Marxist Theories of Imperialism from Marx to

Present Times: A Contemporary Critical

Reassessment
 Abhinav Sinha
The capitalist world has been submerged in possibly the most systemic and strucutral crisis in its history
since last one decade. All predictions of a recovery are proving to be a chimera. Imperialism in the phase
of Globalization has reached a stage where stagnation has become the new norm. It is a well-recognized
fact that the capitalist world never fully recovered from crisis since the collapse of 1973. World
capitalism is going through a mild recession since the early-1970s, periodically collapsing into serious
crises and it is surviving by creating bubbles of fictitious capital. The outbreak of the most recent crisis in
2007-08 with the subprime mortgage crisis in the US and then its spread to the rest of the world has
proven to be the most serious of all the crises that manifested themselves in the sector of finance. This
crisis inaugurated a decade-long global slowdown and has politically expressed itself into the intensified
rivalry between the declining US imperialist hegemony and other imperialist blocs, in principal, the Sino-
Russian axis. Despite the fact that there is no completely direct confrontation between the Anglo-Saxon
axis and the Sino-Russian axis militarily, the intensified rivalry between them is expressing itself in
currency wars, diplomatic tussle over third countries like North Korea, Venezuela, Iran, etc and the
indirect shadow war between them in Syria and to a certain extent in Ukraine. At present, the danger of a
major, if not world, war is hovering above the world. In such a scenario, it has become particularly
pertinent to analyze the present phase of imperialism, the changes in the modus-operandi of imperialism
in the era of Globalization and post-Fordism, the new forms of accumulation and the form that crisis has
assumed since the inauguration of neo-liberal policies. A number of Marxist academicians have attempted
to analyze the new characteristic features of Imperialism in the era of Globalization, like David Harvey,
Ellen Meiksins Wood, Dumenil and Levy, John Smith, Christian Fuchs,Prabhat and Utsa Patnaik, etc.
Some of them have tried to take cue from Marx and Lenin and analyze imperialism in the Twenty-first
century; others have failed to avoid the obsessive compulsive disorder of academism to launch new
neologisms,"invent fire all over again," present old wine in the new bottle while claiming novelty. These
new studies have launched a new debate regarding what is being described using a variety of epithets
including 'new imperialism', 'empire', etc. This has made relevant a critical and contemporary
reassessment of classical Marxist theories of imperialism, the neo-Marxist theories of imperialism that
emerged in the 1960s and 1970s including the Monopoly Capital School, 'Dependency' theory, World
Systems Theory, as well as different Marxist theories of imperialism that came out in the heydey of
neoliberalism and Globalization and the latest analyses of imperialism that emerged in the new
millenium.

Since all the theories of imperialism that emerged after the Second World War claim to be Marxist or at
least heavily influenced by Marxism and build upon the writings of Marx and Lenin, it would be
imperative to recapitulate the basic tenets of the Classical Marxist theories of imperialism. Such an
endeavor, of course, can only start with Marx's fragmentary observations about expansion of capitalism

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on global scale, causes of this expansion, its influence on the advanced capitalist countries as well as on
the backward countries that became colonies.

Marx on Imperialism
Marx did not develop a complete and coherent theory of imperialism and the monopoly stage of
capitalism. Capitalist system was still undergoing the transition to the monopoly stage when Marx died
and phenomenal manifestations of this process were still unfolding. We only find fragmentary but
extremely valuable comments of Marx on expansion of capitalism beyond national boundaries, creation
of world market, foreign trade and colonialism that are relevant for the study of imperialism even today.
Marx's analysis also becomes important because Imperialism and the stage of monopoly capital was
outcome of the same essential tendencies of capitalist mode of production that Marx had identified,
namely, concentration and centralization of capital, the law of accumulation and expanded reproduction
and the law oftendential decline in the rate of profit.

Marx clearly distinguishes between the two periods of capitalist expansion into other regions of the world,
especially Asia because Marx wrote too little about Africa and Latin America. Marx analyzes the early
colonial voyages that began in the late-15th century. This expansion was driven by mercantile capital
which co-existed with pre-capitalist modes of production in European countries. The 17th century marked
the establishment of bourgeoisie as the dominant class in England. But the bourgeoisie was still
dominated by merchant capital which had struck an alliance with the new bourgeoisfied aristocracy of
England represented by Whig aristocrats. The second phase of colonialism for Marx was the period that
began with the late-18th century. Marx could not deal with the different aspects of expansion of
capitalism into the backward regions during this period in detail and we are obliged to rely on his
journalistic writings about the role of British colonialism in Asia and in particular in India and
secondarily in China.

Marx was aware that many pre-capitalist empires also had the tendency of imperial expansion. However,
he clearly differentiated between this pre-capitalist imperial expansion and the capitalist imperialist
expansion. The latter was distinguished by a tendency to expansion which was not hindered by any moral,
cultural or civilizational inhibition and was driven by an insatiable greed for profits, the drive to sell the
dearest and buy the cheapest. Marx remarks that the "semi-barbarians" and "barbarians" were much more
restrained and ethical in their approach as compared to the "civilized" capitalist colonizers. Regarding the
Opium trade with China, Marx remarks:

"While the semi-barbarians stood on the principle of morality, the civilized opposed to him the
principle of self...the representative of the antiquated world appears prompted by ethical motives,
while the representative of overwhelming modern society fights for the privilege of buying in the
cheapest and selling in the dearest markets." (Karl Marx, Friedrich Engels, Karl Marx on
Colonialism and Modernization, Anchor Books, New York, edited by ShlomoAvineri, 1969, p.
343-44)

Marx's treatment of foreign trade involved a refutation of the neo-Classical and Ricardian comparative
cost theory of foreign trade based on "mutual benefits." Marx demonstrated that the profits from foreign
trade were not based on mutual benefits and were possible only on the basis of force, coercion, loot and
plunder.

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For Marx, colonialism of the period before the advent of industrial capitalism served as one of the
important sources of primitive accumulation and as one of the pre-conditions of the development of
capitalist mode of production in England. Marx points out:

"There is no doubt...that in the 16th and 17th centuries the great revolutions, which took place in
commerce with the geographical discoveries speeded the development of merchant capital,
constitute one of the principal elements in furthering the transition from feudal to capitalist mode
of production. The sudden expansion of the world market, the multiplication of circulating
commodities, the competitive zeal of the European nations to possess themselves of the products
of Asia and treasures of America, and the colonial system - all contributed materially toward
destroying the feudal fetters on production." (Karl Marx, Capital,volume-3, Progress Publishers,
Moscow, 1978 Reprint, p. 332-33)

Marx was also clear that the industrial capitalism does not develop without foreign trade and world
market. He believed that one of 'the specific tasks of bourgeois society is the establishment of a world
market, at least in the outline, and the production based upon this world market.' (Marx's Letter to Engels,
8 October, 1858). A world market and foreign trade between Europe and other regions of world existed
before capitalist mode of production became the dominant mode of production in countries of Europe.
However, the advent of industrial capitalism led to profound changes in the structure of foreign trade,
world market and colonialism. In the period before the advent of industrial capitalism, foreign trade was
linked with a process of plunder and coercion, which contributed to the process of primitive accumulation
for the development of capitalism in England in particular and Europe in general. Through this process of
colonialism before the advent of industrial capitalism, a world market came into existence. The growth of
industrial capitalism in Europe was going on along with significant changes in the other regions that were
connected with it through foreign trade. Spread of capitalist expansion to other parts of the world was
converting production in these areas increasingly into commodity production, though this commodity
production was mostly carried under different kinds of pre-capitalist formations. Despite the fact, that
these areas did not develop capitalist mode of production, their commodity production became part of the
circuit of industrial capital of Europe. Marx observes:

"Within its process of circulation, in which industrial capital functions either as money or as
commodities, the circuit of industrial capital, whether as money-capital or as commodity-capital,
crosses the commodity circulation of the most diverse modes of social production, so far as they
produce commodities. No matter whether commodities are the output of production based on
slavery, of peasants (Chinese, Indian ryots), of communes (Dutch East Indies), of state enterprise
(such as existed in former epochs of Russian history on the basis of serfdom), or of half-savage
hunting tribes, etc...The character of the process of production from which they originate is
immaterial. They function as commodities in the market, and as commodities they enter into the
circuit of industrial capital as well as into the circulation of the surplus value incorporated in it. It
is therefore the universal character of the origin of the commodities, the existence of the market
as world-market, which distinguishes the process of circulation of industrial capital." (Karl Marx,
Capital, volume-2, Progress Publishers, Moscow, 1986 Reprint, p. 113)

Thus, Marx was clear that without foreign trade and world market, industrial capital could not exist.
Marx, while analyzing the process of accumulation of capital on world scale, was aware of the fact that

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this accumulation of capital on world scale develops very unevenly. However, he could not go into the
details of this unevenness. Had he been able to complete the planned volumes of Capital on world market
and credit, he might have dealt with these issues in more detail.

As more and more production transforms into commodity production (even under pre-capitalist modes of
production), an international division of labour comes into existence. This international division of labour
inevitably takes the form of a division between areas where industrial capitalism has developed and areas
which become the supplier of raw materials and agricultural goods, a form which is suited to the needs of
centres of industrial capitalism. This observation of Marx is manifested in his characterization of Ireland
as the 'agricultural district of England.'

Development of industrial capitalism also brings a change in the structure and modus operandi of
colonialism as we mentioned earlier. Till the mid-18th century, Marx argued, that the interests of the
different sections of the English bourgeoisie namely the merchant capital (moneyocracy), the landlord
class (aristocracy) and the manufacturer (millocracy) coincided. However, the advent of industrial
capitalism since the late-18th century led to the separation of these interests and a struggle ensued
between the industrial capitalist class on the one hand and the merchant capitalist class allied with old
landed aristocracy on the other. Marx wrote in 1853:

"The ruling classes of Great Britain have had, till now, but an accidental transitory and
exceptional interest in the progress of India. The aristocracy wanted to conquer it, the
moneyocracy wanted to plunder it and the millocracy wanted to undersell it. But now the tables
are turned. The millocracy have discovered that the transofrmation of India into a reproductive
country has become of vital importance to them, and that, to that end, it is necessary above all, to
gift her with means of irrigation and of internal communication." (Karl Marx, 'The Future Results
of the British Rule in India',inKarl Marx on India, Tulika Books, New Delhi, 2006, p. 47)

Marx clearly understood that for industrial bourgeoisie it was necessary to create a market in India, rather
than just plundering it. Marx also understood that the limited capitalist development brought about by
development of means of communication and transport by the British, especially, the Railways, which
Marx saw as the 'forerunner of modern industry in India,' was driven by the 'vilest of interests' and it does
not lead to full-fledged capitalist development but will only lay the foundations for capitalist development
in the future. Marx commented:

"All the English bourgeoisie may be forced to do will neither emancipate not materially mend the
social condition of the mass of people, depending not only on the development of the productive
forces but on their appropriation by the people. But what they will not fail to do is lay down the
material premises for both. Has the bourgeoisie ever done more? Has it ever effected a progress
without dragging individuals and people through blood and dirt, through misery and
degradation?" (ibid, p. 49)

Marx believed that these material foundations of the development of capitalism cannot be converted into
actual capitalist development unless the ruling class in Britain is changed, that is bourgeois rule is
subverted by the proletariat, or the Indians themselves throw the yoke of British rule. In the same article
quoted above (The Future Results of the British Rule in India) Marx opines:

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 "The Indians will not reap the fruits of the new elements of society scattered among them by the
British bourgeoisie, till in Great Britain itself the new ruling classes shall have been supplanted
by the industrial proletariat, or till the Hindoos themselves shall have grown strong enough to
throw off the English yoke altogether." (ibid, p. 49)

It is true that Marx's theory of Asiatic Mode of Production based on self-sufficient idyllic village
communities at the bottom and a despotic authoritarian rule at the top was not correct. It postulated that
Asiatic societies lack the potential of any autocentric development towards capitalism and only an
external power (namely, advanced capitalism) can lead to disintegration of Asiatic mode of production
and potentialities of development of capitalism. However, from the standpoint of Marx's theory of
Historical Materialism itself this notion can be rejected. According to this theory, the prime mover of the
development of any society is the contradiction between its productive forces and production relations
which is expressed as class struggle in the class societies. Marx himself acknowledged the existence of
various kinds of village communities in India and in some of them there was private ownership in land
(Karl Marx, Frederich Engels, Karl Marx on Colonialism and Modernization, Anchor Books, New York,
edited by ShlomoAvineri, 1969, p. 451). He repeats this observation in Capital, Volume-I also. He also
acknowledges that classes, state and inequality existed in Indian society. If these things existed then one
cannot deny, following the method of Marx himself, the existence of class struggle and the potentialities
of the society to develop autocentrically towards capitalist development. However, Marx was clearly
having doubts about his theory of Asiatic mode as is evident from his notes of the book of Kovalevsky
(Communal Landholding,1879). In his notes, Marx observes that classes had developed in the Indian
village community and this is leading to the genesis of contradictions within it. So Indian self-sufficient
village community was no longer a static entity bereft of any autocentric motion for Marx. Further, Marx
had noted in the third volume of Capital that the source of stationary character of social conditions in
Asia was the rent extracted by the state as land-tax in kind. It should be noted that the manuscripts from
which Engels had put together the third volume belonged to period before 1870s. However, his notes
from the study of MountstuartElphinston'sHistory of India in the 1870s show that he became aware of the
fact Akbar, the Mughal king, had taken tax in cash. This information certainly changed Marx's earlier
opinions. A number of such evidences from the notes and manuscripts of Marx can be produced that
prove that he was having serious doubts about his older theory of Asiatic mode and Oriental Despotism.
This brief detour was only to show that the generally-held opinion in western academia about Marx that
he continued to stick to his earlier conception of Asiatic Mode of Production till his death is incorrect.
This is also important because this has led some scholars to a very misleading understanding of Marx's
opinion about the impact of Imperialism on Asiatic societies. They erroneously claim that Marx mainly
saw the positive side of Imperialism on these societies. We have quoted at length above to show that
Marx's assessment of expansion of European capitalism and its impacton these regions was very
dialectical and in the process of development.

Now let us return to Marx's observations about imperialism and the elements of his theory of capitalist
development that laid the foundation of analysis of imperialism by later Marxists like Lenin, Bukharin,
Luxemburg and Hilferding. Marx showed that the development of industrial capitalism means real
subsumption of labour, extraction of relative surplus value. This in turn implies expanded reproduction
and accumulation of capital which obliges capitalist class to look for markets and opportunities of
profitable investment as well as sources of cheap raw materials. He showed that export of commodities
was not only due to realization of the increasing production but also because it could be sold at prices

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higher than their values in the foreign markets. Export of capital to these backward regions for Marx was
mainly driven by the higher rate of profits in these areas due to lower organic composition of capital.
Moreover, the import of cheap raw materials and foodgrains from these areas cheapened the elements of
constant capital and reduced wages by cheapening the principal wage goods. The search for foreign
markets and opportunities of profitable investment in regions where the organic composition of capital
was low inevitably led to imperialist domination of the colonies and also resulted in the lop-sided
development of these colonized regions. As we will see, these essential tendencies of the capitalist mode
of production were the same tendencies that led to the rise of finance monopoly capital, as noted by later
Marxist theorists. Marx showed, on the one hand, that industrial capital destroyed the monopoly of
merchant capital and on the other hand it had its own tendency towards monopolization through
concentration and centralization of capital. Thus, in the age of "free" competition itself, Marx could see
the tendency towards monopolization. Marx wrote :

"Along with the constantly diminishing number of the magnates of capital...grows the mass of
misery, oppression, slavery, degradation, exploitation; but with this, too, grows the revolt of
working class, a class always increasing in numbers, and disciplined, united, organized by the
very mecahnism of the process of capitalist production itself. The monopoly of capital becomes a
fetter upon the mode of production, which has sprung up and flourished along with, and under it.
Centralization of means of production and socialization of labour at last reach a point where they
become incompatible with their capitalist integument." (Karl Marx, Capital, volume-1, Progress
Publishers, Moscow,p. 715)

Marx did not commit the mistake that some of his followers (with the exception of Lenin) committed,
namely, of arguing that monopoly is the negation of competition. Long before writing Capital, Marx was
aware of this fact. Marx writes in Poverty of Philosophy:

"In practical life we find not only competition, monopoly, and the antagonism between them, but
also the synthesis of the two, which is not a formula, but a movement. Monopoly produces
competition, competition produces monopoly. Monopolists compete among themselves;
competitors become monopolists...and the more the mass of the proletarians grows as against the
monopolists of one nation, the more desperate competition becomes between monopolists of
different nations. The synthesis is such that monopoly can only maintain itself by continually
entering into the struggle of competition." (Karl Marx, The Poverty of Philosophy, Foreign
Languages Press, Peking, Third Edition, 1977, p. 146-47)

In Marx's view thus, monopoly was not opposite of free competition; it grows out of free competition and
continues to thrive on the basis of free competition, albeit by changing the character of free competition.
The decreased number of competing capitals in each branch of economy does lead to changes in the way
the competition between capitals is fought off. It intensifies the competition between the monopolies; it
destroys the celebrated "freedom" of individual small capital. Marx clearly saw the dialectical motion
inherent in the process of concentration and centralization of capital. For Marx, the process from free
competition between the small capitals to the formation of monopolies in every branch of production is
not a linear evolutionary process, but dialectical process signifying two stages of concentration and
centralization of capital. Here we also find the reason why monopolization cannot lead to a world trust or
perfect monopoly and negation of competition itself. Marx on the one hand sees that the celebrated

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independence of small capitalist is destroyed, free competition restricted among monopolies and
reproduced in a more intensified fashion and on the other hand he also argues that this monopolization
can never be complete under the conditions of generalized commodity production. Let us see what Marx
has to say about it:

"The growth of social capital is effected by the growth of many individual capitals. All other
circumstances remaining the same, individual capitals, and with them the concentration of the
means of production, increase in such proportion as they form aliquot parts of the total social
capital. At the same time, portions of the original capital disengage themselves and function as
new independent capitals. Besides other causes, the division of property within capitalist families
plays a great part in this. With the accumulation of capital, therefore, the number of capitalists
grows to a greater or less extent...Accumulation and the concentration accompanying it are,
therefore, not only scattered over many points, but the increase of each functioning capital is
thwarted by the formation of new and the subdivision of the old capitals. Accumulation,
therefore, presents itself on the one hand as increasing concentration of the means of production,
and of the command over labour, on the other, as repulsion of many individual capitals one from
another.

"This splitting-up of the total social capital into many individual capitals or the repulsion of its
fractions one from another, is counteracted by their attraction. This last does not mean that simple
concentration of the means of production and of the command over labour, which is identical
with accumulation. It is concentration of capitals already formed, destruction of their individual
independence, expropriation of capitalist by capitalist, transformation of many small into few
large capitals." (Karl Marx, Capital, volume-1, Progress Publishers, Moscow,p. 585-86)

As we can see, Marx was clear that there can be no stage of perfect monopoly because there is a constant
dialectics between attraction and repulsion in the process of concentration and centralization of capital. It
is not a linear process leading from perfect competition (in which Marx never believed) to perfect
monopoly (which for Marx is incongruent with capitalist mode of production). Therefore, for Marx,
perfect monopolization, a stage of a world trust (a la Hilferding) is not even theoretically possible.

Marx's view regarding the increasing importance of the credit system and banks demands particular
attention. Especially, in the third volume of Capital Marx points out that with increasing concentration
and centralization of capital and decreased number of capitals functioning in each branch of economy, the
role of credit system will be increased immensely. The growing scale of production will make the
immensely large investments in any branch of industry imperative for fighting off the competitors or even
starting a new enterprise. This will make the credit institutions, financiers and banks of central
importance. Even in the first volume of Capital, when Marx is analyzing 'capital in general', he displays a
remarkable foresight in this regard:

"Apart from this, with capitalist production an altogether new force comes into play -- the Credit
system, which in its first stages furtively creeps in as the humble assistant of accumulation,
drawing into the hands of individual or associated capitalists, by invisible threads, the money
resources which lie scattered, over the surface of society, in larger or smaller amounts; but it soon
becomes a new and terrible weapon in the battle of competition and is finally transformed into an
enormous social mechanism for the centralization of capitals.

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 "Commensurately with the development of capitalist production and accumulation, there develop
the two most powerful levers of centralization -- competition and credit. At the same time the
progress of accumulation increases the material amenable to centralization, i.e., the individual
capitals, whilst the expansion of capitalist production creates, on the one hand, the social want,
and, on the other, the technical means necessary for those immense industrial undertakings which
require a previous centralization of capital for their accomplishment." (ibid, p. 587)

Evidently, Marx could foresee that the banks will begin to dominate the investments. Similarly, the form
of joint stock companies too will become very significant in this stage. Marx, in Volume 1 and especially
in Volume 3 of Capital foresees a number of tendencies of monopoly stage of capitalism. The following
quotation is one example which besides pointing to the role of joint stock companies and banks also
alludes to the increasing division of labour in bourgeoisie, the increasing parasitic character of owners of
capital and their becoming superfluous in the stage of monopoly with increasing socialization of
production:

"Stock companies in general -- developed with the credit system -- have an increasing tendency to
separate [the] work of management as a function from the ownership of capital, be it self-owned
or borrowed...But since on the one hand, the mere owner of capital, the money-capitalist, has to
face the functioning capitalist, while money-capital itself assumes a social character with the
advance of credit, being concentrated in banks and loaned out by them instead of its original
owners, and since, on the other hand, the mere manager who has no title whatsoever to the
capital, whether through borrowing it or otherwise, performs the real functions pertaining to the
functioning capitalist as such, only the functionary remains and capitalist disappears as
superfluous from the production process." (Karl Marx, Capital, Volume - 3, Progress Publishers,
Moscow, 1978 Reprint, p. 387-88)

Marx was well aware that it is not the negation of capitalist mode of production and production relations.
He called it as 'the abolition of capital as private property within the framework of capitalist production
itself.' He argued that even when this stage is reached the essential capitalist relations of production are in
tact, though they assume a much more developed form, where the working class confronts the
concentrated power of capital in the form of joint-stock companies and banks, where the 'form' has
become social but in which appropriation remains private. As this capitalist 'socialization' grows,
alienation also grows. The inner contradiction of the capitalist mode of production assumes the most acute
form. Taking cue from Marx himself, Lenin called the stage of imperialism a transitional phase in which
the basic pre-conditions of Socialism and apparatus to run a socialist economy have been fulfilled by
unprecedented socialization of production and national accounting of production of different branches of
economy by banks.

