finance capital

finance capital

(MARXISM) the form of CAPITAL, which according to Hilferding (1910) (see AUSTRO-MARXISM), involves a tight integration of ‘financial capital’ (capital in the hands of bankers) and ‘industrial capital’, and occurs when CAPITALISM has reached an advanced stage of concentration and centralization, and MONOPOLY.

Hilferding's ideas on the character and crisis tendencies associated with ‘finance capitalism’ (including the necessity for IMPERIALISM) influenced LENIN's thinking.

Finance Capital

 

capital formed through the merger of industrial and banking monopolies. Finance capital is one of the distinguishing features of imperialism. In criticizing the view of R. Hilferding, who saw in finance capital merely the subordination of industrial capital to bank capital, V. I. Lenin defined finance capital as the “concentration of production; the monopolies arising therefrom; the merging or coalescence of the banks with industry—such is the history of the rise of finance capital and such is the content of that concept” (Poln. sobr. soch., 5th ed., vol. 27, p. 344).

Banking and industrial monopolies merge in a number of ways, a variety deriving from the new banking activities of the age of imperialism. In addition to handling current accounts, banks also manage accounts; that is, they oversee receipts and disbursements. They also grant short-term and long-term credit and serve as trustees for individuals, corporations, government bodies, and nonprofit institutions. Banks own stock in other companies, and they also exercise control through personal link-ups. The closest ties between industrial and banking monopolies are effected through joint holdings of securities.

With the scientific and technological revolution that followed World War II, mergers of banking and industrial monopolies accelerated owing to the increased scale of credit, accounting, and payment operations. Analysis of the balance sheets of industrial concerns in capitalist countries shows that virtually every enterprise uses borrowed capital. The increased significance in all capitalist countries of self-financing in enterprises has not diminished the role of bank credit. The loan capital market has become specialized, and there has been a rapid development of new financial institutions, among them insurance companies, trust companies (for pension funds), investment companies, and savings and loan associations. This specialization has influenced the structure of finance capital. However, most of these institutions are either directly subordinate to or closely linked with monopolistic banks. Monopolistic commercial banks continue to be the principal force in the loan capital market. Industrial monopolies have also maintained their dominant position, even though industry’s share in the gross national product of a number of capitalist countries has declined. Thus, merging industrial and banking monopolies continue to be the nucleus of finance capital.

Personal link-ups continue to be a means through which banking and industrial monopolies are joined. Lenin cited data pertaining to the eve of World War I, when “six of the biggest Berlin banks were represented by their directors in 344 industrial companies. . . . On the other hand, on the Supervisory Boards of these six banks (in 1910) were fifty-one of the biggest industrialists” (ibid., p. 337). In 1970 the directors of three of the largest banks in the Federal Republic of Germany held 650 seats on supervisory boards of industrial and other companies.

Bank trust operations are one of the most recent forms of merger of industrial and banking capital. In existence since the 1920’s, trust operations experienced their greatest development after World War II. In 1967, for example, the assets of the trust departments of US banks, which consisted primarily of controlling numbers of corporate shares, amounted to $253 billion.

The formation of finance capital does not mean that all industrial monopolies merge with all banking monopolies. Some industrial concerns have very close ties with only a few banking monopolies; hence finance capital is represented by a number of groups of merged industrial, banking, and other types of monopolies. Financial groups, which come to the fore under finance capital, represent a qualitatively new stage of monopolization, a stage subsequent to monopolization on the sectoral level.

An important feature of contemporary financial groups in capitalist countries is the international range of their activities. The development of multinational and banking monopolies leads to a strengthening of ties between these monopolies and to the emergence of international financial groups. The opening of branches and the acquisition of controlling interests are not the only ways in which multinationals develop. Mergers, cooperative agreements, and various types of amalgamation of monopolies in different countries have become increasingly common since the 1960’s.

The development of finance capital intensifies the polarization of society; the contradictions between the monopolistic bourgeoisie, headed by financial oligarchies, and the toiling masses, headed by the working class, are exacerbated.

REFERENCES

Motylev, V. E. Finansovyi kapital i ego organizatsionnye formy. Moscow, 1959.
Men’shikov, S. M. Miliionery i menedzhery. Moscow, 1965.
Beglov, I. SShA: Sobstvennosl’ i vlast’. Moscow, 1971.
Zorin, V. Mistery Milliardy, 2nd ed. Moscow, 1972.
Ekonomicheskii rost v usloviiakh monopolisticheskogo kapitalizma: Problemy i protivorechiia. Moscow, 1975. Chapter 3.

V. N. SHENAEV

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