Centralization of Capital
Centralization of Capital
the increase in the capital owned by an individual capitalist or group of capitalists through the absorption or annexation of other capital holdings.
The centralization of capital differs from the concentration of capital with respect to the source of the increase: the concentration of capital results from capitalization of part of the surplus value. The concentration and centralization of capital are two capital accumulation techniques. The centralization of capital is accompanied by the fierce competitive struggle that marks both the expropriation of small-scale capital by large-scale capital and the formation of joint-stock companies. The concentration of sizable capital funds in the capitalist credit system and the use of such funds for issuing and allocating stocks make it possible to establish and operate large-scale enterprises that are beyond the means of individual capitalists. Banks grant credit primarily to the biggest capitalists and thus contribute to the latter’s competitive capabilities.
The accumulation and centralization of capital lead to the concentration of enormous wealth in the hands of a small financial oligarchy, the aggravation of class contradictions, and the need for rapid concentration of production—a process that results, at a given stage of development, in the supremacy of monopolies. The centralization of capital is particularly intense in the age of imperialism, and especially during the general crisis of capitalism.
The centralization of capital is most clearly apparent in banking. Before the 20th century the centralization of capital was primarily a horizontal process, involving the consolidation of enterprises in the same branch of the economy. After World War I the trend was toward vertical centralization—that is, companies assumed control over succeeding stages of the production process by acquiring the sources of raw materials and taking over the production of components and finished goods. The large increase in mergers and absorptions in most of the capitalist countries after World War II resulted in the emergence of a few banking monopolies that control virtually all financial institutions—namely, insurance monopolies, investment trusts, and savings institutions. These monopolies control the money market and all personal savings funds. One hundred such banks in 1975 controlled between 85 and 90 percent of all financial operations in the capitalist world.
The mid-1950’s gave birth to a new and rapidly developing form of centralization of capital—diversification. Vertical integration and diversification resulted both from the internal accumulations effected by individual firms and from the merger and absorption of independent companies. The very nature of these processes changed as well. While in the 1950’s it was generally the small firms that were swallowed up by larger ones in the same branch, the 1960’s saw an increasing number of absorptions of medium-size and large firms; furthermore, such absorptions cut across various branches—that is, the production activity of the firms that were absorbed was unrelated to the operations of the acquiring companies. A complex multibranch organism was thus formed, consisting of large-scale industrial monopoly associations that include other spheres of material production, such as construction and services. In the capitalist countries the centralization of capital is accompanied by stock-exchange speculations.
A noticeable trend in the 1960’s and 1970’s was the increasing concentration and centralization of capital that occurred under the impetus of the expanding scientific and technological revolution, expanding worldwide economic relations, and the related demands of capitalist production and capitalist commodity exchange. Such centralization of capital can be clearly discerned at the present time—especially in the USA—in the emergence of the conglomerates.
To the extent that the industrial corporations continue to increase the share of capital going into production and exchange, the major banks are playing an increasingly decisive role, directly or indirectly, in the formation and targeting of capital derived from the accumulation of profits and deposits. The multinational banking groups that were formed in the first half of the 1970’s were related to the activities of the giant multinational industrial monopolies, the need to make vast sums of money rapidly available in various currencies, the accelerated pace of banking operations, and the active partnership of industrial and banking capital. Among such banking groups are the European Banks International—with total assets of $110 billion in 1974, compared to $53.2 billion in 1971—and the Orion group, consisting of six banks (USA, Great Britain, Japan, Federal Republic of Germany, Italy, and Canada)—with $164.8 billion in 1974 and $87.5 billion in 1971. Such multinational banking groups and major banks of individual countries are actively involved in all spheres of economic life.
The modern bourgeois state itself is playing an increasingly active role in the centralization of capital. In some branches of the economy even the largest concerns require state assistance in order to adopt and implement modern technology to the fullest—for example, in atomic industry, in the production of supersonic aircraft, and in space research. The concentration of financial and economic power in the hands of a few banks and the growth of multinational banking associations are indicative of a new and higher stage in the socialization of production, the intensification of competitive struggle among the various groupings of monopoly capital, and the growing exploitation of the working people.