This article was written in 2014 for Marxist Left Review, the theoretical journal of the Australian group Socialist Alternative, which shares the general outlook of the International Socialist Tendency (IST).
It provides an alternative to and begins a critique of the perspective of IST writers and activists—which also coincides in many respects with that of the majority of academic Marxists based in the rich imperialist core countries. Both of these groupings tend to view Lenin’s theory of imperialism as incorrect and not applicable to contemporary reality.
Chris Harman, the most influential recent IST writer on imperialism, found that the “enduring power” of Lenin and Bukharin’s writings “lies in the way in which they still provide an explanation, like no other, of the whole of what has been called the ‘30 years war’ of the twentieth century…” i.e. 1914-1945. The “enduring power” in other words, has not endured (see Harman, Analysing Imperialism, 2003).
However Harman and other IST writers own understanding of imperialism, which revolves around inter-imperialist war finds itself struggling for any contemporary relevance. The last direct inter imperialist war broke out almost 80 years ago. Yet, during that whole period both imperialist economic exploitation of the Third World and imperialist military aggression against the Third World has been continuous. This is very much in line with Lenin’s expectations.
For example Lenin emphasised, “capitalism has grown into a world system of colonial oppression and of the financial strangulation of the overwhelming majority of the population of the world by a handful of ‘advanced’ countries” (see below).
Lenin’s work not only provides a series of partial predictions and anticipations of key features of the contemporary world such as that quoted above. It does do that. But its most important contribution is that it provides the essential theoretical basis with which it is possible to understand the key features and mechanisms of contemporary imperialism.
It is through these key features and mechanisms that the rich countries continue to maintain their monopolistic dominance over the world economy, over Third World capital and Third World societies today. They have done so even in the context of rapid growth of capitalist commodity production in societies like China, India, Indonesia and much of the Third World witnessed during the neo-liberal expansion.
In pages of Imperialism generally long forgotten, Lenin shows that monopoly control over the highest aspects of the labour process and monopoly over highest labour productivity is the key form of monopoly control. Hence this is also the key to understanding continuing imperialist dominance today.
Arguably, the most elementary and crucial theoretical aspect of Lenin’s theory of imperialism is also forgotten. Lenin famously described imperialism as “monopoly capitalism”. What is little understood is the necessary counterpart of monopoly capital is that it exists amongst and in relation to non-monopoly capital which is an equally necessary aspect of the monopolised whole. Lenin makes this explicit:
“Not in every branch of industry are there large-scale enterprises [and that] monopoly which is created in certain branches of industry, increases and intensifies the anarchy inherent in capitalist production as a whole.” (Imperialism, chapter 1)
“monopolies, which have grown out of free competition, do not eliminate the latter, but exist over it and alongside of it, and thereby give rise to a number of very acute, intense antagonisms, frictions and conflicts.” (Imperialism, chapter 7)
In the contemporary world, capitalist commodity production has spread to dominate all major regions. Yet this development, which occurred under conditions of imperialist monopoly, has not led to the development of monopoly capitalism everywhere. It has led to the development of non-monopoly capitalism in the Third World.
So the basic division, which still exists between rich and poor countries, now runs in parallel to the division between monopoly and non-monopoly capital, or more accurately, between those economies that are characterized by capital which possesses a monopolistic position internationally and on the world market, and those that do not.
For this reason, as the article below points out “the shift of certain types of industrial apparatus to China and other poor economies (though the extent of this is exaggerated) does not undermine the reproduction of monopoly in the imperialist economies as long as the reproduction of the most high-tech aspects [of the labour process] is still controlled in the imperialist core.”
Hence even the rapid and continuous growth of capitalist commodity production in China does not mean the growth in that country of “imperialism”—at least not in the Marxist sense outlined by Lenin.
As the article says, “To show that China is developing into an imperialist economy and state, in the Leninist sense, it would be necessary to show that it is an exploiter nation; that the predominant dynamic of its international economic relations involves the capture of value created by foreign workers through monopolist methods. Not desire or intention, but actual ability. In individual cases, Chinese capital does exploit foreign labour, but that is not its predominant character. Mostly the opposite occurs. Chinese workers carry on their backs a good deal of the weight of the whole world system and the profits of MNCs, but China’s portion of world profit and wages is far below its productive role.”
This last point—that on the world market Chinese capital is forced to forfeit value produced by Chinese workers and not the other way round—can be proven empirically. Some evidence for that conclusion is compiled below. There is even greater evidence today. I am in the process of preparing a book length exposition of this evidence and application of Lenin’s concept of monopoly (and non-monopoly) capital today.
The question of how to characterise the Chinese economy – arguably the crucial question in political economy today brings us to another point of agreement between the IST and major imperialist core based academic writers like Harvey. Both these tendencies, together with the major thrust of bourgeois propaganda ,view China as “rising” as an imperialist power in its own right. However no work exists that gives a detailed outline in Marxist terms of either why this considered to be the case or how it came about.
Pointing primarily to China’s high GDP growth rates, or its large armed forces is often considered ample evidence that China is imperialist and no further discussion is raised. Approaching the matter in this way is hardly consistent with the principles of solidarity and internationalism of the Comintern and of Marx – especially from those speaking in the name of Marxism and who are based inside the rich imperialist states such as Australia and the USA – states which are responsible for aggressive military and economic policies against the Third World in general, and China, which is also a poor country, in particular. Such a perspective can tie the hands of those who espouse it and likely makes it impossible for them to lead workers in their own countries in a consistently anti-imperialist struggle against their own bourgeoisie.
Lenin’s theory of imperialism: a defence of its relevance in the 21st century
Almost 100 years after it was written, Lenin’s classic Marxist theory of imperialism, principally articulated in his book Imperialism: The Highest Stage of Capitalism, remains the best framework to understand capitalism’s international political economy. Subsequent capitalist development shows the key aspects of Lenin’s thesis to be correct. Just as the basic ideas of Marx’s Capital have been proven correct by developments in contemporary capitalism, so too, have all the fundamentals of Lenin’s theory of imperialism. It remains an essential starting point for understanding the principal international developments today, such as “globalisation” and the “rise of China”.
This article is divided into three parts. The first outlines Lenin’s theory and the key ideas necessary to apply it in today’s conditions. The final section applies the Leninist theoretical framework to show that China is not a rising imperialist power, and that even its full development as a capitalist economy is blocked by imperialism.Before looking at China, however, it is necessary to dispense with misunderstandings that prevent Marxists from grasping Lenin’s theory and encourage us to dismiss Lenin as wrong, dated or marginal. There are many distorters of Lenin. Marxist academics, on the whole, are as guilty of this as any party. However, ideas held by politically active Marxists have the most important consequences. The International Socialist tendency (IST) is the strongest active Marxist tendency in the English-speaking world today (outside India). Thus the second section focuses on misunderstandings within that tradition and of various writers at one time associated with it.
Lenin’s theory in the 21st century
Lenin’s theory of imperialism revolves primarily around the systematic exploitation of the poor economies by monopoly capital based principally in the rich economies. Within Lenin’s framework, inter-imperialist wars are secondary to exploitation of the poor economies, as these wars are ultimately about redrawing the terms and conditions of that exploitation.
For Lenin, the key to understanding imperialism is monopoly. He argued: “If it were necessary to give the briefest possible definition of imperialism we should have to say that imperialism is the monopoly stage of capitalism. Such a definition would include what is most important”. Lenin outlined five principal features characterisingimperialism at the beginning of the twentieth century. Monopoly is at the core of all five. They were (1) the transition from free competition to monopoly production; (2) the formation on this basis of monopolist trusts, cartels and banks and their merger into a new, higher form of monopoly – “finance capital”; (3) the exceptional importance of export of capital as opposed to export of commodities; (4) beginning of division of the world between international monopolist businesses; (5) completion of division of the world between the great powers. However, since Lenin wrote, some forms of monopoly have changed.
Lenin had a nuanced understanding of monopoly. He never argued that specific formsof monopoly (that is, specific technical stages) represented the highest “stage” that monopoly could take. Bukharin mistakenly elevated direct state intervention in forms common to his era as the highest and inevitable outcome of capitalist monopoly.Bukharin’s “state capitalist trusts” have mostly been supplanted in the modern era by private multinational corporations (MNCs). These are state-supported private capitalist monopolies and oligopolies.
The flexibility of Lenin’s approach can be seen, for example, in his treatment of colonialism. An approach emphasising “state capitalist trusts”, or too literal a reading of Lenin’s five features, would suggest that imperialism requires colonial rule. However, Lenin repeatedly argued the opposite, as is discussed below.
Lenin’s theory has proven to be a highly flexible instrument for understanding imperialism today. Using it does not mean memorising the lines of his book, but studying the book and the specific forms of contemporary monopoly. This is necessary to uncover the modern ways in which value is sucked from the poor countries by imperialist capital.
Modern MNCs constitute a higher form of capitalist monopoly than the cartels and trusts of Lenin’s era. It is a strengthening, not a weakening, of capitalist monopoly that has made a greater degree of private control possible. In earlier capitalism, the state (or private and semi-private militias etc.) had to substitute for the weakness of undeveloped capitalist commodity relations. State-sanctioned monopolies like the British and Dutch East Indies companies gave way to higher forms of commodity exchange. Slavery was replaced by wage labour. Colonies won political independence.Bukharin’s “state capitalist trusts” are now superseded by MNCs. These all represented advances within capitalist production relations.
The neoliberal era illustrated one principal advantage of private monopoly over state ownership. Private corporations can have a more flexible relationship with the state. They can call for state intervention when they are in crisis, thus allowing MNCs tosocialise their losses while privatising their profits. Capitalists also achieve far greater security of privilege when a business is held as private property.
State subsidy to privately owned capital is normalised through “arms length” collaboration via, for example, “public-private partnerships”. Indirect state subsidy of high labour productivity and technological development occurs through universities and other state-sponsored scientific and technical institutions. Through these means,higher labour productivity in the imperialist core economies becomes the key monopoly wielded by MNCs on the international market. This is achieved by the highly organisedMNCs themselves in combination with advanced and wealthy capitalist states.
Monopolistic unequal exchange
Unequal exchange of values on the international market between highly productive labour working in “First World” conditions and far less productive “Third World” labour is the key mechanism of wealth transfer from the poor to the rich countries today. Lenin does not specifically articulate the concept of unequal exchange in his book on imperialism, but the concept is central to Marx’s theory of value presented in Capital.For example, the concept of “prices of production” already expresses unequal exchange of labour between capitals with different organic composition. Though Marx could not anticipate the specific forms of unequal exchange on the world market 150 years after his death, Lenin’s Imperialism points to these and later Marxists have spelled them out.
In 1972 Belgian Marxist Ernest Mandel showed unequal exchange had become the key mechanism for extraction of value created by Third World labour in the post-war period. Mandel (and earlier Grossman) show that a theory of unequal exchange was already formulated by Marx. Mandel applies this to the 1970s world market to show that, despite the relative decline in capital export from rich to poor countries at that time (something subsequently reversed), there was no end to extraction of value. MNCs were increasingly able to usurp value without the trouble of direct investment. The same trend continues today as many lines of production are increasingly “outsourced” to independent suppliers, while the principal MNCs “downsize” and concentrate on monopolistic “core competencies”, as outlined below.
Doug Lorimer elaborated the specific mechanisms used by imperialist states andMNCs in the “free market” era of neoliberal globalisation to establish stable monopolistic positions. For Lorimer, “the history of monopoly capitalism is at the same time the history of the strengthening of each imperialist state and their use to further the interests of the finance capitalists of its own country on the world market”.
Lorimer noted:“[A]ll of the major technological innovations of the last 50 years were created and developed initially for waging war or preparing to wage war by researchers working for the military departments of imperialist states…it was massive government deficit spending on technical improvements on war goods, on armaments, during World War II and during the Cold War, that created practically all of the technological innovations of the second half of the twentieth century.” The profits from marketing these technologies (such as microwaves, internet, radar) are divided among MNCs, while the responsibility and cost of their development are taken on by the state.
