Finance Capital, Hilferding 1910


Finance capital and classes

We have seen how the process of agglomeration in capitalist monopolies gives capital an interest in strengthening the power of the state. At the same time capital acquires the power to dominate the state, both directly through its own economic power, and indirectly by subordinating the interests of other classes to its own.

The development of finance capital changes fundamentally the economic, and hence the political, structure of society. The individual capitalists of early capitalism confronted each other as opponents in a competitive struggle. This conflict prevented them from undertaking any common action in politics as in other spheres. It should be added that the needs of their class did not as yet call for such common action, since the negative attitude of industrial capital to the state did not allow it to come forward as the representative of general capitalist interests. Instead, individual capitalists defended their own interests as citizens of the state. The great problems which agitated the bourgeoisie were essentially constitutional questions, such as the establishment of a modern constitutional state ; problems, that is to say, which affected all citizens alike, uniting them in a common struggle against reaction and the vestiges of feudal and absolutist-bureaucratic rule.

But the situation changed as soon as the triumph of capitalism unleashed the opposing forces within bourgeois society. The petty bourgeoisie and the workers were the first to rebel against the rule of industrial capital. Both groups launched their attack in the economic field. The freedom of enterprise seemed to be threatened by the petty bourgeoisie which demanded combinations reminiscent of the guilds, and by the workers who insisted on legal regulation of the labour contract. It was now no longer a matter of citizens, but of manufacturers and workers, or manufacturers and craftsmen. Political parties now directed their activities openly in terms of economic interests, whereas these were previously concealed behind the slogans of reaction, liberalism, and democracy, through which the three classes of early capitalism - the landowners with their hangers-on at court, in the bureaucracy and in the army; the bourgeoisie; and the combination of petty bourgeoisie and workers - disguised their interests. In the struggle over the industrial system three groups of economic organizations emerged: associations of industrialists, co-operatives and workers' organizations, the first two frequently encouraged by the state, which invested them with legal powers in respect of some of their functions. But while the co-operatives and the trade unions soon became united in the pursuit of common aims, the employers' associations remained divided by conflicts over commercial policy. Furthermore, industrial capital came into conflict politically with commercial and loan capital.

Commercial capital was far more favourably inclined to an increase in the power of the state than was industrial capital, because wholesale trade, especially overseas trade and notably the colonial trade, sought the protection of the state, and yielded readily to a dependence upon privileges. Loan capital, during the period of early capitalism, supported the power of the state with which it had to transact its most important business - state loans - and it was entirely free of that yearning for peace and tranquillity which permeated industrial capital. The greater the financial needs of the state, the greater was its influence, and the more abundant its loans and other financial transactions. These were not only the basis of its direct profits ; they were also the backbone of stock exchange transactions, and in addition an important means by which the banks could obtain state privileges. Thus, for example, the privilege of issuing bank notes granted to the Bank of England is closely connected historically with the debt relationship between the state and the bank.

Cartelization, by unifying economic power, increases its political effectiveness. At the same time it coordinates the political interests of capital and enables the whole weight of economic power to be exerted directly on the state. By uniting all capital interests it confronts the state as a far more cohesive body than was the fragmented industrial capital of the era of free competition. Moreover, capital now finds a much greater readiness to support it among other classes in the population.

This must appear strange at first sight, because finance capital seems to be opposed to the interests of all other classes. After all, as we have seen, monopolistic profit is a deduction from the income of all other classes. Cartel profit on industrial products increases the cost of means of production in agriculture and reduces the purchasing power of its income. The rapid development of industry deprives agriculture of labour power and creates a chronic shortage of workers in rural areas along with a technological and scientific revolution in agricultural production. This conflict was bound to make itself increasingly felt so long as the tendency of finance capital to raise the prices of industrial products was not accompanied by a similar tendency in the case of agricultural products.

