The biggest financial crisis since the Great Depression may spell disaster for workers, but it spells opportunity for the strongest capitalists.
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The tendency toward an ever greater concentration of capital is natural under capitalism. This process gets a boost during times of economic crisis. As businesses in all sorts of different industries fail, others swallow them—or their assets—at discounted prices. To take an example, there were more than 1,000 U.S. car manufacturers in the 1920s; there are now only three.
Michael Poulos, a financial analyst at Oliver Wyman, summed it up: “What we have gotten is 10 years of consolidation in the last 10 days. The current situation has created opportunities for acquirers that are really unprecedented.” (New York Times, Sept. 29)
Despite so much propaganda to the contrary, free competition does not reign under modern capitalism. In fact, the capitalists have been driven by the logic of the capitalist system, the insistent drive to increase profits, to concentrate production more and more. Industry and finance is increasingly dominated by a few corporate behemoths with subsidiaries and divisions at many different levels of production and distribution. Wal-Mart, McDonalds, Nestlé and Ford are just a few examples.
Even the biggest industrial corporations are not at the top of the economic food web. Those who control the capital, the banks, dominate. When we speak about banks in this sense, we do not mean only the individual credit union or local bank, but the large institutions of finance whose names adorn recent newspaper headlines.
The rise of finance capital
In 1916, almost a hundred years ago, Russian revolutionary V.I. Lenin wrote on the fundamental role of banks: “The principal and primary function of banks is to serve as middlemen in the making of payments. In so doing, they transform inactive money capital into active, that is, into capital yielding a profit; they collect all kinds of money revenues and place them at the disposal of the capitalist class.”
Lenin further described the development of banking: “As banking develops and becomes concentrated in a small number of establishments, the banks grow from modest middlemen into powerful monopolies having at their command almost the whole of the money capital of all the capitalists and small businessmen and also the larger part of the means of production and sources of raw materials in any one country and in a number of countries.”
In the modern stage of capitalism, “millions of small, medium and even some big ‘proprietors’ are in fact in complete subjection to some hundreds of millionaire financiers.”
The current economic crisis validates Lenin’s nearly century-old analysis. Over subsequent decades, the finance industry has experienced a concentration into the hands of a smaller and smaller number of large institutions that control a great deal of capital.
And the pace is picking up. For example, the number of FDIC-insured institutions has dropped by half since 1987. In the last few weeks, the number has dropped even more.
Capitalist media and politicians frequently refer to the vanishing banks and financial institutions that are “falling” or disappearing. In reality, these banks’ assets are being swallowed up and concentrated into the hands of other capitalists—primarily the mega-banks JP Morgan Chase, Bank of America and Citigroup at the present juncture.
Citigroup now controls over $600 billion in U.S. deposits, which is only a fraction of its overall holdings. Until it acquired Wachovia’s assets, the majority of its deposits were held outside the United States. Now, Citigroup will have about $1.3 trillion in deposits worldwide. This means it is $350 billion beyond even the next biggest U.S. financial institution.
In “Imperialism: The Highest Stage of Capitalism,” Lenin described how cartels developed in major industries like steel and coal in the beginning of modern capitalism, which he called monopoly capitalism or imperialism.
One defining characteristic of the imperialist stage is the emergence of finance capital as the dominant form of capital. In the early days of monopoly capitalism, banks became increasingly intertwined with industry through their heavy investments in the sphere of production.
The triumph of finance capital paralleled the growing concentration of capital in fewer and fewer hands. Competition eliminated the weaker capitalists, and those left standing found themselves with greater sums of capital at their disposal.
Integration of industry, facilitated by the role of finance capital in organizing production, pushed this concentration even further. Horizontal integration meant production of a given good, once performed by a multitude of independent producers, became increasingly concentrated in the hands of a few monopolies. Vertical integration meant a corporation producing, say, steel, was also involved in every other stage of production, from raw materials to transport.
Time to fight back
The major financial institutions that dominate the economy today are no different. Bank of America does not only hold customer deposits like a local bank or credit union. Through the process of capital concentration, Bank of America, like other “universal” banks, has spread into different layers of the finance industry: credit cards, home equity and mortgage lending, investment banking, insurance, wealth management, and more.
A crisis in the monopoly capitalist economic system ripples throughout many sectors and countries, which are deeply interconnected. The capitalists who really control the economy are those who own the financial institutions. In the savagery that ensues when institutions fail, the stronger finance capitalists become indistinguishable from boa constrictors or crocodiles: They either eat their prey whole, or tear them to shreds and divvy them up amongst themselves.
The strongest institutions may survive the current crisis feeding off the multi-billion-dollar gift from Congress and continuing to eat up the competition. But for the millions of workers and small businesses, this means more suffering and economic hardship. The solution for us, for the working class and its allies, is not a multi-billion-dollar bailout of the banks. It is not the continued expansion of finance capital.
The real way out lies in fighting for a system that provides jobs, health care, education, housing and food for all—in which capitalist anarchy is replaced by democratic, centralized planning. For all the suffering that comes with economic crises, they expose the unstable nature of the capitalist system, draw a sharp line between the interests of the capitalists and those of workers, and provide fertile ground to plant the seeds of class consciousness. The time to pull working-class people together and build an independent movement that fights for our interests is now.
