Saturday 30 July 2016

Value of Labour-Power, Wages, Productivity and Imperialism

These are notes from, and for, a series of discussions on imperialism organised by Redline. (See here for other details) As such, they are not a fully rounded analysis, just some guidance on points in these debates.


A key point to note is that the discussion of these topics often mixes up the question of the value of labour-power and that of (the rate of) exploitation. Both are affected by social productivity – how much can be produced in an hour – but are different aspects of labour’s employment by capital.
For example, assume that the value of labour-power, represented by the wage, is the same everywhere. Then the rate of exploitation – how much surplus-value compared to the value of labour-power – is higher if some workers work more hours at the average level of productivity. Even with the same number of hours worked, the rate of exploitation would be higher where workers are more productive per hour than average – usually meaning they are working more intensively, or have better technology or have higher skills. One hour of productive social labour under capitalism produces the same amount of value as another only if it is of the same productivity, intensity, etc.[1]
Of course, the value of labour-power is not the same everywhere, so that adds another variable to how exploitation is calculated. If the value of labour-power is much lower in some countries than others, exploitation might be more, but it might also be less, depending upon hours worked, intensity, productivity, etc. Nevertheless, these are abstract points of theory; the reality of the world economy paints a much more straightforward picture.
1. Wages, value of labour-power
Everybody knows that there are huge disparities in living standards worldwide. Equally, every capitalist company knows that workers in one country may get wages that are a small fraction of those in another country. Recent data from the US Conference Board for 2012-13 show that manufacturing hourly compensation costs (ie wages plus various directly-paid benefits) in China and India were 11.3% and 4.5%, respectively, of the US level, despite a previous increase, especially in China. So, if the US worker got $25 per hour, the Chinese worker got under $3 per hour and the Indian worker still less. In the rich European countries, by contrast, compensation levels were generally above those in the US, although for the UK they were 20% lower, at nearly $21 per hour.
Whether one allows for the impact of exchange rates, local costs, or anything else, it remains the case that a large proportion of the world’s proletariat is living in penury compared to those in the rich countries. The disparity is so huge that, even with so-called globalisation in recent decades, there has clearly been no ‘equalisation’ of wages in the world market, nor really any significant narrowing of differentials. For this reason, it would be wrong to argue that there is an equal value of labour-power everywhere, so that if one group of workers gets paid below this, then they are getting paid below ‘the’ value of labour-power. Instead, it makes much more sense to argue that there are different values of labour-power in different countries, for a variety of historical, political and social reasons.
Taking absolute levels of wages (basically, their purchasing power, or real wages), moves towards an equalisation could potentially occur, but only if there were a free market in labour-power. However, from the late 19th century, when travel became less costly, there was also the growth of passport laws and immigration controls in the richer countries. Governments implemented these not only due to concerns about ‘undesirable aliens’. More importantly, labour unions and workers in the richer countries protested about the pressures on the labour market for lower wages from these migrants and the extra demand for housing, etc.
Such controls have remained in place, in different forms, since then. Where they have been relaxed, as with the EU membership of Eastern European countries from 2004, this has caused political trouble, as witnessed in the latest UK Brexit vote. The ‘exit’ voters (mostly in England and Wales) were those who felt they had suffered from an influx of cheaper ‘Polish plumbers’, etc, who had done them out of jobs, made housing more expensive or less available, and made the queues for medical services and welfare payments longer. Similarly, in the US we have the ‘Trump wall’ proposals to keep out the Mexicans, etc. These political moves, contradicting the usual capitalist search for the lowest labour costs, are responses of the ruling class to the economic discontent of a loyalist, pro-imperialist working class that is demanding protection from its state.
From a Marxist perspective, wages are based on the reproduction costs of labour-power, or what capitalists need to pay workers to get them to be able to show up for work (not just individually, but also to allow for family costs, etc). This, in turn, depends on subsistence costs as a minimum, plus what Marx called a ‘historical and moral element’. This latter element is based on the social conditions prevailing, including the success or otherwise of working class struggle for higher wages, benefits, etc.
This also means that there is not necessarily any direct relationship of wages to productivity. It is true that higher productivity can allow the capitalist to make some concessions on wages and benefits while still making a profit. Equally, low productivity means the capitalist will have to impose harsh conditions in order to survive in competition. However, there is no one-to-one relationship. It depends on the political and social situation. A defeat of the working class can lead to high levels of exploitation and high productivity, but low wages. This was true for the West German ‘economic miracle’ in the 1950s, for example, where exploitation of the working class was comparable to that under Hitler.
In periods of crisis-free growth, it is likely that wages will rise, but commonly we find that wages grow less than productivity. The degree to which that happens is not predetermined. Rising productivity is usually an indication of a rise in the rate of exploitation, despite what may also be improved living standards (higher real wages) for workers. However, this mechanism does not work in the same way for workers in the dominating, imperialist countries and for those in a more subordinate position.
In the imperialist countries, the capitalist class may attack living standards, but it has far less freedom to do so than in the dominated countries. In the latter, it is also starting from a lower level of living standards from which to begin exploitation. In this case, the ‘historical and moral elements’ work in capital’s interests. Especially for countries that are newer entrants to the global economy, the more traditional social relationships can substitute for higher wages paid by the capitalist (eg workers from the countryside working in factories but still growing some of their own food). Wages will be very much lower than in the major countries, even if productivity in the factory is not that much lower, or may even be higher, than in the more developed economies.