When capitalist development first got under way it encountered opposition from the agricultural population. Industry destroys peasant domestic production and transforms the essentially self-sufficient peasant economy into an agricultural business geared to the sale of its product on the market. The peasants have to pay a high price for that transformation, and they are therefore hostile to industrial development. But the peasantry is a class in modern society which is incapable of action by itself. Lacking geographical cohesion, isolated from urban culture, and with an outlook confined to narrow parochial interests, it is for the most part only capable of political action when it follows the lead of other classes. At the beginning of capitalist development, however, it stands opposed to the very class which has the greatest power to act in the countryside, the large landowners, who have a direct interest in the expansion of industry. They depend upon the sale of their products, and capitalism creates a large domestic market for them as well as giving them the opportunity to develop agricultural industries such as distilling, brewing, starch and sugar production. This interest of the large landowners is very important because it provides support for capitalism in its early stages, and also ensures the support of the state. Mercantilist policy is also always supported by the landed proprietors, who are the product of the capitalist transformation of landownership.

The further development of capitalism soon destroys this community of interest as a result of the struggle against mercantilism and its executive agent, the absolutist state. This struggle is waged directly against the landed proprietors who largely dominate the state and occupy the highest posts in the army, the bureaucracy and the court, boost their income by economic exploitation of the state, and are the upholders of state power in the rural areas. This conflict becomes more intense after the defeat, of absolutism and the creation of the modern state. The development of industry reinforces the political power of the bourgeoisie and threatens the landed proprietors with total political impotence. Political antagonism is then supplemented by an intensification of economic conflict. The development of industry depopulates the countryside, creates a shortage of manpower, and finally turns what was an interest in exports into an interest in imports. In this way there arises the conflict over commercial policy which ends, in England, with the defeat of the landed interests. On the continent, however, the common interest in protective tariffs prevents the conflict from coming to a head. As long as backward industrial development on the continent obliges the large agricultural estates to export, the large landowners maintain a friendly attitude - within certain limits - towards industry and especially towards trade. They support free trade until the emergence of an interest in imports converts them to protectionism and brings them closer to heavy industry in economic policy. But the same industrial development which strengthens them in Germany by raising the prices of agricultural products and increasing ground rents, also plants the seeds of a new conflict. The upsurge of industry, before cartelization, reinforces its commitment to free trade and commercial agreements, and a danger arises that its power will become sufficiently great for its interest in low grain prices to prevail. Industrial development thus becomes a threat to the landed interests; one which is increased when the same development which is transforming Europe into an industrial state lets loose agricultural competition from America which threatens European agriculture with an abrupt fall in grain prices, rents and land values. The development of finance capital, by changing the function of the protective tariff, reconciles these conflicting interests and establishes a new community of interest between large landed property and cartelized heavy industry. Agriculture now has a secure level of prices, and the further progress of industry can only raise this price level. It is no longer the conflict with industry, but the labour question, which is the principal concern of landowners. Resisting the demands of workers is now their most urgent political problem, and hence they also oppose strongly the efforts of industrial workers to improve their conditions because every such improvement would make it more difficult to retain the agricultural labour force. Thus a common hostility to the labour movement brings these two most powerful classes together.

At the same time the power of the large landed proprietors increases as a result of the disappearance, or at least the considerable abatement, of their conflict with the small landowners. The old historic conflict between them has long been settled by the abolition of feudal imposts on land. The period of falling grain prices as well as the difficulties of the labour problem have halted almost completely the expansion of the large estates at the expense of small land-holdings. On the other hand, the common struggle for an agricultural tariff has united the large and small landowners. The fact that the small farmers had a greater interest than the large ones in protection against imports of meat and livestock naturally did not in any way prevent them from co-operating, since a protective tariff could only be achieved by a common struggle. Another factor to be considered is the specific effect of an agricultural tariff on the price of land. The rise in the price of land is of course harmful to agriculture as such, but it is very advantageous to the individual owner of agricultural land. The common struggle with respect to commercial policy thus united all strata of agricultural proprietors in countries which needed to import agricultural products, and so gave finance capital the support of the arable farmers. The medium and small landowners participated all the more fully in these struggles as the rapid development of co-operatives enlarged the commercial market for peasant agriculture and reduced production for the family's own needs. At the same time, the larger proprietors very easily acquired a leading position in these co-operatives since on the one side no stronger interest group opposed them, and on the other they possessed the necessary experience, intelligence, and authority. This, in turn, reinforced the leading role of the large proprietors in the countryside and led to the politics of the arable farming areas being increasingly dominated by them.