Marx showed brilliant foresight about the growth and nature of fictitious capital representated by
securities, stocks, bonds, etc. Marx wrote:

"The independent movement of the value of these titles of ownership, not only of government
bonds but also of stocks, adds weight to the illusion that they constitute real capital alongside of
the capital or claim to which they may have title. For they become commodities, whose price has
its own characteristic movements and is established in its own way. Their market-value is
determined differently from their nominal value, without any change in the value (even though

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 the expansion may change) of the actual capital. . . . All this paper actually represents nothing
more than accumulated claims, or legal titles, to future production whose money or capital value
represents either no capital at all, as in the case of state debts, or is regulated independently of the
value of real capital which it represents." (ibid, p. 467)

Marx thus clearly understood much before any of the Keynesians or Keynes himself that market of these
financial devices is relatively independent of the markets of commodities. The value of a stock is nothing
but a claim on future production of surplus value. They does not represent the real value of productive
capital, in the sense that value is existing twice: in the productive capital and then in stocks. It is duplicate
of that value and secondly the value of stocks diverges normally much above the real value of productive
capital. In times of crisis, it might diverge less. That is the reason why financial markets are highly
speculative.

Clearly enough, Marx was able to anticipate a number of characteristics of imperialism as identified by
later Marxists like Lenin and Bukharin, namely, the law of concentration and centralization of capital, the
tendency to search for foreign markets in order to oversell in these markets, export capital to areas where
opportunities of investment more profitable than investment in home country due to low organic
composition of capital, to monopolize sources of raw material, and increasing role of credit system and
particularly banks. However, Marx's particular observations about monopoly stage and imperialism
(though he never used the term in its modern sense) are scattered, incomplete at best, despite providing
excellent insights. Marx did not develop a complete theory of imperialism because the phenomena of
monopoly stage were still unfolding when Marx died. However, as we tried to argue above, his analysis
of capitalist mode of production, its inner dynamic and laws of motion prepare the basic foundation of a
theory of monopoly stage of capitalism, that is, imperialism. Imperialism emerged due to these very basic
expansionary tendencies of capitalism, namely, unceasing accumulation, concentration and centralization,
crisis of profitability, search for markets and sources of raw material.That is why Milios and Sotiropoulos
have refused call it a new stage of capitalist mode of production, but a new stage in the evolution of
capitalist social formation. (John Milios and Dimitris P. Sotiropoulos, Rethinking Imperialism: A Study of
Capitalist Rule, Palgrave-Macmillan, 2009)

Precisely due to incomplete, provisional and scattered character of Marx's views and due to the fact that
many elements of these remarks remain unfinished and unclear, there was a lot of debate among the later
Marxists of the early-20th century who analyzed capitalism in the stage of finance monopoly capital.
Different Marxist theorists emphasized different aspects of Marx's theory and debated with each other.
The three most debated issues in these controversies were Marx's theory of law of tendential fall in the
rate of profit (LTFRP hereafter), realization problem and disproportionality between departments. As we
shall see, the core of Marx's theory of crisis, of export of capital and monopolization is LTFRP. We will
see later that the other two problems, namely of realization and disproportionality are symptomatic
expressions of the crisis of profitability itself. However, this much is certain that the validity of any theory
of imperialism cannot just be proven by exegesis, but by its power to explain the realities of Imperialism
today and also to propose, in the vein of Lenin, a revolutionary strategy for present proletarian struggles
against it.

Hilferding's 'Finance Capital'

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The first major Marxist theorist to deal with the question of Imperialism and finance capital was
Hilferding whose magnum opus,Finance Capital was published in 1909. Some elements of his theory
were extremely important for the development of Lenin's and Bukharin's theory of Imperialism later. Karl
Kautsky before Rudolf Hilferding had presented an underconsumptionist position on imperialism first in
1884 and then in 1901, though he still derived revolutionary results from this underconsumptionist
analysis.Hilferding was skeptic about underconsumptionist logic. When Hilferding's monumental work
Finance Capital was published in 1910, it was hailed by Otto Bauer as the 'next volume of Capital';
Kautsky in a glowing review (in which, though, he again presented an underconsumptionist argument)
called it the continuation of analysis started by Marx in Capital in the context of contemporary
developments in capitalism. Lenin called it 'very valuable theoretical analysis' and Bukharin called this
work his 'starting point and essential inspiration' in writing his work Imperialism and World Economy.
Hilferding's work was undoubtedly the most important Marxist work of political economy of
contemporary capitalism in that period. It is noteworthy that the bulk of the work was already complete in
1906 though it was published only in 1910.

Hilferding's work introduced all the basic categories of analysis of imperialism which were later used by
Lenin as well as Bukharin, though their analyses developed in a different direction and the political
lessons of their works were different from that of Hilferding. These basic categories were formation of
monopolies through concentration and centralization of capital, rise of finance capital with the fusion of
bank and industrial capital, the new changed role of banks and export of capital.

Rudolf Hilferding'sFinance Capital analyzes the characteristic features of the 'later phase of capitalism'.
These features include the expansion of credit system, the rise of joint stock companies, trusts, cartels and
syndicates, the rise of banks and the emergence of finance capital by the fusion or coalescence of bank
and industrial capital, and restriction of free competition by finance capital and joint stock companies.
The most important factor that lies at the root of all these developments is the fusion of bank capital and
industrial capital leading to the rise of finance capital that unifies the three forms of capital into one under
the tutelage of finance capital, namely, industrial capital, commercial capital and bank capital. These
developments give rise to a number of tendencies of capitalist system that characterise the capitalism of
the 20th century. These tendencies include the emergence of the imperialist economic policy in which the
major elements are cartellization, protective tariffs, export of capital and the competition between
capitalist nation-states to enlarge their economic territory, which in turn leads to the change in the nature
of capitalist state from the liberal capitalist state favoring free trade to a strong and interventionist state.
Hilferding writes,

"Finance Capital has no faith in the 'harmony of capitalist interests' and knows well that
competition is becoming increasingly a political power struggle...The ideal now is to secure for
one's own nation the dominant position in the world." (Rudolf Hilferding, Finance Capital: A
Study of the Latest Phase of Capitalist Development, Routledge and Kegan Paul, London, 1981 p.
335)

Analysis of Hilferding starts with analysis of money and credit. This chapter is generally regarded as the
weakest of the book as the theory of money propounded by Hilferding was erroneous, as Lenin also
commented in his work Imperialism: the highest stage of capitalism.Lenin has pointed out in his
Notebooks on Imperialism how Hilferding believed that money enters circulation without any value of its

10
own and assumes value in the process of circulation itself. It has been criticized by many others as being
inadequate. However, we cannot go in the details of these critiques. The important point in this chapter
was Hilferding's analysis of credit money, which forms the foundation of his analysis of banks and their
new role. According to Hilferding, credit is a means of keeping 'idle money' minimum, which is not used
for productive purpose. Bank credit for Hilferding is different from old short-term commercial credit that
was given by merchants and also banks in the earlier phase. Bank credit is more effective in economizing
the role of money. The nature of bank credit as opposed to short-term commercial credit given for
commercial operations of the firms ('circulating credit'), is that it is long-term capital credit ('investment
credit'). With the rise of this kind of bank credit, the banks were not simply interested in the solvency of
the debtor, but in the long term prospects of the debtor firm. The division of surplus value between profit
and interest assumes a new proportion, in which the relative weight of the latter increases, manifesting the
growing power of banks in economy.

Hilferding argues that this changed role of bank and credit is result of the unprecedented increase in the
concentration and centralization of capital which was continuing right since the death of Marx, but which
increased in a rapid fashion especially since the mid-1890s. The conentration and centralization of capital
led to the rise of industrial monopoly. This assumed most importantly the form of joint stock companies,
about which Marx also had talked. The most important aspect of joint stock companies was the separation
of ownership and management of capital. The industrial capitalist is freed from the function of industrial
entrepreneur. This has a number of significant consequences. One is the emergence of 'promoter's profit',
which arises from selling the shares in a newly formed joint stock company for a price which is much
higher than the real value represented by the capital stock of the company; it is possible when the yield on
that capital is higher than the current rate of interest on investments. There is a clear tendency of the rate
of interest to be lower than the average rate of profit, as Marx himself had pointed out. The difference
between the capitalized value of a company in stock market and the real value of the capital stock of the
company is the promoter's profit. It is not only an incentive for further formation of joint stock companies
but also a sourse of immense wealth which is then used for further investments. In both ways, it further
accentuates the tendency of centralization of capital, the growth of giant corporations and eventually
cartels, trusts and syndicates controlling entire industries or branches of economy. The buyers of shares in
a company get a dividend which approximates to the rate of interest. Consequently, the big shareholders
pocket increasingly large portion of the profit as promoter's profit. The dividend is generally slightly
above the rate of interest due to addition of a risk premium, which is decided by the board of the joint
stock company. The categories of promoter's profit and dividend as introduced by Hilferding have
certainly enriched our understanding of capitalism in its monopoly stage and are relevant for the analysis
of today's capitalism also.Hilferding’s analysis of rise of joint stock companies, resulting in the separation
of ownership and management of capital, promoter's profit as well as the control of finance capital is
basically a continuation of Marx's analysis of fictitious capital in volume 3 of Capital according to which
the fictitious capital is a duplicate of productive capital. Hilferding shows that promoter's profit is
appropriated by the mere act of negotiating fictitious capital, that is, controlling the issuance and
circulation of stocks, bonds, securities, etc.

Hilferding rightly argues that with the increasing concentration and centralization of capital the scale of
production grows to gigantic proportions. In this stage the role of banks undergoes a change and becomes
of central importance. The reason for this is that with the growing scale of production, any new
investment or replacement of fixed capital requires long-term investment credit. The firm must be freed

11
from the bonds of individual property. Big business requires investments that are far beyond the resources
of any individual capitalist. This capital is mobilized by banks who extend credit in exchange of shares in
this enterprise. Banks give credit and support cartellization and restriction of competition in order to
minimize the risks associated with their loans. At the same time, the competition among banks also leads
to a process of monopolization in the banking sector. Consequently, a handful of banks begin to dominate
the entire banking sector. In this process there is a unification of industrial, banking and commercial
capital under the tutelage of high finance. In this unification, the masters of industry and banks are united
in a close personal network of association. The basis of this unification according to Hilferding is
elimination of free competition between individual capitals by large monopolistic combines. Though the
role of banks is central according to Hilferding in this entire process, finance capital is neither old bank
capital in the service of industry, nor is it the bank capital dominating industrial capital, but it is a new
form of capital that emerges as a result of fusion of the two.

Connected to the rise of industrial monopolies and finance capital is the phenomenon of export of capital.
The free-trade capitalism was characterized by the export of commodities, during which Britain emerged
as the leading industrial power of the world. With the increasing competitive pressures from Germany and
the US and with the increasing protective tariffs, the export of capital replaced export of commodities as
the main trend. Higher prices in the foreign markets due to lower organic composition of capital or higher
profitability also prompted the export of capital. Capital was exported to circumvent the protective tariffs
and was used to establish industrial plants in the foreign country. These industries remained under the
ownership of the parent company directly or indirectly and their profits were repatriated to the home
country. On the other hand, banks establish branches in foreign countries which negotiate the conditions
of loans for construction of industries or infrastructure projects; the conditions of the loans included the
clause that the contract of construction will be given to the companies associated with the bank in the
home country. This intimate connection between banks and industry also led to rapid increase in the
export of capital. While analyzing the rise of export of capital, Hilferding also points to the changed form
of protective tariffs. Earlier protective tariffs were used to facilitate the domestic industry, help it stand on
its feet and cordon it off from foreign competition. However, now protective tariffs were used to enable
domestic industry to reap monopoly profits at home, dump their products in foreign markets and it was a
tribute levied on the consumers at home. It was a device through which monopolization was given
impetus.

Hilferding contends that it is this increasing tendency of export of capital that gives rise to imperialism.
The export of capital on the one hand extends markets and provide new opportunities of profitable
investments, increase the wages in advanced countries, but at the same time they face the limitation of
scarcity of wage labour in the colonized regions or dependencies. Thus, the capital-exporting advanced
capitalist country is obliged to destroy the pre-capitalist relations, resort to forced labour, immigration
from regions of labour-surplus areas. All these things lead to the imperialist domination of backward
countries. The three objectives of imperialist policy according to Hilferding are establishing largest
possible economic territory, close this territory to competitors through protective tariffs and reserve it as
an area of exploitation by national monopolistic combines. This inevitably leads to imperialist rivalry
among advanced capitalist states.Capitalist states in the free-trade era showed a relatively indifferent
attitude towards colonies but in the era of finance capital they follow a very active policy of colonization
due to export of capital. But for Hilferding, unlike Lenin and Bukharin, imperialist rivalry does not

12
inevitably leads to war. He believed that working class opposition might check militarism and war
preparations and in doing so can hasten the collapse of capitalism.

According to Hilferding, rise of monopoly undermines the operation of law of value by transferring
profits from non-cartellized sector. Consequently, a dual economy comes into existence in which the rate
of profit is systematically higher for the big monopolies than smaller industries. In other words, the
averaging of rates of profit is hindered. Investment in both sectors fall according to Hilferding. In
cartellized sector, it falls because the prime objective of cartel is to restrict production, whereas in non-
cartellized sector it falls because the rate of profit is low and discourages investment. Hilferding argues
this leads of overaccumulation of capital, in turn, leading to increased export of capital. The idea of
Hilferding that labor theory of value is undermined and monopoly prices are determined subjectively has
been rightly criticized by a number of Marxist political economists.

Another error of Hilferding was to believe that theoretically there is no objective limits to cartellization.
For him, one single cartel controlling entire production is conceivable. This will convert prices into mere
accounting devices, consciously and subjectively managed and determined by the cartel. This will lead to
constitution of a 'consciously-regulated society but in an antagonistic manner.' Antagonistic because a few
giant corporations will control all capital and production while the masses of people will possess nothing.
This will intensify class struggle as the problem of property relations will be intensified. According to
Hilferding this can lead to violent clashes also. But this single cartel will be able to end the anarchy of
production which is inherent in the capitalist mode of production. The crisis will not be done away with
totally. But the monopolies will be able to shift the burden of crisis to the non-cartellized sectors.

Hilferding also misunderstood that monopolization in the age of finance capital cannot lead to a crisis-
free capitalism by doing away with anarchy of production. He argued that finance capital has socialized
production to the maximum degree under capitalism. In Germany, all production is virtually controlled by
6 banks and whoever takes over these 6 banks takes over the entire national economy. Thus the ground
for overcoming capitalism is prepared. These were the seeds of theory of 'organized captialism' by
Hilferding. By 1920s, he was clearly talking about 'organized capitalism'. In the age of dominance of
monopoly finance capital, certain degree of planning has developed. This has increased due to the
intervention of the state also. Consequently, the relations between the capitalist states after the First
World War came to be characterized by what Hilferding called 'realistic pacifism.' He still believed that
imperialism is a necessary stage but he seems to believe after the war that imperialist rivalry might
become less prominent feature of this stage and that imperialism itself in its colonial form might be less
permanent phenomenon. In 1927 he contended, "We are moving...from an economy regulated by the free
play of forces to an organized economy." Among the features of this organized economy was the
replacement of competition with scientific methods of planning. It is understandable that such an analysis
will inevitably lead to reformist conclusions. If one concludes that the contradiction in the sphere of
production and the anarchy of production is eliminated in the phase of finance capital and that the class
struggle now becomes an issue of distribution of production, then it is a free highway to reformist
political program from there. The same happened with Hilferding whose political conclusion was
bringing socialism through parliamentary means. He argued that with socialization of production and the
rise of a strong, interventionist state, now there is no need for smashing the bourgeois state but now there
is a need to take it over and extend its role in planning and controlling socialized production. The
following quote of Hilferding exposes his errors most clearly:

13
 "There is no absolute limit to cartellization. On the contrary, there is tendency for cartellization
steadily to expand. As we have seen, the independent industries become increasingly dependent
upon those that are cartellized, only to be annexed by them in the end. As a result of this process a
general cartel arises. The entire capitalist production is consciously regulated by one body which
determines the extent of production in all its spheres. Then the fixing of prices becomes purely
nominal and its sole significance is the distribution of the total product among the cartel magnates
on the one hand, and among the masses including all the other members of society, on the other
hand. The price is then not the result of a material (sachliche) relation into which men have
entered, but a mere arithmatical method of allotting things by persons to persons. Money no
longer plays any role. It can disappear entirely, because it is now a question of allotting things
and not allotting values. Together with the anarchy of production vanishes the material
appearance of the commodities, vanishes their character as objects of value, vanishes -- money.
The cartel distributes the products. The material elements of production have been reproduced
and are being utilized for new production. One part of the new products is distributed among the
working class and intellectuals, the other part falls to the share of the cartel to be used for any
purpose it may desire. It is consciously regulated society, in antagonistic form. But this
antagonism is an antagonism of distribution. Distribution itself is consciously regulated and
thereby the money as a necessity is a thing of the past. Finance capital in its pefected sense is
loosened from the soil on which it arose and was nurtured.

"The tendency to bring about a general cartel and the tendency to form a central bank coincide,
and it is from their nexus that the tremendous power of finance capital to concentrate arises."
(ibid, p. 234)

Hilferding's theory of crises also is a problematic area of his overall theorization. He focuses totally on
disproportionality between departments in capitalism as the source of anarchy of production and crises.
However, according to Marx this disproportionality is an expression of the movement of profitability.
Therefore the basic regulator here too is profitability. However, since Hilferding focuses on
disproportionality, his conclusion is obvious. Once the general cartel emerges, it becomes possible for
capitalism to develop without crises, "if only production is properly proportioned." Though, Hilferding
says that socially and politically emergence of a general cartel does not seem to be possible, it is
theoretically and economically conceivable. Due to this very error, Hilferding also could not see the
parasitic and moribund character of capitalism in the stage of finance monopoly. Clearly enough,
Hilferding misses the law of uneven development under capitalism that prevents the formation of any
general cartels. For Lenin, it was even theoretically not possible precisely because all the agreements
between capitalist associations are temporary and depend on the changes in the relative power of the
parties of the association; the law of uneven development shows that since this balance of power
continually changes and leads to a continuous process of fission and fusion, such a general cartel is
theoretically impossible.

Despite these errors and limitations, Rudolf Hilferding definitely laid a foundation for the further study of
imperialism and monopoly stage of capitalism. On these foundations, especially Lenin and Bukharin
developed the Marxist theory of imperialism. However, before Lenin and Bukharin came the work of
Rosa Luxemburg.

14
Rosa Luxemburg and Accumulation of Capital
The next major work that dealt with the question of imperialism was Rosa Luxemburg's magnum opusThe
Accumulation of Capital. It was not a work focusing on the question of imperialism per se. However, in
propounding her own theory of capitalist development, Luxemburg also articulated her understanding of
imperialism. It must be said at the outset that her work was directed against the right-wing and center-
right wing opportunism within the German Social Democratic Party represented by Karl Kautsky and
Rudolf Hilferding respectively. However, she barely confronts them directly. She rather attacks Tugan-
Baranovsky and Marx himself. Tugan-Baranovsky and later Hilferding had presented an interpretation of
Marx's reproduction schema presented in the second volume of Capital according to which the
disproportionality between departments within capitalism can be eliminated and the system can reproduce
itself indefinitely. Rosa Luxemburg, rather than criticizing these erroneous interpretations, attacked the
reproduction schema of Marx, the objective of which was merely to demonstrate the conditions under
which the capitalist system can reproduce itself. Marx was clear that it is possible for capitalism to
reproduce itself under conditions of what Luxemburg called pure capitalism. However, it must not be
confused with the argument that it will reproduce itself indefinitely. Marx demonstrates the conditions
under which capitalism can reproduce itself only to demonstrate when and why it fails to do so. But
Luxemburg failed to grasp that due to her underconsumptionist views. It is noteworthy to recall that her
underconsumptionist views were actually shaped under the theoretical leadership of Karl Kautsky who
held an underconsumptionist position in 1884 and then in 1901 (though this time the focus on
underconsumptionism was present in a round-about form namely as an emphasis on the chronic problem
of overproduction). However, Rosa develops this argument to its culmination and in a different direction
from Kautsky.

The basic assumption that underconsumptionists of all shades share from reactionary
underconsumptionist Malthus, to reformist underconsumptionists like Sismondi and Hobson and to
revolutionary "left" underconsumptionists like Rosa Luxemburg and also theoreticians of what I would
call the broad "exchange-relations school", including Sweezy, Baran, Andre Gunder Frank, Immanuel
Wallterstein and Arghiri Emmanuel, is this: consumption is the regulator of production in capitalism and
in general. As we know, Marx taught that the regulator of production and investments in a capitalist
system in profitability and it is the movement of profitability in an economy that regularly and recurrently
lead to the phenomena of disproportionality as well as underconsumption; in other words,
disproportionality and underconsumption are not the underlying fundamental cause of crisis of capitalism
and they can only be the immediate cause or symptom of the crisis of profitability.

