The Marxism of the Second International,c. 1890-1914
In the 1890s the revisionist Eduard Bernstein challenged many of the fundamental tenets of Marx’s system. He was opposed by more orthodox Marxists, some of the most important of whom, including Karl Kautsky and Rudolf Hilferding, later came to accept much of the revisionist position (Howard and King 1989: chs 4-6, 14).
Bernstein argued that capitalism had changed, and its internal contradictions had become much less sharp. German society was becoming less polarised, he claimed, not more so as the orthodox Marxists maintained, and there was real scope for an alliance between the working class and the liberal bourgeoisie to implement economic and social reforms in the interests of the workers. In Finance Capital, published in 1910 but largely completed four years earlier, Hilferding defended Marx’s classic vision of capitalism against Bernstein and the revisionists; this, and not its detailed analysis of money and finance, is the core message of the book. He argued that the contradictions of capitalism were becoming more acute, not less. As a result of the growing centralisation and concentration of capital and the increased power of finance, social polarisation was increasing. Middle-class liberalism in Germany was both weak and in rapid decline, as the growth of finance capital and its imperialist policies strengthened authoritarian, militarist and racist views among the middle class. The revisionists were deluding themselves that piecemeal reform of the system through a class alliance was feasible.For Hilferding the term finance capital had several layers of meaning, denoting not only one form taken by capital but also a phase in the circulation of capital and an increasingly powerful sectional interest within the capitalist class. Finally, and most importantly, finance capital represented a stage in the development of the capitalist mode of production, and hence also a stage on the road to socialism.
Finance was becoming more important, and those who controlled it were becoming more powerful, owing to increased economies of scale in industry and the growing need for bank finance to carry out the centralisation of productive capital. Financial capitalists therefore became more influential, relative to industrial and commercial capitalists. As a stage of capitalism, Hilferding maintained, finance capital had its own distinctive properties and its own laws of development, above all the rise of monopoly, growing state involvement in economic life, and imperialist expansion and inter-imperialist wars.In his theory of imperialism Hilferding argued that tariffs, once used only to protect infant industries, were now employed to bolster cartels, giving them permanent security against import competition and permitting them to dump their excess production overseas. High prices and correspondingly restricted markets at home were intensifying the search for export opportunities for surplus commodities, while the banks were increasingly involved in the export of surplus capital to underdeveloped countries, where the organic composition of capital was low and the rate of profit was high. In each major capitalist nation, finance capital aimed to establish the largest possible economic territory, closing that territory to foreign competition by means of protective tariffs and thereby reserving it as an exclusive area of highly profitable exploitation.
Hilferding’s description of imperialism as “the policy of finance capital” has given rise to some misunderstanding. He was not suggesting that imperialism was a policy option. On the contrary, in the epoch of finance capital it was a necessity: capitalism could pursue no other policy than that of imperialism. This had enormous political consequences. First, since global cartels were more difficult to form and even less stable than purely domestic price agreements, the struggle for economic territory would lead inevitably to a sharpening of international tensions.
Second, because each national finance capital needed a strong government to defend its interests against foreign interlopers, the traditional bourgeois hostility to the state had become a thing of the past. Third, the cosmopolitan capitalism of the nineteenth century had given way to an aggressive nationalism. Hilferding concluded that the increasing danger of war, and the growing tax burden of armaments expenditures, would convert both the proletariat and, eventually, the middle classes into enemies of imperialism.The Austro-Marxist philosopher Max Adler (1915) agreed with Hilferding that imperialism resulted from the insatiable and uncontrolled drive of capital to realise itself in circumstances in which the export of capital had become even more essential than the export of commodities. Capital was now driven by a new, much more violent desire for investment opportunities that would provide new sources of surplus value. This had radically and brutally transformed the earlier, more peaceful nature of the capitalist system. But it also confirmed the correctness of the materialist interpretation of history, and offered real hope for the future. Economic development had outgrown the existing political and economic forms, and now required a new supra-national order to eliminate external conflicts at the same time as internal conflicts were overcome. Such a new international system could only be a socialist one. In this way, Adler concluded, the ideology of imperialism would give way to the idea of socialism.