky is that it oversimplifies the ambiguities in Kautsky. To make the issue clearer here again is Kautsky, p.90: "Patiently to yield to what may seem unavoidable is not to allow the social revolution to take its course, but to bring it to a standstill." L. Trotsky: In his report to the Third World Congress of the Comintern: "Capitalism thus possesses a dynamic equilibrium, one which is always in the process of either disruption or restoration." The First Five Years, New Park edition, p.226. In a less rigid way he is stressing the same inter-relation of the finiteness of capitalism with the necessity for its overthrow. Rosa Luxemburg put it differently: "But even before this natural economic impasse of capital's own creating is properly reached it becomes a necessity for the international working-class to revolt against the rule of capital." The Accumulation of Capital, London, RKP, 1951, p.467. Lenin argued both aspects by pointing to the decay of capitalism in its last stage, but at the same demanding the existence of a party, which would act as the instrument of change. It is this balance of a decaying capitalism and the need for a subjective overthrow of the system which has been obscured. Colletti is really projecting backwards the Stalinist interpretation of an absolute decline which is furthered by a controlled party, controlled from Moscow. None of the persons mentioned had such a silly interpretation but they all held to a view of the finiteness of capitalism, bound only in Cliff's psychological contradictions, it has no reason to be superceded. That it may hang on, as did the Roman Empire or feudalism until it is physically overthrown is another matter. 12. E. Bernstein, Evolutionary Socialism, Schocken, New York, 1961. There is no superior anti-Marxist text, containing as it does all the usual criticisms although written in 1896. Perry Anderson's attack in terms of the law of value, polarisation of classes and declining rate of profit is there. Given that he wrote in 1896 it is now obvious that his predictions, not that of Marx, are falsified. Thus he dismissively quotes Engels' perceptive comment that crises are extending in time and that it might be expected that the next crisis would be a "new world crash of unheard of violence", (p.79) Engels was right and Bernstein wrong. Given the prediction on the

expansion of the middle class we should all now be middle class, instead of the white collar group being proletarianised as it is, however lacking in consciousness some people may find them. There is almost not a word new against Marx, since Bernstein. 13. Karl Marx: Grundrisse, p. 651. 14. Michael Aglietta: A Theory of Capitalist Regulation, NLB, London, 1976, p.111 ff. 15. Hilferding: Finance Capital. 16. Engels to Marx, Letter 86, p.205-6, Marx-Engels Selected Correspondence, LW, London, 1936. 17. See note 7.

The argument in the first section which appeared in Critique 16, has been that finance capital has to be seen as the declining and parasitic form of capital, which, however, has been partially negated by the nature of the transitional epoch. In this section finance capital is discussed as a concept in its own right. THE CONTRADICTIONS OF HILFERDING & LENIN Thus far although finance capital has been referred to, it has not been defined or explained. In order to do so we will briefly refer to its history as a concept and then attempt to provide a theoretical definition. It will be seen that in order to do so a discussion of Britain is inevitable. A discussion of the decline of Britain goes back to finance capital but an explanation of finance capital has to begin with the experience of Britain or else become a parochial discussion of a particular country, or still worse a vacuous description of global concepts with no context. The word is associated in particular with Hilferding's work Finance Capital, and thereafter with Lenin. As already indicated it became the orthodoxy of the Comintern theorists. Since then it has been employed in a variety of meanings, though the theorists have always claimed orthodoxy deriving from Lenin. Since, as we will show, Lenin was not at all clear in his definition, description or theory, present day theory may be described as simply muddled. Three definitions can be isolated. Finance capital is in the first instance identified with banking capital as a separate entity, and indeed both Hilferding and Lenin effectively do so. To the extent that such capital acts independently then according to them it is banking capital that we are dealing with. Thus we have such as Sam Aaronowitch referring to finance capital as money capital.1 The recent article in the CSE journal, Capital and Class, virtually brings out the same point.2 The essential point is that a form of separation between finance capital and industrial

