Library:Vladimir Lenin/Imperialism, the highest stage of capitalism/Concentration of production and monopolies

The enormous growth of industry and the remarkably rapid process of concentration of production in ever-larger enterprises represent one of the most characteristic features of capitalism. Modern censuses of production give very complete and exact data on this process.

In Germany, for example, for every 1,000 industrial enterprises, large enterprises, i.e., those employing more than 50 workers, numbered three in 1882, six in 1895 and nine in 1907; and out of every 100 workers employed, this group of enterprises employed 22, 30 and 37 respectively. Concentration of production, however, is much more intense than the concentration of workers, since labour in the large enterprises is much more productive. This is shown by the figures available on steam engines and electric motors. If we take what in Germany is called industry in the broad sense of the term, that is, including commerce, transport, etc., we get the following picture: Large-scale enterprises: 30,588 out of a total of 3,265,623, that is to say, 0.9 per cent. These large-scale enterprises employ 5,700,000 workers out of a total of 14,400,000, that is, 39.4 per cent; they use 6,660,000 steam horse power out of a total of 8,800,000, that is, 75.3 per cent and 1,200,000 kilowatts of electricity out of a total of 1,500,000, that is, 77.2 per cent.

Less than one-hundredth of the total enterprises utilize more than three-fourths of the steam and electric power! Two million nine hundred and seventy thousand small enterprises (employing up to five workers), representing 91 per cent of the total, utilize only 7 per cent of the steam and electric power. Tens of thousands of large-scale enterprises are everything; millions of small ones are nothing.

In 1907, there were in Germany 586 establishments employing one thousand and more workers. They employed nearly one-tenth (1,380,000) of the total number of workers employed in industry and utilized almost one-third (32 per cent) of the total steam and electric power employed. As we shall see, money capital and the banks make this superiority of a handful of the largest enterprises still more overwhelming, in the most literal sense of the word, since millions of small, medium, and even some big “masters” are in fact in complete subjection to some hundreds of millionaire financiers.

In another advanced country of modern capitalism, the United States, the growth of the concentration of production is still greater. Here statistics single out industry in the narrow sense of the word and group enterprises according to the value of their annual output. In 1904 large-scale enterprises with an annual output of one million dollars and over numbered 1,900 (out of 216,180, i.e., 0.9 per cent). These employed 1,400,000 workers (out of 5,500,000, i.e., 25.6 per cent) and their combined annual output was valued at $5,600,000,000 (out of $14,800,000,000, i.e., 38 per cent). Five years later, in 1909, the corresponding figures were: large-scale enterprises: 3,060 out of 268,491, i.e., 1.1 per cent; employing: 2,000,000 workers out of 6,600,000, i.e., 30.5 per cent; output: $9,000,000,000 out of $20,700,000,000, i.e., 43.8 per cent.

Almost half the total production of all the enterprises of the country was carried on by a hundredth part of those enterprises! These 3,000 giant enterprises embrace 268 branches of industry. From this it can be seen that, at a certain stage of its development, concentration itself, as it were, leads right to monopoly; for a score or so of giant enterprises can easily arrive at an agreement, while on the other hand, the difficulty of competition and the tendency towards monopoly arise from the very dimensions of the enterprises. This transformation of competition into monopoly is one of the most important – if not the most important – phenomena of modern capitalist economy, and we must deal with it in greater detail. But first we must clear up one possible misunderstanding.

American statistics say: 3,000 giant enterprises in 250 branches of industry, as if there were only a dozen large-scale enterprises for each branch of industry.

But this is not the case. Not in every branch of industry are there large-scale enterprises; and, moreover, a very important feature of capitalism in its highest stage of development is so-called “combined production,” that is to say, the grouping in a single enterprise of different branches of industry, which either represent the consecutive stages in the working up of raw materials (for example, the smelting of iron ore into pig iron, the conversion of pig iron into steel, and then, perhaps, the manufacture of steel goods) – or are auxiliary to one another (for example, the utilization of waste or of by-products, the manufacture of packing materials, etc.).

“Combination,” writes Hilferding, “levels out the fluctuations of trade and therefore assures to the combined enterprises a more stable rate of profit. Secondly, combination has the effect of eliminating trading. Thirdly, it has the effect of rendering possible technical improvements, and, consequently, the acquisition of superprofits over and above those obtained by the “pure” (i.e., non-combined) enterprises. Fourthly, it strengthens the position of the combined enterprises compared with that of “pure” enterprises in the competitive struggle in periods of serious depression, when the fall in prices of raw materials does not keep pace with the fall in prices of manufactured articles.”

