A strong theme in Lenin's Imperialism is the 'parasitism' of the imperialist countries. For Lenin, parasitism is a defining aspect of imperialism as a stage in capitalist development, but his use of the term is both narrower and broader than Marx's:
'Monopolies, oligarchy, the striving for domination and not for freedom, the exploitation of an increasing number of small or weak nations by a handful of the richest or most powerful nations - all these have given birth to those distinctive characteristics of imperialism which compel us to define it as parasitic or decaying capitalism. More and more prominently there emerges, as one of the tendencies of imperialism, the creation of the “rentier state”, the usurer state, in which the bourgeoisie to an ever-increasing degree lives on
14 In my personal experience of meeting and discussing with many financial institutions, the relative status of each group was a direct function of the size of the financial institution, but it was always the case that the pure brokers – those who merely matched up the buyers and sellers, taking on no market dealing risk of their own as banks often did - were at the bottom of the hierarchy.
the proceeds of capital exports and by “clipping coupons”.' (Lenin, 1976a, Chapter 10, pp. 727-728)
Lenin's focus is on the international dimension of parasitism, in the relationships between countries, whereas Marx developed the concept in relation to the system as a whole. For Lenin, a distinguishing feature of parasitism is also where an imperialist country's bourgeoisie increasingly 'lives off the proceeds of capital export' and the revenues from 'clipping coupons' from investments in other countries. The former proceeds of capital export would include the profits of foreign investments in industrial and commercial enterprises, which would include profit of enterprise, but not the enterprise of the foreign investors. The dividends received are in the form of interest and also imply a separation of ownership from the process of
reproduction (Marx, 1974c, pp. 436-437). The latter form of revenue noted by Lenin referred to the interest payment or 'coupon' on the foreign bonds that had been purchased, with interest on foreign loans also included under this heading. This latter form directly corresponds with Marx's concept of parasitism.
For Marx, the concept of parasitism is based upon forms of interest-bearing capital.
Lenin, following Hobson, made the further distinction of stressing the growing importance of foreign interest payments on the money capital advanced (Hobson, 2011, Part I, Chapter IV).15 Even if the payments were not all interest payments, they included surplus value produced in other countries. It is worth noting that Lenin's argument was neither that the bulk of the interest payments came from foreign countries, nor that all the foreign countries were weak and dominated. Importantly, the logic of capital accumulation is that the advance of interest-bearing capital occurs worldwide. A 'rich and powerful' versus 'weak and dominated' country division occurs to the extent that the weaker countries will tend to have smaller, less developed economies and financial systems, with a lower volume of funds to lend, so that they may be more dependent on borrowing funds from elsewhere. However, that does not rule out rich countries lending funds to other rich countries whose financial systems may not provide what their capitalists need (for example, the euromarkets discussed in Chapter 5).
Furthermore, an international division of labour is bound to develop in the sphere of financial operations as much as in the industrial and commercial sphere.
This world division of labour in finance includes not only the purely interest-bearing forms of capital but also the money-dealing forms. Extending Marx's assessment of these forms of capital to the world economy produces a further key development. The more powerful a country's industrial and commercial relationships in the world economy, the more likely it is that its money-dealing capital operations grow too – with insurance, foreign
15 By 1899-1913, the UK had a huge inflow of net investment income averaging 6.8% of GDP (Cain and Hopkins, 2002, Table 5.8, p. 165).
exchange and trade finance. These, in turn, give a spur to the growth of interest-bearing capital, especially as the capitalists in a particular country grow wealthier. The largest financial institutions will tend to be in the richest countries. Pension payments and insurance policies are also far more prevalent than in poorer countries, while the cohort of wealthier people who can invest in funds with asset managers, who can do deals through brokers, or who have significant funds deposited with banks will also be larger.
If companies in a particular country have a competitive advantage in providing financial services, this advantage is also likely to be linked closely to their ability to tie these services together with providing advances of money capital. The early strength of the City of London market in providing long-term investment finance, mainly through the City's flotation of bonds but also its issuance of equities, was very much dependent upon London-based financiers being able to maintain a liquid market in these securities. Stock exchange jobbers could borrow short-term funds to finance their holdings of equities and bonds, and could hope to sell out of their positions when necessary with less risk of capital losses. The Bank of England indirectly supported that market as the cash provider to the banks and discount houses (Michie, 1992, p. 70, pp. 76-78). These operations were principally under the heading of interest-bearing capital, but the overall international dealing mechanism was put in place as a result of the commercial financial operations established by City practice.
