Organised Capitalism, the General Cartel and the Proletariat

chapter 1 Organised Capitalism, the General Cartel and the Proletariat

Hilferding’s famous treatise on modern capitalism of 1910, Das Finanzkapital,1 was the most systematic study of the historical development of capitalism of the period of the Second International. It can be claimed that, in Finance Cap- ital, Hilferding formulated some of the main conclusions drawn from Marx’s Capital common to traditional or orthodox Marxism. In Hilferding’s understanding, the various forms of the concentration and centralisation of capital form the main feature of the development of modern capitalism. Accordingly, he understood it as his main task to analyse the new phenomena of the concentration of capital, the establishment of cartels, and to evaluate their consequences for the functioning of capitalism, the strategy of the working class and the Social Democratic Party. It was an understanding and analysis of capitalism shared in the main by Kautsky too – even though many of the conclusions drawn from the analysis are different in Kautsky’s works and articles. Hilferding’s main idea was that there are, in principle, no limits to the centralisation of production and the formation of cartels. The establishment of one single general cartel was – in the end – the logical result of this process:

If we now pose the question as to the real limits of cartelization the answer must be that there are no absolute limits. On the contrary there is a constant tendency to cartelization to be extended … The ultimate outcome of the process would be the formation of a general cartel.2

Capitalism was due to develop into a society polarised into two opposite forces: the general cartel responsible for the production and distribution of the national product on the one hand, and the working class to be mercilessly exploited by the centralised capital on the other:

The whole of capitalist production would then be consciously regulated by a single body which would determine the volume of all production

1 Hilferding 1981. 2 Hilferding 1981, p. 234.

in all branches of industry. Price determination would become a purely nominal matter, involving only the distribution of the total product between the cartel magnates on one side and all the other members of society on the other.3

The new economic order solves the problem of the organisation of production. The whole national product is consciously distributed among the cartel and the rest of the people. Money and money prices lose their function of import- ance, and are substituted by a planned and conscious distribution of goods. The general cartel thus overcomes the anarchic nature of production and the contradictions inherent in production. The society remains, however, antagonistic by its nature, but this antagonism is only an antagonism of distribution. The antagonism of distribution between the general cartel and the rest of the people becomes even more accentuated in a society regulated by a general cartel:

The illusion of the objective value of the commodity would disappear along with the anarchy of production, and money itself would cease to exist. The cartel would distribute the product. The material elements of production would be reproduced and used in new production. A part of the output would be distributed to the working class and the intellectuals, while the rest would be retained by the cartel to use as it saw fit. This would be a consciously regulated society, but in an antagonistic form. This antagonism, however, would concern distribution, which itself would be consciously regulated and hence able to dispense with money. In its perfected form finance capital is thus uprooted from the soil which nourished its beginnings.4

The finance capital – a further result of concentration – ensuing from the combination of industrial and bank capital is manifest as a unified power based on the ownership of the means of production. The specific nature of capital disappears in a society governed by finance capital. Finance capital solves the problem of organising the national economy, and at the same time the capital associations concentrate property in their hands, making the relations of property apparent and accentuated:

3 Ibid. 4 Ibid.

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Thus the specific character of capital is obliterated in finance capital. Cap- ital now appears as a unitary power which exercises sovereign sway over the life process of society; a power which arises directly from the ownership of the means of production, of natural resources, and of the whole accumulated labour of the past, and from command over living labour as a direct consequence of property relations. At the same time property, concentrated and centralized in the hands of a few giant capitalist groups, manifests itself in direct opposition to the mass of those who possess no capital. The problem of property relations thus attains its clearest, most unequivocal and sharpest expression at the same time as the development of finance capital itself is resolving more successfully the problem of the organization of the social economy.5

In Hilferding’s opinion, the polarisation of society into a general cartel and the propertyless masses has, as such, no economic limitations whatsoever. From the economic point of view, the development of capitalist society would inevitably lead to the formation of a general cartel. Such a development is, however, impossible to imagine when the political forces are taken into account. The general cartel would sharpen the class constrasts to such a degree – and even more importantly, it would make them visible – that the capitalist society would be changed into a socialist one – the power of the general cartel would be changed into the power of the proletariat – long before the final stage of the general cartel was fully established. The development or the tendency towards a general cartel has, however, made the task of the proletariat much easier; not only has it created a working class conscious of its historical mission, but it has also established an economic order readily and easily changeable into a socialist mode of production. The tendency towards the formation of a general cartel has put an end to the anarchy of capitalist production and has thus actually solved the economic problems inherent in capitalism. The above characterisation of Hilferding’s conception of the main historical development of capitalism is, in a sense, the consequential extrapolation of the historical tendencies inherent in capitalism as understood by the majority of Marxist theoreticians during the time of the Second International. In his Fin- ance Capital, Hilferding was both the most influential theoretician on modern capitalism and the formulator of the strategic perspective of a socialist revolu- tion. It is characteristic of his position that after the First World War, specifically