The basic logic of underconsumptionism is that consumption regulates production but capitalism does not
recognize the social needs of consumption. It recognizes only demand and that too effective demand (that
is backed by money/purchasing power). However, capitalism by nature cannot create sufficient effective
demand. Therefore, it cannot reproduce itself on extended scale, is bound to become stagnant and then
collapse because capitalist production by nature is expanded reproduction. The concept of 'demand gap' is
central to all underconsumptionist theories including Luxemburg's theory. In this concept, Department - I
(means of production) is vertically integrated to Department - II (articles of consumption) in a
subordinate position, because production is for the sake of consumption. The total product of the society
is equal to the products that renew or replace the spent means of production plus the net product. The net
product is an aggregation of workers' consumption and capitalists' consumption. In income terms, the net

15
income is equal to wages plus profits. Workers spend all their income (wages) in consumption and
consume their share of the net product. However, the capitalists under the conditions of expanded
reproduction do not consume their share entirely and accumulate a portion of it for expanding the scale of
production. As a result, a demand gap opens up because a portion of net product remains unrealized
because it can find no 'effective demand' within the ambits of pure capitalism. This demand gap widens as
the expanded reproduction progresses because productivity rises, the relative share of wages in the
income decreases and the net product increases. To realize this 'surplus product', a non-capitalist buyer is
necessary; for Malthus, this non-capitalist buyer was the parasitic classes like landlords, aristocratic
classes, etc. However, Luxemburg rightly argues that the consumption/income of these classes derives
either from profits or wages and constitutes a displacement of either capitalists' consumption or workers'
consumption. Rosa said that workers cannot consume this 'surplus' because their consumption is a
function of initial capital investment. The capitalists cannot consume each other's surpluses (either as
individual consumers or as productive consumers according to Rosa) and grow richer as a class.She
argues that such a logic 'constructs a round about that revolves around itself in empty space.' For her, it
was inconceivable because it would mean 'production for the sake of production.' (!) Therefore,the only
option remains a class of non-capitalist producers like petty-commodity producers, peasants, etc.
Therefore, according to Rosa Luxemburg capitalism cannot grow without the existence of non-capitalist
periphery (first within the country and then outside). Hence for Luxemburg,

"the realization of the surplus value for the purposes of accumulation is an impossible task for a
society which consists solely of workers and capitalists." (Rosa Luxemburg, The Accumulation of
Capital, Martino Publishing, Mansfield Centre, CT, 2015, p. 350)

And, there is

"the deep and fundamental antagonism between the capacity to consume and the capacity to
produce in a capitalist society, a conflict resulting from the very accumulation of capital which
periodically bursts out in crises and spurs capital on to a continual extension of the market." (ibid,
p. 347)

Therefore, the basic precondition of capital accumulation is existence of a non-capitalist periphery in the
form of pre-capitalist agrarian regions of the world, where the surplus product can be realized through the
non-capitalist buyers.

This is the crux of Luxemburg's theory of accumulation of capital and this also forms the basis of her
theory of imperialism. Rosa Luxemburg in the process of stipulating this theory attempts a critique of
Marx's reproduction schema which in her opinion were the basic cause of the harmonist illusions of the
likes of Tugan-Baranovsky, Hilferding and others. According to Rosa, Marx failed to expose the problem
of realization in his reproduction schema giving the impression that the capitalist system can reproduce
itself without the limits posed by consumption. We will not go into the considerations of the numerical
models employed by Rosa to refute Marx's reproduction schema. The point is that these numerical
examples used by Rosa are flawed and miss the temporal as well as spatial dimension of the accumulation
of capital and for Marx the real limits of capital accumulation is not consumption but capital itself. We
will come to this in a short while.

16
It is evident that for Rosa Luxemburg the reason for the emergence of imperialism is this crisis of
realization faced by capitalist system, because for realization of surplus product the capitalist system must
expand to the backward non-capitalist agrarian regions of the world. So, capitalism can only 'proceed by
assimilating the very conditions which alone can ensure its own existence.' The expansion of capitalism in
these backward regions leads to capitalist transformation of these non-capitalist peripheries. First,
advanced capitalist regions conquer these regions or establish their dominance over these regions. Then it
destroys their natural economy and intrdoces commodity production in these regions. Natural resources
are seized and the producers are liberated from pre-capitalist coercion to constitute a new proletariat,
which is 'dually free'. Agriculture is separated from industry and trade. All of this is achieved by force and
coercion because capital cannot wait for the natural disintegration of the pre-capitalist formations as it
will take centuries. Luxemburg gives a graphic description of conquest of India, French colonialism in
Algeria and the Opium Wars in China. Simple commodity production in agriculture and industry are soon
superseded by capitalist production and capitalist relations. However, this is what ultimately leads to the
crisis of accumulation and preparation of conditions of eventual collapse of the capitalist system and
imperialism because through this very process capital destroys the very conditions which it desperately
needs for its survival. As the non-capitalist periphery shrinks, the competition between the advanced
capitalist countries to hegemonize the remaining non-capitalist regions sharpens. She contends,

"The imperialist phase of capitalist accumulation which implies universal competition comprises
the industrialization and capitalist emancipation of the hinterland where capital formerly realized
its surplus value. Characteristic of this phase are: lending abroach, railroad constructions,
revolutions, and wars." (ibid, p. 419)

All of this leads ultimately to drive for political emancipation of these colonized regions. This process of
capitalist political emancipation too progresses through wars and revolutions. Therefore, for Luxemburg,
imperialism can be defined as follows:

"Imperialism as a whole is nothing else but a specific method of accumulation. (Rosa Luxemburg,
Anti-Critique, p. 61-2)

"Imperialism is the political expression of the process of accumulation of capital in its

competitive struggle for those remnants of the non-capitalist world milieu, against which no
attachment has yet been levied." (Rosa Luxemburg, The Accumulation of Capital, Martino
Publishing, Mansfield Centre, CT, 2015,p. 446)

"However, the inner economic driving forces of imperialism may be more exactly defined, this
much at any rate is clear and generally known: its essence consists precisely in the extension of
the domination of capitalism from the old capitalist countries to new territories, and in the
economic and political competitive struggle among those countries for such territories." (Rosa
Luxemburg, Anti-Critique, p. 62)

About the eventual demise of the capitalist system, Rosa writes:

"Capitalism is preparing its own demise in a twofold manner: on the one hand by heading for the
moment when, due to its expansion at the expense of all non-capitalist forms of production, all
humanity will consist in acutal fact solely of capitalists and wage-workers, when consequently

17
 further expansion and therefore accumulation become impossible. At the same time it accentuates
to the extent that this tendency forces its way, the class antagonisms, the international economic
and political anarchy, to such an extent that long before the logical conclusion of the economic
development -- the absolute undivided domination of capitalist production throughout the world -
- will be reached, the rebellion of the international proletariat against the domination of the
capitalists will have been brought about." (Rosa Luxemburg, Anti-Critique, Chapter-1)

As we can see, though Rosa Luxemburg shares the undersconsumptionist logic with Kautsky and also the
latter's argument about the division of world between agricultural periphery and industrial core as a
precondition of existence of imperialism, at the same time she attacks Kautsky's belief in super-
imperialism and transition to socialism in a peaceful manner (a position that Kautsky began to develop
only after 1910-11).

Now we can embark upon the criticism of the political economy as well as political conclusions of Rosa
Luxemburg. As we mentioned earlier, in arguing that expanded reproduction and accumulation of capital
is not possible without a non-capitalist periphery, Rosa Luxemburg missed the temporal and spatial
aspects of the process of capitalist reproduction. The accumulation of capital takes place over real time
and the different moments or phases of the circuit take place only partially as a simultaneous process, and
mainly as a sequential process. In simpler terms, the capitalists and workers do not buy articles of
consumption (including luxury goods for capitalists) and means of production (the capitalists) from the
product of the current production cycle, but from the previous production cycle. If we assume the
conditions of expanded reproduction, then in the current cycle the capitalists will buy more means of
production and will hire more workers. Thus the effective demand for increased consumption will be
there and it can realize the surplus value of the previous production cycle. Therefore, the expanded
reproduction can absorb the surplus product of the capitalist production of the previous cycle. Marx did
not argue that it will absorb this surplus product but only talked about the conditions under which it can
do so. Secondly, Marx never argued that whenever it does, it will happen smoothly or in an uninterrupted
fashion.

The second aspect that Luxemburg misses is thespaitaldimension of expanded reproduction. She assumes
that capitalists cannot buy off each other's surplus and still grow richer as a class because that will
tantamount to 'production for production's sake.' But she missed that that is what capitalist production is!
She raises a question at the level of individual capital which can be understood and answered only at the
level of 'many capitals.' She is considering total aggregate capital as an individual capitalist, whereas, the
total aggregate capital is represented by the sum total of all individual capitals competing with each other.
In reality, the capitalists can grow richer by buying off each other's surplus. Capitalists can, do and must
become each other's customers and the effective demand for the surplus product can and does originate
from the capitalist class, because the demand for that part of the social product which is going to be
accumulated comes from capitalists intent upon increasing their employment of variable and constant
capital. But for Rosa this line of argument means that "human consumption becomes increasingly
unimportant, and production more and more an end in itself.". The irony of Rosa's theory is that this is
what the reality is like in a capitalist system! It is not the goal of capitalist system to expand human
consumption. The capitalist is driven by profitability, rather than expansion of consumption. If endlessly
increasing the production of means of production which produce means of production (machine making
machines) appears to be profitable, there is no reason why the capitalist would not undertake such an

18
endeavor. Apparently, Luxemburg confuses the requirements of an individual capitalist (external sources
of demand) with the requirements of capitalist system as a whole, which is a constituted by 'many
capitals' (number of these individual capital can be more or less, but that does not change the essence of
the problem).

Due to these fundamental errors, her analysis of impact of exports to pre-capitalist regions is flawed and
inconsistent. If these exports are offset by an equal magnitude of imports, they will have no direct impact
on the level of demand. There can be increase in demand only if there is an export surplus, which is
possible only if there is export of capital to the non-capitalist periphery. Then the exchange will be
formally equal and yet the advanced capitalist countries will be able to enrich themselves by producing
surplus in the backward regions and repatriating the profits back home. But for Luxemburg this creates a
problem. She believes that inadequate effective demand has been a problem throughout the history of
developed capitalism, but the export of capital began only in its final stage, the imperialist stage. And
even then export of capital plays a much smaller role in the theory of Rosa, as compared to the accounts
of Hilferding, Bukharin and Lenin. Hilferding too, failed to give a sufficient explanation of the reasons of
rise of export of capital, but in Luxemburg's account there is virtually no explanation of the rising trend of
export of capital. Therefore, in general, there is no theory of regulator of investment in general and export
of capital in particular, in Rosa Luxemburg's work. It is natural because due to her underconsumptionist
logic, she fails to recognize that it is the crisis of profitability that is the real underlying reason behind the
rising tendency of export of capital, which is aggravated in the stage of monopoly and is expressed in a
much more active and a different kind of colonial policy based on the export of capital, as compared to
colonialism of pre-imperialism phase. Evidently, Rosa fails to distinguish between the monopoly stage of
capitalism and the free-competition and free-trade stage of capitalism. She fails to recognize the
importance of finance capital, the peculiar significance of export of capital and the concentration and
centralization of capital leading to formation of monopolies in the rise of modern imperialism, because
the very edifice on which she builds her model of accumulation of capital is flawed.

Her theory naturally leads to the notion of 'inevitable collapse' of capitalism because the very existence of
capitalism rests on the existence of non-capitalist periphery which capitalism itself destroys. Rosa
Luxemburg's analysis that accumulation of capital will lead to the break-up of pre-capitalist relations in
the backward regions, will lead to national liberation through wars and revolutions, and her optimism
about an active national bourgeoisie are misplaced. Marx was clear that capitalist penetration in the pre-
capitalist milieu of backward regions will only prepare the material foundations on which capitalist
development is possible, given that the subjugated people liberate themselves from the yoke of colonial
domination. However, Rosa Luxemburg's account of capitalist transformation of the non-capitalist
periphery is non-dialectical and ahistorical as it fails to recognize the fact that the imperialist domination
can only lead to a very limited capitalist development and it mostly hinders, blocks and retards the
advanced capitalist development in the non-capitalist periphery.

In conclusion, it can be said that Rosa Luxemburg's theory of imperialism is not basically a Marxist
theory, but an underconsumptionist theory. Notwithstanding the life-long communist revolutionary
commitment of Rosa, her political economy was not Marxist. Her work definitely has a descriptive value
as it presents a graphic picture of colonial domination and exploitation of the backward regions. However,
her analysis of the prime mover of capitalist expansion and export of capital is erroneous and
consequently her theoryof imperialism too is incorrect. Yet, her theory has influenced a lot of ostensibly

19
Marxian theorizing about imperialism especially after the Second World War, which saw the emergence
of the broad 'exchange-relations perspective' which includes the 'monopoly capital' school of Sweezy and
Baran, 'dependency' theory of Andre Gunder Frank, the 'World Systems Theory' of Immanuel Wallerstein
and 'Unequal Exchange' thesis of Arghiri Emmanuel. These theories will be dealt in the next section of
this paper. For now, we will turn to the next major Marxist theorist of imperialism, Nikolai Bukharin.

Bukharin on Imperialism
Nikolai Bukharin's work Imperialism and World Economy can be regarded as the first systematic Marxist
work on the question of imperialism as Hilferding's main focus was continuation of the project of Marx's
Capital in the new phase of finance capital and Rosa Luxemburg's study was also a work of political
economy in general presenting an undersconsumptionistthoery of capitalist development. Bukharin draws
heavily on the work of Hilferding, though his approach and method show divergence from that of
Hilferding. Bukharin begins his analysis with the emergence of world economy. This concept occupies a
central place in his theory of imperialism. He defines world economy as follows:

"Thus we may define world economy as a system of production relations and, correspondingly, of
exchange relations on a world scale." (N. Bukharin, 2010, Imperialism and World Economy,
Aakar Books, p. 26)

Bukharin tries to follow Marx's logic closely and metaphorizes the evolution of world capitalist system or
world economy with the evolution of commodity production and exchange, its generalization and rise of
capitalist relations. He argues that world economy is plagued with the same anarchical, non-regulated
conditions which plagued national economies before the late-19th and 20th centuries, that is before the
era of monopoly finance capital. In his conception of world economy, Bukharin points to the
interanational division of labour based in the earlier phases on natural particularities and in the later
period on the uneven development of productive forces. He shows how this international division of
labour leads to international exchange, emergence of a world market of commodities, and then a world
market of money, the formation of world prices which, Bukharin erroneously believed does not follow the
law of value but emerge as a result of leveling out of national differences. The international division of
labour manifests itself in the division of the world in industrial regions which export manufactured
products and imports raw materials and food-grains and agrarian regions which export raw materials and
food-grains and import manufactured goods. Bukharin compares this division also to the division of town
and country within a capitalist country. The industrial regions are like the towns and the agrarian regions
as the countryside. Bukharin, explaining the process of evolution of world economy, argues that it is the
result of extensive (area-wise) and intensive (capitalist transformation of production relations) expansion
of capitalist system. According to him, it was the unprecedented growth of productive forces towards the
end of the 19th century, as manifested in electrical industry, chemical industries, engineering industry etc,
that propelled this expansion of capitalist system and emergence of a world capitalist system. The rapid
growth of productive forces led to the increased rate of accumulation of capital and faster concentration
and centralization of capital.

The concentration and centralization of production led to the formation of industrial monopolies as well
as banking monopolies. The fusion of banking capital with industrial monopolies led to the rise of finance
capital, manifested in the form of financial oligarchies which control entire branches of national

20
economies. This further increases the concentration and centralization of capital, in turn, leading to fusion
of national capitalist monopolies with the state. As a result, national states themselves emerge as capitalist
state monopoly trusts. As a result, the national economies become 'organized'. The rise of state monopoly
trusts representing the entire finance monopoly capital of the country (which according to Bukharin now
resembles a monolithic "reactionary mass") lead to eliminiation of competition within advanced capitalist
countries and the law of value becomes inoperative. However, the elimination of competition at national
level is complemented by reproduction of competition at the world level in even more acute and violent
forms. The anarchy of production that prevailed in the national economies before the rise of finance
monopoly capital and state monopoly trusts is now transferred to the international level. The individual
national economies are affected by these laws of anarchy of capitalist production only through
international relations. Therefore, the purely internal basis of crises had been eradicated with the
emergence of state monopoly capitalist trust, representing the bourgeoisie of the nation. Now competition
took place among different capitalist state monopoly trusts because the economic units were now
politicized and they were now separated by state borders. However, the productive forces have developed
to a stage where they cannot operate within these boundaries. As a result, the capital must be
internationalized. Since all national capitals are represented by their state monopoly trust, there is an
intensification of struggle between these state monopoly trusts. Thus the internationalization of capital
itself requires the national consolidation of national capitalist state monopoly trusts. Bukharin here points
to the dialectics between the internationalization of capital without the internationalization of capitalist
interests organized in the state monopoly trusts and the nationalization of capital which is manifested in
the strengthening of the national capitalist states in order to compete for internationalization of their
capital with other national state monopoly trusts. Bukharin's entire line of argument becomes clear from
the following quote:

"...the development of productive forces of world capitalism has made gigantic strides in the last
decades. The upper hand in the competitive struggle has everywhere been gained by large-scale
production; it has consolidated the "magnates of capital" into an ironclad organization, which has
taken possession of the entire economic life. State power has become the domain of a financial
oligarchy; the latter manages production which is tied up by the banks into one knot. This process
of the organization of production has proceeded from below; it has fortified itself within the
framework of modern states, which have become an exact expression of the interests of finance
capital. Every one of the capitalistically advanced "national economies" has turned into some
kind of a "national" trust. This process of the organization of the economically advanced sections
of world economy, on the other hand, has been accompanied by an extraordinary sharpening of
their mutual competition." (ibid, p. 108)

One of the important contribution of Bukharin is that he clearly sees the crisis of profitability as the
driving force of internationalization of capital, as expressed by export of commodities as well as export of
capital. Bukharin is right that this internationalization of capital requires the strengthening of the capitalist
state, however, he extends this logic non-dialectically to the conclusion that competition vanishes from
the national economies. Bukharin was mistaken in believing that formation of state monopoly trusts and
later even purer forms of state capitalism results in the eradication of competition and therefore the law of
value from the national economies. The impact of Hilferding is clearly discernible in this argument of
Bukharin, though he draws different conclusions from this. The elimination of competition at national

21
level is accompanied by intensification of competition at the international level between these state
capitalisms.

Another contribution of Bukharin was his focus on the formation of authoritarian state system, though
here too, Bukharin extends this argument to non-dialectical and mechanical ends. He erroneously
concludes that parliaments have now become anachronistic for capitalism as their basic function, that is,
settlement of contradictions between different sections/blocs of bourgeoisie is not required. Liberal
freedoms according to Bukharin are now only a shadow of their older existence. Capitalism in its
monopoly phase cannot give any democratic rights. Now the stage of socialist revolution has become
relevant and parliamentary road to socialism has become totally inconceivable. On the second issue
Bukharin was totally correct, however, his first argument could not be generalized and shows an impact
of Trotsky's ideas.

Bukharin's account of the collapse of Second International also is broadly correct. He argues that the
collapse of the Second International was not an accident but was a result of the stage of imperialism. The
leaders of working class movement were co-opted in a dual process. On the one hand, they identified
socialism with increased state control and hence confused state monopoly capitalism with socialism,
lending their support to their national state capitalism. Secondly, the imperialist loot and plunder of the
backward regions had allowed the imperialist bourgeoisie to bribe these leaders, leading to formation of a
labour aristocracy and trade union bureaucracy which identified more with the interests of the capitalist
class rather than that of the working class. However, Bukharin is sure that the days of the opportunism in
working class movement, best represented by Kautsky, were numbered. Contradictions of capitalism had
brought the first of what, according to Bukharin, might be a series of world wars. However, when
Bukharin linked revolution firmly with war, he made a serious mistake. Though connecting revolution
with imperialist war so rigidly appears at first as a radical argument, but it disarms the proletariat for
revolution in the period between the wars, from making use of situations favorable for revolution in times
of peace and also from fighting against the dangers of war. Here too, the lack of dialectical treatment is
visible.

Bukharin argues that rise of national capitalist trusts have led to unprecedented socialisation and
organization of production preparing the ground for a higher social order, namely, socialism. He refuted
Kautsky's theory of 'ultra-imperialism' and capitalist peace. For Bukharin, an association of state
monopoly trusts and international monopolies was theoretically imaginable but practically impossible
beacuse the more productive and efficient members of the association would not accept the compulsions
imposed by such an association. Moreover, before the rise of any super-imperialist state, that is the ideal
of all state monopoly trusts, the wars will lead to intensification of class struggle and revolution, or
destruction. However, it is not clear why did not Bukharin applied the same logic to the association of
monopolies within the nation, considering any such association as temporary. Also, he considers
emergence of an international cartel or permanent association of state monopoly trusts as theoretically
imaginable.This is one of the reasons why Bukharin's critique of Kautsky is politically correct but is not
in full congruence with his economic analysis; it is much more artificial, whereas Lenin's critique of
Kautsky is much more dialectical, coherent with his economic analysis and organic. When Lenin wrote
the introduction of Bukharin's book, he shared this idea of considering an international cartel and
association of state monopoly trusts as theoretically possible. However, later in Imperialism: Highest

22
stage of Capitalism, Lenin refutes this idea systematically and argues that it is not even theoretically
possible.