capital has to be assumed. Lenin and Hilferding appear not to do so but Lenin is too astute to assume an identity of the two forms of capital and hence precisely points to the fact that there is a tendency to separation or independence.3 If there is such a tendency, finance capital according to Lenin would be identified largely with banking capital. Hilferding takes it for granted that there is no separation and puts the primacy on finance capital, most particularly the banks. The second definition speaks of a unity of finance capital and industrial capital in the form of a merger of banking capital and monopoly capital. This is the way it is put by Lenin, and derived from Hilferding. It has to be said that this is effectively a vulgarisation of Hilferding. Hilferding is much more complicated since he regards finance capital as abstract capital constituting a new synthesis of the old usurious capital with banking capital to form a new entity, finance capital, based on industrial capital. Lenin it has to be said does not put it this way but rather sees it in an entirely opposed light. He sees it rather as a return to the old usurious capital but in a new epoch: that of capitalist decay. There are effectively here two more definitions to add to the first. For the theory, the institutional forms are really secondary, in Hilferding.4 He is arguing that monopoly capital leads to the formation of abstract capital, which necessarily comes to govern capitalism. It thereby acquires the possibility of planning capitalism in its own interests. It thus lays the foundation of both a higher form of capitalism and the transition to socialism. Lenin totally opposed this view as effectively reformist, taking the view that finance capital was a declining, parasitic form. He does not, however, do more than cite examples of retardation of technology and the reversion of productive land to forms of consumption in order to explicate his theory. He brings out the inherent waste involved in monopoly production but he does not do more than referto the usurious nature of finance capital. In other words, he does not provide an alternative theory. Instead he effectively rejects the theory of finance capital as such and turns to an institutional description of the merger of banking and monopoly capital. This leads to the export of capital and hence imperialism. This, of course, is a theory of imperialism of unparalleled power, but it is not a theory of finance capital. Indeed he makes it clear that he identifies finance capital with monopoly capital. Not surprisingly some of his followers have taken him at his word and concluded that the term finance capital is redundant.5 Thus in institutional terms finance capital may be regarded as identified with money capital or banking capital on the one side, and with monopoly industrial capital on the other. But it can also be regarded as a merger of banking and industrial capital in which the banking capital plays the major role. Looking at it in another way, banking capital may be regarded as independent of industrial capital possibly in contradiction with it, or it may be regarded as subservient to monopoly industrial capital, or yet again it (banking capital) may be regarded as merged with monopoly industrial capital but controlling it. Lenin can be interpreted in any way the reader requires. This has only made for permanent muddle. The reason is that it is not possible to determine which of the three forms is a correct description without developing a theory of the origin and development of the form of finance capital. Clearly, Hilferding attempted it but ended up with a most dubious result rejected by Lenin and indeed by history. Obviously, abstract capital does not plan modern capitalism, nor could it do so without overcoming its own contradictions as capital. That does not, however, invalidate his discussion entirely. To say that finance capital is a declining form is the reverse of Hilferding but it is not a rejection of his starting point of perceiving it as abstract capital. Rather it requires a different explication of both the terms abstract and capital.

A NEW THEORY OF FINANCE CAPITAL Capital cannot be identified simply with money, since the whole nature of capital is that it is capable of extracting surplus value from labour. Thus capital necessarily requires the concrete form of labour, through the production process. Money in itself, or exchange value which has become independent, will necessarily attempt to increase itself in quantity. Money which makes more money, usury or M-M, is indeed money capital, but in so far as it increases itself through trade it can only have the ultimate meaning of greed or simple consumption. The whole point of exchange value independent of use-value is its abstract character and therefore its easy deployment across spheres, industries and countries. That is the nature of money itself, but for Marx money-as-money can only exist effectively when it is in world form for otherwise it cannot be exchanged for all goods. But it cannot be in world form without assuming the selfreproduction of exchange, which can only occur under conditions of accumulation, or the extraction of surplus value. Thus money can only exist as money if the conditions for money to become capital exist. Yet the two drives are contradictory. On the one hand money is the universal equivalent and therefore wholly abstract with a tendency to expand in abstract form. On the other hand capital must dive back into a concrete form simply to obtain surplus value. Thus capital as money and capital as the form of the use-value of labour-power are in contradiction. Historically, the contradiction has been solved first through forms of extraction of surplus value which involved a rapid turnover, like mining, use of unfree or semi-free labour in primitive accumulation and later through the extraction of surplus value in increasing quantity through the acquisition of relative surplus value. In other words the drive to self-expansion of the abstract form of capital, money as money, could be harnessed to a concrete form of labour as long as the concrete capital, the fixed capital required was limited. Once it grew above a certain level a contradiction necessarily established itself between the requirements of capital that it be fluid in order to take advantage of every profitable opportunity and the necessity to extract the surplus value through a concrete production process. Every attempt that capital made to free itself of this contradiction through increasing its rate of profit, by raising its relative surplus value only brought it back to the same contradiction of increasing fixed capital to increase its profit, while immobilising itself and so decreasing its profit. The contradictions of money capital are legion. In its long existence over many epochs, it can only exist through the destruction of the modes of production over which it obtains dominance, as long as they are not commoditised. But if money capital destroys its host, it destroys itself. On the other hand, once labour power becomes a commodity and the labour process is harnessed to the making of money, money capital expands the mode of production to the point, however, where it is subordinated to capital as a totality. Money capital and mercantile capital then become moments in the unity of the production and circulation process of capital. This must mean that they are subordinated to industrial capital, which is the only form of capital capable of bringing into being the means for the objectification of labour, abstract labour. Money capital appears as a moment in the existence of capital but also as its form. Herein lies the contradiction. As money, capital tries to have a rapid turnover and the maximum immediate profit, but it is subordinated to the total need for capital to go through the process of production and so a reduced turnover and lower rate of profit.6 The huge rates of interest of early capitalism are replaced by huge masses of profit, based on ever greater masses of fixed capital.