2. Productivity
A few points on productivity measures in commonly used economic statistics, and the differences between imperialist and dominated countries, are also worth bearing in mind.
The national average productivity level in dominated countries may be low, since it will often include a large subsistence-based agriculture or commercial sector and small-scale producers. This can lead economists to argue that differences in wages are a function of differences in productivity (on their assumption that workers get rewarded according to the value of what they produce – something at odds with a Marxist understanding). But this economist argument conveniently ignores that foreign companies from imperialist countries invest in, or are supplied by, companies in sectors of the economy where levels of productivity that are not materially different from those in the major countries.
Foxconn, for example, has greatly mechanised its massive production facilities in China with a huge number of industrial robots. This highlights how the massive gap between wage levels paid in China, India, etc, and the wage levels paid at home is a sign of extra exploitation, in the sense of value produced versus the value of the wage paid. In other words, it is a higher rate of exploitation (s/v) by these companies in India/China, etc, not a sign that they pay low wages because productivity is low.
I think a key point of John Smith’s Imperialism book is to show how GDP-related statistics mean that measures of value ‘production’ are implausibly distorted in favour of the rich countries. With their commercial (and more general) market power, they are able to force a deal upon the producers of the oppressed countries, although this shows up as value accruing in their own domestic economies. This is why Apple Inc, a US company, looks so profitable, despite producing little or nothing in the US.
3. Profitability, rate of profit
Differences in national rates of exploitation may not be the reason or the only reason for the different measured rates of profit. Tax concessions for foreign capital, or other concessionary deals to attract foreign capital can also be important. Equally, cheaper land or other available resources can also help boost profits, separately from whatever wages might be paid.
This raises the question of why ‘all’ capitalist investment does not migrate to the more profitable location, or why it has not all moved to China, etc. John Smith has made some useful points here, both that a lot of the productive capacity has done this – as shown in some details of FDI that distinguish HQs and more marketing-type facilities from production facilities – and that there has been a distinction in the product markets between more high-tech and low-tech operations. The former are in one ‘market’, that run by the major powers making aerospace products, top-end engineering products, etc, with patents and other barriers to entry from competitors. The latter is a separate market making textiles, clothing, simpler components for other products, where competition is fierce.
I would add that there is also an extra ‘value’ given by design patents and intellectual property, plus marketing power. More or less all of this economic benefit accrues to the companies based in the imperialist countries. This is a form of monopolistic control of markets, boosted by the greater buying power of rich consumers – in this respect it is a feature of monopoly control that is self-reinforcing. One interesting angle on this is given by the ‘Smiling Curve of Stan Shih’, where Shih, a former Acer executive, notes that the worst thing to do if you want to make any money is to produce the goods, rather than designing or selling them!
This harks back to British imperialism’s heyday, when Britain was more of a commercial and financial operator than a producer. If anything, the pattern of the world economy today, with the power of Google, Facebook, Amazon, etc, shows that profitability has little to do with producing any value. Don’t be an idiot, get others to do the hard work producing!
Such developments also cast questions on an equalisation of profit rates internationally, as measured by country-based rate of profit measures. Yes, companies will tend to focus on where more profit can be made. But how do they do this, and does this mean they change location? This is one more sign that Marx’s analysis, and even Lenin’s, is only a starting point for analysing imperialism today.
4. Productivity, C/V, rate of profit, imperialism
Higher productivity means producing more use-values with less of an input of value, ie less value (social labour-time) per unit of commodity produced. Usually, and historically, this comes about through mechanisation. But there can be path-breaking innovations that use up far less resources (constant and variable capital) per unit of output (for example, in telecoms, containerisation) and might even involve much less cost of constant capital. So, there is a very common, but not always a necessary link between a higher C/V and higher productivity.
The point I would stress, however, is that in much historical work on imperialism there is a mistaken view that the basic mechanism of exploitation/value transfer is where higher C/V countries (presumably, the more developed) extract value from lower C/V countries (the less developed). This derives from the process Marx describes for an equalisation of profit rates in the capitalist market, ie that there is a flow of value (based upon prices of production differing from values) from the low C/V companies to the high C/V companies.
The problem is that this has nothing to do with imperialism as something special in a new phase of capitalism! It is a normal feature of the capitalist market, even within an imperialist country. The economic analysis of imperialism has nothing to do with this aspect. Instead, the economic content of imperialism should show how the more powerful countries exert economic power over the oppressed. Furthermore, this is how a monopolistic market run by the major countries tries to prevent whatever free-market equalisation is meant to occur, whether this is of profitability – to protect their interests – or even of wage levels, to keep their populations onside, when it comes to imperial conflict!
5. Conclusion: the benefits of imperialism
In economic terms, imperialism benefits not only the imperialist governments and corporations, but also the mass of the populations in the powerful countries. This comes through concessions that the former are able to give to the latter, whether in welfare payments or in wages directly. In the major countries, even when wages and working conditions are under pressure, or when unemployment is rising, there remains a clear distinction between the living standards and the state-sponsored social safety net available to workers in rich countries and what workers in poor countries receive. These privileges are an important material basis for the political outlook of the mass of workers in the rich countries.