The degree of unity among the propertied interests has also tended to increase because their sources of income are becoming more diversified. The tariff policy has rapidly increased income from ground rent, especially during the last decade when overseas agricultural competition became less intense, partly because of the rapid industrial development of the United States.[1] and partly because the agricultural production of the Central and South American states, though rapidly increasing, cannot keep pace with the increase in demand. The increase in demand meant, of course, that the larger proprietors had surplus income at their disposal, but there were difficulties in the way of using it to increase agricultural output, particularly because the distribution of land ownership presented considerable obstacles to the expansion of the cultivable area. These obstacles might be overcome if the upward trend of grain prices were sufficiently vigorous and enduring, thus permitting land prices to rise correspondingly, and (this being a second important factor) if the large landowners were dealing with an impoverished peasantry which had no alternative but to sell its land. But the period from the mid 1870s to the middle of the first decade of the twentieth century was a favourable one for the peasantry. In fact, it was the large wheat producers and cattle breeders who bore the full brunt of overseas competition and who were most adversely affected by the shortage of labour, whereas the great increase in urban demand for the main products of the small farmer -- milk, meat, vegetables, fruit, etc. - and the lesser impact of the labour problem, favoured the medium and small farms. The attempt of the large farmers to extend their holdings, which could only be vigorously pursued when the falling trend of grain prices was reversed, thus met with resistance from powerful medium and small farmers whose Main products enjoyed constantly rising prices. Hence this surplus income had to be applied primarily to profitable investment in industry. This was also encouraged by the fact that the tumultuous boom which began in 1895 increased the rate of profit in industry, at any rate far above that in agriculture. Such investment was all the easier because the development of the share system created an appropriate form for investments from other spheres of the economy, while the concentration and consolidation of large-scale industry greatly reduced the risk for outsiders. There was also a rapid development of agricultural industries proper which the state, through its tax legislation, helped to become monopolies; an equally rapid development of other industries which were established in the countryside ; and finally, in the case of large landowners, the age-old association between agriculture and mining. All these factors transformed the class of large landed proprietors from one which derived its income from ground rent into one which received its income in part, and to an increasing extent, from industrial profit, from participation in the gains of 'mobile capital'.[2] On the other side, finance capital became increasingly interested in the mortgage business. Other things being equal, it is the level of land prices which is crucial for the expansion of these activities, since the higher the price of land, the larger the amount of mortgage indebtedness can be. A rise in agricultural tariffs thus became a matter of great interest for a not insignificant part of the banking community. At the same time the increased incomes of landowners and tenants tended to attract new capital investment in agriculture and more intensive cultivation; this in turn increased the demand for farm equipment and expanded this particular field of investment for bank capital.

Furthermore, the desire of urban capitalists to enhance their social standing has led them to acquire landed property, or else - and here again we see the principle of personal union - to ally themselves with the large landed proprietors through intermarriage, the most favoured form of social climbing and of defence against the dispersal of property.

Thus the separation of the ownership function from the management of production, brought about by the joint-stock system, makes possible the solidarity of property interests, and this possibility becomes a reality with the increase of ground rent on one side and of extra profits in industry on the other. 'Wealth' is no longer differentiated in terms of the source of income, according to its origin in profit or rent, but now flows from participation in all the sectors of the economy among which the surplus value produced by the working class is distributed.

The connection with the large landowners greatly augments the capacity of finance capital to dominate the state. With them it has won over the elite, and hence on most issues the whole countryside. This support is not unconditional, of course, and it is costly; but the costs, in the form of higher prices for agricultural products, are easily compensated by the extra profit which finance capital obtains through its domination of the state, which is a conditio sine qua non for the pursuit of an imperialist policy. The support of the large landed proprietors also assures finance capital of support from the class which occupies most of the highest and most influential offices in the state and controls the bureaucracy and the army. At the same time imperialism involves a strengthening of the state power, an expansion of the armed forces and the bureaucracy in general, and thereby a reinforcement of the community of interests between finance capital and the large landowners.

