The Classical Marxist Political Economy of Imperialism

Marxist theory has consistently sought to link imperialism to the political economy of capitalism. This is most apparent in Vladimir Lenin’s canonical analysis, built on the bedrock of Rudolf Hilferding’s Finance Capital. The current reappearance of imperialist and hegemonic contests is best analyzed along the path opened by these authors.

Approaches that rely on noneconomic explanations, or even seek to detach imperialism from capitalism, such as Joseph Schumpeter’s, have limited explanatory power. Nonetheless, Hilferding’s and Lenin’s theory must be treated with great caution. The current geopolitical outlook of the world might be reminiscent of that prior to 1914 — but appearances can be deceptive.

For both these authors, the key driver of imperialism was the transformation of the fundamental units of capital in the core areas of the world economy, leading to the emergence of finance capital. Summarily put, monopolistic industrial and banking capital amalgamated into finance capital, which sought expansion abroad in two ways: first, through the sale of commodities and, second, through the export of loanable money capital.

In short, classical imperialism was driven by the accelerated internationalization of commodity and money capital under the auspices of amalgamating industrial and financial monopoly capitals.

Naturally, the finance capitals of different countries competed against each other in the world market, for which purpose they sought the support — typically but not exclusively — of their own states. What followed was the creation of colonial empires to secure territorial exclusivity for the export of commodity capital and to create favorable conditions for the export of loanable capital.

The countries that were colonized were typically at a lower stage of capitalist development or were not even capitalistic at all. Such colonial expansion would have been impossible without militarism, and hence the push toward armed confrontation among the competitors.

In sum, the drive to create colonies sprung ultimately from the aggressive operations of finance capitals seeking to secure profits for themselves. To this end, they coopted the services of the state and this created a drive toward war. States are not capitalist enterprises, and their relations are not determined by a gross calculation of profit and loss. They act based on power, history, ideology, and a host of other noneconomic factors. The ultimate arbiter among them is military power.

Imperialist expansion was thus driven fundamentally by private capital but inevitably entailed national oppression, exploitation, and conflict. The flows of value to the metropolis could result from enterprise profits, but might also derive from exploitative taxation, as in India. They were counterbalanced by the substantial expenses of acquiring and maintaining colonies.

In this light, it is misleading to seek to prove the existence of imperialism through an economic model that shows net monetary surpluses created and appropriated by the metropolis. Imperialism is a geopolitical practice as well as an economic reality. It is rooted in the conduct and profits of globally active capitalist enterprises but gives rise to state policies that have complex and contradictory results. In a profound sense, imperialism is a historic outcome of mature capitalist accumulation.

Contemporary Imperialism

In contrast to the time of Hilferding and Lenin, the first and decisive feature of contemporary imperialism is the internationalization of productive capital, rather than merely of commodities and loanable money capital.

Great volumes of capitalist production occur across borders in chains typically led by multinationals, which exercise control either directly through property rights over subsidiaries or indirectly through contracts with local capitalists. The quantitative leap in the volume of international trade in recent decades is an outcome of trading within such chains.

Producing abroad has far more stringent requirements than mere commodity trading or money lending. The international capitalist must have broad knowledge of local economic conditions in recipient countries, reliable rights to local resources, and, above all, access to capable labor-power. All these make it necessary to have direct or indirect relations with the state of both the country of origin and the recipient country.

The second, and equally decisive, point of difference is the characteristic form taken by financial capital in recent decades, which has been a decisive factor in the financialization of capitalism both domestically and internationally.

The export of loanable capital has grown enormously but the bulk of the flows has been, and remains, primarily from core to core, rather than from core to periphery. The proportion has been in the region of ten to one in favor of the former. Moreover, characteristic of the interregnum is the substantial growth of flows from China to the periphery as well as other periphery to periphery flows.