Tony Norfield, 30 July 2016

[1] Also note that whether value is created is socially determined. For example, if too much is produced of a particular product, then part of the social labour allocated to its production is worthless. This will be reflected in unsold commodities and/or falling prices.

Thursday 28 July 2016

Spain: Fear and Austerity in the EU

It seems that the class struggle, or at least the fear of it, is indeed the motive force of history. The EU has announced that it will not, after all, impose a hefty Є2.2 billion fine on Spain for repeatedly missing its budget reduction targets, as it had been threatening to do for months. EU hard-liners, particularly the Germans, were until recently demanding a Є5 billion fine. Spain has now been given another two years to get its finances in order.
EU Economic Affairs Commissioner Pierre Moscovici, who made the announcement, explained that the Spanish people had already made sacrifices and it was not appropriate to demand more of them, particularly at a time when there is a question mark over the entire European project.  Why has Spain been shown such largesse, when the Greeks were not? The Greek people also made sacrifices, larger than those imposed on Spain.
More significant still is that, according to German press reports, it appears that the change in policy was promoted by none other than German Finance Minister Wolfgang Schäuble, the hard-line archduke of fiscal probity and sticking to the rules. The German business paper Handelsblatt reports that following a long discussion with French, Italian and Spanish ministers at the recent G-20 summit in Beijing, Schäuble himself phoned the EU Commission pressing for a policy change in favour of more carrot and less stick. The Spanish argued that a fine would undermine Spain’s Christian democrats and would only benefit the ‘populist’ Podemos.
The EU’s problem is that the three areas in which it wants to see some major traction – labour market flexibility, pensions, and social spending – are all very politically sensitive and disruptive. This limits how far it can push austerity. Spanish Economy Minister Luis de Guindos has been bragging openly for weeks that the EU would not impose a fine, which was rather undiplomatic.
Greece, with only 2% of the EU’s population and of little economic importance, can be pushed around. Spain, the EU’s fifth-largest economy, is a different matter.  Despite being wrongly dubbed a ruthless neoliberal by the Left, prime minister Rajoy has been resisting on all three fronts.  Sledge-hammer austerity can only knock Spain’s social and constitutional order to pieces and push the popular classes into the arms of Podemos and possibly beyond.


Spain has around 30 different forms of employment contract. Brussels wants these cut down to three or four to make hiring and firing easier. The Spanish labour market is highly differentiated. About a third is ‘protected’, while two thirds form a ‘precariat’ surviving on very short-term contracts with only basic employment rights. The average duration of an employment contact is now 53 days. The effects of this are dramatic. While wages in the protected sector have dropped a few percent since the beginning of the financial crisis, the wages of the ‘precariat’ have dropped 14-17%. This accounts for Spain’s recent improvement in exports, in the absence of any significant rise in productive investment.  So the employment contract reform Brussels wants to see implemented is aimed mainly at the protected sector. But this section of the labour force, which includes much middle class employment, is the bedrock of the two mainstream parties. Destroying employment protection hacks away at political stability. 


Spain has 9.42 million pensioners. Around 45% of the ruling conservative party’s voters are pensioners, as are 40% of socialist party voters. Only 16% of the Podemos vote is made up of pensioners. Moreover, half of those receiving pensions are supporting their offspring’s families. So pensions are a vital source of income in a country where just under half the unemployed no longer receive any benefits at all as their entitlement period has expired.  So deep cuts in pensions, as demanded by the EU, would push a substantial number of families over the brink.