The German bourgeois economist, Heymann, who has written a book especially on “mixed,” that is, combined, enterprises in the German iron industry, says: “Pure enterprises perish, crushed between the high price of raw material and the low price of the finished product.” Thus we get the following picture:

“There remain, on the one hand, the great coal companies, producing millions of tons yearly, strongly organized in their coal syndicate, and on the other, the great steel works, closely allied to the coal mines, having their own steel syndicate. These giant enterprises, producing 400,000 tons of steel per annum, with correspondingly extensive coal, ore and blast furnace plants, as well as the manufacturing of finished goods, employing 10,000 workers quartered in company houses, sometimes owning their own ports and railroads, are today the standard type of German iron and steel plant. And concentration still continues. Individual enterprises are becoming larger and larger. An ever increasing number of enterprises in one given industry, or in several different industries, join together in giant combines, backed up and controlled by half a dozen Berlin banks. In the German mining industry, the truth of the teachings of Karl Marx on concentration is definitely proved, at any rate in a country like ours where it is protected by tariffs and freight rates. The German mining industry is ripe for expropriation.”

Such is the conclusion which a conscientious bourgeois economist, and such are exceptional, had to arrive at. It must be noted that he seems to place Germany in a special category because her industries are protected by high tariffs. But the concentration of industry and the formation of monopolist manufacturers” combines, cartels, syndicates, etc., could only be accelerated by these circumstances. It is extremely important to note that in free-trade England, concentration also leads to monopoly, although somewhat later and perhaps in another form. Professor Hermann Levy, in his special work of research entitled Monopolies, Cartels and Trusts, based on data on British economic development, writes as follows:

“In Great Britain it is the size of the enterprise and its capacity which harbour a monopolist tendency. This, for one thing, is due to the fact that the great investment of capital per enterprise, once the concentration movement has commenced, gives rise to increasing demands for new capital for the new enterprises and thereby renders their launching more difficult. Moreover (and this seems to us to be the more important point) every new enterprise that wants to keep pace with the gigantic enterprises that have arisen on the basis of the process of concentration would produce such an enormous quantity of surplus goods that it could only dispose of them either by being able to sell them profitably as a result of an enormous increase in demand or by immediately forcing down prices to a level that would be unprofitable both for itself and for the monopoly combines.”

In England, unlike other countries where protective tariffs facilitate the formation of cartels, monopolist alliances of entrepreneurs, cartels and trusts arise in the majority of cases only when the number of competing enterprises is reduced to “a couple of dozen or so.” “Here the influence of the concentration movement on the formation of large industrial monopolies in a whole sphere of industry stands out with crystal clarity.”

Fifty years ago, when Marx was writing Capital, free competition appeared to most economists to be a “natural law.” Official science tried, by a conspiracy of silence, to kill the works of Marx, which by a theoretical and historical analysis of capitalism showed that free competition gives rise to the concentration of production, which, in turn, at a certain stage of development, leads to monopoly. Today, monopoly has become a fact. The 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, as the English proverb says, and they have to be reckoned with, whether we like it or not. The facts show that differences between capitalist countries, e.g., in the matter of protection or free trade, only give rise to insignificant variations in the form of monopolies or in the moment of their appearance; and that the rise of monopolies, as the result of the concentration of production, is a general and fundamental law of the present stage of development of capitalism.

For Europe, the time when the new capitalism definitely superseded the old can be established with fair precision: it was the beginning of the twentieth century. In one of the latest compilations on the history of the “formation of monopolies,” we read:

“A few isolated examples of capitalist monopoly could be cited from the period preceding 1860; in these could be discerned the embryo of the forms that are common today; but all this undoubtedly represents pre-history. The real beginning of modern monopoly goes back, at the earliest, to the ”sixties. The first important period of development of monopoly commenced with the international industrial depression of the ”seventies and lasted until the beginning of the ”nineties. … If we examine the question on a European scale, we will find that the development of free competition reached its apex in the ”sixties and ”seventies. Then it was that England completed the construction of its old style capitalist organization. In Germany, this organization had entered into a fierce struggle with handicraft and domestic industry, and had begun to create for itself its own forms of existence. [...]

“The great revolutionization commenced with the crash of 1873, or rather, the depression which followed it and which, with hardly discernible interruptions in the early ”eighties, and the unusually violent, but short-lived boom about 1889, marks twenty-two years of European economic history. … During the short boom of 1889–90, the system of cartels was widely resorted to in order to take advantage of the favorable business conditions. An ill-considered policy drove prices still higher than would have been the case otherwise and nearly all these cartels perished ingloriously in the smash. Another five-year period of bad trade and low prices followed, but a new spirit reigned in industry; the depression was no longer regarded as something to be taken for granted: it was regarded as nothing more than a pause before another boom.