MARX & THE CONTRADICTORY NATURE OF CAPITAL Marx was quite clear on this contradiction. "Fixed capital appears as the most adequate form of capital as such". By using the term 'as such' Marx makes clear that he is referring to "capital's relations to itself'.7 The problem, however, is that fixed capital is attached to a specific use-value whereas capital as value cannot be attached to any specific form of use-value. This general form of capital "as regards capital's external relations... is circulating capital, which appears as the adequate form of capital, and not fixed capital".8 Thus we have a contradiction between fixed capital and circulating capital. At first sight it might be asked why capital does not simply transfer in its entirety to its circulating form and so ensure the easy convertibility of its use-value form into exchange value. The answer is that it can no more do so than the intellectual could convert entirely to a senseless brain. The reason is that "The increase of the productive force of labour and the greatest possible negation of necessary labour is the necessary tendency of labour. . . The transformation of the means of labour into machinery, is the realisation of this tendency". 9 "The productive force of society is measured in fixed capital".10 In other words in so far as capital is performing its necessary tendency to expand itself it will expand the productive forces of the society through the expansion of fixed capital. Its aim is the production of relative surplus value, which is achieved by improving the fixed capital of the firm. Thus the source of its expansion, dynamism and mature existence lies with the reduction of circulating capital in relation to fixed capital. The more it does so however, the more confined it is to a particular capital and so to a particular firm and location, thereby contradicting its immanent drive to universality. The higher the consequent organic composition of capital, the greater the socialisation of labour, and the lower the rate of profit, both because of the strength of labour and the progressive devalorisation of capital. In other words the more successful is the rise in productivity, the lower the value of products including fixed capital itself, to the point where ultimately both extra value and value itself cease to have meaning. Before the ultimate result is attained the tendency manifests itself as it did in the last century. A capital's having to exist in a specific location permits and compels the worker to exercise pressure, while the capitalist cannot take advantage of higher rates of profit in other locations. Logically, he ought to transfer to circulating capital and further down the line to circulation itself. Thus he invests in the extractive industries in the colonies, in construction type industries such as the railways all of which imply large circulating capitals. He invests in other countries where the limits of fixed capital have not been reached such as Germany, USA etc. Here he is aided by the rise of accumulations of money essential to pay for the amortisation of the fixed capital. In this way the contradiction between circulating capital and fixed capital is temporarily resolved. He does not replace his fixed capital but rather invests in the manner described, with the highest profits going to the areas with the largest circulating capitals. He is further aided by the fact that the high organic composition of capital ensures the decline of competition and hence a decline in the tendency to invest in fixed capital. It is not eliminated but only reduced in its intensity, and this permits the transfer of the funds and capital from fixed to circulating capital, from productive capital to unproductive capital, or from capital with its own barriers to capital in a less developed form. FINANCE CAPITAL, IMPERIALISM AS THE DOMINANT FORM OF CAPITAL We may summarise the results of this discussion as follows. In a mature form of capitalism, the contradiction between money as a moment of capital and capital itself, between capital as circulating capital and fixed capital, between abstract capital and capital attached to a use-value is subordinated to the drive for relative surplus value and so the development of the productive forces. Only in times of crisis would the contradiction show itself in open form.

Otherwise, the contradiction would not be such as to threaten the system. For the contradiction to become deadly a new aspect had to enter. That was the simultaneous rise of two new aspects. The growth of fixed capital could only lead to the growth of huge concentrations of production, which themselves had particular consequences. The first was that the need to invest internally was considerably weakened in the absence of the lower levels of concentration, i.e. competition. The second was that huge sums of money came to be accumulated by those self-same firms with the large fixed capitals. Not requiring the same degree of re-investment the sums accumulated, essentially for amortisation of those original investments, could serve the purpose of overcoming the inherent contradiction of capital by investment in areas where the return was quick and relatively high. To achieve this alchemist's dream the investment had to be made in areas of low fixed capital in the first instance, as in extractive industries such as gold and diamond mining. The construction industries and the railways are similar. This was of course the original nature of the export of capital from Britain to the colonies or third world. The investments in plantations were of a similar nature, as were the even more ruthless forms of exploitation shown in Leopold's Congo. The contradiction of these forms of investment is that they are based on earlier forms of capitalism and hence must rely on force direct and unvarnished for their continuance. To the extent that the development of fixed capital does develop the productive forces and establish the abstract labourer, it also controls the labourer. The colonial form, however, which is its necessary antithesis, cannot do so. The costs of the state must then be borne by the metropolitan country and so once again limit fixed capital formation, whether through taxation or inflation. This is not to argue that there is no development of colonies or that there is no benefit to metropolitan industry, but only to point out that there is a general contradiction in the development of the form of finance capital. It necessarily tends towards the form of abstract capital and hence the underdevelopment of fixed capital. This in turn tends to choke off its sources of accumulation, so that it is forced to retreat at strategic periods. NATIONALIST LABOUR, INTERNATIONALIST CAPITAL Finance capital does not, however, invest only in circulating capital or only in trade etc. Historically Britain invested extensively in such countries as Sweden, Germany and the United States, assisting their process of industrialisation. Here the sums of money which would otherwise have gone to the re-equipping of British industry or the expansion of British capitalism were supplied to its competitors. No better example of the extra-ordinary contradictions of British capitalism could be supplied. Capital as abstract capital is international and so assists in the competitive destruction of its base. When that was directly threatened it had to beat a retreat and use its political-military might to defeat its own creation. The United States is today faced with the same problem in relation to Germany and Japan. The parallel is instructive as the reason for the export of capital which has hitherto been given was limited to only one of the two features mentioned. The first feature which, we argued, caused the shift towards finance capital was the concentration of capital. The second must lie in the growth of the power of labour. The two aspects are clearly closely connected as the growth of fixed capital and concentration of production necessarily involves the increasing socialisation of labour. The growth of the working-class as a class is inevitable. Under these conditions in Britain the capitalist class was forced to concede first in limiting the working day and the exploitation of women and children, and then more directly on the shop floor. With a declining rate of profit, a more demanding working-class, which could only get more demanding,