State subsidy for development of high labour productivity is generalised through state institutions like universities. This intimate state-private capital relationship explains why the MNCs are not globally footloose, as it was once popular to believe. It also explains why high-tech production is increasingly concentrated in the rich states – misleading hype to the contrary notwithstanding.
Armed with the best technology and highest labour productivity and backed by the most powerful organisations on the planet – imperialist states – the MNCs confront on the world market (besides their mutual competition) non-monopolist producers, wielding technology that is easily reproducible or was produced by the MNCsthemselves. Mostly these non-monopolist firms carry out simple, “bulk” production processes to turn out non-monopoly goods. The MNCs are able to determine both purchase and sale prices in their trade with non-monopolist producers. Thus non-monopolist producers are allowed profits only just adequate for their survival. The remainder of the value produced by workers in these companies is usurped by MNCs.
Thus modern monopoly production does not negate the market but expands it. Even the sphere of “free competition” is expanded in low-tech areas where stable monopoly cannot be established. However this “free competition” exists only underneath and subordinate to the monopolies and monopoly competition. All but the highest tech production is increasingly pushed into the sphere of subordinate free competition. It is “free” to compete for the crumbs.
Massive expansion of the world market over the last 30 years, including multiplication of the global labour force has created an expanding sea of labour from which theMNCs can extract expanding profit in this manner, even without direct control. That is particularly the case in China. The rapidly expanding capitalist commodity production in China is non-monopolist production. Firms are carrying out simple “bulk production”, possessing no monopoly of their own, and therefore are unable to price set. They must sell at prices dictated by the MNCs. This leaves them with paper thin margins.
Increasingly large and dominant imperialist state-supported MNCs wielding scientific and technological monopolies on international markets, sucking value from non-monopoly producers, can mean nothing other than a global system I call “monopolistic unequal exchange”.
The modern, highly specialised, international division of labour associated with“globalisation” of production more perfectly expresses the character of imperialist monopoly than previous less advanced forms. In Lenin’s time, monopoly was based principally on the physical location of most machinery in the imperialist core. Today this is still the case only for the most advanced machinery, the remainder often moving to low-wage economies. There is greater sophistication in the modern division of labour: production is “fine sliced” into distinct aspects and organised according to the degree of sophistication (difficulty). Thus the “globalisation” of recent decades more fully separates scientific and technological capacity from the general grunt work or low-skilled labour. As far as possible, it separates science itself – as pure, practical pursuit of knowledge in aid of technical or cultural progress – from mundane productive processes (the latter well established and thus relatively low-skill).
Modern monopoly forms better reflect that scientific knowledge, and its advanced application to production, are concentrated, ultimately, not in physical objects but in human beings and human interaction with those objects. It is monopoly of the labour power of the most highly educated workers, by both imperialist states and MNCs, that forms the ultimate and most stable base of imperialist reproduction. Therefore the shift of certain types of industrial apparatus to China and other poor economies (though the extent of this is exaggerated) does not undermine the reproduction of monopoly in the imperialist economies as long as the reproduction of the most high-tech aspects is still controlled in the imperialist core. A mountain of evidence shows this to be the case.
The IST view of imperialism and Lenin
The principal writers about imperialism theory from the IST tradition, Mike Kidron, Chris Harman and Alex Callinicos, form a coherent theoretical tendency advancing a common position on all basic questions. The theoretical innovations Kidron pioneered in 1962 were upheld by Harman and Callinicos, creating continuity within the IST based on Kidron’s original theoretical innovations. After Kidron moved outside the IST, Harman, until his death in 2009, was the most influential theorist on imperialism. His most important work, “Analysing Imperialism”,has influenced the IST and some no longer in the tendency internationally.
Exploitation of the Third World
IST writers claim to uphold Lenin’s theory of imperialism (sometimes describing it as the “Lenin-Bukharin” theory) but in fact reject Lenin’s most fundamental conclusion – that imperialism is about the systematic exploitation of underdeveloped economies by capital of the imperialist core states. This is replaced with an overemphasis on inter-imperialist competition, understood through the prism of the IST’s state capitalist notion of monopoly.
An inaccurate presentation of Lenin (and Bukharin) on a range of issues ultimately stems from rejecting systematic exploitation. Harman argues this position is necessary to combat “left nationalism”, which “deflects attention from the central dynamics of the world system, which depend to a very large extent on what happens in the most important locations of accumulation, foreign investment and trade”. In place of exploitation of the poor countries, IST writers emphasise “inter-imperialist rivalry” and the clashes between great powers, which, it is argued, are principally about securing raw materials and directly seizing the economies of other powers. However, there has been no direct war between “established industrialised countries” for the last 70 years.
Harman argued, “Most of the Third World, including nearly all of Africa and much of Latin America outside Brazil and Mexico, is of diminishing economic importance for the dynamic of the system as a whole. Profits and interest payments from such regions are the lettering on the icing on the cake for world capital, not even a slice of the cake itself”, while “the major sources of surplus value in the world are in the advanced countries”. Lenin is evoked in support of this position.
But for Lenin, “the focal point in the Social-Democratic programme must be that division of nations into oppressor and oppressed which forms the essence of imperialism”. Two years later he wrote: “It would be expedient, perhaps, to emphasise more strongly and to express more vividly in our program the prominence of the handful of the richest imperialist countries which prosper parasitically by robbing colonies and weaker nations. This is an extremely important feature of imperialism.”For Lenin, “capitalism has grown into a world system of colonial oppression and of the financial strangulation of the overwhelming majority of the population of the world by a handful of ‘advanced’ countries”. The imperialism of the beginning of the twentieth century completed the division of the world among a handful of states, each of which today exploits (in the sense of drawing super-profits from) a part of the “whole world”.
Whatever the truth of Harman’s position on the unimportance of exploitation of the poor countries for imperialism, it cannot be said to have anything in common with Lenin.
Export of capital
Probably the most commonly held misconception of Lenin’s theory is that imperialism is principally about the export of capital. Harman argues that Lenin “seemed to make the whole theory of imperialism rest upon the key role of the banks in exporting financial capital”.
But Lenin never wrote that capital export was the basis upon which imperialism rests. His works repeatedly and directly contradict that assertion. Lenin listed five principal features of imperialism; the export of capital was just one.The list is ordered causally, and capital exportappears third. Each of the five features is allocated one of 10 chapters in Lenin’s book. The chapter “Export of Capital” is the shortest of all, with just 1,115 words.
Elsewhere in the book, Lenin gives the “briefest possible definition of imperialism”. Capital export does not appear. He argues:
[I]mperialism is the monopoly stage of capitalism. Such a definition would include what is most important, for, on the one hand, finance capital is the bank capital of a few very big monopolist banks, merged with the capital of the monopolist associations of industrialists; and, on the other hand, the division of the world is the transition from a colonial policy which has extended without hindrance to territories seized by any capitalist power, to a colonial policy of monopolist possession of the territory of the world, which has been completely divided up.
Debating revisions to the Bolshevik program in 1917, Lenin explicitly argued against a proposal by V. Sokolnikov that would have defined imperialism principally as “export of capital”. In Lenin’s view, if the program were to begin with a characterisation of imperialism “we must begin with the characterisation of imperialism as a whole – and in that case we must not single out only the ‘export of capital’”, complaining that “Comrade Sokolnikov inserted a bit of the definition of imperialism (the export of capital)”.
Harman introduces a second misunderstanding. He asserts that Lenin claimed capital export went primarily from advanced to backward countries. Harman wrote that it was a “major departure from the Hobson-Lenin picture” when post-war capital “flows were not from industrial to ‘underdeveloped’ countries. They were overwhelmingly to areas where industry already existed.”
Lenin does emphasise the importance of capital flow to backward countries; however, he did not hold that capital export flows “overwhelmingly” from advanced to backward countries. Lenin provided a statistical table detailing capital export by destination. The table directly refutes Harman. Commenting on it, Lenin said, “French capitals are invested mainly in Europe”, while German capital “is divided most evenly between Europe and America”. Only in the case of Britain could Lenin’s statistical table be said to claim that capital flowed mostly to the undeveloped regions. Here, Lenin wrote, the “principal spheres of investment…are in British colonies”, but even these included countries like Australia and Canada.
“There was a real problem” with Lenin’s theory for Harman and the IST writers, because “[t]he very strength of Lenin’s approach rested on its insistence that the great Western (sic) powers were driven to divide and redivide the world between them, leading to war on the one hand and direct colonial rule on the other. This hardly fitted a situation in which the possibility of war between Western states seemed increasingly remote and colonies had gained independence.” This is another misunderstanding. Lenin never insisted that colonialism was indispensable for imperialism:
The imperialist tendency towards big empires is fully achievable, and in practice is often achieved, in the form of an imperialist alliance of sovereign and independent – politically independent – states… National struggle, national insurrection, national secession are fully “achievable” and are met with in practice under imperialism…
Norway “achieved” the supposedly unachievable right to self-determination in 1905, in the era of the most rampant imperialism. It is therefore not only absurd, but ludicrous, from the theoretical standpoint, to speak of “unachievability”… British finance capital was “at work” in Norway before and after secession. German finance capital was “at work” in Poland prior to her secession from Russia and will continue to “work” there no matter what political status Poland enjoys.
Lenin argued: “The imperialist era does not destroy either the striving for national political independence or its ‘achievability’ within the bounds of world imperialist relationships. Outside these bounds, however, a republican Russia, or in general any major democratic transformations anywhere else in the world are ‘unachievable’ without a series of revolutions and are unstable without socialism.” Here Lenin rather prophetically anticipates the future rise of colonial national liberation struggles.
Harman argues that Lenin’s position was that “export of capital to the colonies would lead to their industrial development”. To illustrate the point he quotes Lenin: “The export of capital influences and greatly accelerates the development of capitalism in those countries to which it is exported. While, therefore, the export of capital may tend to a certain extent to arrest development in the capital-exporting countries, it can only do so by expanding and deepening the further development of capitalism throughout the world.”
But to see that quotation as supporting a view that Lenin thought capital export broughtindustrialisation, Harman must believe that “development of capitalism” and “industrialisation” mean the same thing.
Continuing the same conflation, Harman writes: “One of Lenin’s earliest works, The Development of Capitalism in Russia, had been directed against those who denied the possibility of capitalist development. He continued to stand by this position when he wrote Imperialism. It was this belief that industrial development was increasingly [concentrated] in the colonies that led him to describe the colonising countries as ‘parasitic’.” Again, when Lenin says “capitalism”, Harman understands “industrial development”.
By making no distinction between the two Harman must either deny the possibility of pre-industrial forms of capitalism, or at least imply that capitalism inevitably develops from its lower forms into its highest form: industrial capitalism. This view, which is not supported by anything Lenin said, ultimately underpins the IST position that capitalist development necessarily leads to development of advanced forms of capitalism in China: to industrialisation and therefore to imperialism.
Modern imperialism has created an art form of promoting non-industrial capitalist “development”. An understanding of this is indispensable to understanding political economy today. An obvious example is Indonesia. Bourgeois economics generally makes no distinction between advanced industry and low-skill labour-intensive assembly. Assembly of imported parts into motorbikes and hand-held machine textile production in Indonesia are both categorised as “manufacture”. In that category they join the most advanced machine industries of the US and Japan. Bourgeois economists (especially in the World Bank) since the early 1980s have argued that Indonesia was beginning “industrialisation” – something nobody in Indonesia still believes. Harman’s conflation of capitalist development with industrialisation tends to support this key plank of bourgeois development theory.
