Imperialism in the Neoliberal Era

One of the primary theoretical components of Leninism is the theory of imperialism he elucidated. In this essay, I want to argue that this theory remains relevant in the neoliberal era.

Lenin’s analysis of imperialism can be found in his pamphlet Imperialism: The Highest Stage of Capitalism, written in 1916. Before we can understand Lenin’s theory, it is important to consider the context in which he wrote it. Lenin wrote the text in the middle of the First World War, as a response to the socialist parties who backed their own governments in the conflict. Lenin’s Bolshevik Party was the only organization that maintained opposition to the war and, by extension, opposed the government of Russia. This was because Lenin held that the war was an imperialist conflict, in which all sides attempted to gain new territory and spread their influences. The goal of Lenin’s book is to show that the imperialism found at the beginning of the 20th century was a fundamentally economic phenomenon, rooted in changes in the capitalist mode of production.

Lenin described the text as a “popular outline,” meaning that it was flexible and open to change. We must evaluate it in the particular contexts in which we find ourselves.

It is also important to note that Lenin never claimed that there was no imperialism before the late 19th century. As he explicitly noted, “Colonial policy and imperialism existed before the latest stage of capitalism, and even before capitalism. Rome, founded on slavery, pursued a colonial policy and practiced imperialism.” But, Lenin added:

“general” arguments about imperialism, which ignore, or put into the background the fundamental difference of social-economic systems, inevitably degenerate into absolutely empty banalities, or into grandiloquent comparisons like “Greater Rome and Greater Britain.”

Even the colonial policy of capitalism in its previous stages is essentially different from the colonial policy of finance capital.

What Lenin was attempting to explain was the extremely virulent form of imperialism that began to emerge in the late 19th century, resulting in the scramble for Africa from the 1880s, and the increasing tensions between the major powers that eventually led to world war. This capitalist imperialism differs from earlier forms (such as that seen in the Mongol empire) because only capitalist imperialism can systematically accumulate capital on a world scale. Capitalist imperialism is less focused on the direct plunder of natural resources (though this certainly still takes place) and more focused on investing in other countries. Capitalist imperialism seeks to dominate the economic, cultural, and political life of the Third World and other imperialized countries.

This investment plugs up the falling rate of profit, and is a central feature of capitalism. The source of profit under capitalism is the extraction of surplus value from workers, in a process known as exploitation. This process mutates and replicates across the entire economy. The logic of capital necessitates expansion. It is the job of capitalists to extract more value than they invest, ceaselessly searching for new ways to do so.

If capitalism is exploitative at home, then it must be expansionist abroad. The expansionist nature of capitalism causes it to spread, as Marx and Engels put it, ‘over the whole surface of the globe.” The expansionists crush entire societies that refuse to bend to the whims of the global market. Self sufficient peoples are driven from their land and transformed into wage laborers, in a process remarkably similar to the land enclosure system that gave birth to capitalism in England. From the very beginning, capitalism was driven by its need to expand, to grow. Lenin analysed this dynamic and determined that a new form of imperialism had arisen from it. Those who challenge capitalist-imperialism are, whether they know it or not, challenging the foundational logic of capital: expansion.

For Lenin, any worthy definition of this new imperialism needed to include “five essential features.” They are:

1) The concentration of production and capital is developed to a high enough degree that it creates monopolies, which play a significant role in economic activities. This means that capitalists join together to crush competitors. They fix prices, coordinate production, and make agreements among themselves to prevent others from entering the market.

2) The merging of bank capital with industrial capital to create finance capital. This, in turn, leads to the creation of a financial oligarchy. This had already occurred during Lenin’s era. Three to five big banks manipulated the economies of the major industrial countries.

3) The export of capital becomes extremely important and is distinguished from the export of commodities.

4) The formation of international capitalist monopolies which share the world among themselves.

5) The completed territorial division of the world among the greater capitalist powers.

Lenin was clear that the most important item on this list is the first. He wrote that imperialism was “the monopoly stage of capitalism.” He argued that the rivalries and wars between capitalist powers came about due to the tendency for capital to become more centralized and concentrated. Imperialism arises when the dominant capitalist firms acquire monopoly (or near-monopoly) status in particular sections of the national economy.