could not be met head on. Apart from political measures of incorporation, the most effective measure was to shift investment into areas of lower organic composition, where labour is naturally less militant. This was done internally as well as externally. However, just as effective is a shift of investment into areas where labour is less organised or at any rate is more controllable even with a high fixed capital component. Ultimately, all labour subjected to the control of capital would combine to oppose capital but the process started first in Britain and hence the flight of capital began first in Britain. The investment of capital in areas of the world where there are no unions or there is less labour militancy is now taken as a standard tactic of capital, but it has always been such a tactic. The great difference, however, in the Britain of pre-WW2 days was that the shift of investment was not done directly but through financial institutions, in relation to other countries. The consequence was that there was a direct movement of capital in the form of money to European countries from Britain. The effect was that in Britain the separateness of finance capital was reinforced while the reverse occurred in the capital importing countries. Since there was little direct investment, the capital in the importing country could be handled only by financial intermediaries, even if the ultimate destination was the purchase of shares. This gave considerable power to the banks in countries developing in opposition to British competition. It also gave enormous power to British financial institutions, which could use sterling as the international currency next to gold. Britain did not develop its multinational companies but rather its financial holdings and the requisite institutions. A particular form of capital, finance capital, thus came into existence in opposition to a particular form of labour. The particular form of labour is a local, even parochial, labour relating to its own regional or national fixed capital which has been arbitrarily divided and reduced in stature through the removal of its natural growth in an international and interregional form. Labour becomes nationalist in opposition to internationalist capital, thus reversing the real relation of an international division of labour. It naturally tends to combine with its own local industrial capital against international finance capital and thus finance capital has created a backward workingclass, which is thereby the more easily contained and outmanoeuvred. This localism is cemented with the privileges to which Lenin so graphically pointed, made possible through the profits obtained from empire. In Britain it was not just privileges for the few workers that were made possible by finance capital. In a certain sense finance capital had gone so far in its polarisation of its contradiction with fixed capital that it all but left it to its own particularist devices. This meant a degree of control and concession unprecedented in any country. This then confirmed the economistic and collaborationist tendencies of labour bound within a backward fixed capital. In the countries competing with Britain which received investment the situation was not the same, since their fixed capital was over time increasingly competitive and international in character. Nonetheless the close relation between a protective internal finance capital and the development of industry produced a different form of nationalism. The form of control and ideology were necessarily different. In Britain it was a question of concession on the basis of backwardness, localism etc., whereas elsewhere it took a more directly national form. The merger of banking and industrial capital in Germany produced a necessarily longer term and national approach to industry itself. In Britain the separation of the two forms of capital necessarily led to a particularistic and economistic labour movement, so that the basis for a change in the social relations through the socialisation of labour was partially negated. Only in times of economic and international crisis, such as war, did the particularist attachment to fixed

capital break down. This sounds paradoxical since it is precisely at such times that protectionism and other forms of division of the working class show themselves. However, during wartime industry has to be developed to its maximum with the greatest degree of fluidity of labour. Although at first labour may stand opposed to the labour of other countries and may itself be disunited domestically, that tends to change in the course of the war, as it did the first World War. The unity of the class grows with its industrial power, and the potential for planning becomes manifest. The senselessness of a war of conquest, when co-operation is the natural alternative can only grow even more apparent. During times of crisis, the divisions must increase at first but the very mass unemployment which causes the increase of that division becomes the basis of an increased mobility and fluidity of labour so prized by the employers of labour. It thereby destroys the very mechanisms which attaches the worker to his factory, his fixed capital or rather that of his employer. At the same time the solution to his restored sense of insecurity or as Marx put it, his absolute poverty, lies in a political change within the society. Then the regime must itself find another political solution, usually this has been war. If it is short and sharp it can achieve the object, but only in the form of a delaying mechanism. Of course this does not explain the course of British history but simply points to certain of its peculiarities which arose from the particular nature of its capital. CONTRADICTIONS OF FINANCE CAPITAL If this were all that there was 10 the question it might seem, the last paragraph notwithstanding, that finance capital was the solution to all capitalism's ills. It has, however, three fundamental contradictions. Firstly, and most obviously, the more it develops as a separate entity the less developed must be its fixed capital and hence ultimately its own source of growth. This is why Lenin ultimately was-able to see it as a form of decay. Secondly, a separately developed finance capital must necessarily be in the form of the investing country and the more dependent countries. The conflict between the different investing countries themselves only really developed with the decline of the major financial power, Britain. In other words, historically there has tended to be a dominant financial power, with lesser competitors. This again is no accident. Historically, one country, Britain, developed to the point where it established a world financial system in which it was dominant. Apart from the fact that it was first, Britain established a world financial system because the very nature of capital is that it can only exist in a world form, and since Britain was the world capitalist power it established the form. Concretely, Britain established the financial markets, the international forms of government and private lending and provided the state apparatus for their protection. France was the only other major financial power and it concentrated its investments to an extra-ordinary degree in Russia. Its relative industrial backwardness never gave it the resources to compete with Britain and it was knocked out with its total loss of investments in Russia. Thus international money came to mean sterling. Thus British capital has been international capital and other capitals have been much more local or national. In the process British capital partially lost its national character, permitting it to transfer out of its home base, if it required to do so. Its internationalism, which is at base the attempt by capital to be universal, is contradicted by its particularist base. It can transfer from a particular point but it always remains based on particular fixed capital in a particular location. When the development of that particular fixed capital is retarded at the expense of the development of finance capital the limitations of its internationalism become apparent. The larger the original accumulation the longer can the international form maintain itself. The costs of the