Imperialism as a stage of capitalism
Kidron’s most important article on imperialism is called “Imperialism – highest stage but one”. It begins:
Fate was unkind to Lenin when it singled out his pamphlet, Imperialism, The Highest Stage of Capitalism, to be the most pervasive of his writings… [T]he fact that the pamphlet was purpose-written to explain the causes of World War I, then at its height [has] been lost sight of in an uncritical, almost universal, acceptance of its central themes. This is all the more strange since much of what he analysed has clearly either gone or become much less important than in his day.
Callinicos argues that the original Russian title of Lenin’s pamphlet was “latest”, not “highest”, stage of capitalism; that it was changed only after his death. Callinicos references this claim with a highly self-contradictory article by Bellamy Foster which nevertheless admits that Lenin’s handwritten manuscript of 1916 was entitled “Imperialism, the Highest Stage of Capitalism” after all. These may seem like semantic debates, but their effect is to undermine the legitimacy and importance of Lenin’s theory of imperialism. Summing up this view, Harman finds that the “enduring power” of Lenin’s and Bukharin’s writings “lies in the way in which they still provide an explanation, like no other, of the whole of what has been called the ‘30 years war’ of the twentieth century…[1914-1945]”. So, for Harman, the “enduring power” of Lenin has not endured.
Harman argued that “monopoly capitalism” was replaced in 1929 by “state capitalism”. In the wake of widespread privatisations in the 1980s and amidst the collapse of Stalinism in 1991, Harman briefly offered the term “trans-state capitalism”. Callinicos has preferred stages and dates: “classical imperialism” (1870-1945); “superpower imperialism” (1945-1991) and “imperialism after the Cold War” (1991 onwards). Many academics have their own stages; both David Harvey and Ellen Meiksins Wood have their versions. A multiplying plethora of stages eventually becomes arbitrary and descriptive but less analytical – like the proverbial sociology professors debating whether there are five or seven distinct social classes in capitalist society. Lenin’s meaning in describing imperialism as the highest and last stage of capitalism had nothing in common with this.
The muddle, according to Lorimer, “proceeds from the assumption that the possibilities of development open to a given historically-conditioned social form of production are unlimited. The whole facts and processes analysed by Marx, and Lenin, show on the contrary that only a specifically limited and conditioned development of the productive forces is possible to each historically determined social form of production.”
Obviously, there will always be motion from any given time to another. However, when Lenin wrote of a “stage” of capitalism, he was talking, not about superficial features, but about the crystallisation of the highest possible form of capitalist social relations of production. He identified that the last possible change in basic class structure had formed with capitalism’s monopoly stage. This cannot be superseded without a social revolution.
With the formation of joint stock companies, Marx wrote,
Capital, which is inherently based on a social mode of production and presupposes a social concentration of means of production and labour-power, now receives the form of social capital (capital of directly associated individuals) in contrast to private capital, and its enterprises appear as social enterprises as opposed to private ones. This is the abolition of capital as private property within the confines of the capitalist mode of production itself.
transformation of the actual functioning capitalist into a mere manager, in charge of other people’s money, and of the capital owner into a mere owner, a mere money capitalist…capital ownership, which is now…completely separated from its function in the actual production process… Profit thus appears as simply the appropriation of other people’s surplus labour…
In joint-stock companies, the function [of production] is separated from capital ownership, so labour is also completely separated from ownership of the means of production and of surplus labour. The result of capitalist production in its highest development [in joint stock companies] is a necessary point of transition towards the transformation of capital back into the property of the producers, though no longer as the private property of individual producers, but rather as their property as associated producers, as directly social property. It is furthermore a point of transition towards the transformation of all functions formerly bound up with capital ownership in the reproduction process into simple functions of the associated producers, into social functions…
This is the abolition of the capitalist mode of production within the capitalist mode of production itself, and hence a self-abolishing contradiction, which presents itself prima facie as a mere point of transition to a new form of production. It presents itself as such a contradiction even in appearance. It gives rise to monopoly in certain spheres and hence provokes state intervention. It reproduces a new financial aristocracy, a new kind of parasite in the guise of company promoters, speculators and merely nominal directors; an entire system of swindling and cheating with respect to the promotion of companies, issues of shares and share dealings. It is private production unchecked by private ownership.
The reader familiar with Lenin will recognise the closeness of Lenin’s argument to these passages from Capital. As Lorimer pointed out:
Lenin did not have to invent a new theory to arrive at the conclusion that monopoly finance capitalism was the highest stage of development of capitalism. He merely had to show that the features that Marx had described as characteristic of this stage – joint-stock companies; separation of capital ownership from managerial functions in the immediate process of production; monopolies; the emergence of a “financial aristocracy”; parasitism in the form of rentiers, of nominal company directors and stock-exchange swindlers – had become the dominant and typical form of capitalist business activity at the beginning of the twentieth century. Lenin’s description of the monopoly finance stage of capitalism as its highest stage – the stage which exhausts its possibilities of “evolutionary” as distinct from revolutionary development – was a faithful application of Marx’s conception of “capitalist production in its highest development”.
Alienation of producers from ownership of the means of production is the inner relation which constitutes the essence of the capitalist form of commodity production. When, therefore, from being the inner relation connecting individual workers and individual capitalists in the production process, it becomes outwardly expressed as a fully-developed social antagonism – as a social conflict between the actual producers, associated by the production process into a collective individuality on one side, and the exploiting non-producers, equally associated by their ownership into a collective individuality opposite to theirs – it is obvious that (a) no further development of capitalist relations of production is possible; (b) that the social antagonism has become the starting point for a transition to a new social form of the productive process; and (c) that this starting point has its material basis and its general form in the positive and negative poles of the social antagonism itself, i.e., in associated production by associated owners for the satisfaction of their individual and common needs.
Harman attributed to Lenin the argument that the “key to understanding modern capitalism is an understanding of the dominance in the advanced countries of ‘finance capital’ (the banks and the stock exchange) over industrial capital…” He argued that, in Lenin’s view “finance capital (the banks) were seen as playing a central role. They had reached a higher degree of monopolisation than industry, and very much subordinated industrial capital to their needs.” ButLenin never defined finance capital as “the banks” nor “the banks and the stock exchange”. His definition explicitly contradicts that claim.
Lenin defined finance capital as the merger of banking with industrial capital, and its emergence on this basis as a completely new and higher form of monopoly. Drawing from Rudolf Hilferding’s 1910 book Finance Capital, Lenin wrote:
A steadily increasing proportion of capital in industry…ceases to belong to the industrialists who employ it. They obtain the use of it only through the medium of the banks which, in relation to them, represent the owners of the capital. On the other hand, the bank is forced to sink an increasing share of its funds in industry. Thus, to an ever greater degree the banker is being transformed into an industrial capitalist. This bank capital, i.e. capital in money form, which is thus actually transformed into industrial capital…[is] “finance capital”… Finance capital is capital controlled by banks and employed by industrialists.
Lenin added that Hilferding’s “definition is incomplete insofar as it is silent on one extremely important fact – on the increase of concentration of production and of capital to such an extent that concentration is leading, and has led, to monopoly”.
In Lenin’s view, then, finance capital is “the concentration of production; the monopolies arising therefrom; the merging or coalescence of the banks with industry”, and later, “finance capital is the bank capital of a few very big monopolist banks, merged with the capital of the monopolist associations of industrialists”.
Lenin also named the finance capitalists. They included Siemens, General Electric, the Sugar Trust, United States Steel, Egyptian Sugar Refineries, Union Mining Company of Dortmund and the Steel Syndicate of Germany. These are not banks.
Based on this misreading, Harman argued, “Bukharin went on to develop a more general theory than that of Lenin” because “[h]e focused not just on finance capital, but on the way that industrial capital [sic] too was driven to military adventures… In many ways the history of Western capitalism in the past 50 years has fitted Bukharin’s more generalised picture more closely than Lenin’s rather narrower one with its concentration on ‘finance capital’.”
Harman confused finance capital with loan capital, with credit money or with bourgeois economics’ sectoral category, the “finance sector” consisting of finance, insurance and real estate (FIRE). The latter is a technical category within the division of labour of capitalist business. Lenin’s definition, which describes the rise to dominance of the “financial oligarchy”, describes historical changes in the structure of the capitalist class and its relationship to production.
Two decades later Harman back-pedalled somewhat from openly attributing to Lenin the incorrect view that “finance capital” constituted a distinct and separate sub-sector of the capitalist class (counterposed to “industrial capital”). By 2003 he merely claimed that “the phraseology of certain other parts of [Lenin’s] pamphlet has allowed people [i.e. Harman] to interpret him as saying, rather as Hobson and Kautsky did, that financial interests and the banks were mainly responsible for imperialism”.
Harman thought Lenin’s “phraseology” was “especially” confusing because “he insisted on the ‘parasitic’ character of finance capital”. He quotes Lenin as follows: imperialism brings “the extraordinary growth of a class, or rather of a social stratum of rentiers, i.e. people who live by ‘clipping coupons’, who take no part in any enterprise whatever, whose profession is idleness. The export of capital, one of the most essential economic bases of imperialism, still more completely isolates the rentiers from production, and sets the seal of parasitism on the whole country that lives by exploiting the labour of several overseas countries and colonies.” However, for Lenin and Marx the parasitic stratum of rentiers is not a separate wing of the capitalist class distinct from “productive capitalists”, but its entire upper section – the entire big bourgeoisie, who are now separated from production, as Marx showed.
Harman then goes on to explain why, despite apparently realising his earlier misreading of Lenin, he must persist in trying to associate Lenin with the separation of productive capital from “financial interests and the banks”. This claim supports Harman’s key political position, that imperialism is not about exploitation of the backward economies, as Lenin insisted. It is also the basis on which Harman develops positions that could lead to a sectarian orientation to Third World nationalism.
Harman argues that Lenin’s “stress on the ‘parasitism’ of finance capital” allowed “some people who supposedly based themselves on his work to claim in the decades after his death that it was possible to form anti-imperialist alliances with sections of industrial capital against finance capital – that is, to fall back precisely into the Kautsky policy that Lenin attacked so bitterly”. Lenin’s formulation “seemed to make the whole theory of imperialism rest upon the key role of the banks in exporting financial capital”.
Leaving aside that Harman is arguing here not what Lenin said, but what his “phraseology” seemed to suggest, it is easy to find categorical refutation. Lenin called it a “petty bourgeois reformist point of view” to believe it “possible, under capitalism to separate” out “‘productively’ invested capital (industrial and commercial undertakings) and ‘speculatively’ invested capital (in Stock Exchange and financial operations)”.
Unequal exchange and the Marxist theory of value
Harman argues that “flows of investment are an indication of where capitalists think profits are to be made, and they suggest that it is overwhelmingly within the advanced countries… This means that, whatever may have been the case a century ago, it makes no sense to see the advanced countries as ‘parasitic’, living off the former colonial world.”
While capitalistsmay think profits are “made” somewhere, it does not follow that Marxists agree. When Harman says profits are “made” where investment funds are directed, at that time predominantly in the imperialist countries, and points to the statistical indices of foreign direct investment (FDI) to “prove” this, he is really only giving an indication of where some part of profit is realised, not created.
For Marx, surplus value is not “made” in the absence of very specific social relations. It is created by workers and expropriated by capitalists. To substitute profit realisation forvalue creation, what the capitalists get for what workers do is to adopt the capitalists’ view of where profits come from and to abolish both Marx and the worker in the process.
As Marx explained in volume one of Capital, the profits a capital can make through selling commodities it “owns” does not indicate the value of those commodities, nor where those profits come from. While bourgeois economics makes no systematic distinction between price and value, Marxism does.
Marx’s writings are full of instances where commodities are sold above or below their value. These are examples of unequal exchange of labour time. Monopoly capitalism systematises this tendency to the advantage of the monopolists. It is inconceivable today that MNCs do not systematically sell products above their value (and buy below it) wherever possible. This is their core monopoly advantage.