While finance capital has been supported by the decisive stratum in the countryside in its effort to dominate the state, it was also helped in this attempt, at an earlier stage, by the development of class conflicts among the industrial producers. From the outset finance capital is in conflict with small and medium-size capital. As we have seen, cartel profit is a deduction from the profits of non-cartelized industry. It is in the interest of the latter, therefore, to oppose cartelization. But this interest clashes with others. Industries which are not, or not yet, capable of exporting, have a common interest with cartelized industries in the protective tariff, which can be achieved only through combined action since the cartels are the most powerful protagonists of the tariff. But the formation of a cartel undoubtedly accelerates the monopolistic tendencies in other enterprises, and it is just the most powerful and competitive capitalists in the industries which have not yet been cartelized who welcome the formation of cartels, which promote concentration in their own industry and so speed up the process of cartelization. Their way of combating other cartels is to form a cartel of their own, not in the least to fight for free trade. What they want is not free trade, but the opportunity to take advantage of the protective tariff through their own cartel.

It should also be noted that instances of medium and smaller capitalists becoming indirectly dependent on finance capital are increasing. We have seen that this is the case to a very great extent in capitalist commerce. It is true that this produces a conflict while the process is still going on, but once it has-been completed it is precisely these groups which come to identify their interests with the cartel. The merchants who today are the agents of the coal syndicate or of the organization of alcohol producers are now only interested in strengthening the syndicate because it fends off the competition from outsiders, and in expanding it in order to increase their sales. The numerous and increasing cases of indirect dependence, in which industrialists are kept going by a department store or a large industrial concern, have the same consequences, for the growth of cartelization in general creates an identity of interest for all owners of capital. The participation of the small and medium capitalists in large-scale industry leads in the same direction. As a result of the possibilities opened up by shareholding, profit accumulated in other branches of industry is partly invested in the heavy industries, first because they are developing more quickly due to the relatively more rapid growth of the production of means of production, and second because cartelization is most advanced here and the rate of profit at its highest.

Finally, the policy of finance capital involves the most vigorous kind of expansion and a constant search for new spheres of investment and markets. But the more rapidly capitalism expands, the longer are the periods of prosperity and the more short-lived the crises. Expansion is the common interest of all capital, and in the era of protectionism it is only possible in the form of imperialist expansion. It should be added that the longer a period of prosperity lasts the less severe is the competition felt by domestic capital in its own country, and the less danger there is of the smaller capitalists succumbing to the competition from the larger ones. This is true for smaller capitalists in all industries, including those which are cartelized. For it is periods of prosperity which are most dangerous for the existence of cartels, while conversely a depression, involving an intensified competitive struggle at home and large quantities of idle capital, is a time when the drive for new markets is most intense.

After being disputed for decades the Marxist theory of concentration has now become a commonplace. The decline of the middle strata in industry cannot be halted. But what interests us here is not so much the decline in their numbers, resulting from the destruction of small businesses, as the structural change which modern capitalist development has brought about in small enterprises both in industry and commerce. A great many of these small businesses are auxiliaries of large enterprises and therefore interested in the latter's expansion. Repair shops in the cities, installers of equipment, etc., depend upon large-scale factory production which has not yet taken over such subsidiary work. The enemy of all repair business of whatever kind is not the factory but the handicrafts which once performed this type of work. These strata are therefore in conflict with the working class, not with big business.

An even larger proportion of small enterprises is indeed only seemingly independent; in reality these businesses have become 'indirectly dependent upon capital' (Sombart) and therefore 'enslaved to capital' (Otto Bauer). They are a declining stratum with little prospect of surviving, lacking organizational ability, and completely dependent on the large capitalist enterprises whose agents they are. In this category, for example, belong the swarm of small innkeepers who are nothing more than sales agents for the breweries, the owners of shoe shops which are fitted out by some shoe factory, etc. It also includes the numerous seemingly independent cabinet makers who work for furniture stores, the tailors who work for clothing manufacturers, etc. It is unnecessary to examine these phenomena more fully here, since Sombart has provided an extensive and striking description of them in Der moderne Kapitalismus.

What is important, however, is that in the course of this development these strata have adopted a different political attitude. The conflict of interest between small business and big business, exemplified in the struggle of the handicrafts against the capitalist enterprise in the early stages of capitalism, has been decided in all essential respects. That struggle drove the old middle class to assume an anti-capitalist attitude. The middle class sought to postpone its own defeat by combating freedom of enterprise and by imposing restrictions on the large capitalist enterprises. Legislation was invoked to prolong the existence of the middle class by protecting handicraft workers, reintroducing guild regulations and apprenticeship training, and passing discriminatory tax laws. In this struggle against big capital the middle class received the support of the rural classes, which at that time were equally inclined towards anti-capitalist attitudes. But it encountered the hostility of the working class, which was bound to see these restrictions on productivity as a threat to its vital interests.