form, however, both of direct maintenance, as in the apparatus of force and control in general, and in diminishing the original base, must ultimately overtake it. Its competitors then come into their own. Britain has been succeeded by the United States, which has in turn lost its dominance. Its third contradiction lies in the fact that the international form can only be an. imperial form and hence it must come into conflict both with-its colonial or neo-colonial labour and with its other dependent or semi-independent clients. In this manner it must ultimately lose much of its original investments either through nationalisation or compensatory acquisition. Since its character as finance capital is as parasitic to its client as it is to its source, it naturally tends towards the massive extraction of surplus value from these countries and hence to their ultimate bankruptcy. If finance capital were not finance capital it would re-invest only internally and so assist a rapid industrialisation at low cost. Instead, it ruins both itself and the underdeveloped country through the attempt to gouge out maximum profits until it is too late to save the original investment. It is clear that all three forms of its necessary decline go back to its contradiction of expanding itself beyond its retarded source: the extraction of surplus value from labour in the production process. In its necessary decline, it has no alternative but to turn on its source and attempt to raise its productivity and so destroy its compromise with labour. In the historical context this has become immensely complicated with the rise of industrial capital in the context of the welfare state. However, the essential point has been that the historical advantage of finance capital in Britain has ensured the predominance of capital, although it may be said that the form itself is exhausted today. THE HISTORICAL FORMS OF FINANCE CAPITAL At this point it is useful to turn to the history of finance capital in Britain. It will be shown that the evolution of finance capital in Britain is the archetypal form and not that of Germany as Hilferding argued. It will be argued that banking and industrial capital were merged in all countries initially but, when the evolution of industry reached the point of being self-financing, the separation of the two forms became possible. Whether potentiality became reality depended on concrete history. Once the separation became real the issue becomes one of dominance. This can take two forms: that the nature of the whole reproduction of capital is subordinated to finance capital, or direct rather than indirect control is exercised by finance capital. The first form is that of Britain, whereas the United States appears to be a mixture of the two. Three forms of relations between finance and industrial capital have come into existence. The first is that of the continued merger as in Japan and Germany. It is to be noted that it is precisely Germany which was defeated twice in its imperial ambitions in two world wars, while Japan which was considerably more backward before the first and second world wars was also defeated in its imperial ambitions. The problem was not that they lost their overseas investments, but that their indigenous industries had to be re-built in order to compete once again in the world market, and they both had to extend welfare provisions to include a commitment to full employment and industrial growth. It is also true, as we have argued, that history has shown that there can really be only one national capital which becomes a world capital so that the frustration of imperial ambitions has forced finance capital in their case to remain internal. Even so present day figures show considerable outflows from these countries, indicating a certain change in relations which if continued might go in the direction we have regarded as natural, that of an

independent finance capital separated from industrial capital. The commitment to industrial growth has meant that internationally the flows of investment have been to a much greater degree than before the last World War direct investment rather than investment in shares or loans. Thus the separation is limited internationally but not removed. The second is the obverse: that of an independent finance capital, as in the case of Britain. In its case, it was the dominant industrial power whose imperial form permitted it to act fora time as international capital itself and it won the necessary wars to maintain its dominance. Industrial capital was stunted in relation to other countries such as the USA or Germany. Its enormous returns from overseas investments as the well quoted figure of 10% of GNP in 1914 demonstrates, allowed its finance capital to be both independent and dominant. French finance capital which was similar before the first world war had a much weaker industrial base and was effectively eliminated as a finance capitalist power both by the expropriation of a large proportion of its assets in Russia and by its enormous losses in that war. The nationalisation which is now the fate of finance capital in that country is a natural consequence of the defeat which we sketched above. Its source of surplus value had been so retarded through internal and external losses and defeats that only the use of a strongly centralised bureaucracy could revive it. The third case is that of the present day international financial power, that of the USA. There it is clear that around the 1930s its industrial companies became self-financing. The six powerful groups of finance capital identified by the TNEC and Sweezy have given way to a much more amorphous form, which the debates in the USA have struggled to adapt to Lenin and Hilferding. It is quite obvious that General Motors and AT&T are so large that the banks or other forms of finance in the USA are dependent on their custom rather than the other way around. Nor is it accidental that the state had to step in to assist Chrysler and not the banks alone. The tendency to conglomeration has shown its limitations and the reverse is now occurring. Furthermore a glance at Fortune's 50 largest mergers shows the tendency in practically all cases towards a merger of similar interests in 1981. The essential questions are the degree of control exercised and the source of the surplus value and in these respects the tendency is towards separation. Where the firm is dependent on the bank for the source of its funds for reinvestment and the bank then makes a long term commitment, they are clearly merged with dependence on the bank. In the USA this was true until the thirties and there clearly exists this kind of dependence for small and medium sized firms. Unless however, the banks actually take equity in the firms the dependence is still more limited than the kind described by Hilferding and still existing in Germany for instance. Where, however, the banks might invest in government bonds, lend overseas and lend to a variety of institutions on a basically short term basis, they are then independent of any industry and industry in general. Of course, in the end, the source of surplus value goes back to the production process but its extraction can be very indirect, operating, as indicated, through the government, on overseas interests and on different sectors of industry, with the result that the financial interests develop a firmer short-term interest towards industry. In turn, industry itself can obtain the bulk of its longterm funds from internal sources. In such a case, although ownership of the banks and the industry or firm might be the same they operate independently. In fact, in so far as finance capital can obtain higher rates of profit the tendency will be to transfer funds from the industry. To the degree that competition is limited this tendency will be accelerated. In this case, the two aspects of capital operate independently but the surplus value is transferred to finance capital and in this different sense it is dominant.

