Lenin's Imperialism: Capitalism's Highest Stage Explained

Introduction: War, Capitalism, and Imperialism

Lenin begins Imperialism: The Highest Stage of Capitalism by describing World War I as an imperialist war, which he defines as a predatory war to plunder and annex — a war for the benefit of capitalistic moneyed interests in a struggle for monopolistic control. He sees the economic system of capitalism as "a world system of colonial oppression" that makes slaves of the majority of the world's people to profit a handful who control the wealth. The war, he states, was to decide which financial "marauders" — the Germans or the English — would gain the lion's share of the world's wealth. He argues that as long as imperialism exists, peace and reform will be impossible.

Meanwhile, tens of millions of downtrodden people are "oppressed, deceived and duped," their clear sight obscured by the contradictions of imperialism and the revolutionary crisis brewing all over the world. Once their eyes are opened, Lenin predicts (writing in 1916) a proletariat revolution will take place. He believes that imperialism, which he sees as a final stage of capitalism, signals the decay of the system — something like the crisis stage of an illness when the body begins to lose ground and death approaches. Lenin equates capitalism with parasitism, and parasitism implies a disease. The parasites are the "less than one-tenth of the inhabitants of the globe...of very rich and very powerful states which plunder the whole world...." (p. 13).

Because of enormous profits in exports — billions of dollars over and above huge profits gained at home — capitalists have money to bribe the "labor aristocracy," who will side with them in a revolution because the rich, through bribes and incentives, allow the labor aristocracy to live comfortably. Therefore, Lenin believes the roots of the system must be exposed and its political and sociological implications recognized. This is his stated purpose for writing the book. Imperialism, he says, is the signal that social revolution is imminent. Lenin's thesis is that capitalism has evolved through clear and successive stages of development into imperialism.

From Free Competition to Monopoly

According to Lenin, the first stage of capitalism was the development of free competition at the beginning of industrialization around 1860. However, this stage — which he refers to as "old" capitalism, where manufacturers competed with each other for buyers of their goods — lasted only about forty years. The old style gave rise to ever-larger enterprises in which fewer and fewer big companies began to control more and more production. Lenin calls this a concentration of production.

Monopolies were the intended result. They were often established through the development of cartels, trusts, and syndicates — large combinations of enterprises that banded together to limit competition and fix prices. Cartel members agree on conditions of sale, terms of payment, and the amount of goods to be produced. They divide the market among themselves, fix prices, and divide the profits (p. 22).

Lenin argues that cartels have become part of "the foundation of economic life," so that people now accept without question that "large spheres" of industry have been removed from the realm of free competition (p. 21). He supports this with statistics, noting that the United States had 185 trusts in 1900 and 250 by 1907. He further states that "Not infrequently cartels and trusts concentrate in their hands seven or eight tenths of the total output of a given branch of industry" (pp. 22–23). The resulting transformation of free competition into monopolies is "a general and fundamental law of the present stage of development of capitalism" (p. 20).

When competition is transformed into monopoly, the focus of industry shifts to technical proficiency and reducing the cost of production. Workers are sometimes offered bonuses to generate inventions and ideas for greater, more efficient productivity — what Lenin calls part of the "socialization of production" (p. 25). The old free competition between manufacturers is gone at this point. Concentration has reached the stage where combines can estimate sources of raw materials and capture control over them, forcing out competitors who cannot obtain those materials. The combines divide up the market between themselves, monopolize skilled labor, and secure the best engineers. The organization and cooperation amounts to an established social order. Despite this socialization, however, wealth and control remain in the hands of a few private owners.

Lenin states that cartels and combines are so powerful they throttle smaller industries. He lists eight methods cartels use to suppress competition: (1) stopping the supply of raw materials; (2) stopping the supply of labor through corrupt "alliances" with trade unions that permit members to work only for cartels; (3) cutting off deliveries; (4) closing trade outlets; (5) making agreements with buyers to trade exclusively with cartels; (6) cutting prices to ruin outside companies and then raising them once those companies are destroyed; (7) stopping credit; and (8) boycott. At this stage, Lenin concludes, "the big profits go to the 'geniuses' of financial manipulation" (p. 27). In his estimation, the most successful businessperson is no longer the one who understands the market and customers' needs, but the one who has secured a dominant position through unscrupulous practices.

Banking, Finance Capital, and the Financial Oligarchy

At this point Lenin turns to the pivotal role of banks in the "new capitalism." Beginning around the turn of the twentieth century, banks began to merge; smaller banks were absorbed and subordinated into bigger ones. As this happened, the function of banks changed. Lenin states that "The principal and primary function of banks is to serve as an intermediary in the making of payments," including extending credit. But a transformation took place in which numerous intermediaries were reduced to a handful of monopolists. Small banks were pushed aside by big banks or converted into branches of large banking groups. These groups were no longer intermediaries but combines of monopolists. All capital and revenues became centralized, first nationally and then internationally. This "concentration of capital...greatly changed the significance of banks" (p. 35).

Bank operations grew to such enormous dimensions that "a handful of monopolists control all the operations, both commercial and industrial, of the whole of capitalist society" (p. 35). Banks know the exact financial situations of various capitalists and can control them by restricting or enlarging their credit — ruining a client or causing their capital to increase "rapidly to enormous dimensions" (p. 36). In either case, the capitalist is dependent on the bank. Where once banks were merely intermediaries, they are now able to "intensify and accelerate the process of concentration of capital and the formation of monopolies" (p. 37). Big industrialists sit on the boards of banks and share in their management, deepening the inter-relationship between banking and industry.

"Finance capital," the most common form of capital, is raised by the sale of securities — stocks, bonds, and so forth — to company shareholders. People who run the company are supposed to be responsible to the shareholders and to safeguard their money, but this is not always what happens in practice. Lenin argues that the "holding system" produces a financial oligarchy: a system in which a few control everything for corrupt and selfish purposes.

The holding system enables monopolists "to resort with impunity to all sorts of shady tricks to cheat the public, for the directors of the parent company are not legally responsible for the subsidiary companies, which are supposed to be 'independent'" (p. 49). Balance sheets are typically indecipherable for shareholders, and this is how the directors want it: "The simplest and, therefore, most common procedure for making balance sheets indecipherable is to divide a single business into several parts by setting up subsidiary companies" (p. 50).

Subsidiary companies are so commonplace, Lenin argues, that it would be difficult to find an important company that did not use them for various legal and illegal advantages. He concludes that "Finance capital, concentrated in a few hands and exercising a virtual monopoly, exacts enormous and ever-increasing profits from the floating of companies, issue of stock, state loans, etc., tightens the grip of financial oligarchies and levies tribute upon the whole of society for the benefit of monopolists" (p. 53). He points out that four countries — England, France, Germany, and the United States — owned 80 percent of the world's finance capital in 1917; in his view, the rest of the world was therefore subjugated, indebted to, and tributary to those four "international banker countries."

Conclusion: Capitalism's Capacity to Mutate

The world today is a different place from what it was in Lenin's day. Computer technology and the advent of the Information Age are producing as much upheaval and social change as the industrial revolution did, and with it a change of consciousness. Capitalism is likely to change, but not to die as Lenin predicted.