Where do Nike’s profits come from? Nike does not produce anything; it outsources all its production. Are Nike’s profits then produced by Tiger Woods, Shane Warne and its small group of advertising, design, sales and financial staff in their offices in the US? The Marxist answer is “no”: production workers create the value realised as profits. Yet, increasingly, outsourcing, offshoring and subcontracting generic “bulk production” is a crucial and growing part of the business strategy of MNCs. They increase profits by doing so. Contra Harman, they increase their share of the value generated by workers’ labour by withholding FDI, by replacing FDI with outsourcing.
If an Australian capital, say Pacific Brands, moved its clothes production to Asia and directly employed those Asian workers, the workers would, for Harman, be exploited by Australian capital, because this would register as FDI. But if the Australian bosses decided to outsource the production of their clothing to local contractors, for Harman those workers are no longer exploited by Pacific Brands. It wouldn’t matter if they were the same workers, in the same factory, producing the same products, for the same pay, ultimately for the same capitalists, who sell on the same market at the same price. According to Harman, they are no longer exploited by Pacific Brands, but only by their immediate boss.
Take another example – your computer. One study gives a breakdown of revenues for iPods sold in the US for $300. US-based retailers got $75. Apple secured $80. Chinese workers and bosses got $2.61 between them. How would it be possible to imagine the workers who did most of the work are exploited, not by the capitalists who get most of the profits, but only by some middlemen and subcontractors?
In 1972, Mandel outlined a Marxist explanation of unequal exchange on the world market. Harman reviewed the book but made no attempt to analyse Mandel’s theory, instead dismissing it out of hand: Mandel “fail[s] to take a clear, unequivocal stand on controversial questions that divide Marxists from would-be Marxists”.
In 2003 Harman wrote off unequal exchange with a single mention, incorrectly portraying it (together with super-profits) as “the view that the population of the advanced world as a whole exploit the population of the Third World as a whole”. But Marx himself was a believer in unequal exchange. To take just one example, he argued, “The monopoly price of certain commodities would merely transfer a portion of the profit of the other producers of commodities to the commodities with a monopoly price”.
According to Rick Kuhn, “[a] rigorous formulation of a theory of ‘unequal exchange’ had already been formulated by Henryk Grossman in 1929.” Kuhn notes, “Already during the Middle Ages, as Marx had pointed out, unequal exchange between town and country was a primary source of accumulation of urban capital.” He quotes Grossman: “The further development and extension of the capitalist mode of production from the urban to the world economy did not change the nature of this kind of price formation but rather developed it fully.”
Grossman says that the “technologically and economically more developed country appropriates supplementary surplus value at the expense of the more backward country”. With “monopolistic rises in prices, supplementary surplus value is pumped from outside into the economy of the country with the monopoly”. While Grossman here is talking about monopolies in raw materials, the same is also true for modern forms of monopoly.
For Mandel, “unequal exchange meant that the colonies and semi-colonies tended to exchange increasing quantities of indigenous labour (or the products of labour) for a constant amount of metropolitan labour (or the products of labour)”, thus allowing the productive forces and consumption in the rich countries to be supplemented while the poor countries’ development is retarded.
Third World labour and Third World nationalism
Labour productivity in bourgeois economics can be defined as the ratio of profits to wages. Marx, by contrast, defined labour productivity as the quantity of concrete material products (use values) created in a day by each worker, which is dictated for Marx by the means of production set in motion by each worker.
When a MNC moves a production process from a rich to a poor country, if it moves the same production equipment, the difference in labour productivity is not usually huge. It can generally be overcome or narrowed in a relatively short time if the equipment is not too complex. There are large differences in labour productivity in certain advanced and highly skilled production spheres, but these are not usually moved offshore. Rather, it is low-end, low-skill production that is moved to cheap labour economies.
Indonesian textile workers receive wages around one-thirtieth of the Australian minimum wage. They must work a full work day to earn what an Australian worker gets in the first minutes of a shift. It is absurd to imagine that even the best Australian textile worker could produce in 20 minutes what the worst Indonesian turns out daily. Given similar production processes, doing similar low-skilled and semi-skilled tasks, labour productivity is similar. There is certainly no massive divergence such as wage levels of 30:1 would suggest. This is why Pacific Brands closed its Australian production.
The sense in which the Indonesian textile worker is only one-thirtieth as productive as an Australian worker is the bourgeois sense. Clothing production doesn’t require highly specialised knowledge or sophisticated techniques, so it’s difficult to monopolise. Therefore the capitalist selling clothes may achieve a market price only fractionally above labour and other costs. No matter how many trousers the Indonesian worker produces in a day, she would be considered less “productive” than a shop worker in Pacific Brands’ new Australian stores who merely sold the same number of trousers, so long as the Pacific Brands shop had a bigger price mark-up than the factory. Using unequal exchange in the sale of the trousers, Pacific Brands reduces wages and increases profits. It also weakens the industrial power of the factory worker, who now has no direct claim on the surplus she creates. Her claim to have created profits realised in Australia is also denied by Harman, who reinforces the bosses’ view.
Obviously, Harman and the IST would support any industrial action taken by textile workers. However in the textile and other non-monopoly spheres, the bosses’ margins are usually paper thin. If the clothing factory boss were forced to raise sale prices to pay a wage claim, Pacific Brands could simply find a new supplier, defeating the wage claim that way. It is the imperialist subjugation of Indonesian (and other Third World) labour, as much as their own bosses, that undermines the industrial strength of the Third World proletariat.
Far from making the situation of Third World labour hopeless, imperialism massively complicates and politicises Third World proletarian struggles. Often industrial struggle alone is unable to make economic gains, forcing workers to address issues of exploitation by MNCs, national subjugation and imperialism. These added complications and difficulties, while making many struggles harder to win, can also make politics more explosive and destabilising for the system as a whole.
Difficult and complex struggles of working people in the Third World need to be diligently studied, understood and supported by Marxists in the imperialist core. This involves grappling with complex and thorny issues like Third World nationalism. While First World nationalism is always utterly reactionary, due to the position of First World countries as imperialist exploiter nations, Third World nationalism can and will be a powerful anti-imperialist force.
Harman, however, is opposed to discussing such ideas. He makes the unsubstantiated claim that Third World nationalism is necessarily “a current that holds the present state has to be reformed – and can be reformed – so as to remove the foreign influences and re-establish it as a repository of the common, national, interest”, and “at the international level, left nationalism [here conflating Third World and First World nationalism] means focusing upon issues like the terms of trade or the preference for one trading bloc over another, as if simply improving the terms on which national capitalists sell their commodities on the world market will solve the problems of the mass of people they exploit and oppress.” Of course Third World bourgeois forces make such arguments, but it is historically inaccurate to assert that Third World nationalism is always reformist and never reflects the proletariat’s objective opposition to imperialism.
Focusing on national oppression and exploitation for Harman “deflects attention from the central dynamics of the world system”, which “depend to a very large extent on what happens in the most important locations of accumulation”. Thus Harman’s view (against Lenin) that the Third World is not systematically exploited, that it is not a “most important location of accumulation”, serves as a theoretical justification for his political hostility to Third World nationalism.
In rejecting exploitation of the Third World, IST writers regularly fall into defining imperialism simply as war or military strength. Thisbecomes difficult to distinguish from liberal definitions. It also poses the question “militarism for what end?” or “redivision of the world between the powers for what purpose?” Harman answers, “Oil is the strategic commodity of the 21st century.” This is also close to common liberal views. The Leninist answer is that labour is the most strategic commodity. An increasing majority of world labour is in the Third World. Imperialist wars, against popular revolutionary movements (Korea, Vietnam) or principally about inter-imperialist rivalry and control of Third World capitalists (Iraq), are ultimately about control of Third World labour. Oil is strategic precisely for that purpose.
The myth of ‘rising China’
Because imperialist exploitation of the Third World does not figure in IST theory, expansion of capitalism in China is seen as the strengthening of the Chinese bourgeoisie vis-à-vis the core imperialist bourgeoisies. This analysis, it is claimed, is in the tradition of Lenin, whose words are given “fresh relevance” by China’s rise.
To show that China is developing into an imperialist economy and state, in the Leninist sense, it would be necessary to show that it is an exploiter nation; that the predominant dynamic of its international economic relations involves the capture of value created by foreign workers through monopolist methods. Not desire or intention, but actual ability. In individual cases, Chinese capital does exploit foreign labour, but that is not its predominant character. Mostly the opposite occurs. Chinese workers carry on their backs a good deal of the weight of the whole world system and the profits of MNCs, but China’s portion of world profit and wages is far below its productive role.
No doubt China is “rising” in certain important senses, but rising in relation to what? In what form? In IST theoretical publications, China appears as a rapidly rising imperialistpower. For Harman, China is one of the world’s “rival imperialism[s]” with “industrial growth rates much higher than anywhere else in the world”. According to Ha-young Kim, China “has emerged as a potential challenger for US hegemony”. Ashley Smith claims China is a “rapidly growing economic superpower” that as an economic hub “now rivals the United States and the European Union”. Bramble, who is more nuanced, believes China’s “economic and military power is reshaping the world”.
Relatedly,Harman and others claim the US had been suffering relative economic decline over many years. On this basis, IST writers expect increasing inter-imperialist rivalry between China (and logically other “rising” Third World “imperialist” states) and the established imperialist states. Yet this poses a contradiction for Harman. If China is imperialist, is rapidly developing advanced industry, then, given its size, it must sooner or later be able to rule the world – as bourgeois commentators claim it will. Why, then, do the military tensions between the US and China look insignificant compared to those prior to World War I or II?
To argue that such a profound change in imperialism’s structure is taking place would require a systematic elaboration of the concrete and specific changes that have made it possible. This must be a particularly pressing responsibility for revolutionaries inside rich imperialist states who are arguing the relative decline of their own state and its allies vis-à-vis a poor country. It must be doubly pressing when adopting a position that looks, on the surface, to be similar to that of the majority of the imperialist bourgeoisie. For IST writers to see China, home to one-fifth of the Third World, as rising imperialism reverses Harman’s view that the Third World is largely irrelevant to world capital, yet no systematic elaboration is attempted.
Harman’s explanation boils down to stating that Chinese “coastal provinces have been by far the most successful section of the global system over the last decade and a half, growing somewhere close to 10 percent a year”. In 2009, instead of GDP figures, Harman cites figures for the growth of certain sectors: by 2005 China was “the leading producer in terms of output in more than 100 kinds of manufactured goods…including 50 percent of cameras, 30 percent of air conditioners and televisions, 25 percent of washing machines and 20 percent of refrigerators”. These statistics prove only that capitalist commodity production is growing in China, but no argument is made about the terms of this growth. As we saw from Harman’s misreading of Lenin on industrialisation, he doesn’t distinguish between different forms of capitalist development.
Poverty of statistics and polarisation of profit rates
Statistics explaining one or another aspect of social life under capitalism all have limited and partial meaning. Many are wildly inaccurate; some are utterly misleading. None can be understood outside of a broader framework. Statistics abound that contradict the “rising China” thesis.The United Nations Conference on Trade and Development’s (UNCTAD) latest World Investment Report estimates China’s outward FDI at US$509 billion. This is eclipsed by Italy and Spain, is less than half that of the Netherlands and Switzerland, under one-third of the UK and less than 10 percent of the US. Not only is Chinese FDI a fraction of the US, it falls further behind every year. In absolute terms, US outward FDI is 10 times bigger and growing five times faster.
Itis true, as Bramble argues, that China,“is now undertaking large scale capital export, both to developing and Westerncountries”, but such information should not be taken out of context. Today, even backward countries export capital. In 2012, for example, Thailand’s outward FDI increased by $12 billion. Virtually all Third World nations now have an outward FDI stock. What is important is the terms, especially the profit rate, their capital is able to achieve.