In a third case, where the firms are both large and within the world market, subject to considerable competition, they will tend to be self-financing, generating huge sums of money with the banks acting only as facilitating mechanisms. On the other hand, at certain crucial junctures as during a crisis, or when expansion is critical, stock-market flotations become important and hence the price of shares plays a crucial role. The price of the shares depends in the end on the long term profitability of the firm, in the opinion of finance capital. Thus investment in internally uncompetitive industries such as steel is frowned on, as opposed to so-called high technology, the retail sector etc. A climate of investment opinion is established. The existence of very large institutions like pension funds and insurance companies facilitates the relative independence of finance capital in that its source of funds is ultimately wages rather than surplus value, although control remains vested in fact with particular financial forms and institutions, like the banks themselves. Nonetheless, the interest of pension funds lies with maximizing short-term return in order to pay larger pensions not with longterm risky investment. The effect is to dilute control over companies in which they might have important share-holdings. This is both because the pension funds are nominally owned by the prospective pensioners and because its requirements conflict with the interests of industry. It may be objected that the holding company negates much of what has been just argued.12 Thus it can be said that the holding companies of Rockefeller Brothers or Du Pont are just agglomerations of money capital shifting around where they can, to obtain the maximum return. In fact, this is obviously not true and fails to account for the tendency to de-conglomeration. A holding company which basically controls a large part of an industry is simply a more flexible method of owning a company. The holding company is actually faced with a choice. It can either buy and sell shares, lend money directly, invest in fixed securities - like any financial institution or it can invest on a long term basis in a firm or series of firms. In the first case it is no different from the forms of finance capital described while in the second it would only be different from actually owning a particular company if it was a conglomerate. The problem with being a conglomerate, however, as the financial press points out ad nauseam, is that either the parts function independently or the holding company has to have extra-ordinary managing ability. Since, as we have pointed out, the tendency of capital is to try to overcome its problems with fixed capital by shifting its investments into a more circulatory form the natural tendency of any holding company is to sell its less successful sectors. It will then tend either to hold to the area where it is successful or effectively become investment managers, buying and selling shares etc. In fact, many holding companies tend to be a mixture of both solutions. We may return to the British case by pointing to the differences with the USA. Although concentration of capital is not low in the USA it is considerably higher in the UK both in industry and in financial institutions and hence the separation appears in a starker form. The smaller size means that the more limited market does not make for small and medium sized companies dependent on banks. While they exist they play an almost insignificant role in the economy, so that their dependence on banks is of secondary importance. The second major difference is that the role of the pension funds and insurance companies, together with the relatively smaller stock market has meant that the control over shares is much more concentrated. In Britain nationalisation of the major merchant banks and two or three of the top insurance companies would put effective control over quoted companies in the hands of the state.

BRITAIN The independence of finance capital from its source is always relative, because of its ultimate dependence. It is this contradiction which renders finance capital contradictory not just between form and content but in its form itself. It is unstable because it must render itself independent of industrial capital but it has to return to its origins with potentially disastrous consequences as we have argued above. We can today trace its origins and notice that it is not cyclical but evolutionary. It is subject to the cycles and waves of capitalist development but it has its own evolution. Historically, British industrial development appeared different in relation to its forms of finance because it evolved slowly. It has, however, been pointed out that although large banks do not appear as financiers of the industrial revolution the smaller county banks were closely connected with the development of industry. Then too in the earlier period when crises occurred frequently lending short was converted by default into lending long, particularly when the banks were relatively small. Thus Peter Mathias: "Banks, and the partnerships of banks, throughout the country showed a very intimate connection with wealth made in trade and industry. Rich industrialists not uncommonly became partners in banks . . . Where a merchant or an industrialist or mineowner was a partner in a bank he felt he had special claims for accommodation."13 He argues that the bankers might finance industry with their private funds, or give long term credit by propping up the merchant creditor. In any case, he points out in another connection, in relation to the formation of large capitals a legal division existed in the partnership between those supplying capital and those managing. While the commercial banks evolved as conservative financial institutions their early history was re-written to conform to their stated intentions and most particularly to their later form. On reflection it is clear that the evolution of early industrial capital had tobe one in which the merchant and money capital which had evolved merged itself with aspiring industrialists, who would necessarily be undercapitalised. Thus the view that Britain was some freak which would ultimately conform to the evolution of Germany, as Hilferding saw it, has to be revised. Germany on the contrary travelled the same road as Britain with the important difference that it would be more dependent on the banks because of its later development not in its need for money but in the institutional form. The difference was thus more apparent than real. There was another crucial difference: that the world monopoly possessed by Britain allowed a lower level of competition, in terms of finance required than the later Germany. Thus Mathias: "Very often, too, profits in excess of the requirements of investment in expansion would be invested in government securities, transport stock or other non-industrial assets."14 This, of course, argues that there was no period of nonmonopolistic competition. It would actually appear as if the German cartels had more need to invest in order to compete than the early British industrialists. It would also seem that a separate finance capital began quite early in Britain. However, as we pointed out above there was in fact a close connection between finance and industry in this period. Perhaps the example of the breweries is most picturesque for they "became associated with banks in over fifty cases".15 Marx long ago pointed out the importance of investment in government stock. Nonetheless there is a difference between a tendency which is becoming a reality and the establishment of that reality. What lay behind the evolution in Britain was the growth of the self-financing aspect of capital at the same time as three other tendencies. Firstly, although Britain did not develop the giant monopolies of Germany it did have an increasing size of capital, both through concentration and