State spending

Due to Spain’s very late development as a modern economy, and the weakness of its central state, Spanish politics remains very regional, often parochial, and is dominated by local elites and parties, which are voted in with the express aim of getting as much as possible out of Madrid. The regional federations of both the main parties are very strong.
A significant part of state spending, such as health and education, is channelled through regional governments, the majority of which are conservative. Cuts in social spending have an immediate effect on regional politics and immediately create intra-party revolt.  For example, the main impetus behind Catalans' apparent bid for independence is really a ploy to pressure Madrid to allow Catalans to keep all or a larger part of their taxation, a privilege the Basques already enjoy. So, although the ruling conservative party is hostile to everything Catalan that smacks of independence, it continues to make large concessions to the region in the hope that those wanting only tax autonomy will curb those backing complete independence.
No one really believes that Spain can turn its economy around in two years or meet its budget reduction targets, which have been raised to 4.6% of GDP for 2017. But, for a while, the EU has put this problem on the back burner because it now has its hands full with Brexit.

Susil Gupta, 28 July 2016

Friday 22 July 2016


On Wednesday 3 August at 7pm, there will be a discussion of my book The City at Housmans bookshop, 5 Caledonian Road, King’s Cross, London, N1 9DX. See here for this and other events at the bookshop.

Tony Norfield, 22 July 2016

Thursday 21 July 2016

A Dreadful Waste of Money

'Crowdfunding' has become common in recent years to accumulate small sums of money from many people to achieve a particular objective. So far, so social and, potentially at least, progressive. But what is one to think of the reported 180,000-plus people who have recently joined the British Labour Party at a cost of £25 each, giving it some £5 million? Even with the lower value of sterling, that is a dreadful waste of money.

The Labour Party deserves disdain, at a minimum, even if one were ignorant of its blood-strewn history as a defender of (British) imperialism when in government. In all manner of wars and subterfuges, from the partition of India, to Vietnam, to Ireland, to Iraq and the Middle East in general, the Labour party has been the proponent of, or an ally in, a wide variety of imperial crimes.
An apparently saintly Jeremy Corbyn, embattled leader of the Labour Party, shares the same sins. Apart from being a member of the Labour Party for more than 30 years, he is now a member of the Privy Council. This Council includes senior political figures from all major parties, who are informed about the ill-doings of the British state and pledge not to tell. The oath is as follows:
“You do swear by Almighty God to be a true and faithful Servant unto the Queen’s Majesty, as one of Her Majesty’s Privy Council. You will not know or understand of any manner of thing to be attempted, done, or spoken against Her Majesty’s Person, Honour, Crown, or Dignity Royal, but you will let [ie stop] and withstand [ie prevent] the same to the uttermost of your Power, and either cause it to be revealed to Her Majesty Herself, or to such of Her Privy Council as shall advertise Her Majesty of the same. You will, in all things to be moved, treated, and debated in Council, faithfully and truly declare your Mind and Opinion, according to your Heart and Conscience; and will keep secret all Matters committed and revealed unto you, or that shall be treated of secretly in Council. And if any of the said Treaties or Counsels shall touch any of the Counsellors, you will not reveal it unto him, but will keep the same until such time as, by the Consent of Her Majesty, or of the Council, Publication shall be made thereof. You will to your uttermost bear Faith and Allegiance unto the Queen’s Majesty; and will assist and defend all Jurisdictions, Pre-eminences, and Authorities, granted to Her Majesty, and annexed to the Crown by Acts of Parliament, or otherwise, against all Foreign Princes, Persons, Prelates, States, or Potentates. And generally in all things you will do as a faithful and true Servant ought to do to Her Majesty. So help you God.”

Corbyn's principal divergence from this blood-oath loyalty to the British state shortly after becoming Labour Party leader was ... not to kneel before the Queen. Perhaps his knees were playing him up a bit.

My message to those who have already pledged their £25 to the Labour Party, or may do so, is that they would have a much better chance of a positive outcome by betting on a three-legged horse next running in the Grand National.

Still better a reward would be secured by purchasing, reading and reflecting upon an informative book by, admittedly, a right-wing, former Labour Party member, Edmund Dell: A Strange Eventful History, Democratic Socialism in Britain, Harper Collins, 2000. It should be read with critical eyes (what should not?), but this book is well-written, full of enlightening information and is available at much less than the otherwise wasted £25.

Tony Norfield, 21 July 2016

Saturday 16 July 2016

Commercial Capital and 'Finance'

This note is to record an interesting comment on my new book, The City, and my recent blog post 'Value Theory, Finance & Imperialism' on 3 July 2016, and to give my reply that may otherwise be somewhat hidden at the end of that article.