The outlook of small business today is fundamentally different. The competitive struggle has been settled in all essential respects so far as competition between the handicrafts and capital is concerned. The struggle over concentration now takes place within the capitalist sphere itself, in the form of a struggle between small and medium business firms and the giant concerns. The small businesses are now essentially only annexes of large enterprises, and even where their independence is not purely fictitious they are only auxiliaries of large firms, as is the case, for example, with firms which install lighting equipment, or the modern urban stores which sell factory products. None of them engage in competition with large-scale industry, but are interested, on the contrary, in seeing it expand as much as possible because they work for it as repair or auxiliary businesses, as dealers or agents. This does not, of course, exclude competition among themselves, nor a movement towards concentration, which also occurs here. But this struggle no longer gives rise to any general anti-capitalist outlook among them; on the contrary, they see their salvation in a still more rapid development of capitalism, which has produced them and broadens their opportunities. On the other hand, in so far as they employ workers they come into increasingly bitter conflict with the working class, because the power of workers' organizations is felt most strongly in small businesses.

But even among those strata where the small business still predominates, as for example in the building industry, the conflict with big capital is becoming less bitter. Not only because these entrepreneurs, who depend upon bank credit, are thoroughly imbued with the capitalist spirit, nor simply because their opposition to the workers is becoming more intense, but also because whenever they present specific demands they meet less resistance, and quite frequently even receive support, from the biggest capitalists. The battle for and against freedom of enterprise was waged with particular intensity between the master craftsmen and the small and medium manufacturers of consumer goods. Tailors, shoemakers, wheelwrights and building craftsmen on one side, confronted textile and clothing manufacturers, etc. on the other. But today, when this conflict has been settled in essentials, the protection of handicrafts does not affect any of the vital interests of the most advanced branches of capitalist enterprise. The coal syndicate, the steel combine, the electrical or chemical industry, are more or less indifferent to the kind of demands the middle class puts forward today. The interests of the small and medium capitalists, which may suffer as a result, are not their concern, or at least not directly. On the other hand, the people who make these demands are the most vigorous and bitter opponents of workers' demands. In these spheres of small-scale production competition is at its most bitter, and the rate of profit at its lowest. Every new social reform, every trade union success, spells doom for a host of these enterprises. It is here that the workers find their most furious antagonists, and big business and the big landed interests their best mercenaries.[3]

The same interest also assures the middle class of support from the farming class, and so the old conflict of interest between the bourgeoisie and the petty bourgeoisie is disappearing, and the latter becomes a political praetorian guard of big business. The fact that the middle class has not improved its lot even after its demands have been satisfied changes nothing in this situation. Where the state has set up compulsory organizations for small businesses they have always been a complete fiasco. Even where small business is viable, the co-operatives and guilds (for example in the food trade in the big cities) have become quasi-cartels engaged in a common effort to plunder consumers, as has been the case with butchers and bakers. Or else they are employers' associations, whether membership is direct or the guild members as a body join a separate employers' association, which remains closely dependent upon the guild.[4]

However, it is precisely the impossibility for the middle class, unlike the old-time craftsmen, to put forward significant economic demands of its own, which makes it incapable of independent political action and obliges it to act as a political hanger-on. Denied the possibility of pursuing its own class policy, it falls victim to any kind of demagogy which can exploit its hostility to the working class. From being the economic antagonist of the workers it becomes their political opponent, and sees political freedom, which it can no longer utilize itself, as aiding and abetting the strengthening of the political, and hence economic, power of the working class. It becomes politically reactionary, and the smaller its household the greater the value it places upon remaining master of it. Thus it calls for a firm hand in government, and is ready to support any coercive policy as long as it is directed against the workers. Thus it becomes the enthusiastic promoter of strong government, worshipping military and naval might and an authoritarian bureaucracy. In this way it carries out the aims of the imperialist classes and becomes their most valued comrade-in-arms. Imperialism in turn provides it with a new ideology; through the rapid expansion of capital it hopes to see an improvement in its own business, greater opportunities for employment, an increase in the purchasing power of its customers - all of which makes it an enthusiastic fellow-traveller of the imperialist parties. At the same time it is also most susceptible to the means of influencing elections, especially business boycotts, and its weakness makes it a suitable object of political exploitation.