centralisation. The size of the fixed capital would have to rise over time. This is only a statement of the rise in organic composition of capital, about which Marx was exercised as an evident British reality. Its rise meant an equivalent rise in money capital requiring to be saved over time. In the second place the rise in organic composition as Marx argued and Ricardo had earlier argued on different grounds led to a decline in the rate of profit. This, however, would not have been enough to either lead to a decline in the rate of profit or a movement of capital from industry. It was the third which was crucial. The rise of the working-class movement made it difficult to pass on declining profits to the workers. There is no need to argue this case since it is well documented both in its rise and in the decline of the modes of control over labour power earlier exercised. It should be noted that the three aspects mentioned are necessary forms arising in logical order. The rise of the working-class movement re-enforced the tendency to replace labour with capital and so caused increased concentration and centralisation of that capital but a declining rate of profit which in turn required further attacks on the working-class. The struggle over machinery and working-conditions has its limits when an alternative increasingly presents itself. The freeing of funds has two aspects. On the one hand, it seeks more profitable outlets in productive labour outside its home but on the other it simply re-groups and extracts the same rate of surplus value by other methods. Thus the extraction of surplus value through rent of property, interest, insurance, and taxes paid over to the capitalist class through their ownership of government bonds are just some of the forms in which the worker found himself at a disadvantage. He could only re-coup his position relative to capital through acting on a national scale and hence politically, before he was sufficiently political. Finally, we may summarise the argument as follows: Britain was the first country to evolve Finance capital as such. Money capital and industrial capital were originally merged in Britain but the demerger created the new form of capital, which then partially transferred itself not just to the colonies but also to what became its competitors. The latter, however, could not exist as competitors as opposed to subordinates except through very close connections between banking and industrial capital, not to speak of the importance of the government. Whereas in Britain finance capital was able to achieve its aims through indirect means of control, the latter countries had to do it directly. Concretely this means that in the case of Britain finance capital could obtain its share of surplus value through the forms of interest, rent, insurance, management fees etc. with overseas investment all existing in separate institutional forms from industrial capital. Nonetheless, this meant that the flow of investment went through finance capital. The latter was not self-sustaining but industrial capital tended not only to pay a considerable proportion of surplus value in the above ways but also in the form of dividends and the direction of funds to investment trusts. The result was that finance capital came to control the potential for growth and the renewal of the existing capital stock. As long as it was simply a question of slow growth or no growth, industrial capital could remain as it did operating along its own lines, fundamentally supplying finance capital with its source of funds. Once that changed, although individual firms might be able to raise their level of reinvestment, the system required both much higher levels of investment than could be sustained by individual firms and also a more evenly higher level of investment to allow inputs, spare parts, machine tools to be of the quality required rather than at what might be a lower level. This flow was then regulated by finance capital to the point of possibly not permitting much of a supply of funds at all. This again meant that the separation of the two forms of capital was re-enforced. In short the characteristic of finance capital is that it is capital which attempts to raise its own rate of profit above an otherwise existing typical rate of profit by either using forms of unproductive