“The cartel movement entered its second epoch: instead of being a transitory phenomenon, the cartels became one of the foundations of economic life. They are winning one field after another, primarily, the raw materials industry. At the beginning of the ”nineties the cartel system had already acquired – in the organization of the coke syndicate on the model of which the coal syndicate was later formed – a cartel technique which could hardly be improved. For the first time the great boom at the close of the nineteenth century and the crisis of 1900–03 occurred entirely – in the mining and iron industries at least – under the ægis of the cartels. And while at that time it appeared to be something novel, now the general public takes it for granted that large spheres of economic life have been, as a general rule, systematically removed from the realm of free competition.”

Thus, the principal stages in the history of monopolies are the following: 1) 1860-70, the highest stage, the apex of development of free competition; monopoly is in the barely discernible, embryonic stage. 2) After the crisis of 1873, a wide zone of development of cartels; but they are still the exception. They are not yet durable. They are still a transitory phenomenon. 3) The boom at the end of the nineteenth century and the crisis of 1900–03. Cartels become one of the foundations of the whole of economic life. Capitalism has been transformed into imperialism.

Cartels come to an agreement on the conditions of sale, terms of payment, etc. They divide the markets among themselves. They fix the quantity of goods to be produced. They fix prices. They divide the profits among the various enterprises, etc.

The number of cartels in Germany was estimated at about 250 in 1896 and at 385 in 1905, with about 12,000 firms participating. But it is generally recognized that these figures are underestimations. From the statistics of German industry for 1907 we quoted above, it is evident that even 12,000 large enterprises control certainly more than half the steam and electric power used in the country. In the United States, the number of trusts in 1900 was 185, and in 1907, 250.

American statistics divide all industrial enterprises into three categories, according to whether they belong to individuals, to private firms or to corporations. These latter in 1904 comprised 23.6 per cent, and in 1909, 25.9 per cent (i.e., more than one-fourth of the total industrial enterprises in the country). These employed in 1904, 70.6 per cent, and in 1909, 75.6 per cent (i.e., more than three-fourths) of the total wage earners. Their output amounted at these two dates to $10,900,000,000 and to $16,300,000,000, i.e., to 73.7 per cent and 79 per cent of the total respectively.

Not infrequently cartels and trusts concentrate in their hands seven or eight tenths of the total output of a given branch of industry. The Rhine-Westphalian Coal Syndicate, at its foundation in 1893, controlled 86.7 per cent of the total coal output of the area. In 1910, it controlled 95.4 per cent. The monopoly so created assures enormous profits, and leads to the formation of technical productive units of formidable magnitude. The famous Standard Oil Company in the United States was founded in 1900:

“It has an authorized capital of $150,000,000. It issued $100,000,000 common and $106,000,000 preferred stock. From 1900 to 1907 the following dividends were paid on this stock: 48, 48, 45, 44, 36, 40, 40, 40 per cent, in the respective years, i.e., in all, $367,000,000. From 1882 to 1907, out of a total net profits to the amount of $889,000,000, $606,000,000 were distributed in dividends, and the rest went to reserve capital. … In 1907 the various works of the United States Steel Corporation employed no less than 210,180 workers and other employees. The largest enterprise in the German mining industry, the Gelsenkirchen Mining Company (Gelsenkirchner Bergwerksgesellschaft) employed in 1908 46,048 persons.”

In 1902, the United States Steel Corporation had already produced 9,000,000 tons of steel. Its output constituted in 1901, 66.3 per cent, and in 1908, 56.1 per cent of the total output of steel in the United States. The output of mineral ore was 43.9 per cent and 46.3 per cent respectively. The report of the American Government Commission on Trusts states:

“The superiority of the trust over competitors is due to the magnitude of its enterprises and their excellent technical equipment. Since its inception, the Tobacco Trust has devoted all its efforts to the substitution of mechanical for manual labour on an extensive scale. With this end in view, it bought up all patents that had anything to do with the manufacture of tobacco and spent enormous sums for this purpose. Many of these patents at first proved to be of no use, and had to be modified by the engineers employed by the trust. At the end of 1906, two subsidiary companies were formed solely to acquire patents. With the same object in view, the trust built its own foundries, machine shops and repair shops. One of these establishments, that in Brooklyn, employs on the average 300 workers; here experiments are carried out on inventions concerning the manufacture of cigarettes, cheroots, snuff, tinfoil for packing, boxes, etc. Here, also, inventions are perfected.