Furthermore, until the Great Crisis of 2007–9, both domestic and international financialization were led primarily by commercial banks. During the interregnum the center of gravity shifted toward the various components of “shadow banking,” that is, non-bank financial institutions, such as investment trusts, that draw profits out of securities trading and holding. Three of these funds — BlackRock, Vanguard, and State Street — currently hold in their portfolios an enormous proportion of the entire equity capital of the United States.

Contemporary imperialism is, in short, marked by the internationalization of productive as well as commodity and money capital, once again under the auspices of monopolizing industrial and financial capitals. However, again contrary to the time of Hilferding and Lenin, there is no amalgamation of industrial with financial capital, and certainly none in which the latter dominates the former.

Domination is not, after all, an outcome of the essential motion of capital but derives from the concrete realities of capitalist operations in specific historical contexts. In the early twentieth century, banks could dominate industrial capitals because the latter relied heavily on bank loans to finance long-term fixed investment. Such loans allowed and encouraged banks to get actively involved in the management of big business.

Today, industrial enterprises in core countries are marked by low investment, while simultaneously holding huge volumes of money capital in reserve. Both are characteristic features of the financialization of industrial enterprises as well as of the underperformance of core economies during the interregnum. They also imply that the great international corporations are far less dependent on financial capital than in the days of classical imperialism.

The vast equity holdings of “shadow banks” are certainly important insofar as voting power within large corporations is concerned, and they thus play a role in the decision-making of nonfinancial corporations. It is, however, a wild overstretch to claim that the Big Three dictate terms to corporate USA. They are holders of equity that belongs to others — often other “shadow banks” — and seek profits by managing their securities portfolios. Their position is reminiscent of a rentier but one who strives for a balance of coexistence with the industrialist through the securities markets.

The driving force of contemporary imperialism springs from this pairing of internationalized industrial with internationalized financial capital. Neither dominates the other and there is no fundamental clash between them. Jointly they comprise the most aggressive form of capital known to history.

Economic Requirements of Contemporary Imperialism

The pairing of capitals that drives contemporary imperialism does not need territorial exclusivity and nor does it seek to form colonial empires. On the contrary, it thrives on unfettered access to global natural resources, cheap labor power, low taxation, loose environmental standards, and markets for its industrial, commercial, and financial components.

One point to stress in this connection is that there is no “world” capitalist class. This is an illusion from the days of the ideological triumph of globalization and sole US hegemony. There is certainly a similarity of outlook among internationally active capitalists, ultimately reflecting the hegemonic power of the United States. But the enormous escalation of tensions in recent years shows that capitalists are, and will remain, divided into potentially hostile groups internationally.

Incidentally, there is also no “labor aristocracy” in core countries, contrary to what Lenin claimed. The vast pressure on workers in core countries during the last four decades has disproven that notion.

Internationally active industrial and financial capitals have two fundamental requirements. First, there must be clear and enforceable rules for the flows of productive investment, commodities, and loanable money capital. This is not simply a matter of agreement by treaty among states but something that must be ensured by appropriately structured institutions, such as the International Monetary Fund, the World Bank, the World Trade Organization, the Bank for International Settlements, and so on. Second, there must be a reliable form of world money to act as a unit of account, means of payment, and reserve of value.

Both requirements — especially the latter — reflect the peculiar character of the world economy, which, unlike the domestic, inherently lacks the coordinating and organizing presence of one national state. Nonetheless, industrial and financial capitals still need the support of national states as they navigate the straits of the world market.

Inevitably, the system of national states — as distinct from the system of internationally competing capitals — enters the picture and brings its own noneconomic considerations to bear.

The Role of Hegemony

The characteristic feature of the system of national states is hegemony, and there are few guides better than Gramsci to approaching this issue, as Robert Cox suggested a long time ago. Gramsci’s focus was on the domestic balance of classes and the resultant political outcomes, rather than international state relations. The point that matters for our purposes, however, is that, for Gramsci, hegemony involves coercion as well as consent. Both are crucial to how contemporary imperialism operates.