The issues of agreement between Lenin and Bukharin are their analysis of imperialism and war; both of
them believe that imperialism means war, though Bukharin's causal link of war and revolution is not
shared by Lenin. Secondly, both of them believe that imperialism or finance monopoly capitalism
constitutes a new and final stage of capitalism. And thirdly, both of them critique the opportunism of
Kautsky as well as of Austro-Marxist variety, as demonstrated by Hilferding. However, there are
important points of disagreement also. One is mentioned earlier, namely, Lenin did not believe in
Bukharin's idea that in the age of imperialism competition within national capitalism is eradicated.
Secondly, the cause of war for Bukharin is the competition between national state monopoly trusts as a
result of eradication of competition at the national level, whereas for Lenin the fundamental cause of
imperialist rivalry is implicit in the law of uneven development. Overall, Lenin's treatment is much more
dialectical and non-linear than that of Bukharin, as we shall see while discussing Lenin's theory of
imperialism.

There are other important shortcomings in Bukharin's work also. For instance, Bukharin believes that the
fusion of state and capital is part of a general tendency of capitalism in the age of finance monopoly
capital. However, the history of capitalism has shown that this relationship is historically specific and
cannot be termed an inherent tendency of capitalism. The experience especially since the 1970s has
demonstrated that this relation is much more flexible and subject to change.

Besides, Bukharin in my opinion commits some very obvious mistakes of political economy in this work,
which is otherwise very diligent in following the method of Marx. For instance, as mentioned above, he
believes that world prices are not determined by law of value. Similarly, he believes that just as profit is
equalized internationally leading to creation of an average rate of profit, determining the export of capital,
the wages too are internationally equalized by movement of labour power to areas with higher wages.
This is not correct because Bukharin misses the basic point that imperialist stage signifies the
internationalization of capital, but the internationalization of labour is hindered by various mechanisms of
state. Even present phase of imperialism, that is, Globalization represents a globalization of capital and
not labour.

Summing up Bukharin's theory of imperialism, it can be said that his emphasis on profitability as the
determining factor of export of capital, his identification of finance monopoly capitalism as a new distinct
stage of capitalism, his refutation of opportunism, his detailed analysis of evolution of world economy as
a result of elemental tendencies of capitalist mode of production, are some of the positive contributions of
his theory. However, his belief that competition within national limits is eradicated only to be produced at
international level gives breathing space to Hilferding's theory of 'organized capitalism' and this affects
his overall political treatment of all the issues related with imperialism. Overall, his method lacks
dialectics and there is a strong influence of mechanical and linear method on Bukharin. As a result,
despite being richer in data, expanse of subject-matter, systematic treatment of evolution of world
economy, and attempts to follow the method of Capital in analyzing imperialism, Bukharin's work lacks
the dialectical treatment and higher level of generalization evident in Lenin's work.

Lenin's theory on Imperialism

23
Lenin's theory can be regarded as the most important Marxist theory of imperialism. There are two things
that distinguish Lenin's theory from other Marxist theories of imperialism presented during that period.
First is that Lenin's theory of imperialism does not simply aim to explain the changes in the capitalist
system towards the end of the 19th century, but also to deduce conclusions from this theory relevant for
the strategy and general tactics of world proletarian revolution. This is reflected in Lenin's treatment of
the living questions of the working class movement as well as the revolutionary communist movement of
that period. The second characteristic of Lenin's theory is that though it is not an entirely original research
of the different characteristic features of the capitalism in the stage of imperialism, however, it is marked
by a highly dialectical treatment and much higher level of generalization as compared to the theories of
Hilferding or Bukharin. Due to these two characteristics of Lenin's analysis of imperialism, it emerged as
the most important and prominent Marxist theory of imperialism and in my opinion it remains to be so,
notwithstanding the fact that there are significant quantitative changes in the modus operandi of
imperialism in the phase of globalization which demand fresh analysis from Leninist perspective.

Lenin's booklet Imperialism: The Highest Stage of Capitalism is subtitled as 'a popular outline.' However,
one must not be misled by this humble subtitle. Tremendous amount of research work was behind this
'popular outline.' The 'Notebooks on Imperialism', the volume 39 of Lenin's collected works, runs some
900 odd pages. Preparations for this booklet included reading 150 books and 240 articles. Before tackling
the subject of imperialism, Lenin virtually read everything that he found available in Zurich. We also
must not forget that Lenin's theory of imperialism cannot simply be analyzed on the basis of this small
booklet and must be read in conjunction with other extremely important writings, which did not enjoy the
same amount of fame. For example, his writings like 'A Caricature of Marxism and Imperialist
Economism', 'Imperialism and Socialism in Italy', 'Imperialism and Split in Socialism', 'The Nascent
Trend of Imperialist Economism', etc. The booklet became the most definitive work of Lenin on
imperialism, however, one also needs to go through his 'Notebooks on Imperialism.'

Another thing that we need to remember before embarking upon an analysis of Lenin's theory of
imperialism is what Lenin has urged us to take note of. First, he cautions us that the booklet was written
with a view to circumvent the czarist censorship and therefore he was obliged to confine himself to
strictly theoretical issues, specifically economic analysis of the facts. Secondly, he was obliged to resort
to hints and "Aesopian language" wherever he had to formulate the few necessary observations on
politics. Lenin writes, "It is painful, in these days of liberty, to re-read the passages of the pamphlet which
have been distorted, cramped, compressed in an iron vice on account of the censor." (V.I. Lenin,
Imperialism: The Highest Stage of Capitalism, Progress Publishers, Moscow, 1978, p. 7) Lenin makes it
fairly clear that due to these limitations the work is quite prone to misappropriation and misinterpretation.
One can only say that his fear was not unfounded on the basis of experience of critical evaluation of
Lenin's text by a number of academicians in past 100 years.

Yet another thing about which Lenin adds a caveat at the very outset is that this text is only intended to
present the economic essence of imperialism and this in no way means that there is no need to study the
political, ideological and cultural aspects of this phenomenon. Nor does it imply that these aspects are not
important. On the contrary, a complete analysis of these aspects is desirable and needed. Despite this rider
in the 'Preface' itself, a number of bourgeois academicians and even some "Marxists" have accused Lenin
of ignoring the ideological, political and cultural aspects of imperialism. In my opinion, it is very
important to read the 'Preface to the French and German Editions' published in 1920 in order to assess

24
Lenin's views. With these preliminary comments we can undertake a critical assessment of Lenin's theory
of imperialism.

We do not need to give a summary of Lenin's work. However, a little recapitulation of the basic tenets of
his theory are in order. Lenin bases his analysis mainly on two works. First was J.A. Hobson's
Imperialism and the second was Rudolf Hilferding'sFinance Capital. The basic categories of analysis of
the latest stage of capitalism that Lenin uses in his work are not his original innovations. For example,
formation of monopolies, the concept of finance capital, and export of capital are things which were
introduced and used in the analysis of imperialism before Lenin by Hobson, Hilferding and Bukharin. It is
not the use of the same concepts and categories but the dialectical treatment of these concepts and
categories that is the differentia specifica of Lenin's work.

Lenin begins by analysing the process of concentration and centralization (though he seldom uses the
term 'centralization' but his treatment of the issue at stake certainly implies both the processes) of
production. These are elemental tendencies of capitalist accumulation. However, they reached a
qualitatively new stage towards the end of the 19th century, especially since the 1870s according to
Lenin. He argues:

"From this it can be seen that at a certain stage of its development concentration itself, as it were,
leads straight to monopoly, for a score or so of giant enterprises can easily arrive at an agreement,
and on the other hand, the hindrance to competition, the tendency towards monopoly, arises from
the huge size of enterprises." (ibid, p. 17)

There are political economists today who have misinterpreted Lenin's concept of monopoly as a negation
of competition. We will show in detail that this is not so. However, here we would just show what Lenin
said about such political economists:

"Half a century ago, when Marx was writing Capital, free competition appeared to the
overwhelming majority of economists to be a "natural law". Official science tried...to kill the
works of Marx, who by a theoretical and historical analysis of capitalism had proved that free
competition gives rise to concentration of production, which, in turn, at a certain stage of
development, leads to monopoly. Today, monopoly has become a fact. Economists are writing
mountains of books in which they describe the diverse manifestations of monopoly, and continue
to declare in chorus that "Marxism is refuted". But facts are stubborn things...The facts show
that...the rise of monopolies, as the result of concentration of production, is a general and
fundamental law of the present stage of development of capitalism." (ibid, p. 20)

Lenin never understood monopoly as the negation or absence of competition; neither did he hold any
neoclassical idea regarding "free competition" to be fair and free or perfect competition. What he means
by monopoly is simply the fact that progressive concentration and centralization of capital at a
qualitatively higher stage of its development leads to the destruction of the celebrated freedom of a large
number of small capitals. This in no way implies that these small capitals were ethical, moral or fair in
their mutual competition. Secondly, Lenin shows that the drastic reduction in the number of capitals
active in each branch of industry and with their becoming humongous in size, the nature of competition
does undergo a change. Lastly, Lenin also sees the stages of free competition and monopoly vis-a-vis the
level of socialization of production. The former leads to unprecedented level of socialisation of

25
production. Lenin says nothing less nothing more. However, even a fine political economist like Anwar
Shaikh has misunderstood Lenin's concept of monopoly. Let us see what Lenin says about the relation
between monopoly and competition:

"At the same time, the monopolies, which have grown out of free competition, do not eliminate
the latter, but exist above it and alongside it, and thereby give rise to a number of very acute,
intense antagonisms, frictions and conflicts." (ibid, p. 83)

Moreover, Lenin clearly says that even in the stage of monopoly, new monopolies emerge due to opening
up of new sectors of economy or even in the already existing sectors giving rise to competition; there is
competition between monopoly and non-monopoly sectors and then there is competition between existing
monopolies.

With the stage of monopoly, a number of developments are associated which Lenin mentions. One is, as
just mentioned, unprecedented socialization of production as well as technical innovations, which enables
these huge monopolies to make an approximate estimate of availability of raw material in a country, or
several countries or even whole world. However, diverging from Hilferding and to a certain extent from
Bukharin in significant ways Lenin concludes from this that this develops the potential for doing away
with anarchy of production. But it does not actually do away with the anarchy of production, neither at the
national level nor at the international level. Another inference that Lenin draws from monopolization is
that as far as this socialization of production creates a necessary pre-condition for socialism and negates
private property within the bounds of capitalism, it constitutes a transitional stage between capitalism and
a higher social order. Lenin clearly says that monopoly neither eliminates competition, nor anarchy of
production, nor the recurrent crises. Though in the first section, his description of crises depends more on
the crises of disproportionality, however, his later treatment makes it clear that he regards movements of
profitablity to be the main underlying cause of investments, export of capital as well as crises.

Lenin broadly following Hilferding's analysis, though in short, yet at a higher level of generalization,
argues that the role of banks changes from middlemen in making payments to a power that begins to
control industry. The reason for this according to Lenin is increasing concentration and centralization of
capital, growing scale of production that requires huge amount of capital for any investment or renewal of
investment. Banks have enormous amount of money-capital at their disposal. This is the source of
growing power of banks at the stage when concentration of capital has led to emergence of monopolies.
Lenin describes in detail the process through which banks begin to control industry and their investments,
the way in which banks promote monopolization, formation of cartels, trusts and syndicates and finally
the way in which these powerful banks, themselves undergoing a process of monopolization, begin to
impact state and its policies. Concentration in industrial sector and concentration in banking constitute a
symbiotic process, each giving impetus to the other. The banking capital fuses with industrial capital
because banks too are obliged to invest their capital in industry in order to pay interests to their account-
holders. This becomes especially important with the emergence of central state banks, the schemes of
state like post-office saving accounts, etc. These increase the necessity of bank capital to fuse with the
industrial capital. This gives rise to finance capital in which the bank capital, according to Lenin, is in the
driver's seat.This finance capital is concentrated in the hands of a handful of financial oligarchies which
begin to control the bulk of national economy. Lenin also shows how banks emerge as institutions of
national book-keeping which are in a position to determine the social division of labour. This prepares an

26
apparatus which can be used by socialist system to determine the distribution of means of production and
social division of labour to different branches of economy. But these only prepare the grounds for that.
They cannot achieve that due to the fact that despite the socialization of production the appropriation is
private.

There is one aspect about which Lenin's analysis seems to be betrayed by real developments of
imperialism in the past 100 years. He argues that the role of stock exchange will decrease in the age of
finance monopoly capital because stock exchanges which used to act as an exact measuring rod and an
automatic regulator of the economic movements in the era of free competition, will become irrelevant
because in the era of finance capital and dominance of bank capital over industrial capital, every bank will
become a stock exchange. It has a grain of truth but this judgement is not accurate. However, if we read
the entire portion on stock exchange it might also imply the increasing dominance of banks over stock
exchange and due to this a resultant change in their nature from the free competition period when they
performed the function of free circulation of securities, and therefore a regulator of economic activity. So
far as Lenin means that the Stock Exchanges of free-competition and free-trade era as a place of free
circulation of securities, they do not exist anymore and in the era of monopoly finance capital, they
arehegemonized by the absolute power of banks, that have virtually swallowed the Stock Exchanges, it is
more or less correct. But in itself this statement might create confusion.

Lenin, drawing on Marx and Engels, shows that in the age of finance capital, with the separation of
ownership and management of capital, the capitalist class as owner of capital has become completely
superfluous and lives on rents extracted from his financial speculative activities. His profits ("the
promoter's profit") resemble more to rent or interest, rather than entrepreneurial profit. This much was
said by Hilferding too, but Lenin draws an important lesson from it. For Lenin, emergence of this class of
coupon-clippers who lived by clipping coupons was one of the signs of the parasitic and decaying
character of capitalism in its imperialist stage. Other manifestations of this decaying parasitic nature was
hindrance created by monopolies on further development of productive forces, innovations and
inventions. This, for Lenin, did not mean that in the monopoly stage the technological progress will
stagnate permanently. He was aware that due to existence of competition in the stage of monopoly, there
will be periods of rapid progress too. However, this will not constitute the main trend. Lenin opines:

"In proportion as monopoly prices become fixed, even temporarily, the stimulus to technical and
consequently to all, progress tends to disappear, and to that extent also the economic possibility
arises of deliberately retarding technical progress...Certainly the possibility of reducing cost of
production and increasing profits by introducing technical improvements is an influence in the
direction of change. Nevertheless, the tendency to stagnate and decate, which is feature of
monopoly, continues, and in certain branches of industry, in certain countries, for certain periods
of time, it becomes predominant." (Ibid, p. 94)

But he also says,

"It would be a mistake to believe that this tendency to decay excludes the possibility of the rapid
growth of capitalism." (Ibid, p. 112)

Regarding the definition of finance capital, Lenin accepts the definition given by Hilferding that is,
finance capital is the capital owned by banks but employed by industry. According to Lenin, Hilferding's

27
definition is lacking in only one aspect, that is, such a situation emerged only at a certain level of
development of concentration and centralization of capital resulting in monopoly, though elsewhere in his
work Hilferding has paid attention to this question also. However, for Lenin the broad sequence of
developments should be clear. That is why he says:

"We now have to describe how, under the general conditions of commodity production and
private property, the "business operations" of capitalist monopolies inevitably lead to the
domination of a financial oligarchy." (ibid, p. 46)

Lenin shows how through holding system the financial oligarchy is formed. Through holding system, a
person holding shares worth a few million pounds could control many hundred millions of pounds. In
this, shares of small denominations were especially useful. Lenin shows how the British imperialism was
based on 1 pound share. Lenin describes in detail how the holding system works. Lenin also shows how
the bulk of profit of the finance capital was coming from speculation, by buying shares, inflating their
values and earning obscene amounts as "promoter's profits". Major source of profit of financial oligarchy
is floating foreign loans and issuance of securities. In the times of crisis, these oligarchies make good use
of it by buying the shares of companies in crisis, in the name of "reorganization and reconstruction", take
control of these companies and by inflating the values of their shares, earn huge profits.

In a prophetic paragraph, Lenin shows how the financial capital makes huge profits through speculation in
the real estate. The contemporaneity of this portion strikes you right away when you read it. Lenin argues:

"Speculation in land situated in the suburbs of rapidly growing big towns is a particularly
profitable operation for finance capital. The monopoly of the banks merges here with the
monopoly of ground-rent and with monopoly of the means of communication, since the rise in the
price of land and the possibility of selling profitably in lots, etc., is mainly dependent on good
means of communication with the centre of the town; and these means of communication are in
the hands of large companies which are connected with these same banks through the holding
system and the distribution of seats on the boards." (ibid, p. 54-55)

Lenin argues that once the monopolies are formed they penetrate every sphere of economic life and soon
begin to control it. The celebrated independence of small capital and mythology of "fairness" of free
competition becomes a laughing stock, which was never fair but whose unfairness was hidden behind the
crowd of numerous small capitals. The financial oligarchies offer lucrative offers to state officials,
bureaucrats, political agents and middlemen (which suddenly reminded me of people like Amar Singh
and NeeraRadia, while reading this section!), placed on their board along with representatives of
industrial monopolies and banking monopolies. In this way, the financial oligarchies establish contacts
with the state and even begin to affect its policy-making. Lenin opines that the source of power of banks
is in the general tendency of capitalism to gather a huge amount of money-capital at the disposal of banks
and credit institutions. This assumes a central importance with increasing capitalist development. This
very process leads to domination of industry by banks and then emergence as a result of their coalescence
of finance capital. The abundance of capital that cannot be invested profitably at home is exported.

Here it is noteworthy that a number of later Marxist political economists have claimed that Lenin always
emphasized on disproportionality between departments more than crisis of profitability as the main cause
of crisis. However, if one reads Imperialism: The Highest Stage of Capitalism it becomes clear that Lenin

28
has referred to the movements of profitability as the main cause of export of capital. Lenin often refers to
plethora or abundance of capital. Marx had already showed that any plethora of capital is that plethora
that cannot be invested profitably. Plethora in itself is not a certain amount, but a concept that makes
sense only in relation to the rate of profit. Lenin argues that the monopoly is manifested also in the form
of monopoly position of certain countries with "abundance" of capital which cannot be invested
domestically. Lenin ridicules the petty-bourgeois remedies suggested to get rid of this "plethora" without
the "policy of imperialism". Here Lenin's critique of such petty-bourgeois quacks naturally brings to your
mind the likes of Prabhat Patnaik, C.P. Chandrashekhar and Jayati Ghosh who persevere in their attempts
to make this system understand that it must increase domestic demand in order to get rid of the crisis.
Lenin has nothing but disdain for their quackery and reminds that if capitalism did that it would not be
capitalism, because such measures lead to decline in the rate of profit due to upward pressure on wages
and the regulator of capitalist production and investments is profitability. This "plethora" finds profitable
investment opportunities in backward countries where the organic composition of capital is low, the
prices of land are low, labour power is cheap and cheaper raw materials are available. Moreover, export
of capital enables capitalist monopolies to circumvent the walls of protective tariffs.

Lenin shows by data the incredible increase in export of capital. Here we need to remember one thing. In
the period of Lenin as well as today, the inflow and outflow of capital is greatest among advanced
countries. Many scholars have used this fact to disprove export of capital as an important marker of stage
of imperialism. However, they miss the basic point. Even today the US has largest inflow of FDI from EU
and the largest share of its FDI outflow is to EU. However, if we need to understand the data regarding
capital import and export, we must understand the capital import and export among developed capitalist
nations do not constitute an element of imperialist exploitation and their relationship is one of broad
parity. Secondly, we need to look at the data regarding the share of developing and developed world in
the total FDI inflow/outflow as well as FDI stocks. Thirdly, there is no place of comparison of any two
countries because such an analysis will be totally relativistic; in the analysis of any pair, one would
emerge as imperialist exploiter and the other as the exploited; that holds true even if we analyze the
capital flow between the US and the EU. The analysis should centre on the capital flow between the
developed world and devoloping world; the increasing tendency of export of capital in capitalist
economies; being a net importer or a net exporter of capital in itself does not prove anything. For instance,
the US is net importer of capital; can we call the US a country exploited by imperialism!? The real
yardstick is the role that export of capital plays in the appropriation of surplus from the backward
capitalist countries today and the role this appropriation plays in maintaining the imperialist hegemony of
the developed countries. The case of China is an interesting one. Here we can see that the net export of
capital has increased incredibly in past 30 years. A great portion of this export is going to Africa, but also
to developed countries. It is an interesting issue of research whether China is emerging as an imperialist
power, or, has it already emerged as an imperialist power? We cannot go in the detail of this question
here. However, this much is certain that Lenin's criterion of export of capital has been grossly
misunderstood by a number of scholars, some of whom are Marxist. What is essential to understand is
that in Lenin's theory, influence/control on certain regions, resources, and markets of less developed
world plays a vital role in the appropriation of surplus by the advanced countries and also in their
competition with other advanced countries. It does not really make any difference if the bulk of export of
capital of the EU is to the US and other parts of the developed world. The EU still remains an imperialist
power vis-a-vis countries like Egypt, Libya, India, Indonesia, South Africa, Turkey, etc.

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Lenin's assessment of the impact of export of capital on the colonies, semi-colonies, neo-colonies does
seem to be a little inaccurate. According to Lenin, the export of capital will lead to deceleration of
capitalist development in the sending areas and the acceleration of the capitalist development in the
receiving areas, though they give huge benefits to the financial oligopolies in the advanced countries
through repatriation of profits through state loans, construction projects, etc. Actual experience of history
shows that imperialist penetration of backward areas does create some preconditions of capitalist
development but they also impede and block the natural course of capitalist development in the colonies,
semi-colonies and neo-colonies. However, if we look at the period after the decolonization, this
assessment of Lenin does have a grain of truth. The export of capital and consequent shifting of what
Lenin called "arterial industries" to the developing world, the capitalist development in the developed
world has become decelerated, whereas, the capitalist development in the developing world has increased,
though with much higher levels of unevenness, inequality, incomplete bourgeois democracy, etc. These
are characteristic features of the peculiar kind of post-colonial and relatively backward capitalist
development that has taken place in the erstwhile colonies since last 5 or 6 decades.