Comment from 'Kumiko':
You are on the right track generally as far as the theoretical framework goes. But I'd note that in Vol II, where the analytical assumption of the identity of individual with total social capital is still in place, Marx 1) divides the total productive capital into productive-, commodity-, and money-capital circuits, and regards each independently. Here Marx arrives at the conclusion that the commodity-capital circuit can be excluded from further consideration for the purpose of the analysis, that purpose being the determinations of the sources and destinations of surplus value, the source being found in production, the destination necessarily being found in money under capitalism. But Marx also notes the peculiarity of the commodity-capital circuit in that it is the only circuit of the three to both begin and end "bearing" surplus value. In practice that could give rise to various interesting arbitrage possibilities for independent commerce, once the assumption of identity is dropped.
And that brings me to Vol III Part IV. This is limited to the regard of commercial capital in independent form. Note also Marx's assumption that independent commercial capital is scheduled for extinction in the course of the development of capitalist industrial production. This may be true enough, but the question begged here concerns the *combined* forms of industrial, commercial and financial capital, these being the common social aliases for the three circuits mentioned above. You are correct to dismiss the traditional counter-position of "industry" with "finance" as if these still exist only in independent form. Further, one could go on to critique the classical Hilferding formula for "finance capital" that combines banking with industrial capital as perhaps only applicable to Germany in a certain historical period, as only a specific combination of the three circuits. Even if we agree that modern capital nearly always appears in combined form, we could go on to question the "balance" in the combination of the three circuits, where one or another "dominant", with that dominance also fluctuating with the other circuits over the course of history. And finally we can also question the "inevitability" of the rise to "dominance" of industrial capital, particularly in the three different cases of the United States, Britain and France. Otherwise we would not be speaking of "deindustrialization" today.
My reply:
I agree with your remarks more than might appear at first sight. My focus in the book (and the logic of the book’s exposition as outlined in this blog post) was on how to understand ‘finance’ in a value framework. I saw this as necessary, given the prevalence of shallow, ‘radical’ critiques of finance that usually boiled down to a call for a regulated capitalism. In other words, I wanted to explain how to understand the evolution of the form of value and the key role of finance in the imperialist world economy. This was the subject of my PhD thesis, from which the book, after much rewriting and updating, was derived.
In the book, I do have a critique Hilferding’s concept of ‘finance capital’, both as being too Germany-centric and as a one-sided, nationally-based understanding of how the form of value evolves. I argue instead to analyse how finance develops in the world economy, in particular the role of financial securities and the banking system, to get a clearer view of how the world works.
I take your point that the ‘commercial capital’ aspect of modern capitalism is also a critical one. My priority in the book was different, but it has been on my mind for a while now that commercial capital deserves more attention. For example, major corporations like Apple, Google, Facebook and Amazon are more in the commercial than the industrial sphere. Most of their activities are buying/selling what other companies produce, or getting advertising revenues from these sales. This is also linked to the financial and market power they are able to use. William Milberg and others have looked at this from a ‘value chains’ perspective; John Smith, in his new book Imperialism in the 21st Century, explains well how this amounts to ‘value capture’ in his focus on the globalisation of production.
The latter point also brings out how commercial capital still depends upon production, and how production companies can turn themselves into more commercial ones by getting others to do the producing in markets that are dominated by the powerful corporations. Even in the late 19th century, Britain was more the ‘warehouse of the world’ than the workshop of the world, with huge revenues from maritime transport, shipping, insurance, trade finance, etc, adding to those from its foreign investments.
Does that show how industry was not the ‘dominant’ force in capital accumulation? Not really. Industry (which Marx considered the main form of productive capital) conditioned the developing role of commerce and finance from at least the early 19th century, moulding it into a form that would suit industrial capital. However, it is true that other developments need to be considered. Marx was wrong if he thought that industry had to be the dominant form of capitalist enterprise, but this does not necessarily follow from the logic of his argument if one allows for the development of the world economy, which he had not fully analysed.
While a huge commercial capital sector (or financial sector) could not exist within a single economy taken out of its relationship with others, it is a different question when a small number of powerful capitalist countries dominate the world economy. Britain, for example, could have an outsized commercial/financial sector because Britain dominated world trade and its surplus value was sourced worldwide, not just from within the national economy. This example can be used to understand what has happened today, where domination of world commerce and finance benefits particular countries that, in value terms, produce relatively little themselves. This is explained more fully in my book regarding finance; analogously this is true of commerce as well today, when others do the producing.

Tony Norfield, 16 July 2016

Wednesday 13 July 2016

The New PM

Theresa May has just made her crossing the threshold speech outside No 10 Downing Street. It was striking for two reasons.

Firstly, it revealed the shallow understanding of history that characterises these people, as she claimed that the Conservative Party's full name 'Conservative and Unionist' had something to do with uniting all the nations of the UK (and gave the impression this meant peace, love and happiness). In fact, the 'Unionist' bit of the name is entirely due to the title of a political faction among the Liberal Party that opposed Home Rule for Ireland and later allied with the Conservatives, as any speechwriter would have been able to check on Wikipedia.

Secondly, the new PM May made a lot of references to improving social justice, being anti-the privileged few and helping workers. This was a clear appeal to the Brexit working
class! The Tories have shown real political skill at sorting out this stage of the mess.