This caused capitalism to “decay” as Lenin put it. There is a tendency for production to decline under monopolies, as technological progress and innovation are discouraged. Any innovation could disrupt the monopolies, and so is avoided.

The acute concentration of capital also created inequality between those who owned capital and those who did not. Monopoly capitalism created a large stratum of capitalists known as renters. These are capitalists who live solely on the interest or dividend made on their investments.

This inequality meant that the general population could not absorb the mass of commodities (new products) generated by increased productive capacity. They were simply not wealthy enough. The rate of profit would begin to fall, necessitating the expansion of banks and factories. This expansion would open up new regions for investment, sources of raw materials and cheap labor, and new consumer markets. This, in turn, would allow goods to be produced more cheaply. The masses would again be able to purchase commodities, plugging up the falling rate of profit. Think of imperialism as putting a bandage on the contradictions of capitalism. This is obviously advantageous  for the capitalist class, but it works against the interests of the international proletariat. This is further discussed below.

Lenin worked from the premise that the capitalist class controls the state. It followed that monopolistic firms would become linked to the state, using its machinery for the purpose of colonization. Capitalists would use this process to produce commodities and raw materials cheaply, as well as to undermine indigenous industry, making the colonies dependent on investment from imperialist nations. The overall effect of this is that the imperialist nations pumped wealth out of the countries they controlled. The wealth flowing into the domestic economies of imperialist nations stalled the aforementioned falling rate of profit.

This is accomplished by a phenomenon known as super-exploitation. One of the key points in the Marxist analysis of capitalism is that workers are exploited by the bourgeoisie. I have written about this before, but it is worth reviewing the concept in some detail here. Part of the working day is taken up by the time necessary to reproduce the worker. This is known as Necessary Labor Time, or NLT. The worker is paid a wage that is more-or-less equal to this amount. But it does not take the worker all of the working day to produce an amount of value equivalent to the amount necessary to sustain them. The rest of the value they produce goes to the capitalist, not the worker. This value is called Surplus Value. This is the ‘secret source’ of all profits under capitalism.

It is the job of the capitalist to extract as much profit from their workers as possible. As such, they will do whatever they can to increase the rate of exploitation. This can be accomplished in a number of ways. The first is that the capitalist can simply make the working day longer, so that the worker spends more time producing surplus value. However, labor laws in many imperialist countries prevent this, so this is not always possible. This is one reason why imperialism is so common under capitalism. Capitalists need to increase the rate of exploitation, so they will often move their factories to countries with fewer labor regulations. This requires the state to mediate conflict, giving rise to imperialism.

The second is that the capitalist can increase productivity in industries that produce goods for workers, whether by increasing automation or engaging in other strategies, such as cutting wages. This impoverishes workers, because they no longer have jobs. This, in turn, reduces the amount of goods they can buy. This has the effect of reducing the value of wages below that of labor power. Wages no longer represent the amount of value a worker needs to sustain themselves. This is super-exploitation, and it most often takes place in imperialized countries. This is both because of the aforementioned lax labor laws, and because these countries are rich in the natural resources that are required to produce goods. Multinational corporations use the state to buy up these resources, further undermining indigenous sovereignty. It is through super-exploitation-the driving of wages below the value of labor power-that goods are able to be produced more cheaply. This plugs up the falling rate of profit that necessitated imperialism in the first place.

Two notable consequences followed from imperialism. The first was that the surplus value extracted by imperialist nations paid for the creation of the labor aristocracy, a section of well-paid workers with similar interests to those of the capitalist class. This made socialist revolution in imperialist countries less likely than it would have been otherwise, since the working class more closely identified with capitalism.

The second consequence was that nation-state rivalries in the imperial system intensified nationalist sentiment among the working class. This diverted their focus from class struggle. Like the development of the labor aristocracy, this nationalism strengthened the bourgeoisie  against the proletariat.