The United States was the sole hegemon for nearly three decades after the collapse of the Soviet Union, its power deriving from economic predominance reflected in the size of its GDP and its attendant markets, the volume of its international trade, and the magnitude of inward and outward capital flows. Above all, its hegemonic position derived from the unique ability to entrench its own domestic currency as world money.

US coercive power is partly economic as is evidenced by the enormous range of sanctions that it regularly imposes on others. Primarily, however, it is military, drawing on enormous expenditures that currently exceed $1 trillion annually. This is greater than that of the “old” imperialist powers by at least one order of magnitude and finances a vast network of military bases across the globe. Unlike the classical period, militarization and a huge military-industrial complex are permanent and integral features of the US economy.

The US power of consent is based on its dominant role across the range of international institutions that regulate international economic activity. This form of power draws on universities and think tanks that produce the prevalent ideology in international institutions. It has proven instrumental to generating a common outlook among internationally active capitalists across the world for several decades.

As sole hegemon, the United States has consistently furthered the interests of its globally active capitals. In doing so, it has created conditions that also allow the capitals of other “old” imperialist countries to operate profitably, not least by ensuring controlled access to dollars at critical moments, as in 2008 but also in 2020. In this regard, too, contemporary imperialism is dramatically different from the classical version.

The hegemonic problem for the United States arose out of the contradictory nature of these tendencies.

On the one hand, favoring the interests of internationally active capitals had substantial costs for sections of the US domestic economy. Manufacturing migrated, leaving behind persistent unemployment, enterprises registered in tax havens to avoid taxes, technical capacity was lost, and so on.

On the other, the relocation of productive capacity helped the emergence of independent centers of capitalist accumulation in what were previously considered the Second and the Third Worlds. The main role was played by national states that navigated the shoals of globalized production, trade, and finance. But relocation of production was also a crucial factor.

The prime example is obviously China, which has emerged as the largest manufacturing and trading country in the world. To be sure, giant Chinese industrial and financial enterprises have distinctive features and relations compared to their US equivalents, not least since several of them are state owned. But the finance capitals of classical imperialism also differed substantially among themselves as, for instance, Kozo Uno pointed out.

For our purposes, enormous Chinese, Indian, Brazilian, Korean, Russian, and other industrial and financial enterprises increasingly operate on a global scale and seek state support to influence the rules of the game as well as to determine world money. That means primarily their own state, though they also cultivate relations with other states.

The Drive to War

The roots of the steadily aggravating imperialist contests are to be found in this configuration of global capitalism. The United States will obviously not submit to the challenge and draws on its vast military, political, and monetary power to protect its hegemony. That makes it the main threat to world peace.

The current contests are, in other words, reminiscent of the pre-1914 era, in the fundamental sense of being driven by underlying economic motives. This does not mean that crude economic calculation is behind every flare up, but it does mean that the contests have deep material roots. They are, thus, extraordinarily dangerous and difficult to deal with.

Moreover, the contests are qualitatively different to the opposition between the United States and the Soviet Union, which was primarily political and ideological. During the interregnum, the United States has relied on the support of the “old” imperialist powers, primarily by drawing on its power of consent, rooted in anti-Soviet times. Nothing guarantees that it will be able to do so forever.

The Left is thus faced with a difficult but at the same time clear choice. The gradual emergence of “multipolarity” as other powerful states challenge US hegemony has created some space for smaller countries to defend their own interests. But there is nothing meritorious or progressive about Chinese, Indian, Russian, or any other capitalism. Furthermore, it is vital to remember that the world was multipolar in 1914, and the result was catastrophe.

The answer can still be found in Lenin’s writings, even if the world has changed greatly. The socialist left must oppose imperialism, while recognizing that the United States is the main aggressor. But that ought to be done from an independent position that is openly anti-capitalist and has no illusions about China, India, Russia, and other contenders, much less the “old” imperialists.

The path must be that of domestic anti-capitalist transformation based on popular sovereignty and coupled with national sovereignty that seeks international equality. Such would be a true internationalism, resting on the power of workers and the poor. How it could again become a real political force is the deepest problem of our times.