This is likely to add to the UK Labour Party's turmoil. Unless Boris Johnson becomes the new Chancellor of the Exchequer (announcements of Cabinet posts are due later), Labour has had it in the 'Blairite' mould, since the Tories will look like they can do things better. But Labour is also unelectable in a more 'radical' mode, given the nature of the British working class.

Interesting times ahead.

Tony Norfield, 13 July 2016

Saturday 9 July 2016

BREXIT, the City and British Politics

I was interviewed by the Argentine magazine Ideas de Izquierda about BREXIT, the City and British politics last week. The interview will be published on their Spanish language website in a few days, and the English version is available now on the website Left Voice.

Tony Norfield, 9 July 2016

Sunday 3 July 2016

Value Theory, Finance and Imperialism

The following text consists of notes from a lecture that I gave in London on 27 June at an IIPPE conference on ‘Imperialism Today’. This set of notes is in the form of bullet points, ones that I elaborated on in the talk and discussion. To that extent, they will not necessarily be completely clear to new readers. But I do not plan to extend these into a full article. Instead the notes are a summary of the underlying value logic that is part of what is explained more fully, discursively and straightforwardly, with examples, in my new book The City: London and the Global Power of Finance. I hope these notes will help as a concise summary of my developed argument, and also give some guidance points for others interested in drawing links between Marx’s theory of value and contemporary financial developments.

Tony Norfield, 3 July 2016

1. What is Imperialism?

Marx showed how capitalism develops a world economy.
‘Imperialism’ describes a stage when particular countries cannot be understood outside of their world relationships.
Focus of analysis: examine how social relations are shaped by the capitalist world economy.
Example: the US$ is ‘world money’, given the international power of the US economy, not just the local US currency.
Lenin also formulated how economic and political perspectives must change with the emergence of imperialism.
Marx’s analysis of imperialism?
- Marx analysed world developments, but only in a limited way in Capital Volumes 1, 2 and 3
- Vol 3 analysed ‘many capitals’, and their different forms, but not relationships between countries in the world market
- Later volumes planned to cover the state, foreign trade and the world market more systematically
Hence, in Capital there is:
- No real discussion of colonies (just brief mentions)
- Nor much on monopoly, national differences in wages, etc
Obviously, the world also developed further from the 1860s!
‘Imperialism’ as in Lenin’s 1916 pamphlet: 
- decisive role of monopolies in the world economy
- bank/industrial capital merges, producing ‘financial oligarchy’
- capital export (and revenues from it) much more important
- territorial division of the world is complete among key powers
- changes in division of world power increases propensity to war
- division of world into oppressed/oppressor countries, with the oppressors benefiting economically (his focus was on the ‘labour aristocracy’)
A century-old analysis still relevant?
Monopolies dominate world economy - yes
Bank/industrial capital & ‘financial oligarchy’ – not this form
Capital export – different kinds of international links today
Territorial division of the world – yes, but also changes
Propensity to war – yes, although now many wars by proxy
Oppressed/oppressor country division – yes, some changes
Benefits of the oppressor – yes, but not just a ‘labour aristocracy’
Politics of imperialism:
Conflicts/rivalries between major powers by end-19th century
Wars began to involve the whole population, not just military
Social unrest with the growth of the working class
Ruling class gains loyalty of workers via welfare reforms, extra voting rights, etc (UK, France, Germany, especially)
By 1914, the main European socialist parties backed their own states in war
Development of loyalist working classes in many rich countries that will fight to defend their nation state and their related privileges! So, it is not just a very small portion of the working class in these countries that becomes pro-imperialist. This is a major political issue today!
Summary definition of imperialism:
A division of the world that results from the exercise of monopoly power by corporations and their states.
Big corporations may have economic advantages, eg better technology, but they have a powerful position in the world economy due to their links with particular states.
States back property rights (from expropriation by rivals, also via patent laws) & extend economic power in international trade and investment deals.
Economic power and ability to exploit is reinforced by these privileges, ones that also include access to finance.
The balance of power is not fixed. Relationships are likely to change with the different accumulation of capital and power-competition successes of different countries.

2. Imperialism & Financial Power

Financial markets show what the world economy allows!
Marx’s ‘law of value’ for commodities has evolved:
- Equity prices, bond yields, FX rates are critical for companies and governments
- For example, the US uses the $ as ‘world money’ to isolate non-favoured countries (eg Iran, Russia)
- Major companies dominate world markets, via stockmarket takeovers, ownership links, etc
- Access to capital occurs via major financial centres, especially New York and London
… in addition to trade/investment deals run by major states
This is a regular, daily mechanism, and does not rely upon crises to work, although such crises often give the major powers an extra ability to gain influence.