According to Lenin, the competition for largest possible territories for exploitation by monopolies
through export of capital leads to division of the world figuratively (among the leading world powers) and
actually (among the capitalist monopolist associations). The relationship between this 'figurative' and
'actual' division of the world must be understood as the failure to understand this has led a number of
theorists of 'new imperialism' to bizarre conclusions. Lenin shows with the data of various industries
including electrical industries, oil production, etc how the world of Lenin's time was divided among
capitalist monopolistic combines. The agreements and conflicts between the monopolistic combines is
described in detail by Lenin to show that due to different trajectories of growth, conflict turns into
agreement and agreements are broken to give rise to new rivalries. At the root of this dialectical
movement is the law of uneven development. In this movement, the state of advanced capitalist countries
emerges as an instrument of monopoly capital. Lenin specifically refutes the argument of Kautsky and
other social-democrats that monopoly leads to elimination of competition. Lenin writes:

"International cartels show to what point capitalist monopolies have developed, and the object of
the struggle between various capitalist associations...for the forms of the struggle may and do
constantly change in accordance with varying, relatively specific and temporary causes, but the
substance of the struggle, its class content, positively cannot change while classes exist." (ibid, p.
71)

Evidently, Lenin argues that monopoly does not eliminate competition but only alters the form, nature
and manifestation of competition. According to him, division of the world is based on the share of capital
of different monopolies and states. This share is subject to constant change due to a variety of factors.
Whenever this changes, conflicts emerge. Figurative division of the world between political alliances of
the states is only on the basis of actual division of the world between the monopolistic associations. And
both of them are subject to change. Right now the world is on the verge of a major change in the
figurative as well as actual division of the world, though this process can be uneven, interrupted and full
of violent convulsions.

Related to this theme is Lenin's divergence from Bukharin's conception of world economy. In Bukharin's
work, the concept of world economy overlooks the internal divisions; even when these internal divisions

30
are considered they are subordinate to the general laws of world economy. Consequently, the entire
concept of world economy becomes a bit monolithic and homogeneous. However, Lenin's concept of
international economy is one of multi-layered network of imperialist powers. Due to the monolithic
concept of world economy, Bukharin drifted towards the so-called "Polish heresy" which totally rejected
the rights of nations to self-determination. It was argued that in the age of imperialism the very concept of
national self-determination had become obsolete. Trotsky too argued in the same vein and his influence
on Bukharin cannot be struck out. As a consequence, it was argued by Bukharin that the socialist
revolution in this era is more likely to establish a global or at least a multinational socialist state, which is
incompatible with the notion of national self-determination. Lenin attacked this idea vehemently and
called it a breed of "imperialist economism". He did not support the right to self-determination from a
nationalist viewpoint but precisely from the standpoint of future of socialist revolution. At the root of this
critique was Lenin's totally different conception of imperialism as a multi-layered network of imperialist
powers, a kind of chain. Lenin understood that the rise of monopolies, formation of financial oligarchies,
export of capital and division of world between capitalist monopoly associations has bound the different
capitalist as well as non-capitalist social formations together; but at the same time he realized this is not
an organic unity creating a monolithic structure but a structure that resembles a multi-tier network which
is internally contradictory, fluid and dynamic. These different social formations (advanced capitalist,
relatively backward capitalist, as well as colonial, semi-colonial and neo-colonial) are like links in a chain
of imperialism. Each link has its own dynamics and rate of growth due to the existence of particular
socio-economic relations, their particular political condensation and their particular political conjunctures.
This also led Lenin to propound his famous theory of 'weak links' which argued that the coming
revolutions most likely will occur in the 'weak links' and his theory was validated by historical
experience. The reason was that he correctly captured the nature of imperialist system as a multi-layered
network rather than a monolithic and homogeneous world economy. The latter concept dominated a
number of Marxist scholars of that period and it was a smooth road to Kautskyite social-democratic or
Trotskyite permanent revolution theory.

While discussing the territorial division of the world, Lenin makes a number of valuable observations. He
talks about three categories of imperialist powers. These categories are useful to analyze the changing
scenario of present imperialist world also. The first category belongs to the new and rapidly emerging
imperialist powers (in Lenin's time, the US, Germany and Japan); the second category is of old imperialist
powers in decline (in Lenin's time, Britain and France), and the third category belongs to countries like
Russia which are still backward as compared to other imperialist countries but which have a combination
of most advanced and concentrated forms of finance capital and industrial capitalism existing with
backward relations. One can disagree over which countries today belong to which category, but there
would be a general consensus on the fact that these categories are still relevant and apply to present
imperialism.

Another very important and relevant observation of Lenin is that colonialism is not conditio sine qua non
of imperialism. Imperialism can and does exist without colonialism, semi-colonialism, neo-colonialism.
He argues that finance capital is capable of subjecting and does subject states with the fullest
independence. Lenin contends further that there can be multiple forms of domination of finance capital
and dependene, besides colony, semi-colony and neo-colony. One of these forms is commercial colony
which has political independence. Argentina, for Lenin,was the most important example of such a
commercial colony. Another form of domination of finance capital that Lenin mentions is particularly

31
important for today's world. He argues that smaller and relatively less developed capitalist states also are
exploited by imperialism. The example of such a nation that Lenin gives is Portugal. It is a fully
politically independent capitalist state and is allied with British imperialism. Its role as a 'junior partner' of
British imperialism is evident in the fact the Portugal allows Britain to invest in its colonies, use its
network of telegraph cables, etc. Such countries according to Lenin are neither colonies nor semi-colonies
nor neo-colonies. They are aligned with this or that imperialist bloc and play the role of a subordinate
partner. Let us see what Lenin says in this regard:

"A somewhat different form of financial and diplomatic dependence, accompanied by political
independence, is presented by Portugal. Portugal is an independent sovereign state, but actually,
for more than two hundred years...it has been a British protectorate. Great Britain has protected
Portugal and her colonies in order to fortify her own positions in the fight against her rivals, Spain
and France. In return, Great Britain has received commercial privileges, preferential conditions
for importing goods and especially capital into Portugal and the Portuguese colonies, the right to
use the ports and islands of Portugal, her telegraph cables, etc., etc. Relations of this kind have
always existed between big and little states, but in the epoch of capitalist imperialism they
become a general system, they form part of the sum total of "divide the world" relations and
become links in the chain of operations of world finance capital." (ibid, p.81-82)

In present world, the situation has changed to a certain extent. Now such states that are relatively less
developed are not allied to one imperialist power for a long time, but they play the role of 'junior partners'
of imperialism in general, inclining to one axis sometimes, while to some other axis at other times. One
thing is clear from the above account that colonialism, semi-colonialism and neo-colonialism are not the
only possible modus vivendi of imperialism. Imperialism can exist without colonialism, semi-colonialism
and neo-colonialism. Barring a few exceptions, that is the case today. Obviously, Lenin did not discuss
and could not have discussed this case in greater detail because he was a revolutionary practitioner and it
was his duty to analyze the most living questions of his time and the most representative realities of his
time.

Similarly, Lenin did not believe that the division of the world between an industrial and agrarian region is
a precondition of imperialism, as Kautsky suggested. Lenin also criticized Kautsky for not understanding
the peculiarity of relationship between imperialism and finance capital and linking the former with
advanced industrial countries. This refutation applies to a great degree to the recent theorizations about
imperialism by Prabhat and Utsa Patnaik also. Lenin points out that imperialist domination in itself has
nothing to do with agrarian regions or what the Patnaiks have called tropics (whose cheap goods are
essential for development of capitalism in the temperate countries) and that imperialist countries strive
equally hard to hegemonize highly developed industrial territories because world is already partitioned
and struggle for redivision obviously leads to a scramble for all kinds of territories and secondly it
involves struggle for hegemony over the globe to weaken the rivals, so there is not enough room for
consideration of agrarian or industrial regions.

Lenin also debunks the claim of Kautsky that a stage of 'ultar-imperialism' can arrive. Lenin calls it a
theory of ultra-nonsense. Lenin argues that it is even theoretically impossible. Kautsky argued that there
is a possibility of development of the cartellization in foreign policy also leading to emergence of a world
monopoly, a single international trust inaugurating an era of 'ultra-imperialism'. He defined it as the union

32
of many 'imperialisms' into one imperialism jointly exploiting the entire world by internationally united
finance capital. Lenin demolishes this whole argument as ultra-nonsense. The very idea of 'ultra-
imperialism' is a meaningless "pure abstraction". Lenin argues that if we analyze the growth of monopoly
in the age of finance capital in a historically determined concrete situation it becomes clear that given the
different rates of growth, disparities and uneven development of capitalism, such a stage of ultra-
imperialism will never come. There always will be many imperialisms even though at different times
different imperialism(s) might be hegemonic. This criticism applies to theories which emerged after the
collapse of Soviet Union when even some "Marxists" began to talk about "uni-polar world" and "Pax
Americana", for instance Prabhat Patnaik and Aijaz Ahmad. Due to this realization, Lenin's critique of
Kautsky's and other social-democratic leaders' opportunism was much more complete, coherent and
effective than Bukharin's critique which was artificial due to his belief that competition will be eradicated
within national capitalism. The same logic disarmed him to refute Kautsky and later-Hilferding. Lenin's
analysis of the link between imperialism and the rise of opportunism within the working class movement
due to bribing by imperialistic ruling class of the leaders and a sizeable minority of upper echelons of
working class in the advanced countries, is much superior to Bukharin's analysis.

This small booklet is so rich in its historical observations and the assessment of trajectories of
development that all the insights cannot be presented here, but it would be imperative to mention the fact
that the phenomenon that is today being registered by a number of leading studies of imperialism (like
John Smith's), namely, of shifting of production from developed North-Western capitalist countries to
what is being called the 'Global South', was recognized a 100 years ago by Lenin. Lenin shows how
Britain is not producing most of the commodities that it uses and most of its arterial industries are shifting
to its colonies in Asia and Africa. This applies especially to the US today. Another related observation of
the contemporary Britain that applies ditto to the US today is that most of the land in Britain at that time
was not being used for productive purposes but for recreational and non-productive activities. The
parasitism of Britain's financial oligarchy was leading it to a slow but steady decline. The same can be
said about the US today, again.

Towards the end of the book Lenin presents a brilliant critique of petty-bourgeois critiques of
imperialism, reformist critiques of imperialism as well as imperialist critiques of imperialism. However,
we cannot go in details of this critique of Lenin.

Finally, it is important to understand the concept of 'highest' or 'latest' stage. Some authors have tried in
vain to prove that Lenin did not mean the 'highest stage' but only meant the 'latest' or 'contemporary stage'
of capitalism. The reason for this desperate attempt to defend something that does not need a defence is
an utter confusion about the nature of this concept. The nature of this concept is logical, rather than
chronological. Imperialism is called the highest stage of capitalism and the eve of proletarian revolution
by Lenin not to mean that revolutions are round the corner. It means that imperialism creates the
necessary prerequisites of socialism in the form of unprecedented socialization of production and the
accounting of entire national economy by banks. Whether or not these material preconditions are actually
transformed into a higher social order, is not a spontaneous economic act, but a conscious political act and
depends on the struggle against opportunism and revisionism in the working class movement, among
other things. Thus, Lenin is against any kind of "inevitable collapse" or "inevitable breakdown" theory.
Imperialism is the highest stage also does not mean that the history of imperialism itself cannot be divided
into many phases from Fordism to post-Fordism and neoliberal globalization, which in my opinion is the

33
latest phase of imperialism. Therefore, it is essential to understand the political concept of 'the highest
stage' as a logical concept rather than as a chronological concept. Let us see what Lenin has to say about
it:

"...then it becomes evident that we have socialization of production, and not mere "interlocking";
that private economic and private property relations constitute a shell which no longer fits its
contents, a shell which must inevitably decay if its removal is artificially delayed, a shell which
may remain in a state of decay for a fairly long period (if, at the worst, the cure of the opportunist
abscess is protracted), but which will inevitably be removed." (ibid, p. 120)

Therefore, those who uselessly want to salvage the concept of 'the highest stage' should remain in peace.
Do not try to fix it, if it is not wrecked!

Summing up Lenin's contribution to Marxist theory of imperialism, it can be said without any
exaggeration that his theory still remains the most complete theory of imperialism with high level of
generalization and excellent use of dialectical method. A lot of themes have been left undeveloped and
unfinished and demand further development. However, the very objective of the project was very humble,
namely to present 'a popular outline' of the 'economic essence' of imperialism. Lenin not only breaks new
ground in the analysis of imperialism but also systematizes the findings of Marxist studies done till that
time about imperialism. As a consequence, Lenin succeeded in presenting the most complete paradigm
for the study of imperialism and it is relevant even today. This is not to say that Lenin's theory of
imperialism does not need to be developed today. The world since the end of the Second World War and
especially since 1970s has undergone profound metamorphosis from the decline of Fordism, deregulation,
fragmentation of assembly line and emergence of a truly global assembly line, flexibilization and
invisibilization of working class, different process of informalization, emergence of new types of
monopolies in the form of transnational corporations, changing nature of the presence and intervention of
the nation-states, and the unprecedented level of financialization and rise of speculative capital. These
changes in my opinion constitute significant quantitative changes that need to be understood and
interpreted from the Leninist framework. However, this too is certain that it is this framework which has
the greatest analytical rigour and incisiveness to understand these changes in totality, in motion and in
their inter-relations, in other words dialectically.

Neo-Marxist Theories from 1940s to 1970s

The period after the Second World War saw a spurt in new Marxist studies of imperialism and monopoly
capitalism. The most important work in this period came out from the US, namely, The Political Economy
of Growth by Paul Baran in 1957. The second important work was Monopoly Capital by Paul Sweezy and
Paul Baran. However, the roots of their political economy, which came to be known as the 'Monopoly
Capital School', were laid in 1942 when Paul Sweezy published his The Theory of Capitalist
Development. The publication of these empirically rich and important work laid the foundation of what I
would broadly term as 'The Exchange Relations Perspective' (ERP from here onwards). ERP has five
major sub-branches: the first was Sweezy-Baran's 'monopoly capital' school; the second was Andre
Gunder Frank's 'Dependency Theory'; the third was Immanuel Wallerstein's 'World Systems Theory';
fourth was Samir Amin's theory of 'Underdevelopment'; and finally, the 'Unequal Exchange' theory of
Arghiri Emmanuel. All these five subsets of ERP are different in their analysis in significant ways but

34
also share some basic positions of political economy. These basic positions are underconsumptionism,
primacy of exchange relations (rather than production relations) and analytical preference to sphere of
circulation and distribution.

In analyzing ERP too, we should 'begin from the beginning'. The roots of this broad trend are in the
publication of The Theory of Capitalist Development of Sweezy. This work is an extension of the
Luxemburgiteunderconsumptionism that we analyzed above. Sweezy makes no bones about the fact that
he is going to develop an underconsumptionist theory of capitalist development and crisis "free of the
objections which have been levelled at earlier versions." (Paul Sweezy, The Theory of Capialist
Development, New York, Monthly Review Press, 1942, p. 179). However, what Sweezy produces is the
same traditional underconsumptionist argument that consumption regulates production; therefore
Department I is integrated in a vertical subordinate position to Department II and any increase in
production in Department I is an effect of changes in Department II. Once he makes this assumption he
smoothly transitions into traditional underconsumptionism which argues that since capitalists have
tendency to invest more in machines, the production of machines increases. Any increase in production of
machines leads to an increase in consumption goods; consequently, consumption lags behind production
because the share of wages in national income falls and capitalists have a tendency to accumulate, rather
than consume. As a result, a demand gap opens up leading either to crisis or stagnation. We have already
critiqued this position above.

In the next major work, Monopoly Capital published in 1966, Sweezy and Baran add little to the
foundations of their analysis. Here they just add that the overproduction or over-capacity is not limited to
Department II but also Department I. In other words, capitalism in its monopoly stage has the tendency to
continually increase production beyond its capacity of consumption, or internally generated effective
demand. Sweezy and Baran assume that Marx's analysis was based on the free competition phase (they
ascribe the neoclassical idea of competition to Marx, though Marx critiques this idea of perfect
competition) and in the monopoly stage of capitalism his notions of law of value and law of tendential fall
in the rate of profit are not relevant.

Sweezy and Baran use the category of 'economic surplus' to effectively replace the category of surplus
value. It is noteworthy that the category of surplus introduced by Sweezyand Baransimply means the
difference between the total produce of society and the portion of it which is used to replace the expended
factors of production, what is generally called the net product. This concept does not have any historical
specificity and it does not relate to the relations of production. Economic surplus can exist in a variety of
modes of production. It does not have anything particular to do with capitalism or capitalism in its
monopoly stage. Secondly, this surplus has nothing in particular to do with the relation between the direct
producer (wage labour under capitalism) and the exploiter (capitalist under capitalism with monopoly of
ownership of means of production). The way the surplus product is extracted, i.e., the mode of surplus
extraction is not explained in any way by this concept of economic surplus. It is a concept that belongs at
a macro level to the sphere of circulation. The concept of surplus is not specifically and explicitly related
to exploitation. It is a macroeconomic concept with no or incomplete microeconomic foundations. The
sole problem in Monopoly Capital is disposal and absorption of this surplus. Thus the problem is solved
at the level of circulation; for the absorption of the surplus, capital must look for external sources,
otherwise the demand gap will keep widening and the system will be bogged down in chronic depression,
crisis or stagnation. This expanding surplus is only temporarily and partially absorbed by military

35
spending, wasteful consumption spurred by new sales efforts through advertising, etc. So, the chronic
depression and stagnation is inevitable.

According to Sweezy and Baran there is a constant tendency of rising surplus, which they call the law of
tendency of the surplus to rise. They claim that Marx's law of tendency of the rate of profit to decline and
law of value does not apply to the stage of monopoly capitalism. Under monopoly capitalism, the costs of
production decrease, but the prices increase or remain constant. This enables the monopoly capitalism to
prevent the rate of profit from declining and their profits continue to rise. However, this argument
completely ignores the production in non-monopoly sectors. ShinzaburoKoshimura, using Marx's
arguments about monopoly and monopoly prices (which are conspicuous by their absence in Sweezy and
Baran's treatment) demonstrates that monopoly capitalism actually shows the unfolding of the law of
value itself. Marx wrote in volume three of Capital:

"...if equalization of surplus-value into average profit meets with obstacles in the various spheres
of production in the form of artificial or natural monopolies, and particularly monopoly in landed
property, so that monopoly price becomes possible, which rises above the price of production and
above the value of the commodities affected by such a monopoly then the limits imposed by the
value of the commodities would not thereby be removed. The monopoly price of certain
commodities would not merely transfer a portion of the profit of the other commodity-producers
to the commodities having the monopoly price. A local disturbance in the distribution of the
surplus value among the various spheres of production would indirectly take place, but it would
leave the limit of this surplus value itself unaltered...The limits within which the monopoly price
would affect the normal regulation of the prices of commodities would be firmly fixed and
accurately calculable." (Karl Marx, Capital, volume-3, Progress Publishers, Moscow, 1978
Reprint, p. 861)

Thus the logic of monopoly prices and monopoly profit is only an extension of the theory of value rather
than its negation. There are limits within which monopoly price would affect the normal regulation of
prices of commodities. The rise of monopoly does not negate competition but reproduces it in more
intensified form at a higher level.

The "law of increasing surplus" proposed by Sweezy and Baran has been shown to have little empirical
evidence and is based on classifying all government spending as surplus, which is extremely misleading.
Another problem with Sweezy and Baran's account is that they believe that stagnation is now the
permanent state of capitalism, interrupted by periods of expansion that are caused by external factors. The
reason for this stagnation as opposed to Marx's argument is not declining rate of profit but
underconsumption or the problem of realization, or absorption of surplus. The crises in the stage of
monopoly capitalism is superseded by a permanent state of stagnation due to this realization crisis. Thus
for Sweezy and Baran, the sphere of circulation now determines the sphere of production. Exchange
relations, therefore, are given primacy over production relations. We have shown while discussing
Luxemburg's theory of imperialism that expanded reproduction is possible, proportionality between
departments is possible and surplus can be realized within the system. The failure to realize this is caused
by the foundational error of forgetting that department I produces for department I also (producing means
of production that produce means of production) and forgetting that this tendency increases with
development of accumulation, owing to the belief that consumption determines production under

36
capitalism. Secondly, we have also shown above that underconsumption is not the cause of the crisis but
the symptom of the crisis of profitability. Thirdly, the state of stagnation is not permanent because every
major crisis or stagnation leads to devalorization of capital, restoring profitability by precisely this
devalorization. Therefore, one must not forget that every crisis is a sudden or a protracted cathartic
process for the system.