Of course it begins to have doubts when the bill is presented, and the harmony between itself and big business is disturbed for a time. But the taxes are borne mainly by the workers, and even if indirect taxes fall more heavily on the middle class than on big business its power of resistance is nevertheless too weak to dissolve the bond between them. Only a small part of the middle class breaks away from its support of the bourgeoisie and allies itself with the proletariat. Apart from the seemingly independent self-employed, who are actually engaged in domestic industry, most of these belong to the urban strata of small tradesmen who depend on working class customers, and either for business reasons or because they have acquired a working class outlook through constant association with workers, join the workers' party.

An entirely different position is taken by those strata which have come to be described recently by the unfortunate term 'new middle class'. These are the salaried employees in commerce and industry, whose numbers have increased greatly, and who have become the actual managers of production in a hierarchical system, as a result of the development of large-scale production and the corporate form of enterprise. This is a stratum which has grown even more rapidly than the proletariat. The advance towards a higher organic composition of capital involves a relative, and in some cases, or in some branches of industry, an absolute decline in the number of workers. This is not necessarily the case with technical personnel, whose numbers tend rather to increase with the size of the firm, even if not proportionately. For the advance to a higher organic composition of capital means an advance toward the automatic plant, and a change to more complicated machinery. The introduction of new machines makes human labour power superfluous, but it is far from making technical supervision superfluous. The expansion of the mechanized, large-scale capitalist concern is therefore a vital interest of all grades of technical personnel and makes the salaried employees in industry most fervent supporters of large-scale capitalist development.

The development of the joint-stock system has a similar effect. It separates management from ownership and makes management a special function of more highly paid wage earners and salaried employees. At the same time, the higher posts become very influential and well paid positions into which all employees apparently have the opportunity to rise. The interest in a career, the drive for advancement which develops in every hierarchy, is thus kindled in every individual employee and triumphs over his feelings of solidarity. Everyone hopes to rise above the others and to work his way out of his semi-proletarian condition to the heights of capitalist income. The more rapidly corporations have developed, and the larger they have become, the greater also becomes the number of positions, especially the influential and well paid ones. The white collar employees see only this harmony of interests, and since every position seems to be merely a stepping-stone to a higher one they feel less interest in the struggle over their own labour contract than in the struggle of capital to expand its sphere of influence.

This is a stratum which in terms of its ideology and its origins forms part of the bourgeoisie, whose ablest or most ruthless representatives are still rising into the capitalist strata, and who still to some extent have a higher standing than the proletariat because of their income. Members of this stratum come more frequently into contact with capitalist directors, who keep them under close scrutiny and select them very carefully. Any attempt on their part to organize is fought fiercely and implacably. Although development will eventually drive these strata, who are indispensable to production, onto the side of the proletariat, especially when power relations begin to fluctuate, and the power of capitalism, though not yet broken, no longer appears invincible, they are still at present not particularly active in any independent struggle.

Future developments will no doubt gradually change this passive attitude. The decline in opportunities to attain an independent position, which is a consequence of the movement of concentration, obliges the small businessmen and petty capitalists more and more to send their sons into careers as employees. At the same time, as the number of such employees grows, the expenditure on their salaries becomes a more important item in costs, and a tendency arises to depress salary levels. The supply of this kind of labour power is increasing rapidly, but on the other hand there is an increasing division of labour and specialization, even for this highly skilled labour power, in the large firms. Part of the work, which is mechanical in character, is done by less qualified workers; a large modern bank, an electrical corporation, or a department store employs a great many white-collar workers who are little more than trained routine workers, and whose higher education, if they have had one, is more or less a matter of indifference to the employer. They are constantly in danger of being replaced by unskilled, or semi-skilled workers, and women workers offer strong competition, which they have to fight against when the price of their labour power is being determined. Their level of living is declining, and they are only too painfully aware of the fact because they are accustomed to bourgeois pretensions. Furthermore, as the giant concerns expand, it is largely these badly paid positions which increase in number, while there is no corresponding increase in the higher posts. The growth in numbers of giant modern concerns has rapidly increased the demand for all kinds of white-collar workers, but the expansion of existing concerns has by no means involved a similar increase. Moreover, with the consolidation of the joint-stock companies the most remunerative positions are increasingly monopolized by the stratum of big capitalists and the career prospects for white-collar employees deteriorate greatly.[5]