3. A ‘Real’ versus a ‘Financial’ Economy?

All big capitalist companies are tied into ‘finance’
- FX deals to buy imports / sell exports
- Borrowing for purchases, or to invest
- Use financial derivatives to insure against price moves
- Mergers & takeovers to monopolise markets
Financial operations are integral to modern capitalism, and it is a liberal, reformist delusion to make a big distinction between 'real' and 'financial' companies.

4. Theory of Finance - Overview

‘Finance’ is big because it is driven by governments, corporations, banks and other financial institutions.
- Value relationships take on a financial form, so ‘finance’ pervades the system as a whole and is a means of gaining wealth and power!
- Note the prominence of the US and the UK, and how the workings of the global financial system are of particular benefit to them.
-  This is not ‘complex financial dealing’ by dangerous speculators, who disrupt the otherwise solid workings of the capitalist economy.

5. Finance & Marx’s Value Theory

Marx’s theory of value is about the capitalist organisation of social labour.
It is an analysis of the forms that arise from capitalist production and the exploitation of labour, the tendency to crisis and the limits of this mode of production.
Capitalist finance in Marx’s theory:
- a means by which existing surplus-value is circulated
- ‘finance’ = money dealing + interest bearing capital
- interest bearing capital (and banking) create new forms of value, and appear also to create new value
Interest, banks, fictitious capital, etc, are dealt with first in Volume 3 of Capital. This is a ‘logical-historical’ development of the earlier analysis.
The first page of Vol 3 of Capital: Marx notes that Vol 1 analysed the immediate process of capitalist production ‘with no regard for any of the secondary effects of outside influences’. Vol 2 studied the circulation process of capital, which must be added to the immediate process of production to complete the ‘life span of capital’.
Vol 3 went beyond this synthesis to ‘locate and describe the concrete forms which grow out of the movements of capital as a whole’.
Vol 3 develops those forms of capital which:
‘approach step by step the form in which they assume on the surface of society in the action of the different capitals upon one another, in competition, and in the ordinary consciousness of the agents of production themselves’.
Vol 1 & Vol 2 do not examine how competition might affect different capitals, nor the forms of capital that arise from that process.
Vol 3 examines ‘many capitals’ and competition, but not in concrete detail. For example, Marx excludes the analysis of the world market, different values of labour-power, etc, except in occasional remarks.
Industrial capital, and its circuit of  M – C … P … C’ – M’, has almost complete attention in Vols 1 & 2:
‘Its existence implies the class antagonism between capitalists and wage-labourers …. The other kinds of capital, which appeared before industrial capital amid conditions of social production that have receded into the past or are now succumbing, are not only subordinated to it and the mechanism of their functions altered in conformity with it, but move solely with it as their basis ….’
But Vol 3, Parts IV & V are critical for an understanding of finance. These show how the ‘M’ and ‘C’ components of this circuit become transformed under the influence of industrial capital. In turn, they have an impact on the forms of value accumulation by the system as a whole.
a) The basic M – C … P … C’ – M’ circuit includes market exchange and changes of value form (M - C, C - M)
b) This circuit implies surplus funds, or demands for funds, arising for productive capital at different times. Merchant capital (commerce, etc) develops in this context
c) The form of value in the circuit changes not only between M, C and P (Vol 2). The forms taken by M also evolve.
d) A key stage in the analysis is where M is an advance of capital outside the basic circuit, as in M – M’. This is the basis of Marx’s concept of ‘interest bearing capital’.
Step 1: Distinguish M – C – M’ from M – C … P … C’ – M’
This is not simply a logical (or functional) separation, but one that develops in reality.
Buying/selling by merchant capital is separate from the part of the circuit of capital that produces surplus value.
The specialist buying/selling function can be done more efficiently by merchants. It shortens circulation time, lowers costs and allows more surplus-value production per year.
Merchant capital produces no value or surplus value itself, but enables more surplus value (per year) to be produced by others.
Step 2: Focus on specialist monetary aspects of merchant capital (eg FX deals or loans for operating capital which assist the circuit of industrial capital, promoting M–C and C–M).
This is ‘money dealing capital’ (MDC), distinct from the previous ‘commercial capital’ part of merchant capital.
Marx’s theory has productive, commercial and money dealing capital as separate, but related, parts of the original circuit of industrial capital dealt with in Vol 2.
Each part of MDC is involved in averaging the rate of profit, assuming each section of capital could move into other areas. Capital advanced for production may be advanced for merchant (MDC) functions, or vice versa.
Money dealing operations are only an advance of money to industrial and commercial capitalists - an exchange for a different form of money (as in FX) or for a security (eg advance money against bills of exchange that are redeemed later). They are not an advance of capital.
Step 3: Another form of capital develops out of this money dealing – Interest Bearing Capital (IBC)
Up to Step 3, Marx examined forms arising out of the circuit of industrial (or productive) capital.
With Step 3, there is a new form of capital, IBC, outside that circuit. It has its own special circuit: M – M’.
With IBC, money is advanced as money capital (by money capitalists) to the 'functioning capitalist' who later returns the money back to the owner with interest.
Marx includes both the merchant and industrial capitalists as potential recipients of IBC from the money capitalist.
In both cases, it is assumed that the loaned funds are invested as capital and (could) gain a surplus value.
Even if the funds are not invested profitably, then the money capital still has to be repaid with interest.
Marx's concept of IBC does not include all loans of money capital for whatever purpose. This is consistent with Vol 3 analysing 'the process of capitalist production as a whole'.
So, bank loans to workers, for mortgages, for personal consumption, etc, are treated differently, or not at all, in Capital. These are just advances of loanable money capital, not of IBC.
The latter loans are still paid back with interest, but the concept of IBC is determined outside this relationship.
However, in all cases, the interest is still a deduction from surplus value deriving from the productive sphere.
Key points on this topic
a) ‘Finance’ is not confined to the operations of banks; monetary advances and transactions pervade the whole capitalist system! ‘Industrial’ companies also conduct many financial operations.
b) For IBC in particular, the advance of money capital in the M – M’ circuit can also be performed in a number of different ways, and by different institutions.
c) This also means that other forms of ‘M’ can develop outside the M – C … P … C’ – M’ circuit.
d) This takes us on to fictitious capital and bank credit, key forms of capital, and of value in modern financial systems.
Bonds, Equities, ‘Fictitious Capital’
‘Fictitious capital’ (basically, the term means financial securities)
The prices of these securities do not represent any value created and are determined differently from commodities.
Bonds have a higher status than equities regarding terms of repayment; but a lower status, usually none, in ownership of corporate assets.
There is a legal differentiation of ‘pure’ money capitalists (bond owners) from owners of companies (via equities).
The securities are tradable, potentially translated into money. They can be used as collateral for loans. Equity securities are often used as a means of payment in takeovers.
Bond prices: the discounted present value of future coupon payments and the principal repayment.
Key plus/minus factors: risk of non-payment (credit risk);  interest rate level at which future payments discounted.
Prices move independently of value created. A bond ‘worth’ $1m need not relate to any sum of capital invested.
Equity prices: an equity represents a share of ownership and future company profits, and the price reflects that.
Key plus/minus factors: expected future profits; interest rate level at which future payments are discounted.
The prices of both kinds of security are also influenced by speculative buying/selling!