All these problems have led to misleading conclusions that 'monopoly capital' school derives about the
nature and role of imperialism. The real reason for the expansion of advanced capitalism to what later
came to be known as 'periphery' is the absorption of surplus, realization problem. The export of capital
increases this problem to a higher level because this export of capital increases the amount of repatriated
profits, in turn, leading to even greater "demand gap". However, 'monopoly capital' school fails to explain
why the capitalists export capital? For Sweezy and Baran, the three salient feature of imperialism in the
era of monopoly capitalism are rise of the US as the hegemonic imperialist power, maintaining its
economic hegemony by brute force and militarism; second, the threat of socialism, that the US perseveres
to limit and suppress by economic and military means; and third is the rise of MNCs. The rise of MNCs
signal the beginning of a new kind of capitalist firm that is different from the nationally-rooted
monopolies of Lenin's time. There is no doubt that there has been an important change in the form of
existence of monopoly firms. However, Sweezy and Baran say that these MNCs have shifted from the
strategy of export of commodities to export of capital and shifting of production to Third World countries;
we have seen that this process was well underway in Lenin's time itself and Lenin had alluded to these
developments. Moreover, Sweezy and Baran claim that the interests of MNCs diverge from national
interests that was not the case with monopolies of Lenin's time. This too is only an apparent reality. In
fact, the TNCs/MNCs of today are represented by the individual imperialist countries (often the mother
country or the country of origin of that MNC) or some bloc of imperialist countries.Sweezy and Baran
argue that the essence of imperialist domination of colonies and neo-colonies is the economic surplus of
these countries is pumped out by imperialism. This economic surplus is not used for accumulation
because the comprador bourgeoisie consumes part of this surplus wastefully in luxuries. Decolonization
has not prevented the inflow of foreign capital because the pressures of socio-economic development in
these countries is great while local sources of surplus is wasted in luxury and speculation. Consequently,
the bourgeoisie of the ex-colonies is obliged to rely on foreign investments. On the other hand, the MNCs
that export capital to these countries and shift production to these countries use the local capital for
financing these enterprises. This rather than relieving from the problem of absorption of surplus, increases
it.

Harry Magdoff of the 'Monthly Review' school of Marxism tried to move towards the Leninist notion of
imperialism but in attempt to save the position of Sweezy and Baran, his analysis falls short of capturing
the essence of contemporary capitalism. In short, the position of 'monopoly capital' school is an
underconsumptionist logic of absorption of the net product, as the reason of crisis/stagnation as well as
imperialism. The hallmark of this position is giving primacy to exchange relations rather than production
relations that is evident in the notion of 'economic surplus'. The political analysis of Sweezy and Baran is
shared by a number of communists who are still clinging to the idea of comprador bureaucratic
bourgeoisie, semi-feudal semi-colonial or neocolonial social formation and new democratic revolution.
We can see the non-Marxist roots of the political economy of 'monopoly capital' school.

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The next major trend within ERP was Dependency Theory. Though Andre Gunder Frank is the most
well-known name of this trend, its origins can be traced to Paul Baran'sPolitical Economy of Growth.
Here,Baran traces the roots of underdevelopment of the Third World countries and their inability to
undergo capitalist industrialization in the extraction of surplus from these countries by the imperialist
countries, first through colonialism and then through neo-colonialism. The comprador bourgeoisie in the
erstwhile colonies collaborated with the imperialist bourgeoisie in this extraction of surplus in return of a
share in this surplus. However, since this bourgeoisie expends its share on the state bureaucratic apparatus
and its luxuries, accumulation is not possible. Therefore, there is a systematic development of
underdevelopment in these countries. Imperialism here is based on extraction of surplus and absorption of
surplus. However, how the surplus itself is produced is taken for granted.

Andre Gunder Frank takes the basic idea of surplus extraction from Third World countries or the
periphery by the metropolis/centre. Later, he stipulates that periphery and centre exist even within a
country and therefore we should talk about the metropolitan regions and peripheral regions, the
boundaries of which sometimes coincide with national boundaries. According to Frank, development and
underdevelopment are the two sides of the same coin. Development in the core/metropolis is not possible
without underdevelopment in the periphery. This is based on the process of extraction of surplus from the
periphery by the metropolis. He argues that from the time when a world market came into existence with
the expansion of capitalism from Western Europe to other parts of the world (first he says it was in the
16th century and then later pushes this time to 5000 years ago!), a world capitalist system came into
existence with the dialectical poles of metropolis and periphery through the extraction of surplus. As
capitalism developed, the development of metropolis and underdevelopment of periphery also became
consolidated. Frank disagrees from Baran that underdeveloped regions failed to develop capitalism.
According to him, underdeveloped regions are capitalist and capitalism necessarily has these two poles of
developed regions and underdeveloped regions. Frank also argues that there is an entire hierarchy in the
the world capitalist system in which some countries can be characterized as metropolis, others as
periphery and yet others as semi-periphery. The developments in the peripheral regions is derivative of
development in the core regions. The satellite or peripheral countries develop a commercial and
comprador bourgeoisie due to the penetration of capital from the core regions which act as agents of
bourgeoisie in the core countries.

As evident, for Frank capitalism came into existence as a result of extension of world market through
foreign trade, colonial voyages and establishment of colonies. This definition of capitalism has nothing to
do with Marx's definition who showed that foreign trade, mercantilism and coming into existence of a
world market is possible in the era of feudal relations also. Secondly, the thing that lies at the root of
emergence of capitalism, imperialism and underdevelopment is extraction of 'surplus'. This theory does
not bother to explain what class relations, production relations and mode of production led to production
of this surplus, or the particular mode of extraction of this surplus from one class by another class. The
existence of surplus is assumed. Thus the entire focus of Frank is on exchange relations, who does not
conceptualize capitalism as a mode of production and imperialism as a particular stage of capitalism, but
as a global system based on a set of exchange relations. As a result in Frank's theory, there is no place of
class struggle. For Baran as well as Frank the source of capital accumulation is not exploitation of
labourpower but the extraction and redistribution of surplus from one region to another, creating
underdevelopment in the former and development and accumulation in the latter. But as Marx said, "the
profit must exist before it can be redistributed." The comment of Dore and Weeks on Frank is correct:

38
 "By ignoring the mode of production, production itself is ignored. Once the analysis loses touch
with the process of production, the fundamental social axiom that all societies, save the most
primitive ones, are based upon the exploitation of direct producers disppears from view. And
without the mode of appropriation (and thus exploitation) at the heart of an analysis of societies, a
discussion of classes has no scientific content. Without reference to the mode of production, the
concept of class merely provides a taxonomy for the sphere of appearances, a more-or-less
arbitrary exercise in attaching labels." (Dore, Elizabeth and Weeks, John, 'International Exchange
and the Causes of Backwardness', Latin American Perspective, Spring, 1979)

The third trend of ERP is closely related with 'Dependency' theory and aims to explain the process
through which the extraction of surplus from underdeveloped regions by the developed countries takes
place. This trend was initiated by Arghiri Emmanuel, who gave the theory of unequal exchange.
Emmanuel attempts to show that due to wage differentials between the developed regions and
underdeveloped regions of the world, there is a persistent flow of value from the latter to the former.
These value transfers depress the incomes, living standards and investment and distort the trajectory of
growth in the periphery which favors production of primary goods for export and luxury goods for
domestic consumption, creating a condition of chronic underdevelopment. Emmanuel assumes, just like
the neo-classical trade theory based on Ricardo's theory of comparative costs, that all countries use same
technologies and produce same products, these techniques of production require the fixed technical
composition of capital; the rate of profit is equalized internationally leading to an international prices of
production; given these assumptions, the profit rates will be higher where the wages are lower. Since in
the age of imperialism export of capital has become the dominant trend, it has to be taken into account to
revise the theory of comparative costs proposed by Ricardo based on exchange of commodities only.
(Ricardo assumed on the basis of quantity theory of money that international trade will be beneficial for
all because the trade deficits will always be changed into trade surpluses and vice-versa due to changing
quantities of money; though this theory was in contradiction with Ricardo's labour theory of value, yet he
stuck to it). Emmanuel accepts the Ricardian theory on its own grounds (the exchange of commodities),
but argues that in the age when export of capital has become the main trend, the international flows of
capital will be detrimental to the peripheral economies dragging them down into chronic
underdevelopment. The reason for this is that the lower wages in peripheral economies will invite foreign
investment leading to constant transfer of value to the metropolitan centres. Therefore, competition and
the mobility of capital results in systematic and continuous transfer of surplus value from underdeveloped
countries to the advanced imperialist countries: this is what Emmanuel calls 'unequal exchange'. The very
foundations of the theory is flawed. For example, wages for Emmanuel are pre-determined and
independent variable determining the prices of production. This is a gross misunderstanding of law of
value determining the value of the labour power and its phenomenal expression, that is, wages (as "price
of a day's labour"). The value of labour power in different countries is determined by the productivity in
the industries producing the wage goods especially used by workers in general. This productivity in turn
is determined by the level of development of productive forces and the production relations of a country.
However, Emmanuel's analysis leaves the sphere of production, production relations and class struggle
and rather focus on the sphere of distribution of surplus value. Secondly, the very assumption that of a
single global technology of production and different wages in different countries implies that both the
prices and the profit rates cannot equalize.Either the prices are different and the profit rates equalize, that
would require trade restrictions, in which case there is no transfer of value, or the profit rates vary and the

39
prices equalize across countries. In that case, all production would migrate to underdeveloped countries,
which would eventually eliminate any kind of dependence. However, the gap between the developed
countries and underdeveloped countries is a reality. However, it can be explained from Marx's method
rather than resorting to neo-Ricardianism, as Emmanuel does. The reality is that the absolute advantage
that the more efficient capitalist countries enjoy over countries with lower level of development of
productive forces leads to a structural inequality and this applies also to the period in which exchange of
commodities dominated, contrary to what Emmanuel assumes. The absolute advantage is implicit in the
fact that the values of the same commodities tend to be lower in countries with higher productivity,
making them internationally more competitive. As a result, the underdeveloped countries run persistent
trade deficit. In the era of export of capital and shifting of production to Third World countries the wage
differentials actually lead to double effect, as Anwar Shaikh has shown. It can lead the transfer of surplus
value to zero and yet uneven development and underdevelopment of the periphery. The inequality which
for Emmanuel is simply the inequality of nations due to differential wage rates is actually a manifestation
of the inequality between capitals which is result of the law of uneven development of capitalist relations
of production and forces of production. Concentration and centralization of capital are valid laws of
capitalism nationally as well as internationally. In either case, the patterns of exchange and transfer of
surplus value are not the causes of capitalist development or underdevelopment, but the effect of this
development or underdevelopment rooted in the uneven development of the forces and relations of
productions. The prescription of Emmanuel, that is why, reminds one of Proudhon's solultion, i.e.,
equalization of wages. The internationalization of wages cannot solve the problem of underdevelopment
of backward capitalist countries; it will only destroy the indigenous capital! To argue for same wages
everywhere is only arguing for equal exploitation of workers everywhere, subjectively. And objectively it
would not even lead to that. The real wages in any country are ultimately limited by the level of
development of its forces of production. If the worker of a country like Bangladesh gets wages so high as
to enable them to consume the entire social product of country, even then their wages will not equal the
wages of an average American worker because the total social product per capita in Bangladesh is lower
than the real wages of average American workers. We can see the absurdities to which the ERP
perspectives can lead to.

There is no need to discuss Immanuel Wallerstein's 'World Systems Theory' which is a variant and
extension of Frank's 'dependency theory' in many ways and Samir Amin's theory of global accumulation
which is more of an extension of Emmanuel's theory of Unequal Exchange, but also has an eclectic
mixture of elements of dependency theory and world systems theory. The basic characteristic features that
all subsets of ERP theories share is a disdain for sphere of production and focus on sphere of circulation
(exchange and distribution), underconsumptionism, dependency and underdevelopment. It is important to
note here that a lot of NDR theorists in Third World, unable to prove existence of semi-feudal relations on
the basis of the study of internal contradictions and production relations of their countries have relied
heavily on the dependency and unequal exchange theories to prove the existence of a comprador
bourgeoisie, continuing imperialist domination in the neocolonial form and lack of "sufficient capitalist
development". However, the very roots of these theories constitute a departure from Marxist-Leninist
methods.

A Re-statement of Classical Marxist Positions: John Weeks and

Anwar Shaikh
40
The late-1970s and early-1980s saw the emergence of a few studies in response to different ERP theories
that challenged them and attempted to re-state the materialist and Marxist position regarding the
accumulation of capital, expansion of capitalism, monopoly capital and imperialism. This includes studies
by Rober Brenner, John Weeks and Anwar Shaikh in the main. Brenner's study is not so much about
expansion of capitalism but more about the origins of capitalism. It challenges the general thesis of ERP,
especially those of Sweezy, Baran and Frank, that it is the expansion of market that leads to emergence of
capitalism, though there are significant differences in these three ERP proponents. We will leave out
Brenner's study here and would focus on the arguments of John Weeks, Elizabeth Dore and Anwar
Shaikh.

Weeks and Dore published their study in 1979 and Weeks published a number of other essays and books
during the late-1970s and early-1980s. They argue that the foundation of materialist theory of production
is theory of reproduction of the social relations of production. In context of capitalism, it is the theory of
capital accumulation. Weeks and Dore criticize 'dependency' theory's emphasis on the development of
capitalism on the basis of extraction of surplus from backward countries. Since this theory only sees the
division between developed and underdeveloped regions, it cannot explain the political boundaries
between countries that are essential in international accumulation and uneven development. They show
that contrary to the claims of 'dependency' theorists, most of the capital flows into the developed
countries. They also show that the existence of surplus product does not necessarily imply capitalist
accumulation. Expanded reproduction happens not as a result of redistribution of surplus but by increase
in the surplus value as a result of development of productive forces. The first condition of capitalist
development and existence of capital relation is creation of a class of "dually free" wage labour and a
class of capitalists who monopolize the ownership of means of production. Without labour power
becoming a commodity, capital relation cannot emerge. Secondly, the law of accumulation and
concentration and centralization of capital shows the necessity of capital to expand. This expansion of
capital beyond national boundaries leads to exchange among developed countries as well as between
developed and underdeveloped countries. According to Weeks'argument, competition is an inherent
element of capitalism and it cannot exist without competition. Marx never posited a dichotomy of
competition and monopoly because contrary to claims of Sweezy and Baran, Marx's analysis never
functioned on the neoclassical notion of free competition. Monopoly rather than negating
competition,reproduces it on a higher level in a more intensified form because capital in the stage of
monopoly can move across branches of production, rather than being limited within their boundaries.

Quoting Marx from Grundrisse, Weeks shows that the basis of competition under capitalism is not in the
sales of products, that is, in market. That is how competition appears under capitalism. The real basis of
competition, however, is the fact that there is the existence of free wage labour and the purchase of this
labour power creates the conditions of competition. The necessary conditions of bourgeois production,
free wage labour and a market for the means of production, mean that the possibility of capital
marshalling the forces of production for an invasion of branches of industry where the rate of profit is
above average is always present. Thus, competition under capitalism is not determined by conditions in
the product market but is determined by the existence of labour power as commodity, though it may take
an apparent form of struggle for sales in a market. Therefore, it is the basic capital relation and the drive
for maximum profits that drive the export of capital.

41
If the number of capitals in various branches of production is drastically reduced due to free competition
itself, it does not mean that competition is eliminated. This monopoly stage does not change the basic
source of competition : the existence of labour power as commodity. Moreover, Marx never believed in a
'golden age' of "free competition". Even in the early phases of capitalism competition was fettered by pre-
capitalist modes of production and lack of credit. It does not begin with free competition in the literal
sense of the term, rather with limited competition. The increasing concentration and centralization leading
to the stage of monopoly intensifies competition rather than eliminating it. Weeks quotes from Marx:

"We all know that competition was engendered by feudal monopoly. Thus competition was
originally the opposite of monopoly and not monopoly the opposite of competition. So that
modern monopoly is not a simple antithesis, it is on the contrary the true synthesis.

Thesis: Feudal monopoly, before competition

Anti-thesis: Competition

Synthesis: Modern monopoly, which is the negation of feudal monopoly as it implies the system
of competition, and negation of competition insofar as it is monopoly." (Karl Marx, The Poverty
of Philosophy, Foreign Languages Press, Peking, Third Edition, 1977, p. 145)

Lenin in the same vein believed that monopoly reproduced and intensified competition. In the stage of
monopoly, competition reaches its highest level in the form of imperialism. To understand imperialism it
is imperative to understand the law of uneven development and the law of competition. Monopoly capital
accentuates the uneven development. Monopolization of certain branches create conditions of super-
profits for the associations of capitalists monopolizing that branch. Other big capitalist associations try to
intrude into these sectors, but smaller firms cannot do that. As a result the competitive struggle is more
and more restricted to capitalist monopolies. However, it is not the end of competition but its resumption
on a higher level. Monopolies might temporarily retard technical developments in a sector. These periods
give capitalism in the stage of imperialism its parasitic character. Such interruptions, however, are only
temporary until a new big competitor breaks in this sector challenging the old monopoly in the sector.
When this process takes place in general at the international level, it leads to conflict between capitalist
monopolistic associations, who seek the interest of their national states or a group of national states. This
leads to direct or indirect imperialist conflicts.

Moreover, Weeks continues, the stage of monopoly does not negate the law of competition propounded
by Marx. Secondly, the process of capitalist accumulation on world scale takes place in a context of
countries, or national-states, which are ruled by distinct ruling classes controlling a definite territory.
Nation is nothing but bourgeois political and social condensation of the capitalist relations of production.
This process of capital accumulation on world scale is based on the production and appropriation of
surplus value on world scale, rather than by "extraction of economic surplus" or redistribution of surplus,
as 'monopoly capital' school and 'dependency' theorists argue. The reason for underdevelopment in the
neo-colonies and semi-colonial countries is not simply the extraction of economic surplus by imperialist
countries. It is rather the pre-capitalist relations that hinder the process of capital accumulation and
capitalist development in these countries. Therefore, Weeks gives primacy to the internal contradictions
of these countries rather than deriving underdevelopment from extraction of surplus by imperialist
countries. For him, it is the opposite. The transfer of surplus value from these backward countries to

42
advanced capitalist countries is shaped by the production relations and class struggle in these countries.
According to Weeks, one of the main obstacles in the capitalist transformation of these economies was
the prevalence of pre-capitalist relations in agriculture due to which productivity in this sector did not
increase. Therefore, the value of labour power does not come down and capital accumulation cannot
progress satisfactorily. Rise of productivity in any single sector only leads to temporary super-profits. As
soon as, the advanced technology is adopted by other firms in the branch, this temporary rise in surplus
value is equalized and gone. Therefore, the rise of productivity in agriculture and increasingly decreasing
necessary labour time is necessary for progressive accumulation. This condition was not fulfilled in the
backward countries.

Secondly, the export of capital from foreign countries is not due to low value of labour power, but due to
the fact that with advanced technology foreign capital can produce the same goods at much lower cost
than the domestic capital of backward country. Therefore, the prime moveris higher rates of profit. If
export of capital can yield a higher rate of profit in backward countries than in the advanced countries, the
capital will be exported. Low wages in backward countries are low for foreign capital as well as domestic
capital. The real factor therefore is the advanced productive forces of advanced countries and lower
organic composition in the backward countries giving a higher profitability. However, this argument is a
little imbalanced. Because the low wages in so-called Global South does play a role of magnate for
capital. Even if it does not mean the national oppression of the "national bourgeoisie" of these countries,
it must be admitted that the low wages are a reason for export of capital to these countries. Secondly, in
the high-end industries like automobile industry the technological differenital is absent or negligible.
Therefore, the export of capital to countries like China and India cannot simply be ascribed to
technological superiority of western capital. It is definitely the higher rates of profit in these countries due
to low OCC, but the factor of lower wages cannot be denied.

Due to this higher profitability, local competitors are ruined or driven out of those branches where foreign
capital entersif they do not adopt the advanced technologies. New international competitors enter these
branches and despite considerable barriers to competition in these countries, there will still be a tendency
for the price of the commodity to go down towards its new lower average social value. The super-profits
of foreign capital will tend to be eliminated. The rate of surplus value fails to rise faster enough to
compensate for the decline in the rate of profit, also because in these countries the productivity in
agricultural sector is low. As a result, the rate of profit continues to decline. Consequently, foreign capital
goes to new branches and the same process is repeated, often eliminating local capitalist class from these
branches and eliminating their existence as an independent capitalist class. If the production relations and
the character of the state remains the same,the pre-capitalist relations in agriculture and other sectors will
be reproduced. Weeks and Dore accept that whether the penetration of foreign capital also breaks the
precapitalist relations in the agricultural sector is something that needs to be researched. History shows us
that the politically independent bourgeoisie adopted a particular path of capitalist development in
countries like India, which through a blend of foreign capital investments and policies of import
substitution and also by balancing their reactionary bourgeois national interests by using the inter-
imperialist rivalry have achieved capitalist development, albeit of a peculiar type. We cannot develop this
theme here. This much is certain, however, that despite a few minor lapses, Weeks and Dore have
attempted to restate the Marxist position on Imperialism with a fair amount of success.