The consolidation of industries and banks into large monopolies brings a further deterioration in the situation of salaried employees. They now confront an overwhelmingly powerful capitalist group; their mobility, and hence the prospect of finding a better job by taking advantage of competition among entrepreneurs for the best employees, becomes uncertain even for the most able and talented among them. The number of salaried employees may also be reduced absolutely as a result of combinations. In the main, this affects the number of highly paid jobs, because management can be streamlined. The rise of combinations, particularly trusts, reduces the number of the highest technical positions, and there is also an absolute reduction in the number of salesmen, commercial travellers, advertising personnel, etc.[6]

But it takes a considerable time for these consequences to make themselves felt in the political attitude of this stratum. Originating in, and recruited from, a bourgeois milieu they continue to adhere for the time being to their old ideology. This is a stratum in which the fear of sinking into the proletariat keeps alive the determination not to be taken for a proletarian, a stratum in which hatred of the proletariat and contempt for proletarian methods of struggle are at their most intense. The commercial clerk- regards it as an insult to be called a worker, whereas a privy councillor, and occasionally even the director of a cartel, enthusiastically claims -this title for himself, though, of course, what the former fears is the identification with a lower social stratum, whereas the latter puts the emphasis on, the ethical value of work. At all events, this ideology keeps the salaried employees at a distance from proletarian views for the time being. On the other hand, the development of corporations, and especially of cartels and trusts, enormously accelerates the pace of capitalist development. The rapid development of the large banks, the expansion of production brought about by the export of capital, the conquest of new markets, all serve, to open up new fields of employment for salaried employees of all kinds. Still divorced from the struggle of the proletariat, they see their best prospects in the expansion of capital's sphere of activity. More educated than the middle class which I described earlier, they are more easily seized by the ideology of imperialism, and because of their interest in the expansion of capital, they become prisoners of its ideology. Since socialism is still ideologically alien to them, and too dangerous in practice, they accept the ideology of imperialism as promising a way out, which offers the prospect of advancement in their careers and increases in their salaries. Although its social position is weak, this stratum of salaried employees has considerable influence in forming public opinion, through its connections with petty capitalist circles and its greater facility in public activities. These are the subscribers to specifically imperialist publications, partisans of racialist theory (which they frequently interpret in terms of competition), readers of war novels, admirers of colonial heroes, agitators and electoral fodder for finance capital.

But this is not a definitive position. The more the expansion of capitalism encounters obstacles which slow down its rate of growth, the more complete the process of cartelization and trustification, and hence the growing predominance of those tendencies which produce a deterioration in the position of salaried employees, so the opposition of these strata to capital (for which they perform the most important as well as the most useless functions in production) will increase. At the same time there will be an increase in the numbers of those who even now constitute a majority, the employees who will remain permanently in subordinate positions, badly paid, working excessively long hours, and reduced to the position of routine workers for capital; and they will be driven increasingly to take up the struggle against exploitation alongside the proletariat. The greater the strength of the proletarian movement and the better its prospects of victory the sooner this will happen.

In the end their common interest in halting the advance of the working class increasingly unites all sections of the bourgeoisie. But the leadership of the struggle has long since passed into the hands of big business.


[1]Wheat exports from the United States constituted 33 per cent of total wheat production in 1901, 29 per cent in 1902, 19.5 per cent in 1903, and 10.5 per cent in 1904. See I. M. Rubinow, Russia's Wheat Trade.

