Finance Capital: Rudolf Hilferding: the way Marx expected, Hilferding’s Finance Capital () pointed to the role of banking and finance, arguing that the. Marxian and Non-Marxian Foundations of Rudolf Hilferdings Finance Capital＊. Jan Greitens. Abstract: Finance Capital, written in by Rudolf Hilferding. Lenin’s concept of finance capital is essentially a derivative from. Hilferding’s, which is a more complex concept. This is not objectionable in itself but critics of.
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Skip to main content. Log In Sign Up. Notes on Rudolf Hilferding’s “Finance Capital”. This project looks at the introduction of price- based competition in four sectors in five European countries, and is led by Professor Ian Greer at the University of Greenwich. He was seeking to expand the ideas opened up by Capital to encompass important phenomena such as the banking sector, cartels, and imperialism. The format and style of the book also strongly channel Marx. Like Marx, he likes to include extended passages of quite dry analytical language, and then suddenly accelerate into angry rhetoric about the injustices of capitalism.
And, like Marx, he also enjoys taking a sarcastic and patronising tone with bourgeois political economists. His ideas were very influential- most obviously on Lenin whose Imperialism draws on this work.
However, certain elements of it now appear dated. Nonetheless, in some ways he was quite prescient, and he raises some important ideas that the TEMS team need to think about. The book is arranged in five sections. Even the translator of the English edition suggests that this section has not aged particularly well, and it has very dubious relevance to us anyway. One thing he does do here is expand the idea of disruption in the circulation process, which Marx introduces in Volume II.
As Marx suggested, in the C-M-C process it is inevitable that there will be periods where certain amounts of capital lie idle- i. Credit is the only way to make use of this idle money.
The former, hilverding it is simply exchanged between capitalists, has no effect on the rate of interest. It also has clear limitations, and the emergence of a banking industry is therefore a big change: Banks become institutions for clearing and settling balances, a technical improvement which… reduces the amount of cash required for settling balances.
Bear in mind that Marx and therefore also Hilferding assumes that the proportion of fixed capital in productive capitalist investments generally expands. With this in mind, he argues that something significant happens when banks turn their credit into fixed capital. Fixed capital, because it represents a long-term caputal, does not flow back to the capitalist straight away. When it invests its capital in a capitalist enterprise the bank becomes a participant in the fortunes of the enterprise; and this participation is all the more intimate the more bank capital is used as fixed capital.
The bank enjoys far more freedom of action in its dealing with a merchant than with an industrial entrepreneur. The mobilization of capital. Fictitious capital Hliferding of the areas where Hilferding saw himself as going beyond Marx was in his analysis of the joint stock company- and this forms much of the purpose of this section.
Unlike interest-bearing capital, shareholders only get a claim to a future proportion of profit. The advent of the joint stock company immediately releases a whole range of small capitals which can be made available to finance production, accelerating expansion.
It also gives rise to the development of a special market for fictitious capital- the stock exchange. However, Hugo Radice explains it in fairly straightforward terms: Instead, it is caiptal sum gained through the process of administering financial transactions.
The proportion of income financial companies receive from fees as opposed to interest has expanded greatly in the last thirty years, which may be taken as evidence of a growing rentier logic on their part Guillen, Because joint stock corporations are concerned with interest and future profit, they can be more patient than individual entrepreneur-capitalists. The latter face disaster if an investment makes lower than average profits in the short term.
This is a long quote from p The interest which its owners have in obtaining the largest possible profit as quickly as possible, their lust for booty, which slumbers in every capitalist soul, can be subordinated, to a certain extent, finanve the managers of the corporation, to the purely technical requirements of production. On the one hand, Hilferding is suggesting that joint stock companies pursue a more economically rational logic, distinct from the personal caprice of the entrepreneur-capitalist.
Hilferding then proceeds to look at the stock exchange, where shares and securities circulate see p for a concise definition of securities. The real purpose of the stock exchange is speculation, and its participants have a particular set of interests largely disconnected from the hilferdign economy.
Speculation is a classic example of something intrinsically stupid and irrational, which in the process of capitalist development becomes essential- or at least, it is important to a certain stage of capitalist development. The stock exchange depends on the ability of capital to exit certain branches of production and rapidly move elsewhere. Thus, they are obsessed with speed and increasing the tempo of transactions.
In this sense, the stock exchange is a mechanism of totalizing marketization. In this sense, the extreme marketization of the stock exchange becomes subservient, over time, to the monopolist banks.
Through the development caputal banks and their ever-greater interconnection with industrial capital, something happens which is quite the opposite of the intense marketization involved hilfedding speculative activity: Once the bank has control of the marketing, the mutual relations between the bank and industry become closer.
Short term price fluctuations capita, undermined and price itself is taken under planned control.