Large and rapidly growing GDP and trade are extremely important. However, taking GDP as a measure of imperialism is a mistake. China encompasses one-sixth of humanity. The advance of capitalist commodity production across such a vast state will necessarily give high GDP figures. Rapidity of GDP growth in China reflects only rapid expansion of capitalist commodity production. Rapidly increasing energy, steel and cement consumption expresses the same. Nothing in those figures tells us the terms of that expansion, that is, which capitals will benefit the most, who will ultimately realise the new surplus being created.
A capitalist economy encompassing one sixth of the planet’s population must possess some gigantic companies. China does. Four of the world’s top 10 corporations by gross profits are Chinese. However, this doesn’t really tell us much. Here is the list in order of gross profits, with each company’s return on assets (RoA) in brackets: Exxon Mobil (13), Apple (24), Gazprom (10), Industrial Commercial Bank of China (1), China Construction Bank (1), Volkswagen (7), Shell (7), Chevron (11), Agricultural Bank of China (1) and Bank of China (1). Thus, according to Fortune, imperialist giant MNCs’ average return on assets is12 times higher than that of Chinese monopolies!
This reflects that most Chinese monopolies are not budding MNCs, but domestic conglomerates. They’re also not in sectors in which China is supposed to be internationally competitive, or that have driven its economic growth – principally export-oriented manufacturing. The biggest companies are mostly giant domestic banks. Nolan and Zhang explain that by 2009, the world’s three largest banks by market capitalisation were Chinese. “However, the international operations of China’s leading banks remain far behind those of the Atlantic core. China does not have a single bank among the world’s top fifty, ranked by geographical spread. The 2008 financial crisis appeared to offer a once-in-a-lifetime opportunity to acquire banking assets in the high-income countries – yet, despite their huge market capitalisation, China’s banks were conspicuously absent from the wave of mergers and acquisitions in this sector.”Giant Chinese banks’ failure to capitalise on imperialism’s “great recession” starkly contrasts with imperialist finance capital’s aggressive expansion during the 1997-8 “Asian” economic crisis.
A second popular argument to show China’s rise (and US decline) is China’s massive foreign trade surplus, which has grown up alongside and in relation to ballooning US debt. It is often assumed that this phenomenon is enough to “prove” China’s rise, without any investigation or explanation of its actual meaning or context. For any capitalist business or state, what is important is not the size of a debt but its terms. If a business can get cheap finance and invest it profitably, then it makes sense to borrow and invest as much as possible.
Lawrence Summers estimates the “striking” cost to developing countries of holding foreign currency reserves is that they are “earning what is likely to be a zero real return.” This is almost certainly the case for an overwhelming portion of China’s dollar surplus (not just its reserves), which is “invested” in US Treasury bonds or other similar low-yield dollar-denominated financial securities. Why does the Chinese capitalist state invest its massive dollar surplus in “financial products” controlled by the biggest US capitalist banks and the US state? If China is a rising imperialist economy, why not use this enormous dollar surplus to buy up the best and most advanced capital equipment, technologies and personnel in every sector (or at least some leading sectors) and start ruling the world?
The Chinese ruling class does not choose “zero real return” investments out of stupidity or for “political” reasons. That it is forced into the absurd position of benevolent banker providing massive cheap credit to US capital is perhaps the clearest evidence of the weak position of Chinese capital. It is locked out of the most profitable activities by the established MNCs. Chinese capital cannot use its dollar surplus to establish its own high-end MNCs because of the vastly lower level of Chinese labour productivity. Even zero gain investments make more business sense than fighting losing battles against Volkswagen, Google or Goldman Sachs.
US dollars, euros and yen are pieces of paper (or electronic equivalents) that take almost no labour to produce. Yet they are exchanged for real goods composed of real raw materials worked by real humans. By holding (as opposed to effectively investing) trillions of these papers as reserves or low-yield financial securities, China (and other Third World states) exchange workers’ labour for nothing: for mere insurance against speculators, payable to imperialist states that print “hard currencies”.
Looting Third World labour in this way is exacerbated by each round of “quantitative easing” (QE), that is, the printing of money. Since 2007 QE has been carried out in US dollars, euros, the British pound and the yen. Printing money redistributes value from existing money holders towards those who capture the newly issued currency. Thus every round of US dollar printing since the 2007-8 crash (QE in the US is currently $45 billion monthly) represents a devaluation of dollar reserves held by China, Brazil etc.
Additionally, Cem Somel argues, amassing foreign “hard currency” reserves exerts downward pressure on Third World currencies, thus reducing the terms of trade for the products of those countries’ labour. The low exchange rate Chinese policy expresses that the competitive base of Chinese capital is essentially the cheapness of Chinese labour (combined with labour productivity relatively higher than other poor country producers).
WhenChina’s surplus dollars are parked in US banks, they don’t just sit there. They form an extremely solid foundation of cheap finance that US capital is far better positioned to invest. While China may have little choice but zero or low-return investments, the US banks have far better choices available through their ties to other US MNCs and vast international operations.
Lack of profitability even for the biggest Chinese capital reflects the weak position of Chinese capital overall. It occupies, not the heights of monopoly capitalism, but the shadow of the MNCs. Massive MNC profitability and large imperialist state revenues give them the capital to reinvest continuously in creating new monopolies – dispersing and disorganising non-monopoly capital as they move. The remaining businesses, and Third World states, are relegated to standardised, non-monopolistic activities in which competition is intense, the market flooded and rates of profit abysmal. This is nothing new. Lenin: “The privileged position of the most highly cartelized” causes “a still greater lack of coordination” in other branches of industry.
Some capitalists are doing very well in China. However, a list of the billionaires shows that money is not being made so much in foreign trade or industry. According toForbes, by far the largest category of billionaires – there are 18 – is in real estate and construction. The only other large groups are in pharmaceuticals (9), retail and auto distribution and sales (7) and internet and online games (6). Notably, despite hype in the capitalist media about Chinese raw materials investment in Africa and Latin America, there is only one billionaire in minerals. Even more striking is that, despite producing much of world output, there are only two billionaires in textiles and apparel and three in electronics. Besides auto production, which supports four billionaires, all other manufacturing combined props up just five more.
China in world trade
UNCTAD says that “global value chains” (GVCs – trade networks) “are typically coordinated by Trans National Corporations[TNCs]” that govern “networks of affiliates, contractual partners and arm’s-length [independent] suppliers”; that “patterns of value added trade in GVCs determine the distribution of actual economic gains from trade between individual economies and are shaped to a significant extent by the investment decisions of TNCs.” UNCTAD’s 2013 World Investment Report concedes that “the distribution of actual economic gains from trade” is determined by “investment decisions of TNCs” within networks of “affiliates” and “partners” these TNCs control.
Transnational corporations are “redefining their core competencies to focus on innovation and product strategy, marketing, and the highest value-added segments of manufacturing and services, while reducing their direct ownership over ‘non-core’ functions such as generic services and volume production.” Outsourcing “enable[s lead] firms to raise profits by reducing costs, raising flexibility and offloading risks while retaining rents from design, marketing and finance”. By the 1990s, branded manufacturing firms increased shareholder value by shifting fixed assets and risk to suppliers. The increase in “arms length outsourcing” (i.e. to independent suppliers) reflects the weak position of suppliers. Suppliers have not won business away from MNCs but have been given it by MNC lead firms precisely because suppliers are too weak to price set and can be handed risks.
Monopolies by definition obtain higher than average profits through keeping other capital out of the monopolised sphere(s). Non-monopoly capital must crowd into remaining sectors with a lower than average profit. Profit is pushed down further by the crowding, as Lenin suggested. Cattaneo et al write: “The constant competition for foreign investment and contracts with global brand owners and other lead firms leaves many developing country suppliers with little leverage in the chain”. This is the “race to the bottom”.
In electronics, “even the world’s major contract manufacturers have been trapped in low value-added segments of the value chain. In the personal computer industry, most of the profits have been captured by branded lead firms such as Dell and Hewlett Packard, and especially by platform leaders in software operating systems (Microsoft) and central processing unit chip sets (Intel).” When IBM sold its personal computer business to the Chinese Lenovo in 2005, it was not a case of IBM retreating in the face of Chinese competition; rather IBM sold the old furniture and refitted its shop. IBM last year was among the most profitable companies in the world. Its $15 billion profit at 14 percent (RoA) compared to Levono’s just over half a billion at 3.8 percent.
As Chinese and other Third World capital moves into an area of production, prices tend to fall. Usually already falling profitability meant the MNCs had already left, making room for second-rate capital. If Third World capital is able to force entry to a leading sector, the increased number of competitors tends to push prices down. Both cases cause terms of trade to move against Third World producers.
Historically, Third World exports have been concentrated in agriculture and other raw materials. Until recently, these suffered from low and often declining terms of trade against the manufactured products of the imperialist core. From the 1960s, ‘70s and ‘80s, increasing volumes of manufacturing for the world market was shifted to the Third World and later also Eastern Europe. Concurrent with this shift was a devaluation of production that had been relocated. Chinese merchandise terms of trade fell over 20 percent between 1990 and 2009. Even “very large” contract manufacturers in China have “surprisingly” little power.
By 1999 UNCTAD already found that “[t]erms-of-trade losses are no longer confined to commodity exporters. Many manufactures exported by developing countries are now beginning to behave more like primary commodities… The prices of manufactures exported by developing countries fell relative to those exported by the European Union by 2.2 percent per annum from 1979 to 1994.”
The contribution of manufacturing to GDP has been declining in the imperialist economies and increasing in many Third World nations. Yet the Third World share of income from manufacture has not kept pace with its production. Between 2000 and 2011, UNCTAD reports the terms of trade for “exporters of manufactures” were the worst performing of any grouping. “Net barter terms of trade” for agricultural exporters improved marginally; mining, minerals and oil exporting countries improved 60 to 100 percent, while manufacturing exporters’ terms declined 25 percent. Regional terms of trade for “East and South Asia” experience a decline of around 15 percent.
China is no exception to these trends, being more integrated than most Third World nations into monopolist-controlled trade patterns. In China, “foreign affiliates [of MNCs] accounted for some 50 per cent of exports and 48 per cent of imports in 2012”!China plays a critical role as “the final assembly point for East Asia’s export-driven growth”.
China as new imperial power?
For Phil Gasper “the U.S. faces growing economic competition from rising powers such as China, India and Brazil”.The supposed “rise” of these states, especially China, is frequently compared with the rise of Germany, the US and Japan around the beginning of the twentieth century. These are relevant historical comparisons, however, a more detailed look at China shows it diverging from, not converging with, the historical path of last century’s late developing imperialist states.
Lenin described the history of England’s industrial monopoly thus:
[B]y the middle of the nineteenth century, having adopted free trade [England], claimed to be the “workshop of the world”, the purveyor of manufactured goods to all countries, which in exchange were to keep her supplied with raw materials. But in the last quarter of the nineteenth century, this monopoly was already undermined; for other countries, sheltering themselves with “protective” tariffs, developed into independent capitalist states.
The change in fortunes did not take place through a peaceful evolutionary rise of German and US industry gradually and imperceptibly surpassing England, or simply by tariff walls. The violent political struggles – ultimately two inter-imperialist world wars – are well known. Violent economic revolutions were also a prerequisite for one hegemony to overtake another.
In The Communist Manifesto, Marx and Engels noted: “The bourgeoisie cannot exist without constantly revolutionising the instruments of production”. This means continuous overthrow of one productive technique by a more advanced one. Only through this revolutionary overthrow can new capitalists rise over old. GM and Ford could not have become leaders of US industry if the car had not overthrown rail.
The US and Germany rose by dominating the development of electricity, chemicals and automobiles, all industries that fundamentally altered how every advanced economy was organised. As electricity came on board, all factories were forced to replace antiquated steam engines and their associated cumbersome and inflexible propulsion assembly. Mass commercial production of chemicals revolutionised raw material production. Automobiles completely transformed economic geography, bringing whole new territories under intensified exploitation.