A report of the Department of Commerce and Labor in Washington (cited by M. Schwab, Chamberlains Handelspolitik, p. 73) states: 'The fall in exports of bread grains, foodstuffs and cotton which has taken place in recent years, and especially in the last year, 1903-4, cannot be ascribed either to poor harvests at home or to low prices abroad. Last year the output of corn, wheat and cotton was not below average, and in fact, in most instances, exceptionally high. The main reason for the steady decline in the proportion of farm products in total exports is obviously the increasing demand in the United States. The quantity of wheat retained in the country for internal consumption up to 1880 never reached 275 million bushels, but in 1883 it exceeded the 300 million mark and continued to increase steadily with the growth of population. It was more than 400 million bushels in 1889, 500 million bushels in 1902, and in the fiscal year ending 30 June 1904 it reached 517 million bushels. This is the largest figure to date.'

`Between 1880 and 1900, the population of the United States increased from 50 million to 76 million, or 52 per cent, whereas the wheat acreage of the republic only increased from 34 million to 42 million, or 23.5 per cent. The entire cereal growing area increased only from 136 to 158 million acres, or 16.5 per cent' (ibid., p. 72).

[2]For Prussia, see K. Kühnert, 'Das Kapitalvermögen der selbständigen Landwirte in Preussen', in Zeitschrift des königlich-preussischen statistischen Landesamtes, vol. 48, 1908. This is based on Prussian statistics showing the assessment of income tax and supplementary taxes for 1902 in respect of landowners paying a minimum of 60 marks in land tax, thus covering the really independent farmers. 'Actual capital wealth' does not refer here to landed property, working capital for agriculture and forestry, or fixed and circulating capital in plants and mines, but to capital claims of every kind, such as shares, savings deposits, mining stocks, etc. Thus what is meant is capital wealth exclusive of fixed and circulating capital used in manufacture or agriculture. It appears that the owners of land paying at least 60 marks in land tax, who numbered 720,067, had an aggregate capital wealth of 7,920,781,703 marks, of which 3,997.549,251 marks (50.5 per cent) belonged to the 628,876 owners who derived most of their income from agriculture or forestry - that is, those whose main occupation is independent farming - while 3,923,232,452 marks (49.5 per cent) belonged to the 91,191 owners for whom agriculture and forestry provide only a supplementary income, and constitute a secondary occupation.

Of the total gross wealth of the 720,067 independent Prussian farmers, amounting to 39,955,313,135 marks, 74.1 per cent consisted of landed property, 19.8 per cent of capital wealth, 5.9 per cent of fixed and circulating capital, and 0.2 per cent of exclusive rights and privileges; more specifically, in the case of the 28,541,502,216 marks owned by the 628,876 farmers whose main source of income was agriculture the percentages were: 84.9, 14.0, 1.0, 0.1, while for the 91,191 for whom agriculture is a secondary calling, with a total wealth of 11,413,811,919 marks, the figures were: 47.1, 34.4, 18.3 and 0.3.

[3]Just how well aware the large industrialists are of this fact is shown by the position taken by Freiherr von Reiswitz, the general secretary of the Hamburg-Altona Employers' Association and the chief advocate of the principle of mixed employers' associations. He cites as advantages of mixed associations that, in the first place, 'they are extremely educational' for employers because there is almost always a strike in one of the participating branches so that the association, 'finds itself, so to speak, in a constant state of war', while on the other hand - and this is the main thing - they make possible a united approach by big business, small firms, and craftsmen. Freiherr von Reiswitz sets great store by this collaboration among all sections of industry, for political reasons. The craftsman is the best fighter in the guerrilla war against Social Democracy, and hence big business has a major interest in keeping him going economically. See Reiswitz, Gründet Arbeitgeberverbände, pp. 22 et seq., cited by Gerhard Kessler, 'Die deutschen Arbeitgeberverbände', in Schriften des Vereins für Sozialpolitik, vol. 124 (1907), pp. 106 et seq.

[4]Kessler, op. cit., p. 15.

[5]According to a report in the Berliner Tageblatt, 14 June 1909, on the conference of the German Bank Employees Association, Fürstenberg (Berlin) the chairman of the executive committee declared: 'The movement of concentration in banking has fortunately come to an end. Even so, at present 90 per cent of all bank employees in Germany have no prospect of ever becoming independent.'

[6]The formation of the Whiskey Trust made 300, the Steel Trust 200 commercial travellers redundant. See J. W. Jenks, The Trust Problem, p. 24.