Abstract
This chapter deals with the concept of finance capital — a high topic in early-twentieth-century Marxist literature — emphasizing its usefulness as an instrument with which to analyses modern capitalist economies. Drawing mainly on Marx’s observations on chapter 27 Volume III of Capital, ‘The Role of Credit in Capitalist Production’, on Hilferding’s Finance Capital and on the more general Marxian framework (capital as a social relation) it seems possible to replace this pseudo divorce (also known as the ‘corporate revolution’) with a new phase of capitalism in which capitalists are as dominant as before, although operating through a different institutional apparatus. In this sense the chapter resurrects the more general meaning of finance capital so as to include not only capital at the disposition of banks but also capital at the command of non- banking entities and/or individuals. Both forms of private wealth — bank deposits and tradable securities — are seen as enjoying the same essential properties of liquidity (readily convertible into its money equivalent) and increasing value (appreciation, interest, dividends) and should therefore qualify as finance capital. Breaking away from the notion that the dominance of finance capital evolves through the dominance of financial institutions it seems possible to speak of a financial phase as a stage in which an ever-increasing proportion of the capital used in industry is finance capital without resorting to the unlikely task of demonstrating the preeminence of the banking sector over non-banking activities.
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Notes and References
Edward S. Mason, Corporation, in David L. Sills (ed.), International Encyclopedia of the Social Sciences (New York: Macmillan & The Free Press, 1968), pp. 396–403.
See for example John K. Galbraith, The New Industrial State (New York: Harper & Row, 1967), and Robin Marris, The Economic Theory of Managerial Capitalism (New York: Free Press, 1964).
Adolph Berle Jr., The Twentieth Century Capitalist Revolution (New York: Harcourt Brace, 1954), p. 39.
John K. Galbraith, The New Industrial State (1967, 1978), Brazilian translation from the third revised edition; O Novo Estado Industrial (Sao Paulo: Abril Cultural, 1982), p. 11.
The Board Revolt in Business Week International (New York: McGraw-Hill, Inc. 20 April, 1992), p. 20.
See 2 August 1993, p. 49 for American Express; 8 March 1992, Business Week International pp. 46–8 for Digital; 2 August 1993, pp. 24–6, 4 May 1993, p. 28; and 10 April 1993, p. 44 for IBM.
Although Hilferding’s book develops an integrated analysis dealing with money, credit and the political aspects of financial capitalism, this chapter is only concerned with the author’s basic concept of finance capital. For a critical appraisal of some of Hilferding’s main arguments see G. Pietranera, ‘Il pensiero economico di Hilferding e il dramma della socialdemocrazia tedesca’ in R. Hilferding, II capitale Finanziario (Milano: Feltrinelli Editore, 1961), pp. IX–LXXIII;
A. Hussain, ‘Hilferding’s Finance Capital’, in Bulletin of the Conference of Socialists Economists, (London, March 1976), vol. V, 1 (13), pp. 1–18;
J. Tomlison ‘Finance Capital’ in The New Palgrave: A Dictionary of Economics, edited by J. Eatwell, M. Millgate and P. Newman (London: Macmillan, 1987), pp. 337–9.
R. Hilferding, Das Finanzkapital: Eine Studie über die jüngste Entwicklung des Kapitalismus (1910), English translation: Finance Capital: A study of the latest phase of capitalist development (London: Routledge & Kegan Paul, 1981), p. 21.
Vladimir I., Lenin, Imperialism, The Highest Stage of Capitalism: a popular outline (1916); (New York: International Publishers, 1985), and
Bukharin, I. Nikolai L’Economie Mondiale et L’Impérialisme Esquisse Economique (Paris: Editions Sociales Internationales, 1928).
Paul M. Sweezy, The Theory of Capitalist Development. Principles of Marxian Political Economy (1942) (New York: Monthly Review Press, fifth edn. 1964), p. 260.
John A. Hobson, The Evolution of Modern Capitalism: A Study of Machine Production (1894), (London: Walter Scott, 1916) especially Ch. 10 op. cit., Ch. 10, ‘The Financier’, Thorstein Veblen, The Theory of the Business Enterprise (New York. Scribner’s. 1904).
Karl Marx, Das Kapital-Kritik des politischen Ökonomie (Dritter Band, 1894); English translation; Capital, A Critique of Political Economy, Vol. III, (Moscow: Progress Publishers, 1978, first published 1959), ch. 24, p. 468.
Figures for the growth of financial assets in the US can be found in Raymond Goldsmith, Financial Intermediaries in the American Economy Since1900 (Princeton: Princeton University Press, 1958). For the composition of private wealth see James D. Smith, and Stephen D. Franklin, ‘New Dimensions of Economic Inequality: The Concentration of Personal Wealth 1922–1969’, in American Economic Review, vol. 64. no. 2 (May 1974). pp. 162–7.
Karl Marx, Das Kapital-Kritik des politischen Ökonomie (Erster Band, 1867), English translation, Capital, A Critique of Political Economy, Vol. I (Moscow: Progress Publishers, 1977, first published ch. 25, 1954). p. 588.
I am not neglecting the literature on the principal-agent question nor ignoring the motivational issues surrounding corporate management behaviour, but I am rejecting the notion that these problems can radically subvert the dynamics of a capitalist economy. For an interesting review on the inconclusive character of this literature, see F.M. Scherer, ‘Corporate Ownership and Control’, in John R. Meyer and James M. Gustafson (eds), The US Business Corporation (Cambridge, Mass.: Ballinger 1988), pp. 43–66.
This interpretation is offered by D. Foley in the entry for ‘Credit and Fictitious Capital’ in A Dictionary of Marxist Thought, edited by Tom Bottomore; (Oxford: Basil Blackwell Publisher, 1983). The high profits and often fraudulent character of the stock trade during the second half of the nineteenth century received much attention from contemporary authors such as Marx, Hobson, Veblen and Hilferding (a full section in his Finance Capital is exclusively dedicated to the promoter’s profit).
Marx pointed to the superfluity of capitalists in a context where their privileges had no more connection with the productive activity than those of the former feudal lords in a growing bourgeois society. Karl Marx, Theorien über den Mehrwert (1905–10), Italian translation ‘Teorie sul Plusvalore’, III in F. Engels (ed.), Opere Complete di Marx, vol. XXXVI (Roma: Editori Riuniti, 1979), p. 335.
Since Berle and Means this has become a generalized standard for the debate on corporate control. An update of their initial conclusions in the early 1960s can be found on Robert J. Larner, Management Control and the Large Corporation (New York: Dunellen, 1970).
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Prado, N., Pinto, A. (1998). Finance Capital Revisited. In: Bellofiore, R. (eds) Marxian Economics: A Reappraisal. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-26118-5_13
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