Lenin argued that this strategy could only be effective for a relatively short period of time. In the long term, it would undermine capitalism rather than strengthen it. Competition between imperialist nation-states would escalate to war. These wars would cause financial drain and destruction of productive capabilities. That drain and destruction would weaken imperialist states because their ability to exploit their victims would decay. Nationalist and anti-colonial movements would also weaken imperialist nations, leading to increased class antagonisms, increased class consciousness, and eventually socialist revolution.

Imperialism hit its stride, as Lenin argued, in the 19th century. Industrial nations were plagued with a falling rate of profit exacerbated by economic inequality. They saw the Third World not only as a source of raw materials and cheap labor (which would make goods cheaper and therefore stem the falling rate of profit), but also as a market for goods that had already been produced. Barely a century later, the industrial nations were exporting not only goods, but capital. This capital often took the form of machinery, investments, and loans that were used to control the markets and governments of Third World countries. This was a vital part of the “new imperialism” that Lenin identified.

Although the world has seen dramatic changes since Lenin’s book was published, the core points of the theory are more relevant now than ever.

Most obviously, monopolies or near-monopolies play massive roles in economic life. A handful of  corporations and banks, based primarily in the United States and Europe, have unprecedented power over policy and global markets. In the late 1980s, twenty-seven percent (27% ) of world manufacturing industries were dominated by four firms or less, according to John Bellamy Foster’s The Endless Crisis. By 2007, forty percent (40%) of the industries here examined were concentrated in this manner.

Further, these monopolistic entities are fused with the states in which they are based. Investment banks and other firms use the power granted by these states (in the form of the military, legal centers, and so on) to appropriate and concentrate the surplus value of the international working class. This creates yet more inequality, where the capitalist class lives in luxury, and workers in imperialized countries live in abject poverty.

Modern Multinational corporations do, admittedly, constitute a higher form of capitalist monopoly than the cartels and trusts of Lenin’s era. But Lenin  never argued that specific forms of monopoly (that is, specific technical stages) represented the highest “stage” that monopoly could take. The specific forms monopolies take is not the point of Lenin’s analysis. What matters is that monopolies increase the degree to which property is concentrated in fewer and fewer hands. The stifling of competition that follows from this is part of what leads to imperialism. Thus, the fact that multinational corporations are not necessarily owned by the states in which they are based (as was generally the case in Lenin’s time) matters little when discussing the continued relevance of his theory of imperialism.

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 labor. Colonies won political independence. Bukharin’s “state capitalist trusts” are now superseded by Multinational Corporations. These all represented advances within capitalist relations of production.

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 multinational corporations to socialize their losses while privatizing their profits. Capitalists also achieve far greater security of privilege when a business is held as private property. The “decoupling” of monopolies from the state does not represent a blow to Lenin’s theory of imperialism. Rather, it shows that the capitalist class has a greater degree of unmediated control over markets. In the neoliberal era, imperialism is more prominent and likely, not less.

Foreign investment, the export of capital, plays an even larger role today than it did when Lenin was writing. The exception was paradoxically the years of the post-war boom (1950s and 1960s) when the rate of growth of international trade generally surpassed the rate of growth of foreign investment in as the growth of international finance was consciously restricted to be mainly the handmaiden of trade.

But this has changed under globalization of the 1980s and 1990s, which is proof in itself of the re-emergence of the classical features of imperialism in this its latest phase.

US income from trade and from investment, 1960-2000 (in bns US dollars)

25.9 56.6 271.8 535.2 1,065.7
Investment income
4.6 11.7 72.6 171.7 352.8

What is noticeable is that income from capital invested abroad grows in importance as compared to profits from sale of merchandise exports. It amounts to 17 percent of income from trade in 1960 and increases steadily until in 2000 it reaches 31 percent.

Again, it flows from Lenin’s concept of finance capital as essentially loan/banking capital that investment income is conceived entirely as income from “interest and dividends” and hence “speculation” and the source of “parasitism”. But as the last century wore on, it was more and more the case that income from abroad was profits repatriated from fixed assets operated by MNCs in other countries.

On breaking down the above figures for “income receipts on US-owned assets abroad” one discovers that the proportion of income from investment in fixed assets held abroad grew faster than income from bonds and loans in the decades up to 1980 for example.

