Title page book Das Finanzkapital

Das Finanzkapital ---- A book with a sinister shadow

Publication: Dietz Verlang (1955, Berlijn)

First insertion on Heterodox Gazette Sam de Wolff: 23 april 2015

E.A. Bakkum is a blogger for the Sociaal Consultatiekantoor. He loves to reflect on the labour movement.

Rudolf Hilferding belongs to the leading marxist economists in the beginning of the twentieth century, and may be mentioned in the same breath with Karl Kautsky, Eduard Bernstein and Rosa Luxemburg. The book Das Finanzkapital is his most famous work, and for decades was leading in the social-democratic movement. The first publication of Das Finanzkapital dates from 1910. The version of your reviewer is a reprint, originating from the former GDR1. Hilferding wants to update the classical theory with his book, because she has fallen into neglect since the death of Karl Marx. Marx has put the crown on the construction of the classical theory. However, he has always interwoven his scientific discoveries with a political activism, and therefore they are banned from universities. Marxism is rejected. The analysis is left to social-democratic activists, who must do that in their leisure time2.

When reading Das Finanzkapital it is immediately obvious, that it is written in the same style as the illustrious trilogy Das Kapital by Engels and Marx. With 566 pages it has an enormous size, but this is mainly due to the many repetitions. The contents of Das Finanzkapital is not really new. The book describes the concentration in the German industries. That is in excellent agreement with the economic framework of Marx, who predicts an unbounded accumulation of capital. The theme of the economic increases of scale is even the core of the original social-democracy. However, Das Finanzkapital is mainly a study of German banking, because this is the driving force behind the national concentration. Although the industrial concentration also occurs in the Anglosaxon states, there the banks are of secondary importance. So the analysis of Hilfdering is not generally valid, but it limited to the German situation.

Das Finanzkapital is a scientific study. Unfortunately, history has cast a sinister shadow over the ideas of Hilferding and of the social-democrats. The reason is the unwise mixing of science and political propaganda, which is detrimental. Namely, Hilferding ends his book with a kind of pamphlet, which actually is hardly justified by his preceding considerations. In that final chapter he wrongly and dogmatically identifies the concentration with the rising nationalism and even with armament. The capitalist imperialism would have a particular violent character. According to Hilferding the conglomerate of industries and banking is the ultimate form of capitalism. The socialist revolution would be the only way to prevent worldwars.

In 1917 the capricious demagogue V.I. Ulianov (also called Lenin) used the unhappy pamphlet of Hilferding as a justification in his own book Het imperialisme als hoogste stadium van het kapitalisme. While Hilferding had set ajar the gates to hell, Ulianov opens them wide. He uses in his book various flowers of speech, which are meant to work up the hate of the masses against their government. The title of his eighth chapter is characteristic: "the parasitism and the rotting of capitalism"3. It is a paradox, that he intensifies his hate campaign at the moment, when the ruling regime changes and is open for compromises with the social-democracy. In the temporary chaos Ulianov seizes power in Russia, and thus has significantly increased the human misery during the twentieth century. Whereas since then the west decolonizes, the Soviet Union transforms into an imperialistic state. It is a tragedy.

After this short intermezzo your reviewer returns to Das Finanzkapital. What do its scientific discussions say? The book has five departments. The first one is an extensive elaboration of the role of money and credit. The department is needed, because since the appearance of Das Kapital many innovations have been introduced in the financial system. At the time the value of money is still couples to the Gold Standard, but thanks to credits the total quantity of money can be much larger than the gold stocks. The gold covers merely the minimally necessary quantity of money (liquidity). The circulating credit consists mainly of trade bills, although giro checks also emerge. Hilferding believes, just like Marx, that the profit rate has the tendency to fall. The department gives an interesting sketch of the development of the money theory. Now, a century later, she is evidently totall outdated and obsolete4.