To dominate in any leading industry usually required the independent control of research and development, the results of which could be monopolised. Lenin showed, for example, that the superiority of the US Tobacco Trust was due to “the magnitude of its enterprises and their excellent technical equipment”. The trust devoted “all its efforts to the substitution of mechanical for manual labor on an extensive scale”. It bought “all patents that had anything to do with the manufacture of tobacco and spent enormous sums for this purpose.” “At the end of 1906…the trust built its own foundries, machine shops and repair shops.” One such establishment in Brooklyn employed 300 workers to carry out “experiments on inventions concerning the manufacture of cigarettes, cheroots, snuff, tinfoil for packing, boxes, etc.” Lenin pointed to the same tendencies in steel and electricity.
Schwartz confirms Lenin’s contention and elaborates it. At that time monopolistic research and development were the concern of imperialist states too: “The first university industry complexes, the forerunners to Silicon Valley, developed in Germany’s chemical industry and US agriculture. Germany used waste products from coal mining to produce dyes, pharmaceuticals, soaps and fertilisers. By the end of the 19th century the US agriculture department systematically disseminated knowledge from agricultural colleges to farmers.”
But some advances in productive technique are relatively minor. They may overthrow an existing technology in one industry but not disturb others. Supremacy in auto manufacturing achieved by the Japanese imperialists in the 1970s reflected superior organisation of existing technology. Through developing techniques such as lean production, just-in-time inventory and more sophisticated methods of forcing work intensity, the Japanese capitalists could operate existing technologies better. However, because the changes were relatively minor, they were easily replicated. This meant Japanese auto bosses could not wipe out European and US competitors. Japanese auto had developed neither a complete revolutionisation of production nor an entirely different product to replace or radically alter cars and thereby disrupt a whole series of industries.
Germany and the United States could break and surpass England’s established industrial monopoly only by revolutionising production in ways English capital could not easily replicate. To dislodge the “workshop of the world” required developing and monopolising for an extended period new powerful and highly disruptive techniques.
US and German industry achieved an extended period of far higher labour productivity than Britain in these new rapidly expanding sectors, allowing German and US companies to secure consistent super-profits, which were reinvested, establishing a significantly higher average national labour productivity than Britain. This was crucial to undermining Britain’s advantages: colonial empire, military might and financial dominance, all of which slowed and complicated the transition from old to new hegemony.
The transition from British to US and German supremacy (and from rail to auto, steam to electricity and natural to synthetic materials) occurred at the same time as (and necessitated and brought about) the transition from free competition to monopoly capitalism. The scale of investment required for commercial viability in these new industries was beyond individual capitalists. It required their combination in trusts, cartels and joint stock companies, the merger of banks with each other and of giant banks with giant industry.
Because Britain’s industrial monopoly was achieved in capitalism’s pre-monopoly stage, its capitalist class structure expressed the previous and lower form of class and business organisation, resulting in a slower, more haphazard and partial uptake of new productive techniques. This gave German and US capital several business cycles of advantage.
Schwartz explains: “German and US capital eroded British hegemony through cartelization of industry and professionalization of management in aid of organizing the scale necessary to lead in electrification of production.”On the other hand, “arms length” (that is, pre-finance capital) “relationship[s] between British banks and British manufacturers meant those banks were happy to lend colonial developers money that could be spent on US or German exports”. The haphazard (pre-monopoly) structure of the British capitalist class gave a free kick to its German and US competitors, one completely inconceivable in the modern world.
The first industrial revolution made England the workshop of the world. The second brought Germany and the US to the front, the US eventually taking control. What is dubbed the third industrial revolution – the introduction of semi-automated production after World War II – was also controlled by the US and other existing advanced economies. Likewise the “fourth industrial revolution”, widespread introduction of computerisation, has also been led by the US and imperialist core. Under monopoly capitalism the monopolists seem able to maintain their monopolies despite periodically “revolutionising the instruments of production”.
The US, Germany and then Japan, along with a small number of other First World states – Western Europe, Russia, Canada, Australia and New Zealand – positioned themselves on top or close to it just before the music stopped. A roll call of imperialist nations today contains largely the same names as 100 years ago. We would need only to add bits of nations: half of Korea, small pieces of historical China: Taiwan and the port city of Hong Kong, plus the port city state of Singapore as well as the non-national apartheid state of Israel. Every single one of these has enjoyed the closest backing and ties to imperialism, particularly the US. None could conceivably have risen without that patronage.
Imperialism today is hostile to Chinese strength (but not its economic growth). Ominously for China, the US and allies do not harbour such lackadaisical complacency as English laissez-faire capitalism. Systematic US incursions into Chinese cyberspace and airspace and more or less continuous imperialist militarism around the globe are just the better known politico-military aspects of modern monopolism. A Marxist argument that China is today a “rising” imperialist power would need to show that China, despite all that, is developing scientific and technological monopolies of its own in the same way Germany and the US did.
China’s embrace of the WTO and the New York Stock Exchange
If China is becoming imperialist, it is doing so through integration with arrangements designed by the established imperialist states for their own interests. The US (and Britain before it) organised aspects of world trade differently to suit their respective interests (Germany and Japan each failed in their attempts to do so). China, by contrast, formally joined the World Trade Organization in 2001, “binding itself to an accession protocol more expansive, in terms of both market access and permissible trade practices, than that faced by any other developing country in history”.
China’s economic history for 25 years has been characterised by convergence with the operations of the MNCs. By the late 1990s, the Chinese government “attempted to revive key state-owned enterprises (SOEs) by exposing them to foreign competition and oversight”. Eventually the same goal was pursued through publicly listing Chinese “national champion” companies on the New York and Hong Kong stock exchanges, and also in London, implying adherence to “the regulatory strictures of the stock market on which it is listed”.
This meant state firms were often in practice more accountable to the US Securities and Exchange Commission than to the Chinese state bureaucracy, which in any case lacked sufficient technical personnel to direct firms in the increasingly sophisticated financial, organisational and legal arrangements of international business. Foreign direct investment, foreign joint ventures, foreign contracts and foreign technology have been the drivers of China’s expanded commodity production.
Harman notes that the Soviets after World War II had “levels of industrial productivity less than half those of the US…[and] were in no position to sustain themselves in economic competition through free trade”. Yet the relative development of 1990 China was far behind even low Soviet labour productivity vis-à-vis the imperialist core. Yet the IST theorists appear to think the Chinese state could establish itself as a new imperialism through joint work with massive international monopolies.
The expansion of Chinese (and other Third World) commodity production has not occurred at the expense of imperialist countries. It has been led by MNCs through integrating Chinese labour into an increasingly specialised global division of labour to benefit the imperialist states and MNCs and the Chinese capitalist class as junior partners. There is some (mostly very one-sided) competition over the division of spoils, but there are no moves by the Chinese bourgeoisie to overturn the whole arrangement.
Globalisation of production and advancing division of labour
Capitalist production from its earliest phases needed to standardise and isolate production processes formerly carried out in succession by skilled artisans. Standardisation and simplification were necessary to replace artisan production with capitalist exploitation of the proletariat. In early industrial capitalism, machines could replace only the simplest and most mechanically repetitive labour. A higher development of the division of labour, and with that a higher degree of standardisation and simplicity of each production task, coupled with advances in technology, permitted a larger number of more complicated processes to be performed by machines. Implicit in this were increasing numbers of workers required, not in immediate production, but to design, develop and maintain more sophisticated machines and equipment.
With the appearance of large monopolies, with imperialism, it became possible systematically to organise specialisation globally. Lenin described production in which “raw materials are transported in a systematic and organized manner to the most suitable place of production, sometimes situated hundreds or thousands of miles from each other; when a single centre directs all the consecutive stages of processing a material right up to the manufacture of numerous varieties of finished articles”.
Contemporary advances in information technology allow capitalists to further separate steps. Digitisation and massive data storage and retrieval have “allowed the codification of highly sophisticated manufacturing processes”. Steinfeld argues, “[C]odified, processes can be split into discrete steps – modules, in effect – and standards to ensure their connectivity can be established.” Meanwhile, advances in communications and transport allow greater physical and geographical separation of these steps.
Today MNCs increase profits by separating highly complex and skilled processes – research, design, engineering, marketing – from simpler, lower skilled, low-profit processes. Separating individual production processes means trading semi-finished products and parts internationally. UNCTAD estimates that around60 per cent of global trade in 2012 was in intermediate goods and services.
One hundred years ago, the physical location of industrial plant and equipment was synonymous with advanced development. It is less so today. Direct production processes often embody standardised, low-value “bulk production”. Specialisation has reached such a high stage that MNCs are ableto “fine-slice their international production networks, locating each value adding activity in its lowest-cost location on a regional or global basis”. This is done on a hierarchical spectrum across poor to rich states.
There is a lot of steel production in China, but this doesn’t tell us the technical capacity of the producers. Could that steel production be paralysed if high-tech inputs were withdrawn? Would its productivity be impaired? What portion of the value created by the workers in that industry accrues to MNCs through technological rents and other payments? What are the rates of profit of high-tech MNCs compared to Chinese steel producers?
Monopoly capitalist “globalisation” is not some kind of egalitarian wave that flattens productivity differences. Just as it polarises skilled and unskilled, monopolists and the crowd, globalisation intensifies the polarisation between the imperialist core and the poor periphery by concentrating technical and scientific knowledge in the core and outsourcing what is already standard and cheap.
This polarisation is the basis for imperialism’s support for expansion of Chinese commodity production and the mechanism with which it is controlled. It allows MNCs to ensure they disproportionately benefit from that expansion without going to war. It explains why 10 percent annual economic growth in China is seen as a good thing.
A more correct historical analogy for the contemporary relationship between imperialism and China is, not that between Britain and Germany and the US, but that between industrial Europe and North America and its old agricultural periphery. In a symbiotic relationship of mutual capitalist expansion the old and new imperialist core exchanges higher technology, higher value-added commodities for low-tech, low-value produce. The basic social relations have not changed, only their technical expression.
Scientific and technological monopoly
Apple’s $45 billon profit last year was not made manufacturing products. “Why engage in physical manufacturing if you can capture the value achieved through it by control of the design parameters that those in manufacturing have to meet?”Mostly whathas moved to China are “manufacturing-intensive segments” of production. “More precisely, it is the codified, commodified, non-integral manufacturing activities that move. Competing in these areas, while hardly trivial, often does involve mastering open processes rather than developing proprietary ones.”
“Open” as opposed to “proprietary” processes are those that can’t be monopolised because their technical requirements are neither secret, highly sophisticated nor otherwise specialised. Bosses in this type of manufacturing can’t mark up sale prices because any competent producer can achieve roughly the same costs. Chinese capital’s striking ability to master and best perform these tasks explains its success as the most rapidly expanding low-value producer and thus most successful poor country.
The claim is widely repeated that Chinese capital is increasingly producing high-tech products, “climbing the value ladder”. But for the most part, this is based on statistical illusion. Statistical categories used to designate high, medium and low technology final products take no account of which aspects of those products are actually produced.Apple’s iPhones produced in China are typically recorded as “high-tech” Chinese exports, regardless of where the sophisticated components within the phone were designed, developed or produced. As long as the final assembly was in China, it was “Chinese”.
In 2010 Apple imported iPhones for $179 and sold them for $600 on the US retail market. Such a mark-up would be impossible if Chinese capital, or even Foxconn, Apple’s Taiwanese subcontractor, controlled the high-tech aspects of production. iPhone exports from China to the US in 2009 were $2 billion. The portion of that revenue going to Chinese workers, bosses, and all other Chinese costs was only $73.3 million or 3.6 percent.