43
The other major political economist who restates the Marxist theory of foreign trade and international
exchange and attempts to show the origins of underdevelopment of peripheral countries is Anwar Shaikh.
Shaikh begins by refuting the Ricardian concept of comparative cost which argues that international trade
is beneficial for all. Shaikh is particularly critical of the concepts of 'monopoly capital' (as negation of
competition) and 'surplus extraction theory' of the 'monopoly capital' school. He restates the Marxist
theory of foreign trade and international exchange that shows that the countries with more advanced
productive forces and advanced capitalist relations will enjoy an absolute advantage in the age of export
of commodities as well as in the age of export of money capital and productive capital. In fact, the stage
of export of money capital and productive capital comes into existence precisely of this absolute
advantage already created during the period in which export of commodity predominates. Shaikh on the
one hand rejects the neo-Smithian notions of 'monopoly capital' school and 'dependency' theory, on the
other hand, he also rejects the neo-Ricardian assumptions of 'unequal exchange' theorists like Emmanuel
and Samir Amin. He admits that given the higher profitability and advanced technologies of advanced
countries the main factor that attracts foreign investments in backward countries is cheap labour or low
wages. First, the foreign investments invade the export sector of these countries which produce for the
world market. Sectors producing for domestic markets are targeted only if they yield higher rate of profit
than producing the same commoditiy back at home. The increasing competition between foreign capitals
in these sectors of backward economies will result in decline in the prices, reducing the extra profits. In
this process, the local capitals will be driven out of these sectors and flow to the sectors which are not
penetrated by foreign capital or which have come into existence to serve the sectors monopolized by
foreign capital. The foreign capitals will use investments in backward countries also to elbow out their
competitors at home. FDIs have a dual impact on the economy of the backward countries: on the one
hand they reduce the value of their exports resulting in more unfavorable terms of trade for them. On the
other hand, shifting of production from advanced countries to these countries will tend to improve the
underdeveloped nation's balance of trade and will create new avenues of employment of its labour. But
this positive impact is compensated by future capital outflow in the shape of repatriation of profits.
Shaikh argues:

"it does so only at the expense of an eventual capital outflow (surplus-value transferred out in the
form of repatriated profits), declining terms of trade, and increased foreign domination. Instead of
negating international inequality therefore, foreign investment tightens the grip of the strong over
the weak -- not merely through monopoly and state power, but through "free" competition itself."
(Anwar Shaikh, 'The Laws of International Exchange', in Growth, Profits and Property, Edward
J. Nell (ed.), Cambridge University Press, 1984, p. 231)

However, Shaikh is very skeptic about the concepts of 'monopoly' and 'imperialism'. He argues that
capitalism is inherently 'imperialist' from the very beginning insofar as it is expansionary by nature. To
relate imperialism with 'monopoly' and 'export of capital' accroding to Shaikh is incorrect. The
domination of backward countries started from the time of free trade and export of commodity itself. Yet,
Shaikh accepts that the rise of finance monopolies and export of capital does bring a qualitative change in
the relationship between imperialist countries and underdeveloped countries and also the relationship
among imperialist countries expressing itself as inter-imperialist rivalry. However, he argues that it is
confusing to call this phase as imperialism and previous phases as something else because imperialism
according to Shaikh is inherent in capitalism. However, if we look closely, we might assume that Shaikh
would agree that 'imperialism' (that for him is simply the capitalist relations of international exchange that

44
signify an unequal relationship and uneven development since the very beginning of capitalism) assumes
different forms as capitalism progresses from the stage of free competition to the stage of monopoly (not
as negation but as intensification of competition). One question on which Shaikh is not clear is that
whether the decreasing number of magnates in every branch of production affects the nature of
competition in some way or not. If we do not recognize the changes in the nature of competition from
progressive concentration and centralization of capital, the entire history of capitalist accumulation
becomes a smooth and even evolutionary process. Such an observation would amount to an ahistorical
view of capitalism which sometimes also affects Marxist political economists of the finest category.

These re-statements of classical Marxist positions about international trade, monopoly formation, law of
competition, and law of accumulation are lacking in their political aspect and are purely economic re-
statements. Still, they are effective in showing the non-Marxist character of all kinds of neo-Smithian,
neo-Ricardian, underconsumptionist frameworks of ERP paradigm which masqueraded as Marxist
theories of monopoly capital, imperialism and under-development. Therefore, these theorists, like
Brenner (whom we did not discuss), Weeks and Dore, and Anwar Shaikh are important for stimulating
the thinking on the development of a Marxist-Leninist position on Imperialism.

Now we can embark upon a brief discussion about the theorists of 'new imperialism', especially David
Harvey, Ellen Meiksins Wood, Callinicos etc. as well as John Smith's work 'Imperialism in the Twenty-
first Century.'

Theories of 'New Imperialism': Harvey, Wood, Callinicos, Smith

The world of academics has an irresistible fetish for dropping ever new neologisms and 'inventing the fire
all over again' while claiming novelty for it, as we mentioned earlier. Nothing proves this better than the
theorists of 'new imperialism'. And may be the work that is characterized with this tendency the most is
David Harvey's The New Imperialism. This is an ambitious work which aims to unravel the working of
imperialism in the 21st century. Harvey in this work argues that the new imperialism can only be
understood by comprehending the autonomous but historically connected logics of political power and
that of capital. In other words, the dialectics between autonomous territorial logic of state and the logic of
capital. Harvey claims that his understanding of new imperialism is based on,

"dialectical relationship between the politics of state and empire on the one hand and the
molecular movements of capital accumulation in space and time on the other." (David Harvey,
The New Imperialism, Oxford University Press, 2003, p. 89).

Thus, the 'economic' ('movements of capital') and the 'political' ('politics of state and empire') are leveled
as autonomous and independent moments within the social totality. For him,

"the fundamental point is to see the territorial and the capitalist logics of power as distinct from
each other." (ibid, p. 29)

The reason for this, according to Harvey, is that the logic of state, as a matter of rule, is confined within
fixed territorial boundaries, whereas this does not apply to the logic of capital. Secondly, the agents of
state and capital or fractions of capital are separate autonomous entities, whose actions may intertwine
each other in complex and contradictory fashion sometimes. The capitalist will seek endless accumulation

45
of capital, whereas the statesman would seek more power for his state vis-a-vis other states. He claims
that the states would strive for accumulation of control over territory as an end in itself.In sum, there is a
conflict in the logic of state and logic of capital. This logic has an unmistakable influence of Weberian
sociology as well as Schumpeterian arguments. Brenner has rightly pointed out that such an
understanding is based more on the logic of Arendt regarding imperialism than Lenin. For Lenin's
analysis, Harvey does not have any regard anyway. He argues that Lenin's book Imperialism is more of
'pamphleteering' than theorizing (!) and that imperialism is not the last stage of capitalism, but the first
stage of global capitalist rule, as Arendt suggested. Both these statements show sheer lack of
understanding of Lenin's theory of imperialism on the part of Harvey.

Harvey's argument about separation of the economic and political shows that he does not have a coherent
theory of state. For example, he fails to tell us why territorial logic of state and interests of capital are in
conflict, whenever they are so. His descriptive history of imperialism from the 1840s to the present
actually shows just the opposite. As a result, as Brenner has rightly commented, Harvey drops this
argument of an autonomous territorial logic of state as a hot potato! The reason is Harvey himself cannot
show this to be happening in reality. That is why, on this question, the entire treatment of history of
imperialism by Harvey contradicts himself again and again.

Imperialism for Harvey is a result of capitalist crisis of overaccumulation of capital. In his account of the
US imperialism since the end of the Second World War and its interventions in the 'Third World', Harvey
argues that the real aim of these interventions was to ensure that spread of communism and socialism and
also radical bourgeois nationalism (of Nasser or Sukarno-type) is stopped. The reason for this is to ensure
in the 'Third World' countries a ground for free movement and profit-making by international capital, i.e.,
the financial oligarchy and transnational corporations. For Harvey, this interventionism was not simply
based on dominance, but also on a quest for hegemony on the part of the US as the recognized leader of
the capitalist world. Through Bretton Woods institutional framework, the US promoted capitalist
development in these countries by helping them to convert the Rostowian "take off" into proper capitalist
development. But at the same time, the US, from a 'patron of national liberation movements' (!?) became
an oppressor of any country that opted for even a mildly non-capitalist path (what is that!?). However,
again this theorization is betrayed by the description given by Harvey. The description actually shows that
the role of the US has always been one of imperialist dominator in the 'Third World' and only for the
advanced captialist world (Europe, Japan) it strove for the position of hegemony as an accepted leader.

According to Harvey, the period of 'new imperialism' begins after the crisis of 1973. The reasons for this
crisis according to Harvey was rising wages due to pressure of organized labour in the US, budget deficit
due to social spending by the state and intensified competition from Germany and Japan. However, if we
cast a glance at actual data the "profit squeeze" thesis of Harvey falls flat. The wages were actually not
rising just before the breaking out of crisis that began in 1973. Moreover, this crisis was not just in the US
economy but a global crisis. The factors mentioned by Harvey as the reason of the crisis cannot even
explain the crisis in the US economy, let alone explaining it at the global level. The social spending was
not causing budget deficit because Vietnam War was over and social spending were not so much of a drag
on the state budget. The international competition offered from Germany and Japan itself was not very
effective in the times of crisis. The actual reason for this crisis, as a number of Marxists political
economists have shown, was the crisis of profitability due to LTFRP. The long boom that began after the
Second World War on the basis of creation of new opportunities of profitatble investment on account of

46
the reconstruction of Europe and Japan was coming to a saturation point towards the end of the 1960s
itself. However, Harvey fails to realize the real reasons of the crisis.

When the 1973 crisis started, the period of neoliberal policies and 'new imperialism' started as a response
to this crisis. The main strategy of accumulation during this period was what Harvey calls 'accumulation
by dispossession'. Under this category comes a host of activities facilitated by the state on behalf of
capital. It includes opening up of new spaces for profit-making or production of the 'other' of capitalism
for the capital to feed upon, which capitalism always needs as Luxemburg said. This includes
privatization of state property and thus throwing the resources owned by state on the market. This is
fundamentally erroneous conception to regard the property of state to be the property of the public
without considering the class character of the state. Also, it is incorrect to assume the state property is not
on the market for profit-making. The state in most of the capitalist countries is itself a big monopoly
capitalist and makes profits through the industries owned by the state in most possible ways. Harvey
moves on to include a host of things in 'accumulation by dispossession', for example,devalorization of
capital and labour in a regional and local crisis by the imperialist countries (East Asian Crisis, 1997 which
for Harvey becomes a consequence of conspiracy by the US imperialism), the acquisition of the
Commons, plunder of nature, taking away of the pension of workers if their company goes bankrupt (the
case of Enron workers), the destruction of family farms producing for market and profit by agri-business
companies, the transfer of wealth from common people by financialization and speculation like workers
losing homes due to usurious lending. As evident, this concept of 'accumulation by dispossession' loses
all substance by becoming a laundry list of all dispossessions (some of which are certainly caused by
advanced capitalist accumulation). This shows the level of muddled theorization by Harvey and one
yearns for Leninist pamphleteering instead!

Most ironically, Harvey claims that Marx was at mistake to think that primitive accumulation is a process
that is limited to the initial period of capitalism. First of all, Marx never said that and Marx clearly
understood and actually wrote about the fact the moments of primitive accumulation and advanced
capitalist accumulation co-exist in the overall development of capitalism, though the latter becomes the
predominant trend. This can easily be proven that the main source of accumulation today is advanced
capitalist accumulation. Moreover, for Marx, the concept of primitive accumulation is not simply
important due to the role of force and coercion in dispossessing people from their possessions to create
new spaces of profitable investment. The basic function of this concept for Marx is that this act is
constitutive of the capital-relation, i.e., creation on the one hand of a class of wage-labour that is free from
the encumbrances of ownership of means of production and "free" to sell his labour power and on the
other, a class of capitalists who have the monopoly of ownership of means of production. What Harvey is
talking about here is a blend of 'original accumulation' of Adam Smith and processes of advanced
captialist accumulation. For Harvey, the new imperialism is particularly characterized by what he calls
'accumulation by dispossession' in which, as we just saw, he includes a disparate collection of methods of
accumulation, some belonging to primitive accumulation and others to advanced capitalist methods of
capital accumulation, especially used with particular ferocity in the era of neoliberalism.

In trying to explain the invasion of Iraq by George Bush Jr., Harvey argues that the real reason can be
explained by the geo-political factors rather than economic factors. The quest to control the main sources
of oil which lie at the heart of world domination in present era was the real reason of invasion of Iraq.
Harvey argues,

47
 "whoever controls the Middle-East controls the global oil spigot and whoever control the global
oil spigot can control the global economy." (ibid, p. 19)

The US actually wants to control the Middle-East for countering its economic decline by giving the US,

"effective control over the global economy for the next fifty years...What better way for the US to
ward off that competition and secure its own hegemonic condition than to control the price,
conditions and distribution for the key economic resource upon which its competitors rely?" (ibid,
p. 25)

However, a number of scholars have shown that the oil industry rather than the US state will be the
beneficiary of the oil of Middle-East if the US succeeds in establishing its hegemony over it. Christian
Fuchs (Critical Globalization Studies: An Empirical and Theoretical Analysis of the New Imperialism,
Science and Society, Vol. 74, No. 2, April 2010) has shown with empirical data that the real beneficiary
of US occupation of Iraq were huge oil corporations of not only the US but also Europe, especially
Britain. Secondly, the US cannot control the prices of oil by this occupation. It has never been able to do
so. Thirdly, it cannot refuse oil to its competitors because that would tantamount to war, as Brenner
argues. If the US is willing to engage in such a war with, say, China or Russia, it does not need to invade
Iraq. It can do that without invading Iraq.

Apart from these serious problems, Harvey sometimes also seems to suggest that the flow of value
transfers has reversed in the last 30 years, though he accepts that the export of capital and shifting of
industry from the US and Europe to the 'Third World' in order to exploit cheap labour and raw material
has increased unprecedentedly. These two are contradictory arguments. The first suggests that now the
Global North is the victim because value is flowing from it to the Global South. The latter argument
clearly means that the Global South's cheap labour and raw material are being exploited by the Global
North leading to massive transfer of surplus value from the former to the latter. Harvey curses finance
capital for the transfer of production from the US to developing countries and resultant 'de-
industrialization' of the US, whereas the real reason of this transfer, though facilitated by finance capital,
was the crisis of profitability in the manufacturing sector. For remedy, what Harvey suggest is surprising
not just for its reformism and chauvinism but also for open invocation of Kautsky:

"The only possible, albeit temporary, answer to this problem within the rules of any capitalistic
mode of production is some sort of new 'New Deal' that has a global reach. This means liberating
the logic of capital circulation and accumulation from its neo-liberal chains, reformulating state
power along much more interventionist and redistributive lines, curbing the speculative powers of
finance capital, and decentralizaing or democratically controlling the overwhelming power of
oligopolies and monopolies (in particular the nefarious influence of the military-industrial
complex) to dictate everything from terms of international trade to what we see, read, and hear in
the media. The effect will be a return to a more benevolent New Deal imperialism, preferably
arrived at through the sort of coalition of capitalist powers that Kautsky long ago envisaged.

...There are, of course, far more radical solutions lurking in the wings, but the construction of a
new 'New Deal' led by the United States and Europe, both domestically and internationally, in the
face of the overwhelming class forces and special interests ranged against it, is surely enough to
fight for in the present conjuncture." (ibid, p. 209-10)

48
This is how Harvey reaches his political nirvana! Fight for 'New Deal' type benevolent imperialism for
rest of the world and 'New Deal'-type welfarism for the imperialist world! Why? Because the neoliberal
consensus is opposed to this. Therefore the Marxists should fight for left Keynesian welfarism because
the neoliberal orthodoxy is opposed to it. This, in the name of being realistic, because this is the only
possible alternative in the 'present conjuncture'. Though Prabhat Patnaik and Utsa Patnaik argue in a very
different way, but their solutions are methodologically similar to Harvey's; the only differences are due to
their "geo-political locations", to borrow from Harvey himself!

Ellen Meiksins Wood in her book Empire of Capital presents a different narrative about 'new
imperialism'. For her, the term 'new imperialism' denotes the form of imperialism that emerged after the
Second World War with the US becoming hegemonic in economic as well as in the political-military
sense. The new imperialism for her is basically an 'economic relationship' as opposed to earlier forms of
imperialism (including the imperialism that emerged between the later-19th century and the Second
World War) where the economic and political intersected each other in apparent ways. However, with
capitalism becoming the truly global system after the Second World War, there is a divergence between
the political and the economic, though it’s the new kind of political-military hegemony that creates the
condition for the global domination of capital under the tutelage of the US capital. Therefore, 'new
imperialism' is a purely 'economic relationship', it requires brute force to implant and sustain it.

Wood argues that capital must be understood as an autonomous entity, which while always retaining a
national origin in terms of ownership, canexapnd beyond national boundaries. Individual capital seems to
be moving away from its national origin, expanding into an international space which is composed of
many nation-states. However, Wood fails to see that capital that crosses national boundaries is
incorporated into different processes of accumulation based on the conditions that prevatil within the
country in which capital enters. It involves in each country a different set of conditions of class
exploitation, irrespective of the fact that the surplus value/profits are eventually repatriated to the original
owner. Thus for Wood, if capital of advanced capitalist countries expands beyond the borders of the
nation of its origin, then that nation-state is obliged to resort to political imperialism of a kind which is
appropriate to developed capitalism and in this way it secures the specific political and legal conditions
under which the accumulation for that capital can proceed. Wood argues,

"Actually existing globalization ('new imperialism' - author), then, means the opening of
subordinate economies and their vulnerability to imperial capital, while the imperial economy
remains sheltered as much as possible from the obverse effects." (Ellen Meiksins Wood, Empire
of Capital, Verso, London, 2005, p. 134)

This kind of domination needs more than ever a system of multiple nation-states according to Wood,
owing to the fact that 'new imperialism' is a directly economic relationship. She opines,

"The 'globalized' world is more than ever a world of nation-states. The new imperialism we call
globalization, precisely because it depends on a wide-ranging economic hegemony that reaches
far beyond any state's territorial boundaries or political domination, is a form of imperialism more
dependent than any other on a system of multiple states....

"Imperial hegemony in the world of global capitalism, then, means controlling rival economies
and states without going to war with them." (ibid, p. 154, 157)

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Accoriding to Wood, present day wars are of a different kind as compared to the past imperialist wars. It
is not a generalized conflict between imperialist powers, but represent a 'constant threat of force' based on
the military power of the new empire of the US. The imperialist capital needs this kind of constant threat
and possibility of a war in order to impose its hegemony over the international system of 'multiple nation
states.' Therefore, an important characteristic of 'new imperialism' is a war without temporal ends and
geographical limits, or specific aims. It is characterized by pre-emptive military strikes and rule of
universal capitalism under the tutelage of the US empire. Thus, for Wood, Iraq war was not for oil but for
securing the US global hegemony. For Wood, 'new imperialism' thus means a unilateral US hegemony.
She argues,

"In all cases, the overriding objective is to demonstrate and consolidate US domination over the
system of multiple states." (ibid, p. 167)

The problem with Wood's account, despite capturing a few realities of present imperialism, is twofold.
First, the kind of unilateral US domination she talks about does not exist. When there was an optical
illusion of such a unilateral US domination existing during the Iraq and Afghanistan wars, or just after the
collapse of the Soviet Union, even then, it was more of a phenomenal reality and the world even then was
pregnant with simmering inter-imperialist rivalry. Secondly, the kind of divergence between the economic
and the political that Wood talks about is not real. Every war still is imposed by the US imperialism or
imperialism in general is imposed with a specific set of economic and geopolitical aims, which are
intertwined in an inseparable way. It holds true for invasion of Afghanistan as well as Iraq. An additional
third problem with Wood is that her analysis, just like Harvey's analysis (with whom she disagrees on a
number of fundamental issues) is empirically very poor or in words of Bob Sutcliffe is 'empirico-phobic'.
This makes the whole endeavor more of an exercise in politico-historical speculation, rather than an
analysis firmly grounded in empirical research and theoretical analysis based on hard facts, which
characterized the early Marxist theories of Imperialism.

Alex Callinicos' work Imperialism and Global Political Economy relies heavily on some of the Weberian
and Schumpeterian sociological concepts borrowed by David Harvey. Callinicos agrees with Harvey
while also accepting openly the influence of Weberian sociology (in a 2006 article critiquing Sam Gindin
and Leo Panitch). According to Callinicos, imperialism is a result of intersection between economic and
geopolitcal competition. The economic and geopolitical competition began to merge definitively only
towards the end of the 19th century, i.e., the period about which Hobson, Lenin, Hilferding, and Bukharin
were writing. Before the late-19th century, the geopolitical competition was separate from economic
competition. In other words, during the transition from feudalism to capitalism and in the early phases of
capitalism when the traces of feudal elements remained in the capitalist state, this separation of
geopolitical and economic competition continued. However, it does not seem to be true to argue that
during this period the dimension of politics was entirely separate from the economic base due to
persistence of feudal elements in it. The truth is that the initial phases of capitalism already presupposes a
state with predominantly capitalist character, though the bourgeoisie may not have become completely
dominant in it. Callinicos' mechanical logic of separation between the economic and the political falters
historically.

Callinicos argues that the different phases of imperialism are based on the changing character of the
intersection between the geopolitical competition and the economic competition. The reason for this is

50
that the intersection between the geopolitical competition and economic competition can be reduced to the
competition between the agent of state and agent of capital who have different vested interests and
motivations. The historical form of these relationships in different contexts depends on the conditions of
reproduction of these two groups of actors or agents. According to Callinicos, there are two phases of
capitalist imperialism. First, from the late-19th century till the Second World War and the second from
the end of Second World War onwards. In the first period, the economic and geopolitical competitions
reinforced each other mutually. In the second phase, in which US has become the unquestioned
hegemonic power, there is a divergence between the political and economic because now the competition
between capitals will not give rise to military conflicts. Clearly enough, Callinicos closely follows
Harvey. However, in claiming that Lenin's theory was schematic and did not recognize this divergence,
Callinicos is not correct. Lenin did not believe that every war between imperialists was a direct result of
immediate economic conflict. However, it can be shown that even in cases where it was not, there was a
dialectical relationship between the long-term economic interests of capital and the geopolitical conflicts
among imperialists or between imperialists and non-imperialist countries. At any rate, nine out of ten
wars since the end of the Cold War are driven by long-term or short-term economic interests, besides a
variety of political factors. This applies onthe Vietnam War, Korean War and also on Iraq War and
Afghanistan War.