capital or less developed capitals with lower organic compositions and higher rates of surplus value, which may or may not be in the same country. In its crudest form it amounts to an outflanking operation in relation to the working-class. It tends to evolve to separation but this process has been historically aborted and three forms have evolved, as in the examples discussed of Britain, Japan, Germany and the USA. We may conclude this second part by restating the nature of finance capital as an abstract capital which has shifted away from its concrete form as fixed capital to one in which it becomes the form only of realisation in the process of circulation. In so far as it does, so it is parasitic since capital can only exist as a unity of its two aspects and any attempt to emphasize the one over the other only leads to a seizure. In this case, the sucking dry of the fixed capital leads to the decline of capital itself, but not before the forms by which it does so have exhausted themselves. In the next part, I shall go into the concrete forms of finance capital and their nature. In the final part, I shall consider the consequences for labour. The essential point is that Britain had a particular social structure predicated on its head start in the industrial revolution, which outlasted its industrial decline. Thus it had a particular form of capital and a particular form of labour. (From Critique No.17) NOTES
1. Sam Aaronowitch, Ron Smith, Jean Gardiner, Roger Moore, The Political Economy of British Capitalism, A Marxist Analysis, McGraw Hill, 1981. A distinction is made between finance capital which they say is Lenin's concept of merger and financial capital which is "concerned with the growth of credit by which money can be used as capital", p.61. Thus they have produced a semantic difference to hide a real divergence of industrial and finance capital. The need to claim orthodoxy or continuity with one's past is no doubt strong among those who canonize Lenin, along with Stalin. The distinction between the two terms (p.29) is no doubt essential to recognise because of the obvious divergence of the two forms of capital, which can no longer be ignored. As a result they produce an empirical work with a low theoretical level. 2. Jerry Coakley, 'Finance, Capital: A Study of the Latest Phase of Capitalist Development,' Capital and Claw 17, p. 134ff. 3. Lenin. Imperialism the Highest Stage of Capitalism, 'It is characteristic of capitalism in general that the ownership of capital is separated from the application of capital to production, that money capital is separated from industrial or productive capital, and that the rentier, who lives entirely on income obtained from money capital, is separated from the entrepreneur and from all who are directly concerned in management of capital. Imperialism or the domination of finance capital is the highest stage of capitalism in which this separation reaches vast proportions.' p. 132 of the Varga and Mendelsohn edition. New Data for Lenin's "Imperialism', or p. 118 of Vol 19 of the Third Russian edition of Lenin's Works: 'Either finance capital is separate or it is merged with monopoly industrial capital.' Yet Lenin does not resolve the problem. 'The "personal union" between the banks and industry is completed by the "personal union" between both and the "state".' p. 102. "The result is twofold: on the one hand the merging loan ev er greater extent, or as N. Bukharin aptly calls it. the coalescence of banking and industrial capital: and on the other hand, a transformation of the banks into institutions of a truly "universal character".' (p. 104) He then goes on to give instances of merger. Lenin appears torn between two conceptions: one which is derived from the logic of capital and the other an empirical description of Germany. Varga and Mendelsohn vulgarise the whole thing by ignoring the question of separation and providing detailed examples of the merger. 4. Hilferding. Finance Capital. RKP, London 1981. The crucial theoretical chapter is translated also in Bottomore and Goode, AustroMarxism pp. 204-8. I have used the Russian translation by Stepanov, Moscow 1931. The Chapter involved is that on the Capitalist Monopolies and the Banks. 5. The kind of muddle which theorists have got into is well illustrated by the Soviet view or rather one Soviet view. They argue that finance capital is simply the merger of banking and monopoly capital. Which of the two is more important is an empirical question. 'In actuality finance capital denotes the merger of banking and industrial monopolies'. After slating Hilferding in the usual ritual way for being an idealist, the authors declare. 'Behind every bank, however big it might be, however independent in its actions it appears, there stands a finance-oligarchic group, in whose hands the bank is one of the tools of monopoly control.' Readers may be forgiven for concluding that the industrial monopoly is what is important and the banks a secondary phenomenon. Quotations are taken from M.

Dragilev and G. Rudenko. Monopolistuheskii kapital Sotsekrig. Moscow 1961. pp. 96-7. On this view Britain was not part of finance capitalism. Hence Sam Aaronowitch's strenuous attempts to show the Soviet view correct in his books The Ruling Class and Monopoly Capital. In his later incarnation he has dropped this nonsense. The reason for the Soviet problem is revealed on the same page when it is pointed out that nationalisation of the banks does not necessarily change the system. Thus the French nationalisations of the banks changes little according to them. Obviously if you have a system in the USSR where nationalisation is its chief feature, it cannot be identified with such as France. As a result, finance capital can exist according to Soviet theorists even if all finance is nationalised because the only thing that is important is the existence of monopoly industrial capital, with holding companies. Logically, they ought to simply adopt Sweezy's terminology of monopoly capital, but they cannot without criticising Lenin, or admitting that capitalism has developed new forms. 6. Marx, Grundrisse, pp. 620-3 goes into some detail on this issue. 7. Ibid., p. 694. 8. Ibid. 9. Op. cit., p. 964. 10. Op. cit., p. 695. 11. Fortune, January 24, 1983. 12. The debate around Sweezy, MR. November 1971. Fitch and Oppenheim. Socialist Revolution, Vol I. nos. 4, 5, 6, takes place on different grounds. Sweezy curiously argues that there could not be two factions of capital. While his adversaries argue that corporations are controlled by finance capital. Sweezy appears not to know of Marx's statement; 'As a particular form, interest bearing capital stands opposite, not labour, but rather opposite profit-bearing capital.' Grundrisse p. 653. Earlier he speaks of 'monied capitalists and industrial capitalists can form two particular classes only because profit is capable of separating off into two branches of revenue.' The real problem is that there is a real separation existing in Britain and a tendency towards that fact elsewhere, rather than a simple merger. But that separation is in lad predicated on a common source and consequently it is limited. 13. Peter Mathias. The Transformation of England, Methuen, London 1979, p. 106. 14. Op. cit., p. 105. 15. Op. cit., p. 106. of Oxford