Cong Cao explains the case of the Wanda wireless mouse manufactured by Logitech International, a Swiss-American company. Despite being designated “high-tech”, the mouse epitomises “labour rather than technology intensive gadgets” that “have a profit margin of sometimes as low as 2-3%”. For example, Wanda sells in the United States for around US$40, “of which China takes a meagre US$3 for wages, power, transport, and other overhead costs”, yet this too counts as a “high-tech” export.
China’s strongest export growth has been in electronics, computers and telecommunications equipment which have increasingly supplanted lower value apparel, textiles, footwear and toys. By 2006 “electrical machinery and mechanical appliances” (e.g. televisions, mp3 and DVD players) accounted for close to half of exports. These count as “high-tech”. Yet my local Kmart sells DVD players for $25. It may have some higher-tech component in it, but that tells us nothing about the firm that assembled it. Statistical categories like “computers and peripheral equipment” are hopelessly broad. Seventy percent of Chinese “high-tech” exports are “export processing operations”, that is, predominantly low-value, low-skilled, labour-intense final assembly, using imported parts. Low-tech final assembly of fridges and printers is not qualitatively different from shoes and socks.
In every sector some processes are simple and standardised and others difficult, specialised, not yet codifiable; they therefore command higher margins and profits. No new advanced technology can be codified while it’s still under development. In this period, capitals able to wield it can make above average profits.
Steinfeld observes: “Chinese specialization in manufacturing assembly has facilitated not only US but also Western European and Japanese specialization in something much more difficult to replicate: knowledge creation and invention.” “The incumbents – global lead firms – are hardly stationary, and in many cases have completely transformed themselves. Chinese firms…may be rising on the basis of their low-cost manufacturing expertise. At the same time, most lead firms…are moving away from manufacturing entirely.” Instead they are focusing on “overall product definition, design, marketing, and supply chain management”.
Schwartz points out that “large investments in production of durable goods” in the US from 1991 to 2005 outweighed loss of investment in non-durables: “Leathergoods, textiles, and clothing, and foods and beverages that combined account for just ten percent of manufacturing gross fixed capital formation, saw absolute declines. On the other hand machinery and equipment, transportation equipment, and electrical and optical equipment, combining to make up 40 percent, saw relative increases.”
Even within low-end industries like clothing and textiles, the same polarisation occurs. MNC-controlled clothing production today is usually completely outsourced to independent producers. However, MNCs still monopolise development and production of new synthetics and fashion design. Cutting, sewing and other low-end, low-skill, labour-intense processes are outsourced before finished items are returned to the MNCs for marketing and sales.
Highest profits occur disproportionately at the beginning and end of production – R&D, conception, design and marketing and sales. The middle stages – direct production – secure the lowest profits. In a more complicated product, like a car, each component is increasingly separated into high- and low-value processes, as is the production of each separate raw material.
Auto represents an ageing and increasingly commonplace technology, so high profits now come more from added electronic equipment, software and marketing than from the car itself. If China were really rising, high-value aspects of auto production would move there along with low-value bulk production. In practice, the opposite is occurring. Ford, for example,“launches models in the US, then once all the bugs have been ironed out…the same model (by this time no longer representing an advanced technology) can be shifted to Mexico”.
The leading global automakers are all core MNCs, and “the heavy engineering work of vehicle development, where conceptual designs are translated into the parts and sub-systems that can be assembled into a drivable vehicle, remain centralised in or near the design clusters that have arisen near the headquarters of lead firms”. All the important automotive design centres in the world are located in imperialist states. Detroit boasts GM, Ford, Chrysler, Toyota and Nissan. Cologne is home to Ford Europe, while in Germany, Wolfsburg hosts Volkswagen and Stuttgart, Daimler-Benz. GM’s European division is in Russelsheim. Renault designs in Paris, while Nissan and Honda maintain design centres in Tokyo, and Toyota is in Nagoya, Japan.
Internationally an increasing concentration is occurring in Detroit. European and Japanese auto giants are all establishing a larger presence there. “Monopolist parts suppliers” like Yazaki (Japan), Bosch (Germany) and Autoliv (Sweden) are following suit. Thirty-four of the 50 largest suppliers were in Detroit by 2005.
Thus, even in one of capitalism’s most important bulk production industries, we have a striking example of the real meaning of globalisation: not dispersal and the undermining of old monopolies, but increasing geographical centralisation of monopoly. It is only in this sense that we can understand the thoroughly misleading designation of “industrialisation” in the Third World along with its concomitant “de-industrialisation” of the imperialist core.
Chinese capitalist expansion comes from the combination of low wages with highly efficient organisation and mechanisation of relatively simple bulk production. Heavy investment in basic capital equipment, original development of cheaper methods to produce already low-cost goods, massive state-led infrastructure development reducing export costs, the advantages of massive scale and huge numbers of cheap, reliable, educated workers all combine to make China a location of choice for much low and medium technology production. It is among the most successful of the poor capitalist economies.
The argument that China is not imperialist does not deny the importance of economic changes taking place. On the contrary, it emphasises and highlights these changes byseeking to uncover their precise character, including a realistic view of the limits within which they are occurring. Productivity advances, no matter how astounding, under conditions of monopoly capitalism cannot lead to sustainable higher than average profitability so long as they are limited to “mastering open processes” rather than creating monopoly.
Hierarchical globalisation of research and development
For technological and scientific monopolies to develop in China would require not just bulk direct production processes to move, but also advanced research and development independently controlled by Chinese capital. There is no evidence this is happening.
Systematic monopolisation of scientific knowledge is not new. As Lenin observed: “It stands to reason that the big banks’ enterprises, worth many millions, can accelerate technical progress with means that cannot possibly be compared with those of the past. The banks, for example, set up special technical research societies, and, of course, only ‘friendly’ industrial enterprises benefit from their work.” Schwartz showed also the crucial role of German and US states in R&D, something that has become more pronounced because, as Lorimer put it, “technological innovations [of the twentieth century] required huge initial spending on research and development before it was possible to profitably apply these to production…outlays that capitalist businesses would not make.”
Thus research and development from the outset of capitalism’s imperialist stage was characterised by centralisation and monopolisation by firms and imperialist states. It has also been shown that direct production processes have been increasingly “globalised” at least since Lenin’s time. Spread of direct production is now coupled with “outsourcing” leading to a growing number of independent firms and capitalist groups carrying out production within global trade networks – albeit in strict subservience to the monopolies. There is also, today, a certain “globalisation” of R&D. However, in contrast to direct production processes, R&D’s globalisation has been characterised by geographic spread without dispersal among firms. Rather, “leading technology focused corporations, who had once operated concentrated, highly centralized R&D operations, now appear to be managing highly diversified highly internationalised research networks they themselves own.” So, while MNCs seek to outsource low-value direct production, where they have moved aspects of R&D to countries like China, it is still kept in house.
By doing so MNCs are able to dominate the R&D scene in China. Steinfeld reports that graduates from China’s top three or four technical universities are “cherry-picked” by foreign multinationals. By 2006, 37 percent (and rising) of all high-tech workers and already 41 percent of engineers worked for foreign firms. Top level graduates worked for foreign R&D centres by choice.
Technology-focused MNCs organise their internationalised research networks using the same basic hierarchy as in production. So in R&D’s globalisation we can also observe the familiar divide between low-value, relatively simple processes taking place in the Third World, while high-end work is reserved for advanced research centres in the imperialist states.
These are principally based in the US which is the leading imperialist state, not only in finance and military as is well known, but in science and technology too. Such is the basis for the global dominance of famous US “tech” giants like Apple, IBM, Microsoft and Google and a plethora of lesser known MNCs that command or even develop the newest technology in a range of industries. However, it is not only the USA. All large imperialist economies have a practical monopoly in one or more high-tech niches. For Chesnais an imperialist state is one which “possesses…a number of corporations part of whose firm-specific advantages are rooted in their domestic technological and industrial base.”
The term R&D conflates two things: “research” and “development”. These are intimately related and overlap, but broadly speaking, “research” encompasses discovery or invention, while the commercialisation, that is, modification of existing technology for the purpose of viable production, falls to “development”.
In terms of establishing monopoly, the “R” side takes precedence, especially in “new to the world” inventions. It is usually this type of research, carried out independently of capitalist competitors, most often by the US state, that provides a particular imperialist capital with the possibility of achieving a monopoly. Steinfeld explains: “In general, research on fundamental new-to-the-world technologies – at least on the commercial front – still remains the domain of companies from the world’s richest economies. Moreover this kind of research is often conducted close to corporate headquarters.”
China practises some “D” but little “R”. This reality logically extends from the general character of China’s economic expansion – low-cost capitalist commodity production for imperialist MNCs. Two examples show what this “D” is and why it is not threatening, but a complementary part of MNC operations in China. “A major global cosmetics company”, speaking with researchers from the Massachusetts Institute of Technology, claimed it had 100 million potential customers in China. Accordingly, Chinese-based R&D has to accompany sales growth because one-third of all its products sold in China are specifically tailored to that market. “Development”, then, is testing and developing slightly different cosmetic varieties suited to Chinese aesthetics using existing technology and techniques. Other examples include MNCs trying to win market share in China. For example, an international toll gate supplier needed to modify its product to suit local regulations, vehicle types and so on, to win Chinese contracts, something that involved a degree of low-end local R&D spending.
A major European auto parts maker told the same researchers that because Chinese automakers like Chery and Geely use worse quality metal than those in Europe, and use hand rather than machine welding, the parts supplier moved some R&D to China to re-engineer its products for worse production conditions. While the cosmetics and toll gate companies’ product development was a sideways movement, this auto supplier’s R&D moved technology backwards.
The above are all examples of MNC-run R&D operations. There is also R&D led by Chinese capital, but it typically involves reverse engineering of products developed elsewhere. Motorbike producers in Chongqing city, famously, pulled Japanese bikes apart, copied their basic designs and components and independently modified the original, for simpler and cheaper manufacture. This allowed technologically backward producers to make worse-performing bikes at a competitive price, and gain domestic low-end market share. Their R&D couldn’t develop products to compete globally with Japanese MNCs.
The only exception to this pattern according to Steinfeld is in energy production, where MNC-led R&D in China is “at least in some cases” carrying out fundamental new research. “In this industry China is a key market defining innovation globally.” The Chinese government insists on the most advanced technologies for all new plant, which means a reliance on French, Russian, Canadian and US corporations. “[T]here is an openly stated ambition to in future learn to develop plant more cheaply using Chinese technology”. If successful in this ambition, Chinese capital in this one sector may achieve a higher than average profitability for a period. However, even if achieved, the ability to “develop plant more cheaply” would constitute a monopoly only in production of existing designs, not a revolutionisation of productive technique. It would be a higher end version of reverse-engineered motorbikes.
By restricting ambitions to cheapening existing production processes, Chinese R&D undermines its own position in at least two ways. Simplified production processes inherently remove barriers for other entrants to this sphere of production. So while MNC-led R&D seeks to complicate production in ways only MNCs can hope to replicate, Chinese R&D works in the opposite direction.
By cheapening production processes, but not in a monopolistic manner, Chinese producers work to their own disadvantage. Regardless of how ingenious, large scale or breathtaking it may appear, Chinese cheapening of production, carried on within the framework of domination by outside monopolies, must in the end benefit primarily those monopolies.
Manifold examples demonstrate this. It is not only China that has independently developed low-end R&D. In the streets of Metro Manila, the jeepney drivers will tell you the jeepneys, which dominate Manila’s public transport system, were a Philippine invention. They are constructed from discarded or used car parts from Japan. Philippine ingenuity meant a lot of vehicles could be built very cheaply. Fast forward a business cycle or two, and the advantage is wiped out. Because the techniques were developed by and for low-tech producers, they can be replicated by other low-tech producers, and there are a lot of low-tech producers in the world. Now the jeepneys are not so economical. Local replication in poor countries across the world has pushed up the price of used parts, eroding the advantage of using such unreliable materials. Jeepneys are good for Japan and other rich auto markets though – pushing up the price of their junk.