Callinicos argues that previous Marxists have relied too heavily on the concept of finance capital which
has prevented contemporary Marxists from realizing that after the end of the Second World War, the
nature of capitalism has changed and there has been a separation of industrial capital and bank capital. As
example, Callinicos argues that most of the US corporations like General Motors rely on their own
revenue for financing their operations rather than resorting to bank credit. He contends further that these
corporations themselves start their own financial arm or institution which indulges in financial activities.
However, this example actually contradicts Callinicos's argument. It does not matter whether bank capital
is being employed by the industrial enterprise, or the industrial enterprise is obliged to pump its
abundance of capital into financial arena; the end result is same. Financialization is also a result of
declining rates of profit in the productive economy, apart from the need of productive economy at the
higher scale of production for bank credit in order to make new investments or replace their fixed capital.
Callinicos also argues that most of the credit is now going to consumers rather than industrial enterprises
or productive economy. This has changed the nature of finance capital and shows the separation of bank
capital and industrial capital. However, this logic too, is misplaced because the consumer-lending or the
so-called debt-financing is done precisely to give impetus to productive economy undergoing depression.
The relationship, therefore, has changed only in the phenomenal aspects.

Following Wood, Callinicos too argues that Iraq War was not simply for oil but for geopolitical interests
of US imperialism, and in particular maintaining the strategic control over the source of this most
strategic commodity. However, it is difficult to show that here the geopolitical interests totally diverge
from the economic interests. Moreover, empirical data shows that the Iraq War benefitted the private oil
companies in a big way. Callinicos criticizes Lenin for a number of issues which are totally off the mark.
For example, Callinicos thinks that Lenin borrowed a definition of imperialism from Hobson that was
underconsumptionist (for support Callinicos quotes the portion where Lenin refers to the "overripeness"
of capitalism in advanced countries). However, we have shown above that for Lenin the main reason of
export of capital to backward countries was crisis of profitability due to a "plethora" of capital in
advanced countries that cannot be invested profitably. Callinicos has failed to understand a number of

51
other arguments of Lenin. For example, the meaning of parasitical character of capitalism in imperialist
stage is seen as a weakness of Lenin's analysis which he borrowed from Hobson, according to Callinicos.
He also refutes Lenin's analysis of the phenomenon of the rise of a labour aristocracy due to the impact of
imperialism and super-profits of imperialists. As an evidence of refuting this theory of labour aristocracy
Callinicos cites the example of well-paid metal workers of Europe standing in support of Bolsheviks. This
shows how utterly Callinicos has failed to understand the concept of labour aristocracy, which is a
political concept rather than simply economic one. First of all, equal examples can be given where it is the
upper echelons and political leadership of the well-paid and white-collar workers that are converted into
labour aristocracy. It is not the entire class of well-paid workers, but the political leadership of these well-
paid sections and mostly a small minority of these sections that emerges as political agents of bourgeoisie
in the working class movement.Moreover, if we accept Callinicos' theory against the conept of labour
aristocracy, then the Leninist idea of 'weak links' is trashed, which in our opinion, is much more relevant
than ever. Such is the impact of Trotskyism in Callinicos' formulation. In these matters, Callinicos
juxtaposes the work of Bukharin as superior in its theoretical rigour, which in our opinion is just the
opposite of reality. In reality, despite being more detailed and empirically richer and despite the attempt to
follow Marx's method, Bukharin's work is second to Lenin's work in terms of dialectical treatment and
higher level of generalization. Similarly, Callinicos objects to Lenin's and Bukharin's characterization of
imperialism with monopoly because monopoly means the end of competition for Callinicos, which is
neither Lenin's idea nor Marx's, though Bukharin definitely was under this impression.

Callinicos accepts that US is hegemonic in the structure of imperialism. Its hegemony is based, as against
British Imperialism of the late-19th and early-20th century, on managing the advanced capitalist world,
rather than contesting against them economically and militarily and eventually defeating them. He accepts
that this hegemony does not mean that there is no geopolitical and economic competition. He takes the
Russia-Georgia war as a response of Moscow to Washington's attempts to establish its hegemony in the
region.

In short, Callinicos' work is highly eclectic, with severe problem of sociologism. It misappropriates and
misinterprets Lenin's position to claim novelty regarding its own formulations. Methodologically too,
there are serious problems with Callinicos, especially where he follows the mechanical division
introduced between geopolitical competition and economic competition in the name of being dialectical
and avoiding economic reductionism. We cannot go here in further detail regarding the critique of
Callinicos.

Another work which has gained considerable popularity is John Smith's Imperialism in the 21st Century.
It must be said at the outset that Smith's book is an important contribution in the study of imperialism
today. It shows brilliantly and with revolutionary passion how the workers of what he calls 'Global South'
are exploited by the TNCs and their 'supply chains'; the horrible conditions in which they are forced to
work without any safety arrangement; and the way the states of Global South are a party in this whole
process of what Smith calls 'super-exploitation'. Smith gives a moving account of conditions of work in
countries like Bangladesh as well as a country like China. He point out:

"The starvation wages, death-trap factories, and fetid slums in Bangladesh are representative of
the conditions endured by hundreds of millions of working people throughout the Global South,
the source of surplus value sustaining profits and feeding unsustainable levels of consumption in

52
 imperialist countries." (John Smith, Imperialism in the Twenty First Century, Dev Publishers and
Distributors, New Delhi, 2016, p. 10)

Smith describes the whole process in which the TNCs capture this surplus value produced by hundreds of
millions of workers in the Global South and is transferred through the value chains to the imperialist
countries of Global North. It is shown that the major portion of value and surplus value created in the
countries of South are transferred to imperialist countries, whether it is the products like T-shirts in
Bangladesh or Apple iPhones in China. Smith says,

"Just as with the T-shirt, the standard interpretation of data on production and trade assumes that
the slice of the iPhone's final selling price captured by each US, Chinese, and other national firm
is identical to the "value-added" that each contributed. They reveal no sign of any cross-border
profit flows or value transfers affecting the distribution of profits to Apple and its various
suppliers. The only part of Apple's profits that appear to originate in China are those resulting
from the sale of its products in that country. As in the case of the T-shirt made in Bangladesh, so
with the latest electronic gadget: the flow of wealth from Chinese and other low-wage workers
sustaining the profits and prosperity of Northern firms and nations is rendered invisible in
economic data and in the brains of the economists." (ibid, p. 22)

One cannot deny that this statement contains grain of truth. Smith shows that 80 percent of global trade
(gross export) is linked with international 'value chains' of TNCs. Outsourcing has been the clearly
apparent strategy of these TNCs of North in countering the pressures created on their profitability by
higher wages, unionization, the remnants of regulation at home. This is their way to suppress the wages of
workers at home. This has led to tremendous increase in the employment of workers in the low-wage
countries of South and shifting of production from the North to South. In other words, the centre of
gravity of global production has shifted from North to South. This claim also is true and it can be
demonstrated by actual data and facts, as Smith has done.

Smith basic argument is that most of the recent debates have focused on financialization, the crisis of
profitability as the reason of the present depression, etc. However, few people have focused on the way in
which industrial production has been shifting from the North to South in a big way and the basic
underlying reason for this shift. This according to Smith alludes to a new change in the modus operandi
of imperialism in the 21st century. The key feature of this change is the strategy of forcing down the
wages below the value of the labour power. Smith argues that the crux of present imperialism does not lie
so much in over-financialization or financial hegemony or in what Harvey has called 'accumulation by
dispossession', but it is the exploitation of the ultra-cheap labour of the Global South, and it is this hunger
of imperialist countries to reap ultra-profits that has led them to shift their production to Global South.

Smith critiques neo-classical view which is also followed by a number of Marxists that since the labour in
the imperialist countries is more productive, therefore, despite the horrible work conditions, working-
hours in the Global South, the worker in the North might be more exploited. This misconception is based,
according to Smith, on a misinterpretation of Marx and it confused the production of more use values
with the production of more values. According to Smith, wage differentials are created by suppressing
labour mobility. However, the question of the productivity being higher in the sector of wage-goods in the
developed countries (which actually increases the rate of exploitation) and the question of skilled labour-
power (which participates in the labour-process not only with its own labour but with labour of others

53
who have contributed in the production of this skill) are not dealt satisfactorily by Smith, which might
show that, economically speaking, the rate of surplus-value (s/v) can be higher in the advanced countries
due to higher level of productive forces in overall economy as a whole. Though, it must be admitted that
this technological differential is decreasing rapidly with the transfer of production to Global South and it
can be doubted how far the labour of Global North can actually be regarded as more productive in
general. Still, there are problems with the method of Smith.

Smith points out that in the last decade a huge class of wage-earners has come into existence in the Global
South and it is the main source of imperialist profit today, which is captured and transferred from Global
South where it is produced. In 1950, 34 percent of global industrial work-force was in South, in 1980 it
increased to 53 percent; in 2010, it was 79 percent and today it is around 84 percent. Economically active
population grew from 1.9 billion in 1980 to 3.1 billion in 2006 and almost all of this increase took place
in the South. Out of these, 1.6 billion work for wages, 1 billion are small peasants and rest include wage-
earners, petty commodity producers, etc in the informal sector. It is the largest working class in the
history of human civilization. Despite this increase, the share of wages has decreased steadily in the
national income and Smith shows convincingly that this decrease has been faster in countries of South.
This shows the way in which production has shifted to South and the way the workers of these countries
are exploited. These workers are low-wage workers, whose wages are mostly driven down below the
value of their labour-power. However, Smith misses one point: not all of these workers are producing for
the TNCs. In fact, in countries like India, China, Brazil, South Africa, etc., most of these workers are
producing for the huge corporations of these countries themselves. Another major point that Smith misses
is that the wages of these workers are equally low for the TNCs of North and the corporations (even
TNCs) of South. Missing these cardinal fact creates a number of problems in Smith's analysis, as we will
see later.

Smith argues that Marx talked about two general ways of increasing the surplus value: the absolute
surplus value (which predominates in the early stages of capitalism) and relative surplus value (which
predominates in the advanced stages of capitalism, though Marx was always clear that both of these
methods continue to co-exist in capitalism). Another method used by advanced capitalist countries
especially in colonies and backward countries is driving down the wages below the value of labour
power. However, since it was not the dominant tendency, Marx did not analyze this method in detail. This
is one of the methods used to counter-act the decline in the rate of profit according to Marx. Smith
contends that in 21st century this method has become the dominant method of appropriating surplus
value, whereas relative and absolute surplus value have become the secondary tendencies. This method is
called 'super-exploitation' by Smith. This too is an erroneous argument because such a 'super-exploitation'
cannot be constant due to a variety of reasons including the fact that wage-diffentials exist not simply
because the labour mobility is restricted (Asian workers even when the work in the Global North get
lower wages than their white counterparts) but also due to the fact that wages of each country is not
determined simply and only physiologically. We will come to this point a little later.

Smith also critiques the way in which mainstream economics calculates GDP and shows that in case of
imperialist countries in 21st century the 'D' (domestic) of the GDP might be a complete lie. The confusion
is created by the analysis of 'value added' which is designed to hide the fact that most of the GDP of
Northern countries is not value created by workers in these countries but by workers in the South. Value
creation is confused by value capture in these calculations. However, these facts are used by Smith to

54
argue that the world is even today split between 'oppressor nations' and 'oppressed nations'. He argues that
Lenin's analysis of this division of world between oppressor and oppressing 'nations' is true even today
and 'dependency' theorists correctly re-emphasized it, though orthodox Marxists and, what Smith calls,
"Euro-Marxists" find it hard to accept and are at the wrong side of reason here. It is important to note that
Lenin's analysis of oppressed and oppressor nation was wholly based on the existence of colonies, semi-
colonies and neo-colonies. Even in his booklet Imperialism when he talks about the imperialist
domination of politically independent countries like Portugal, he is not talking about an oppressed nation,
but shows how the bourgeoisie of nations like Portugal were like 'small brother' of big brother imperialist
countries like Britain in the international imperialist chain. On the one hand, Smith accepts that 21st
century capitalism is characterized by a situation in which capitalism has emerged as a 'global mode of
production' for the first time in its history and on the other he talks about the contradiction between
'oppressed' and 'oppressor' nations, i.e., the contradiction of national liberation; this is paradoxical. This
can be sustained only if Smith agrees that the countries of Global South are still colonies, semi-colonies
or neo-colonies. Only then one can talk about 'oppressed' and 'oppressor' nations. Smith's thesis is weakest
on this point. Secondly, the very category of 'nation' is used in a very uncareful way which might lead
readers to draw a number of wrong inferences.

Another thing which intrigues is Smith's lauding of 'dependency' theorists and their similarity with
Lenin's analysis. Lenin's theory of imperialism was based on the fundamental tendencies of capitalism
like the law of accumulation, increasing concentration and centralization of capital leading to the stage of
monopoly, the crisis of over-accumulation which is nothing but crisis of profitability for Lenin, and
export of capital. All these laws are derived from the basic Marxist law of value. Following Paul Baran's
notion of 'surplus' and its 'extraction' by advanced capitalist countries from backward nations, the
'dependency' theorists do not use the categories of value and surplus value. Moreover, even Smith uses
the categories of value and surplus value! Still, he lauds 'dependency' theorists because they argued that
even after the decolonization, the contradiction between the 'oppressed' and 'oppressor' nations remained
and eventually the 'dependency' theory collapsed because these dependent peripheral nations did not
remain agrarian and un-industrialized, but became the centres of industrial production. Therefore, the only
problem with 'dependency' theory was the development of world capitalism past the stage described by
'dependency' theory, but their basic categories of analysis are correct. At the same time, Smith criticizes
those Marxist political economists like Dore and Weeks, Nigel Harris, etc who critiqued 'dependency'
theory for departing from the basic Marxist positions and argued that the rate of exploitation of workers in
advanced countries can be higher than those in the underdeveloped countries despite the higher living
standards of the former. There is nothing wrong in this logic, though it can be suspected how far the
workers in advanced countries are actually exploited more (purely economically) than their counterparts
in the South in present times. Still, the analytical point presented by Weeks, Dore, Shaikh, Harrissetc
holds, i.e., the low wages may signify 'super-exploitation' or higher rate of exploitation but not
necessarily. Exploitation is not simply low-wages (even if it is below the value of labour power).

Another thing that is missed by Smith is that the value of labour-power is not simply and only a
physiological concept. It also depends on the social and cultural norms prevalent in each country, which
can never be even, howsoever globalized is production and capital. If the wages in factories of Foxconn
are too below the average wages of industrial workers in China (notwithstanding the difference in the
value of skilled and unskilled labour power), then one can claim that these workers in China are 'super-
exploited' in economic sense of the term. Otherwise, this 'super-exploitation' cannot be proven as far as

55
purely economic parameters are concerned. One cannot simply compare the wages prevalent in the North
and the ones prevalent in the South to prove that the former is 'exploiter' of the latter or the latter is 'super-
exploited.' Also, the rates of profits have a stronger and more intense tendency to equalize due to the more
unhindered mobility of capital across the globe. However, it is not the globalization of labour and the
mobility of labour-power is hindered and regulateed in every possible way, which Smith also marks.
Therefore, the differences in national wages are increased. But these restrictions are not the only reason
for national wage differentials as Smith seems to convey.

Moreover, all transfer of value and surplus value cannot simply be attributed to this 'super-exploitation'.
Some of it is exactly what Marx called the transfer of value from lower OCC capitals to higher OCC
capitals, or from less productive industrial capitals to more productive industrial capitals. Michael Roberts
has used the same numerical example used by Smith to prove capture and transfer of value through super-
exploitation to show that it is acutally transfer of value due to higher technology and OCC of Northern
capital even if we assume that the rate of surplus value is same in both areas. It is true that what Smith
calls 'super-exploitation' amplifies and increases this transfer of value. However, to reduce it to super-
exploitation would be misleading. Secondly, to assume that this value is transferred to the advanced
capitals of North only is misleading too. This value is also transferred through similar value chains to the
indigenous or local corporations, which can more aptly be termed as the TNCs of Global South.
Secondly, to assume that low wage workers are concentrated in South only would be incorrect. Actually,
there is a huge class of low wage workers that has come up in countries like the US, UK and even
Germany and France, though they might not be industrial workers. They work in different kinds of sectors
like food chains, service providers, and a host of 'unproductive workers' (it must be remembered that for
Marx these unproductive workers are exploited too, sometimes intensively). Therefore, there is more
'North' in North and more 'South' in South, but it is also true that there is 'North' in South and there is
'South' in North. The very division of North and South, if applied mechanically, becomes absurd, though
those who claim that there is no such division today, are even more misplaced. These (often Trotskyites)
gentlemen argue that revolutions are equally likely to take place in Northern countries (if we use it as a
synonym of advanced imperialist countries, notwithstanding their geographical location) and negate
Lenin's theory of 'weak links', whereas in a new way and at a higher level this Leninist theory has become
much more relevant than ever. This is not to say (and Lenin never said that and that is why he was
optimistic about revolution in Germany) that as a matter of rule revolution in some advanced country
cannot take place. However, Smith criticizes such scholars from a position which resembles 'Third-
worldist Marxism'.

Another thing that must be understood is that 'super-exploitation' based on low wages (below the value of
labour power) cannot be a permanent phenomenon if it begins to assume a general character across the
country because the 'super' in 'super-exploitation' is relative to national prevalent average wage (apart
from the physiological parameters) rather than wages in advanced capitalist countries or average
international wage (because the tendency of equalization of wages across the world is too weak to create a
tendency towards an international average wage; hence, national wage differentials). Once, these low
wages become the accepted and established norm due to capitalist competition between capitals as well as
the capitalist competition imposed on the workers themselves, they represent the new average value of
labour-power in that country. Therefore, if we go into the fundamentals of the logic of 'super-exploitation'
we would be obliged to accept that there can be no permanent 'super-exploitation' in the purely economic
sense, though the wage differentials between countries themselves represent an international power

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structure. But this,in the last analysis, can be reduced to the different levels of capitalist development of
productive forces and the historical location of the different countries in the structure of world capitalism.

The strong influence of 'Third-worldist Marxism' and Monthly Review-school Marxism on John Smith
cannot be denied. Smith is also wrong in following Higginbottom that Lenin did not rely on law of value
and LTFRP in analyzing imperialism. This is a common misreading of Lenin that we have refuted above.
Smith is correct when he argues that what has driven the shift of global industrial production to the South
is the crisis of profitability faced by capital in the advanced countries. He also correctly puts finger on the
restrictions put on the mobility of labour to keep the wages depressed in the countries of South.

However, his conclusion that this super-exploitation of workers in countries like China, India,
Bangladesh, Vietnam is oppression of these 'nations' by 'oppressor nations' of North is absurd. The reason
for this is the fact that these low-wage workers are equally and sometimes even more exploited (in terms
of rate of exploitation as well as the number of workers exploited) by corporations of these countries, who
are not supplying to the TNCs. These corporations are themselves exporting capital to countries of Asia
and Africa and even to Europe and the US. Can we call this bourgeoisie national? Can we call the China,
India, Brazil, etc as 'oppressed nations'? It is not as if China, India, Brazil, etc do not have an industrial
and financial bourgeoisie and are dominated by commercial or bureaucratic bourgeoisie. Therefore, the
argument of 'oppressed' and 'oppressor' nation seems to be an absurd argument in today's context. No one
can deny the imperialist exploitation of the workers of Global South; however, to term this exploitation as
national oppression of countries of Global South by countries of Global North is misleading because it
completely ignores the capitalist development of countries of Global South, the nature of their
bourgeoisie, the way in which these bourgeoisie participate in and benefit from the exploitation of the low
wage workers, and the fact that at the national level most of the capitalist classes of these countries of
Global South are actually the major shareholder in the appropriated surplus, though they certainly are the
'junior partner' in the appropriation of surplus value at the global level. As a result, the nuances and
contours and political implications of the capitalist development in these countries are totally missed by
John Smith.

In sum, despite his excellent analysis of the process in which production has shifted to Global South, the
inhuman way in which workers of Global South are exploited, the low wages and horrible work
conditions, the process through which the profits of TNCs of the North are made; Smith's economic
analysis falters and consequently, his political conclusions are misleading and sometimes absurd. The
impact of 'Third-worldism', 'Monthly Review' school, 'dependency' theory, a misreading of certain
elements of Lenin's theory of imperialism and a selective reading of Marx's theories has prevented this
work from presenting a correct view of imperialism in the twenty-first century.

In lieu of Conclusion...
The task of developing a Marxist-Leninist theory of Imperialism especially in tune with the developments
in the modus operandi of imperialism after 1970s is far from being completed. A lot of things need to be
explained from an ML perspective. Some of them represent important quantitative changes and others
include a few qualitative changes. From emergence of post-Fordism, a global assembly line, the new
dimensions of multi-polarity in imperialist world, informalization at a higher level, deregulation, over-
financialization, dominance of speculative capital to the absence of any socialist camp, the new ways in

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which imperialism is giving rise to military conflicts and wars in the form of shadow-boxing between
imperialist powers, the declining US hegemony, the assertion of Sino-Russian axis, the new strategy and
general tactics of proletarian revolution in the erstwhile colonies, which have become capitalist countries,
albeit of a peculiar kind; there is a need to analyze and understand these changes seriously. There have
been and ongoing attempts to undertake this analysis with mixed results. Our purpose was not (and could
not have been) to present a summary of all of these theories of imperialism. Our aim was simply to
present the esoteric aspects of Classical Marxist theories of imperialism from Marx to Lenin, review the
attempts to understand imperialism in the period of decolonization and after, the attempts to revive the
Classcial Marxist positions against underconsumptionist and 'Third-worldist' Marxist theories of
imperialism and then present some of the representative theories of imperialism that came out in the
period of what has been called the 'new imperialism'. The objective was not to present a general critical
summary, but to analyze these theories in the light of contemporary developments, to refute the
misreadings and misinterpretations of especially Marx and Lenin and restate the Marxist-Leninist position
on imperialism with questions that might prove to be productive in developing the theory of imperialism
in the context of Twenty-first century. We hope we have failed in a better way as compared to earlier
attempts of critical evaluation of theories of imperialism.

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