Imperialism and the concentration of capital

the-hanging-gardens-of-babylon

In his book Imperialism, Lenin remarked: “The concentration of production; the monopolies arising therefrom; the merging or coalescence of the banks with industry – such is the history of the rise of finance capital and such is the content of that concept”.

This quote encapsulates the dynamic of capitalism in the past century and is vindicated by modern research. Three systems theorists at the Swiss Federal Institute of Technology in Zurich have taken a database listing 37 million companies and investors worldwide, pulled out all 43,060 multinational corporations and the share ownerships linking them to construct a model of which companies controlled others through shareholding networks, coupled with each company’s operating revenues, to map the structure of economic power.

The model revealed a core of 1318 companies with interlocking ownerships. Each of the 1318 had ties to two or more other companies, and on average they were connected to 20. What’s more, although they represented 20 per cent of global operating revenues, the 1318 appeared to collectively own through their shares the majority of the world’s large blue chip and manufacturing firms, the “real” economy, representing a further 60 per cent of global revenues.

When the team further untangled the web of ownership, it found much of it tracked back to a super-entity of 147 even more tightly knit companies (all of their ownership was held by other members of the super-entity) that controlled 40 per cent of the total wealth in the network. “In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network,” says Glattfelder. Most were financial institutions. The top 20 included Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group.

The results can be seen here: http://arxiv.org/PS_cache/arxiv/pdf/1107/1107.5728v2.pdf.

The top 20 multinational corporations are Barclays plc, Capital Group Companies Inc, FMR Corporation, AXA, State Street Corporation, JP Morgan Chase & Co, Legal & General Group plc, Vanguard Group Inc, UBS AG, Merrill Lynch & Co Inc, Wellington Management Co LLP, Deutsche Bank AG, Franklin Resources Inc, Credit Suisse Group, Walton Enterprises LLC (holding company for Wal-Mart heirs), Bank of New York Mellon Corp, Natixis, Goldman Sachs Group Inc, T Rowe Price Group Inc and Legg Mason Inc.

The romantic dream of the self-made, hard-working industrial capitalist is thus shattered by the hammer of reality. This heroic figure is exposed as no more than a shareholder in gargantuan corporations, the motor force of capitalist imperialism. The profits of large-scale production and international exploitation of the resources of oppressed nations guarantee that capital breaks out from the shell of individual property.

The investments required by large (and especially multinational) companies go beyond the accumulated capital of any single individual, and banks become necessary to mobilize the capital needed by productive enterprises. Capitalism is hence provided with a mobilization of credit which keeps the quantity of idle money to a minimum and mobilized the largest amounts for productive purposes. The increasing mass of credit leads to a change in its very nature, which goes from the provision of short-term finance, or circulating credit, to long-term investment projects, or investment credit, which provides banks with higher interest in enterprises’ long-term prospects. This of course ends up cutting into entrepreneurial profits, and increases finance capital’s share in the economy, as can be seen in the following graph:

bank-assets-to-gdp

On top of this, banks and their role as capital mobilizers reinforce the tendency towards growing concentration and centralization of capital. Banks come to dominate companies, increasing their stake in productive enterprise through the acquisition of share capital (it is no coincidence that the top companies in the global network of capital are banks or financial services corporations, like Barclays, Capital Group Companies and FMR Corporation). As capital centralizes and banks push up the profit rate on their investments by sponsoring larger and monopolistic companies, free competition is thwarted. “Not real capitalism” is indeed the purest expression of the laws of motion of capitalist society and the product of the logic of this mode of production.

As financial capital is transferred from competitive enterprises to multinational oligopolies, the rate of profit is systematically pushed up for big businesses and the three primary contradictions of global imperialism, outlined by Joseph Stalin, are brought to their highest point under the existing conditions of social polarization, where capital, concentrated in the hands of few giant capitalist associations manifests itself in direct opposition to the world proletariat.

Imperialism is then nothing else than the highest stage of capitalist development, where gargantuan concentrations of capital compete for dominance over the world, and especially over the oppressed people. It is a capitalism that is forced to admit its own contradictions and its own desperation, as sweat-stained profits become blood-stained profits.

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