The second department discusses the trade in shares. They are called fictitious capital by Marx, because their value is determined by the paid dividends. Thus a foundation profit can arise, namely when the profit is larger than is expected on the grounds of the really invested capital. At the time the shareholder society has already developed into the dominant form of the firm. In Germany notably the banks supply the capital for the investments, so that precisely they benefit significantly from the foundation profit. But this also leads to an interwoven productive industry and banking. It irritates Hilferding, that the large shareholders trade with fore-knowledge. Inexperienced speculators become the victim of this, because speculation is a zero-sum activity. Nonetheless, the banks try to eliminate their risks by stimulating the formation of cartels by the industries.

The third department elaborates on the formation of cartels and trusts. Hilferding calls them combinations. They can form due to a horizontal or vertical integration. A problem is that the start-up of enterprises often requires a huge investment. Subsequently that capital is fixed for many years, and kan not "move out". That stimulates the enterprises to make mutual agreements, with the aim of reducing competition. It often happens, that combinations also take care of the trade with the end user (for instance in coal). The capital is supplied by the banks, and is called the financial capital by Hilferding. Since combinations can dictate their own profit, they are attractive for credit suppliers. In the last resort one single national cartel could emerge. Following Marx, Hilferding believes that the concentrations is the start of a transformation towards socialism.

In the fourth department Hilferding gives an extensive description of the developments, which can occur during economic crises. According to Hilferding they principally always occur due to a failing demand, because money is hoarded. However, they can also be caused by overproduction, Disturbances can be created by an outdated industrial structure. During the baisse the notations drop sharply. Accompanying phenomena are crises in the exchange, banking, money and trade. Hilferding believes that the banks will learn to curb the crises, however without being able to completely eliminate the conjuncture. It is evident that Hilferding, just like Marx, does not succeed in developing a clear theory of crises or of the conjuncture. The result remains poor.

The fifth and final department discusses the economic policy of the financial capital. In this part it becomes clear, that political choices must be made. Thanks to the financial capital, banking integrates with the industry and commerce. Germany and the United States of America use a policy of trade protection, and thus stimulate the formation of combinations. The protection is not even abandoned, when the combinations have become competitive on the world market. Thanks to the export the combinations benefit from advantages of scale in the production. At the same time the export requires the formation of a colonial empire. Incidentally, Hiferding acknowledges, that sometimes international cartels are formed. Moreover, the capital flows between the various colonial empires increase. This all furthers the global growth, and results in the rise of a global system of law.

It is clear that Hilferding is truly aware of the many facets of globalization. Yet in the final chapters he concludes, that imperialism mainly leads to protection and hostility. It is a failure. In fact here the analysis of Hilferding becomes sociological. He argues that the formation of the French-Russian block and of the German-Austrian block has economic causes, and not political ones. Thus he even explains the German ideology of races by referring to economic developments. He also is convinced that the conflict between capital and labour grows. He yet admits, that the trade union movement becomes more powerful, among others due to the conclusion of collective agreements. However, Hilferding suspects, that finally the combinations will reject the collective agreements. Now his arguments become extremely speculative, and, as said, partly conflicting with the nuances in the model of the previous chapters. The socialist revolution is forthcoming, he believes. It is done5.

All in all Das Finanzkapital gives an interesting analysis of the then situation, especially in Germany. The contents of the book is more coherent than the third volume of Das Kapital. However, for modern readers the verbosity, among others resulting in endless repetitions, is irritating. When finally in the last tens of pages Hilferding reduces his story to an unfounded dogma, the social-democratic exertion of science shows its most ugly side. Certainly, he could not foresee that one of his disciples (so Ulianov) would use the dogma for establishing a terrorist dictature. But nevertheless the claptrap hurts his book, which is not brilliant anyway. Therefore your reviewer can not recommend reading Das Finanzkapital.