“Other trusts also employ so-called developing engineers whose business it is to devise new methods of production and to test technical improvements. The United States Steel Corporation grants big bonuses to its workers and engineers for all inventions suitable for raising technical efficiency, or for reducing cost of production.”

In German large-scale industry, e.g., in the chemical industry, which has developed so enormously during these last few decades, the promotion of technical improvement is organized in the same way. By 1908, the process of concentration of production had already given rise to two main groups which, in their way, were in the nature of monopolies. First these groups represented “dual alliances” of two pairs of big factories, each having a capital of from twenty to twenty-one million marks: on the one hand, the former Meister Factory at Höchst and the Cassella Factory at Frankfort-on-Main; and on the other hand, the aniline and soda factory at Ludwigshafen and the former Bayer Factory at Elberfeld. In 1905, one of these groups, and in 1908 the other group, each concluded a separate agreement with yet another big factory. The result was the formation of two “triple alliances,” each with a capital of from forty to fifty million marks. And these “alliances” began to come “close” to one another, to reach “an understanding” about prices, etc.

Competition becomes transformed into monopoly. The result is immense progress in the socialization of production. In particular, the process of technical invention and improvement becomes socialized.

This is no longer the old type of free competition between manufacturers, scattered and out of touch with one another, and producing for an unknown market. Concentration has reached the point at which it is possible to make an approximate estimate of all sources of raw materials (for example, the iron ore deposits) of a country and even, as we shall see, of several countries, or of the whole world. Not only are such estimates made, but these sources are captured by gigantic monopolist combines. An approximate estimate of the capacity of markets is also made, and the combines divide them up amongst themselves by agreement. Skilled labour is monopolized, the best engineers are engaged; the means of transport are captured: railways in America, shipping companies in Europe and America. Capitalism in its imperialist stage arrives at the threshold of the most complete socialization of production. In spite of themselves, the capitalists are dragged, as it were, into a new social order, a transitional social order from complete free competition to complete socialization.

Production becomes social, but appropriation remains private. The social means of production remain the private property of a few. The general framework of formally recognized free competition remains, but the yoke of a few monopolists on the rest of the population becomes a hundred times heavier, more burdensome and intolerable.

The German economist, Kestner, has written a book especially on the subject of “the struggle between the cartels and outsiders,” i.e., enterprises outside the cartels. He entitled his work Compulsory organization, although, in order to present capitalism in its true light, he should have given it the title: “Compulsory Submission to Monopolist Combines.” This book is edifying if only for the list it gives of the modern and civilized methods that monopolist combines resort to in their striving towards “organization.”

They are as follows:

1. Stopping supplies of raw materials (“one of the most important methods of compelling adherence to the cartel”);
2. Stopping the supply of labour by means of “alliances” (i.e., of agreements between employers and the trade unions by which the latter permit their members to work only in cartelized enterprises);
3. Cutting off deliveries;
4. Closing of trade outlets;
5. Agreements with the buyers, by which the latter undertake to trade only with the cartels;
6. Systematic price cutting (to ruin “outside” firms, i.e., those which refuse to submit to the monopolists. Millions are spent in order to sell goods for a certain time below their cost price; there were instances when the price of benzine was thus lowered from 40 to 22 marks, i.e., reduced almost by half!);
7. Stopping credits;
8. Boycott.

This is no longer competition between small and large-scale industry, or between technically developed and backward enterprises. We see here the monopolies throttling those which do not submit to them, to their yoke, to their dictation. This is how this process is reflected in the mind of a bourgeois economist:

“Even in the purely economic sphere,” writes Kestner, “a certain change is taking place from commercial activity in the old sense of the word towards organizational-speculative activity. The greatest success no longer goes to the merchant whose technical and commercial experience enables him best of all to understand the needs of the buyer, and who is able to discover and effectively awake a latent demand; it goes to the speculative genius [?!] who knows how to estimate, or even only to sense in advance the organizational development and the possibilities of connections between individual enterprises and the banks.”

Translated into ordinary human language this means that the development of capitalism has arrived at a stage when, although commodity production still “reigns” and continues to be regarded as the basis of economic life, it has in reality been undermined and the big profits go to the “geniuses” of financial manipulation. At the basis of these swindles and manipulations lies socialized production; but the immense progress of humanity, which achieved this socialization, goes to benefit the speculators. We shall see later how “on these grounds” reactionary, petty-bourgeois critics of capitalist imperialism dream of going back to “free,” “peaceful” and “honest” competition.