6. Economic power, financial securities and bank credit

Creditors can set terms for company or government behaviour, especially in a crisis, when a question of writing off debt (privatisation, policy, etc) or access to new funds.
Ownership, of course. But voting rights on company decisions are not the same as the equity holding! Control of society’s resources via centralising capital and creation of monopolies.
Bank credit is a distinct mechanism of finance!
This topic has been very badly dealt with in Marxist theory.
A bank does not simply use existing sums of money from depositors to lend to borrowers, whether they are companies or individuals.
It does not act simply as a ‘go between’.
Banks can create new funds within the banking system: they grant loans to borrowers, who then use the funds (not usually as cash, mainly bank transfers) to buy things.
Banks make up any shortage of funds from other banks, or via the central bank. This credit creation can boost expenditures and demand from consumers and investors.
‘Stretching’ the law of value creation
The credit creation process is unique to banks. It depends on a (national) banking system and a central bank if it is to work well.
It also allows a bank’s ‘assets’ (loans) to grow far beyond its capital (funds due to shareholders). This can boost demand in the economy and also the potential for a crisis.
The ratio of assets/capital = leverage ratio.
When bank loans/credits run beyond the ability to pay back, a bank’s loan ‘asset’ becomes a loss! With high leverage ratios, a relatively small scale of losses can destroy a bank's capital and lead to bankruptcy.
(Note: Bank loans are not securities, but they may be ‘securitised’, as with Mortgage-Backed Securities.)

7. Conclusions: Imperialism and Finance

The role of ‘finance’ reflects the operation of the law of value on a world scale and the influence of dominating powers.
The form taken by social labour under capitalism (especially imperialism today) is not simply a ‘value’ form based on commodity production and socially-necessary labour time.
It is dominated by financial forms of value that accentuate the concentration of ownership and control of social wealth.
Financial securities (equities & bonds) and bank credits are the dominating forms of value today.
Equity and bond markets act as regulators of corporate decision-making and government economic policy.
Social resources are controlled via mergers & takeovers, assisted by the system of credit and trading in financial securities.
Major banks provide funds to the global economy, especially via the role of the US dollar.
This how capitalist economic discipline is imposed and value is appropriated by those countries and companies with privileged positions in the global capitalist market system!