  1. This book is also acquired from the richly filled warehouse of the Leninist second-hand bookshop Helle Panke in Berlin. (back)
  2. This idea of Hilferding somewhat distorts the truth. It is true that Marx was a subversive element in the eyes of the then bourgeois dictature. However, the classical theory already had a languishing existence at the moment, when Marx elaborated it. It was impossible to apply the labour theory of value in a fruitful manner. Therefore during the seventies of the nineteenth century the rise of the theory of marginal utility is experienced as a redemption. Besides Marx has undeniably made an innovative contribution to the development of the political economy. Notably the historical materialism must be mentioned. This theory is actually closely related to the Historical School, which until the First Worldwar dominated the scientific research especially in Germany. After the First Worldwar the Historical School withers, and its domain of study is taken over by econometrics and sociology. In short, the theory of Marx has been abandoned, because other theories turned out to offer better perspectives. (back)
  3. Here are some other examples of phraseology: "the hired ink-coolies of imperialism" (what do you mean, a scientific debate?), "the rotting of the Second International" (the global social-democratic league), "temporary rotting of the labour movement", "an apology of imperialism, its flattery", "the imagination of sugary reformists" (who desparately try to again close the gates of hell! Then Ulianov also includes Kautsky in this group!), "Kautsky's completely meaningless talk", "the sugary Kautsky", "the disguise by Kautsky of the deepest contradictions of imperialism, which necessarily leads to flattery of imperialism", "private property relations, a hull which can remain in a state of decomposition for quite a long time (when the worst case, the healing of the opportunistic abcess, drags on)", "international monopolistic associations of capitalists, who divide the world among each other", "vulgar English imperialists". The editor of the reprint (1946), published by publisher Pegasus, states that Ulianov has restrained himself because of "the Tsarist censorship"! Of course, according to the present norms the malices of Ulianov are not offenses. Ulianov has even been cherished for a long time by the international social-democracy, which then apparently did not foresee his later radicalization (or is it a mental illness?). It is really difficult to understand that the revered Dutch social-democrat Wibaut still in 1931 sympathises with the Leninist world movement and with the Soviet Union. Thanks to J.V. Dzugashvili (also called Stalin) the Russian people would have a life that was filled more "with peaceful generosity ... than with an unending revengefulness and hate!" See chapter 20 in Wibaut de machtige (2013, Prometheus Bert Bakker) by H. de Liagre Böhl. It is almost collaboration. Fortunately, the social-democracy finally did always succeed in shaking off its dogma's.
    Almost a century later the Flemish author Didi de Paris can make fun of it in CCPK: Contrary to the wrong messages that appeared in the papers, communism must expand (EB: de Paris means Leninism). The Wall fell because we grew out of joint. Everywhere in the world communism has fallen. Up in the sky. Into space. Communism has been blown up to unseen proportions, and the peak is not yet in sight, the sky is the limit. The CCPK, the Cosmic Communist Party of Kessel-Lo is a party, which shifts its bounds. (back)
  4. Money has a humouristic side. For instance, there is the joke of the man, who gave a weekly pocket-money of a quarter to his son. The son must store his money in a red box. It costs the son ten years to discover that the red box is the gas meter. Or: a young man asks in a crowd: "Has anybody perhaps lost twenty euros?" Various people shout: "Yes, I did!" The young man answers: "I have found ten cents here. I do not know where the rest has gone". Or: a man says to his comrade: "I can not eat for days now". The other asks: "Gall problems?" Reply: "No, money-bag". The French author Boris Vian once said: "Money does not make happy, when one does not have it". Credit is also fun: a man takes a taxi to the court of justice, where he will be adjudged bankrupt, and invites the driver to join his creditors. Or: the municipality of Amsterdam want to build a new metro-line. The costs are unknown, but the mayor estimates that they will double. (back)
  5. Conny Braam shows in De onweerstaanbare bastaard, that the revolutionary spirit van take on many forms (p.266): Apparently the sailors in Den Helder had established a sailor's council and planned to take over the ships. Russian warships were apparently underway in order to support the uprising. There would even be plans to chase away the queen. When he got messages that De Cycloop was red with flags and heated sailors and that moreover a fisherman's council had been established, he knew that it was his holy duty to combat the threatening revolution in IJmuiden by all means. Just a quarter of an hour later the rebels were driven into the pubs, where there were so many toasts on the revolution, that soon only cheerful drinking-song resounded outside. (back)