Imperialism's relationship to monopoly is often discussed with regard to capital accumulation in industry that benefits larger corporations. The same thing also happens with companies operating in the financial sphere: being bigger can also mean being able to provide services or capital at a lower cost, or at least to be in a more influential market position. One factor important for giving economies of scale to a financial company is that it has fewer incremental costs for delivering a higher volume of business than does an industrial company.
It is no more costly to lend $1000m than to lend $100m, except as an extra charge for using up the bank's capital. It is no more onerous to do 50 deals per day totalling $1000m than to do 50 deals with a total value of $100m. However, for interest-bearing and money-dealing capital operations the revenues can be up to 10 times higher. The extra scale and the extra revenues may justify investing in better management systems and technology, which may involve extra costs, but even then there is negligible extra cost in 'raw materials'. While extravagant salaries in the financial sector are an important element of these companies' expenses, the salary bill is usually invariant to the volume of business in the short term (hiring and firing come later), although bonus payments may have a closer correlation with the scale of business revenues. To that extent, the advantages of the monopolistic financial company would derive from its technical and competitive advantages as discussed in Section 2.
However, the ability to get the larger scale of operations depends not only on the national
market, but also on the international market, and then the position and power of the state is a vital factor.
As noted in Section 2.1, the state is important for establishing a monetary and financial system within national borders. As capitalism expands to create a world market, the operations of financial companies expand alongside those of commerce and industry on an international basis. In this, too, they get support from their national base – if only in the national currency to which they have privileged access via the home central bank. Their home currency is commonly chosen as their area of comparative advantage over banks and financial institutions in the other countries.
For example, a US bank setting up in France will do so initially to service US companies that have operations in France. While it will have access to euro currency
operations and European Central Bank finance, directly or via the Banque de France, since it is accepted as part of the local monetary system, it will have no advantage in the euro
compared to local French banks and may not even be allowed to take euro deposits from non-corporate residents. Normally, it will also have less capacity to fund euro operations than the principal French or euro-based banks, since that is not its home territory, nor the site for the allocation of a large share of its capital. However, the typical US bank will in general be able to offer better (larger-scale and/or cheaper) access to US dollar funding and financing operations than French banks, both to US companies and to other companies, because of its links into the US banking system and the funding operations of the US Federal Reserve. In the same way, this will be true for other nationality banks setting up in a foreign country.
Financial companies thus have advantages in expanding their operations when their countries have a dominant position in global trade and to the extent that international transactions are denominated in their national currencies. Financial power rests on having privileged access to credit markets and the ability to undertake large-scale transactions. This is obviously a function of the size and operations of particular financial companies, but it is also closely related to the home market from which these companies originate. This brings the discussion back to the second 'imperial set' of features introduced in Section 2.1. Such aspects of economic power are external to a particular company in the sense that they do not depend on its productive capabilities. However, they are a function of the economic power of the states to which they belong.
The form of economic power I focus upon here is not that which secures favourable trade and investment deals with other countries – issues more usually discussed under this heading – but one that operates far less overtly and appears to others simply as having to use the prevailing infrastructure for conducting (financial) business. Financial power, or the lack
of it, is most evident in a crisis, as a number of countries in Asia found in 1997-98 and as others have found before and since. However, the mechanism examined in this thesis concerns the more prosaic, day-to-day, regular operations of the financial system, not what can appear to be exceptional crises. The cumulative results of the regular, dull mechanism are striking. Examples of this form of power and privilege are getting access to large-scale funding, whether through the banking system or via the stock market, or to the currency or currencies used for international business transactions. This is part of the broader mechanism by which an imperialist country can appropriate value from other countries through the functioning of the financial system. It is not confined to the narrow definition of parasitism discussed in section 2.6. Chapters 4 and 6 examine this question in detail, showing that the US is far from being the sole beneficiary of this power.