On pages there are some quite interesting and heavily sarcastic capjtal of changing public attitudes to speculators, which have quite a contemporary ring to them.
This leads him hilferdihg the final chapter of this section, where he lays out the logical ends of these developments. In this sense a fiannce developed credit system is the antithesis of capitalism, and represents organisation and control as opposed to anarchy. Here he reiterates this. He starts by observing how fixed capital investments- which are inclined to rise over time- present obstacles to exit from certain industries. Cartels and monopolies, by inflating their own profits, impede competition and solidify unequal profit rates across industries.
In this sense, they exacerbate the disproportionalities that tend capitalism towards crisis see Capital Volume II. To me, it is not clear how convinced Hilferding is that the anti-market situation outlined above is an inevitable destination of capitalism. On pagehe suggests that during depressions cartels become harder to organise, and may break apart as members turn on each other. Later on, however, he suggests that monopolies and cartels are more likely to survive depressions and crises, while financ businesses go to the wall.
He spends some time discussing different types of concentration. He distinguishes between horizontal and vertical integration. The former is a cartel which does restrict competition.
The latter sees a wider range of functions being taken under administrative control, but competition remains fierce between vertically-integrated firms. Another point of interest in this section is the role of commerce. As noted above, Hilferding suggests that the connections forged by the concentration of finance capital forces commercial capital into a subservient position.
Interestingly, this seems very much like what is happening today with the elite supermarket chains. But Hilferding sees things going in the opposite direction. Under monopolised finance capital, vertical integration sweeps the hilferrding aside.
If monopolistic combinations abolish competition, they eliminate at the same time the only means through which an objective law of price can actually prevail.
Perhaps more interestingly for our purposes, he argues that fixed capital investments impose commitments and pressures that can be very serious when prices finznce eventually forced down in a recession. The final chapter of this section is interesting. It suggests that the nature of crises changes over time, as cartels capitzl.
Banks are also able to mitigate crises to some degree by regulating the money supply. Banks hlferding an interest in preserving not just individual capitals but entire swathes of capitals. Is this a swipe at Vince Cable, years in advance? In summary, cartels may exacerbate disproportionality and hence they are unable to fend off crises- but, they are able to shift the burden of crises onto smaller capitals, ensuring that the process of monopolisation continues.
The economic policy hulferding finance capital This is the climax of the book, where Hilferding reaches an all-encompassing denunciation of imperialism. He goes considerably further than Marx himself, in exploring very specifically how the internal dynamics of capital accumulation lead to imperial and colonial conquest.
Even from the perspective of political history and ideological analysis, this is an interesting chapter. He begins with a critical discussion of liberal thought on free trade. While the liberal bourgeoisie have prided themselves on their opposition to the state and championing of individual freedoms, Hilferding argues that this advocacy was only ever a captive to material circumstance.
Because Britain had the most developed industry and the best access to markets, the reduction of tariffs was entirely in the material interest of British capitalists. Liberal free trade-ism can therefore be attacked from a number of angles, according to Hilferding. It was not normative but self-interested, and consequently, in places like India where there was some doubt as to whether British sales could out-compete local industry, the liberals conveniently took on a conspicuously more proactive imperialist policy.
But as domestic capitalism develops, cartels form. Cartels can use their extra profits used through price-fixing to undermine competitors abroad through underselling. Thus, in cartels we can see the development of trade wars, as countries escalate competitive tariffs and subsidies. This can create an incentive to export productive capital i. Arrighi is more ambivalent, suggesting that while post-War US hegemony was characterised by the strong use of tariffs as well as increasingly integrated organisational forms it is wrong to explain this in terms of finance capital.
In fact, he argues that the banks were among the most vocal advocates of free trade in the US.
Finance Capital | work by Hilferding |
Most importantly, as Europe moves towards finance capital, and hence greater concentration of capital in the hands of the banks, there is a growing and urgent need to export interest-bearing capital, as well. This has severe implications. It leads to competition between finance capitals to lend to developing countries, pushing down the rate hilerding interest and finane credit bubbles perhaps exemplified in more recent history by the Asian financial crisis.
And ultimately, it produces a change in the attitude of the capitalist class towards state power. If I am exporting goods, I want free trade assuming I am in a dominant position, as were the British liberals. Hence, the tying together of finance capital and the violent subjugation of colonies. There are a lot of interesting historical asides here. Because Germany was increasingly developing bank-directed cartels revolving around heavy industry, Hilferding saw it as in some ways a more mature capitalist system than Britain.
The underdevelopment of joint stock companies in Germany meant bank capital took a more directive role from the start. Hence, its industrial backwardness led to organisational superiority.
As Lapavitsas has since argued, this idea has been a little confounded by the fact that hilferdihg was the US model that emerged as the next global hegemon, rather than Germany.