Ge and Fujimoto, in contrast to Steinfeld, argue that China’s R&D is not starting to lead. For them the motorcycle industry is “a typical field for examining” innovation and R&D. They conclude: “Although since 1993 China has become the largest production site of motorcycles in the world, almost all the models are developed by foreign companies mainly from Japan”. “Will [Japanese] history [of advanced industrialisation] repeat in China? The answer appears to be ‘no’. It is paradoxical to observe that after a long span of about two decades of development, even though the top companies have the capacity of one million units and the collective production volume has overtaken Japan to become the No. 1 in the world, the Chinese enterprises still keep on imitating the models from foreign companies.”
Marx taught us that capitalism creates its own grave-digger in the modern proletariat. However, partial, stunted, weak or deformed development of capitalism creates those same weaknesses in the proletariat. The fullest possible capitalist development in the Third World will accelerate the development of the world proletariat, and with it, the conditions for abolishing capitalism altogether.
Systematic division of the world proletariat between rich and poor countries means holding down the industrial and social power of the overwhelming majority of the proletariat, and of humanity as a whole, who live and work in the Third World. Imperialism’s global apartheid – its rich-poor country divide – also weakens First World workers. By offshoring production and jobs, imperialist capital attempts to keep its “own” working class more compliant.
Despite this, ruptures, tremors, crises and revolutions have periodically occurred in the Third World throughout capitalism’s imperialist stage. They will continue to occur so long as imperialism exists. These are among the most important forms in which capitalist crisis manifests. As the period of the Vietnam War showed, revolution and crisis in the Third World have the potential to radicalise the proletariat and students throughout the imperialist core, to break down the power of the US military and ultimately to bring capitalist stability into question.
For Marxists inside the imperialist core to relate to future such waves of radicalisation and struggle requires us to have a correct orientation to popular struggles in the Third World. Studying and developing theoretical tools today that deepen our understanding of imperialism and the Third World is necessary if Marxists are to prove capable of leading workers in these struggles. Lenin was the first Marxist to understand the anti-colonial revolution. He brilliantly anticipated much of its content and significance. In this regard, we still have much to learn today from the leader of the Russian Revolution.
Far from having become antiquated, the framework provided by Lenin’s Imperialism: the Highest Stage of Capitalism is still able to cast light on even the most modern developments in world political economy – as I have tried to show in relation to China. If this article provokes even a handful of serious people to go back and study or re-study Lenin’s thesis, then it has done its job.
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Steinfeld, Edward S., 2004, “China’s Shallow Integration: Networked Production and the New Challenges for Late Industrialization”, World Development, 32, 11.
Steinfeld, Edward S., 2010, Playing Our Game: Why China’s Rise Doesn’t Threaten the West, Oxford.
Sturgeon, Timothy, 2008, “From Commodity Chains to Value Chains: Interdisciplinary Theory Building in an Age of Globalization”, Industry Studies Working Paper2008:2.
Sturgeon, Timothy, Johannes Van Biesebroeck and Gary Gereffi, 2008, “Value chains, networks and clusters: reframing the global automotive industry”, Journal of Economic Geography, 8, 3.
Thun, E. and L. Brandt, 2010, “The fight for the middle: Upgrading, competition, and industrial development in China”, World Development, 38, 11.
UNCTAD, 2012, Trade and Development Report: Policies for Inclusive and Balanced Growth, United Nations.
UNCTAD, 2013a, World Investment Report: Global Value Chains: Investment and Trade for Development, United Nations.
UNCTAD, 2013b, World Investment Report: Country fact sheet: China,United Nations,unctad.org/sections/dite_dir/docs/wir2013/ wir13_fs_cn_en.pdf.
UNCTAD, 2013c, Trade and Development Report: Adjusting to the changing dynamics of the world economy, United Nations.
 Lenin, 1963.
 A separate article is needed to critique the influential academic writers on imperialism, David Harvey and John Bellamy Foster and the Monthly Review school.
 Lenin, 1963.
 Bukharin’s term “state capitalist trusts” is sometimes wrongly attributed to Lenin also. Lenin never used it.
 Mandel, 1980.
Unlike Emmanuel, who formulates an eclectic and ultimately non-Marxist theory of unequal exchange based on differential wage levels. These are a symptom, not a cause, of unequal exchange. Emmanuel, 1972, p87.
 Lorimer, 1999, p13.
 Lorimer, 2002, p32; also Eaglen and Pollak, 2012, p1.
 The exceptions to this are“natural” monopolies based on proximity to natural resources or to markets in the imperialist states.
 Freeman, 2006.
 UNCTAD, 2013a, p.125.
 Kidron abandoned the theory of imperialism in 1965, shortly before leaving the IST. Kidron, 1962.
 From 2003 Callinicos began to develop a version of the “new imperialism” theory associated with David Harvey.
 Harman, 2003; Harman’s 2009 book Zombie Capitalism largely repeats theoretical formulations from 2003 and 1991; Jeff Bale, for example, approvingly wrote that Harman’s “Analysing Imperialism” is “a remarkable example of historicizing imperialism – both in terms of how it has unfolded and how Marxist thought has evolved in response to it”. Bale, 2010.
 Harman, 2003, p72.
 Harman, 2003; also Callinicos, 2009, p178.
 Harman, 2003, p6.
 Lenin, 1974.
 Lenin, 1972.
 Lenin, 1963, Preface to the French and German editions.
 Lenin, 1963.
 Harman, 2003; also Kidron, 1962; Callinicos, 2009, pp153, 179.
 Lenin, 1963.
 Lenin, 1972.
 Harman, 2003; also Kidron, 1962; Callinicos, 2009, pp153, 179.
 Lenin, 1963.
 Harman, 2003; see also Kidron, 1962; Kidron, 1965; Callinicos, 2009, p179.
 Lenin, 1964b.
 Lenin, 1964b.
 Harman, 2003.
 Harman claims Lenin’s book The Development of Capitalism in Russia supports this same claim but provides no reference. Lenin’s book carefully separates different stages of capitalist development. Lenin, 1964a, Chapter VII, Part XII.
 Kidron, 1962.
 Callinicos, 2009, p44; also Harman, 2009, p93.
 Bellamy Foster, 2004.
 Harman, 2003.
 See also Gasper, 2011.
 Harman,1984, pp55, 62, 74.
 Lorimer, 1999.
 Marx, 1981, Chapter 27, pp567-569.
 Lorimer, 1999, p17.
 Lorimer, 1999, pp17-18.
 Harman, 1975.
 Harman, 1980; also Kidron, 1962.
 Lenin, 1963.
 Lenin, 1963.
 Harman, 1980.
 see Lorimer, 2011.
 Harman, 2003.
 Harman, 2003; Callinicos quotes the same phrase, which he describes as “one of the weakest elements of Lenin’s book”. Callinicos, 2009, p48.
 Lenin, 1963.
 Harman, 2003; also Callinicos, 2009, p201; Harman defines benefit of imperialism as return on overseas investment. Harman, 1984, p87.
 The majority of FDI now goes to “developing” and “transitional” (that is former Eastern Bloc) countries. UNCTAD, 2013a.
 Morgan Stanley economist Stephen Roach explains: “extract[ion of] product from relatively low-wage workers in the developing world has become an increasingly urgent survival tactic for companies in the developed economies.” Cited in Smith, J., 2011, p2.
 Gindin and Panitch, 2012, p288.
 Mandel, 1980, p359.
 Harman, 1978.
 Harman, 2003; see also Callinicos, 2009, p181.
 Marx, 1981, p1003.
 Kuhn, 2007.
 Kuhn, 2007.
 Mandel, 1980, p345.
 Marx, 1976, p526.
 Marx, 1981, p263.
 Harman, 2003.
 “Imperialism – the use of the armed force of the state for economic ends”, Harman, 1991; see also Harman, 1984, pp37, 63, 87; Harman, 2003, p75;O’Lincoln, 2005, p178.
 Harman, 2003.
 Jones, 2005; also Callinicos, 2009, p207; Kim, 2013.
 Harman, 2003; Harman, 2009, p243.
 Kim, 2013.
 Smith, A., 2012.
 Bramble, 2011.
 Harman, 2003; also Smith, A., 2012.
 Harman, 2003; see also Callinicos, 2009, p210.
 Harman, 2009, p242; Kim, 2013; Smith, A., 2013.
 UNCTAD, 2013a.
 Bramble, 2011.
 Harman, 2006; also Achcar, 2010.
Just two Chinese corporations appear on UNCTAD’s top 100 global non-financial corporations. By foreign assets, they’re ranked 36 and 74. By UNCTAD’s Transnationality Index, which ranks companies according to proportions of foreign assets versus domestic assets, they rank 84 and 100. UNCTAD, 2013b.
Nolan and Zhang, 2010, pp106-7.
 Smith, J., 2010, p199.
 Somel, 2005.
 Lenin, 1963.
Forbes mostly does not distinguish production from sales, thus: energy (2), agriculture (3), beverages (2), metals (2), hygiene products (2), software (2) and solar (1). Forbes, 2014.
 UNCTAD, 2013a, px.
 Gereffi et al, 2005, p79.
Milberg and Winkler, 2013, p12.
Sturgeon, 2008, p8.
Milberg, 2008, p434.
 Cattaneo et al, 2010, p18.
 Cattaneo et al, 2010, p18.
 Fortune, 2014.
 UNCTAD, 2013c, p51.
 Milberg and Winkler, 2013, p281; also Heintz, 2006, p516.
 UNCTAD, “Trade and Investment Report” 1999, pvi, cited in Smith, J., 2010, p228.
Smith, J., 2010, p231.
 UNCTAD, 2012, p9.
 UNCTAD, 2013a, p136.
Asian Development Outlook, 2010, cited in Lorimer, 2011.
 Gasper, 2008; I leave aside comparisons with Japan for reasons of space and because the rise of the US and Germany over Britain offers the best proxy for today’s far more competitive conditions.
 Lenin, 1963.
 Marx and Engels, 1969.
 Lenin, 1963.
Schwartz, 2000, pp153-4.
Schwartz, 2000, p282.
Schwartz, 2000, p153.
Schwartz, 2009, pp120-1.
 Steinfeld, 2004, p1979.
 Steinfeld, 2010, p32.
 Steinfeld, 2010, p33.
 Steinfeld, 2010, p33.
 Harman, 2003.
 Marx, 1976, Chapter 14.
 Lenin, 1963.
 Steinfeld, 2004, p1972.
 UNCTAD, 2013a, p122.
 UNCTAD, 2013a, p156.
Steinfeld, 2010, p115.
Steinfeld, 2004, p1983.
 See ISIC (UN) statistical tables.
 Milberg and Winkler, 2013, p36.
Milberg and Winkler, 2013, p41.
Cong Cao, “China’s Scientific Elite” in China Perspectives, 2004, cited in Lorimer, 2011.
 Steinfeld, 2010, p86.
Steinfeld, 2010, pp18, 75.
Steinfeld, 2004, p1983.
Schwartz, 2009, p123.
 Schwartz, 2000, p276.
Sturgeon et al, 2008, p303.
Sturgeon et al, 2008, p315.
Sturgeon et al, 2008, p316.
 Lorimer, 2002, p32.
 Steinfeld, 2010, p148.
 Steinfeld, 2010, p161.
Chesnais, 2007, p132.
 Steinfeld, 2010, p164.
 Steinfeld, 2010, p153.
 Steinfeld, 2010.
 Steinfeld, 2010, p152.
 See Ge and Fujimoto, 2004.
 Steinfeld, 2010, pp163-7.
 Steinfeld is not an isolated academic arguing against the current. He takes a more positive view of China’s R&D than is usual. See Ge and Fujimoto, 2004; Thun and Brandt, 2010; Ernst and Naughton, 2012.
Ge and Fujimoto, 2004, p15.
 Ge and Fujimoto, 2004, p16.