“The prolonged raising of prices which results from the formation of cartels,” says Kestner, “has hitherto been observed only in relation to the most important means of production, particularly coal, iron and potassium, but has never been observed for any length of time in relation to manufactured goods. Similarly, the increase in profits resulting from that has been limited only to the industries which produce means of production. To this observation we must add that the raw materials industry not only has secured advantages from the cartel formation in regard to the growth of income and profitableness, to the detriment of the finished goods industry, but that it has secured also a dominating position over the latter, which did not exist under free competition.”

The words which we have italicized reveal the essence of the case which the bourgeois economists admit so rarely and so unwillingly, and which the modern defenders of opportunism, led by K. Kautsky, so zealously try to evade and brush aside. Domination, and violence that is associated with it, such are the relationships that are most typical of the “latest phase of capitalist development”; this is what must inevitably result, and has resulted, from the formation of all-powerful economic monopolies.

We will give one more example of the methods employed by the cartels. It is particularly easy for cartels and monopolies to arise when it is possible to capture all the sources of raw materials, or at least, the most important of them. It would be wrong, however, to assume that monopolies do not arise in other industries in which it is impossible to corner the sources of raw materials. The cement industry, for instance, can find its raw materials everywhere. Yet in Germany it is strongly cartelized. The cement manufacturers have formed regional syndicates: South German, Rhine-Westphalian, etc. The prices fixed are monopoly prices: 230 to 280 marks a carload (at a cost price of 180 marks!). The enterprises pay a dividend of from 12 per cent to 16 per cent – and let us not forget that the “geniuses” of modern speculation know how to pocket big profits besides those they draw by way of dividends. Now, in order to prevent competition in such a profitable industry, the monopolists resort to sundry stratagems. For example, they spread disquieting rumours about the situation in their industry. Anonymous warnings are published in the newspapers, like the following: “Investors, don”t place your capital in the cement industry!” They buy up “outsiders” (those outside the syndicates) and pay them “indemnities” of 60,000, 80,000 and even 150,000 marks. Monopoly everywhere hews a path for itself without scruple as to the means, from “modestly” buying off competitors to the American device of “employing” dynamite against them.

The statement that cartels can abolish crises is a fable spread by bourgeois economists who at all costs desire to place capitalism in a favorable light. On the contrary, when monopoly appears in certain branches of industry, it increases and intensifies the anarchy inherent in capitalist production as a whole. The disparity between the development of agriculture and that of industry, which is characteristic of capitalism, is increased. The privileged position of the most highly cartelized industry, so-called heavy industry, especially coal and iron, causes “a still greater lack of concerted organization” in other branches of production – as Jeidels, the author of one of the best works on the relationship of the German big banks to industry, puts it.

“The more developed an economic system is,” writes Liefmann, one of the most unblushing apologists of capitalism, “the more it resorts to risky enterprises, or enterprises abroad, to those which need a great deal of time to develop, or finally, to those which are only of local importance.”

The increased risk is connected in the long run with the prodigious increase of capital, which overflows the brim, as it were, flows abroad, etc. At the same time the extremely rapid rate of technical progress gives rise more and more to disturbances in the co-ordination between the various spheres of national economy, to anarchy and crisis. Liefmann is obliged to admit that:

“In all probability mankind will see further important technical revolutions in the near future which will also affect the organization of the economic system. …” (For example, electricity and aviation.) “As a general rule, in such periods of radical economic change, speculation develops on a large scale.”

Crises of every kind – economic crises more frequently, but not only these – in their turn increase very considerably the tendency towards concentration and monopoly. In this connection, the following reflections of Jeidels on the significance of the crisis of 1900, which, as we have already seen, marked the turning point in the history of modern monopoly, are exceedingly instructive.

“Side by side with the giant plants in the basic industries, the crisis of 1900 found many plants organized on lines that today would be considered obsolete, the “pure” [non-combined] plants, which had arisen on the crest of the industrial boom. The fall in prices and the falling off in demand put these “pure” enterprises into a precarious position, which did not affect the big combined enterprises at all, or only affected them for a very short time. As a consequence of this the crisis of 1900 resulted in a far greater concentration of industry than former crises, like that of 1873. The latter crisis also produced a sort of selection of the best equipped enterprises, but owing to the level of technical development at that time, this selection could not place the firms which successfully emerged from the crisis in a position of monopoly. Such a durable monopoly exists to a high degree in the gigantic enterprises in the modern iron and steel and electrical industries, and to a lesser degree, in the engineering industry and certain metal, transport and other branches in consequence of their complicated technique, their extensive organization and the magnitude of their capital.”

Monopoly! This is the last word in the “latest phase of capitalist development.” But we shall only have a very insufficient, incomplete, and poor notion of the real power and the significance of modern monopolies if we do not take into consideration the part played by the banks.