But interestingly, as with Britain 100 years ago the more mature the imperialist power becomes the more it relies upon “parasitism” (Lenin, following Hobson, also calls it “coupon clipping”). So since 1980 overseas income from bonds and loans outpaces the growth of income from fixed assets.

The UK alone for example today receives a staggering 26 percent of all global US foreign investment. Hence the main capital exporters are also the main capital importers (although the reverse is not necessarily the case).

In a perverse way of course this is a confirmation of the point Lenin makes that, “The export of capital influences and greatly accelerates the development of capitalism in those countries to which it is exported.”

Exported capital also comes in the form of foreign “aid.” This is often used by the United States to alter the policies of victimized countries. One example of this would be anti-gay laws in Uganda. In this case, there is a lack of direct coercion involved in the passage of the laws. The imperialists are not literally forcing anyone to pass these laws, but the governments of these countries often feel compelled to follow the wishes of the imperialists so that they do not lose what little aid they are given. This is one way in which imperialism is used to expand the hegemony of capitalist states.

Lenin’s conclusion that imperialism would lead to war has also been validated, though not in the form he anticipated. Wars between differing imperialist powers appear to be a thing of the past, but the capitalist class’ unceasing drive to consolidate their control over markets has led to endless bloodshed and countless deaths. One of the results of, for example, the Iraq War was that the United States directly appropriated the oil that belonged to Iraqis. This is an act of imperialism carried out for the express purpose of maximizing the profits of the capitalist class.

Lenin pointed out that the oligarchy of finance capital in a small number of capitalist powers, that is, the imperialists, not only exploit the masses of people in their own countries, but oppress and plunder the whole world, turning most countries into their colonies and dependencies. This leads to independence movements in the colonies. The imperialist countries will do anything they can to crush these movements, including war. Imperialist war is a continuation of imperialist politics. World wars are started by the imperialists because of their insatiable greed in scrambling for world markets, sources of raw materials and fields for investment, and because of their struggle to re-divide the world. So long as imperialism exists, the source and possibility of war will remain. War is inevitable under an imperialist system. Since imperialism is a specific stage in capitalist development, it follows that we cannot abolish war until we abolish capitalism. Lenin pointed this out over one hundred years ago, and it remains true to this day.

Finally, we come to Lenin’s idea that imperialism is used to exploit the labor of workers in other nations, thus driving down the price of goods and plugging the falling rate of profit. The clearest example of this takes place in the Congo. Corporations such as T-mobile buy up military officials, who then force residents of nearby villages to work themselves to death in cobalt mines. These workers are, in many cases, young children. They are subject to the super-exploitation mentioned above.

It is worth noting that in the neoliberal era, the category of imperialism itself enjoyed a resurgence in popularity among the imperialists. After the fall of the Berlin Wall and the subsequent collapse of the Soviet Union, many writers asserted that “Western imperialism-though few will like calling it that-can now unite the European continent.” Even Foreign Policy, a journal in the pocket of the state department, asserted that “the logic of imperialism….is too compelling…to resist.” Far from being irrelevant in the epoch of neoliberalism, imperialism has become so ubiquitous that even members of the capitalist class have been forced to say so.

Before I conclude, I want to say a few things about what Lenin’s theory means for the concept of “humanitarian intervention.” Put simply, Lenin proves that it is a myth. Imperialism is born out of the necessity to resolve contradictions within capitalism. Whenever the imperialist countries intervene anywhere, this is what they are doing: ensuring their own survival. They do not care about the welfare of the people in the imperialized countries. Indeed, the logic of capitalism means that they cannot care. To care would interfere in their ability to extract super-profits.

Lenin’s theory of imperialism answers vital questions. Why is the United States always at war? Because war is a tool to plug falling rates of profit and stifle class struggle. War is not the result of a few individual politicians. It is baked into American capitalism. Only when we understand imperialism as a systemic issue-arising from dynamics inherent to capitalism-can we hope to combat it effectively.

The above facts make Lenin’s book as timely as it was when it was first published, and the analysis of imperialism contained within is vital for the victory of the revolutionary movement.