5 Hilferding 1981, p. 235.

Jukka Gronow - 9789004306653 Downloaded from Brill.com09/26/2021 02:22:05AM via free access 32 chapter 1 in 1926, Hilferding could formulate a reformist version of the same theory (the concept of an ‘organised capitalism’).6 Hilferding’s later revisionism does not in any sense diminish his role as highly influential theoretician of the Second International. On the contrary, the concept of ‘organised capitalism’ as formulated in his famous speech at the Party Congress in Kiel in 19267 only supports the general conclusions of Finance Capital. The main difference between Hil- ferding’s theories of 1910 and 1926 is that in the later work he recognises the general cartel as the very end of capitalism in itself; the dictatorship of the proletariat has become obsolete, since the economy organised by the big cartels has made it possible to overcome not only the anarchic nature of capitalism, but also its inner antagonism. All that is necessary for the Social Democratic Party to do is take over the management of the organised economy through the state institutions.8 One could – by way of a preliminary formulation of the problem – argue that among the Second International theoreticians, the theory of capitalism was, in a fundamental sense, based on two complementary propositions. As already pointed out, Marx’s main contribution to the understanding of capitalism and the fate of the working class was understood as being the historical law of capitalist accumulation as presented at the end of the first volume of Capital. Hence, Capital was essentially read to describe the law-like historical development of capitalism. Marx was interpreted as having claimed that the accumulation of capital was not only producing an increasing amount of wage labourers – the working class – but was also leading to the concentration of capital and the establishment of big industrial enterprises and capital associations. According to the second proposition, this would also complete a change in the laws of commodity production; the law of the appropriation based on ownership of the products of one’s own labour is reversed into its opposite. In monopolistic capitalism, the exploitative nature of capitalism becomes visible. The law of equal exchange characteristic of earlier commodity exchange is violated, and capitalist private property loses its basis of legitimation. The free- dom and equality of the commodity producers of so-called simple commodity production is thus violated. In monopolistic capitalism, the accumulation of capital is based on the direct exploitation of wage workers and consumers too. The accumulation and concentration of capital has led to a relation of exploitation, which no longer expresses itself in the form of reified social relations;

6 Hilferding 1973a. 7 According to Gottschalch, Hilferding used the concept of organised capitalism as early as 1915 (Gottschalch 1962, p. 190). 8 Schimkowsky 1974a.

Jukka Gronow - 9789004306653 Downloaded from Brill.com09/26/2021 02:22:05AM via free access organised capitalism, the general cartel and the proletariat 33 the surplus product produced by the wage workers is appropriated by the capitalist in a direct, one could almost say feudal, way. The strategic consequences drawn from this thesis are crucial. Since the exploitation has become quite visible and can be experienced by its objects in a direct way, capitalism – as a fully established mode of production – is politically impossible; its very establishment will inevitably lead to its replacement by a different mode of production, the elements of which have furthermore already been developed within capitalism. In Hilferding’s Finance Capital, this kind of reasoning is explicitly presented. In his study, Hilferding did not, however, formulate all the political and strategic conclusions inherent in his theory. And Hilferding’s later political standpoint – that of an organised capitalism – is already that of a social democrat of the Weimar Republic – even if in his own self-understanding, he remained a Marx- ist. From this point of view, it is interesting to study the concept of capitalism and the interpretation of Marxism presented by Karl Kautsky. Kautsky never formulated such an explicit theory of modern capitalism as had Hilferding. Nor did Lenin for that matter. There is no such systematic presentation of mono- polies, finance capital or imperialism in Kautsky’s voluminous work. In many of his works and articles, he did, however, quite extensively discuss the problem of cartels, finance capital, export of capital, restrictive tariffs [Schutzzölle], joint stock companies, imperialism, and so on. He had already formulated many of the propositions later to be systematised in Hilferding’s work, and after the pub- lication of Hilferding’s Finance Capital, Kautsky hailed it as a great contribution to the understanding of modern capitalism.9 Despite the lack of a coherent theory of monopoly or finance capitalism, Kautsky shared many of Hilferding’s conclusions. Capitalism was essentially seen as constituting the capitalists and the proletariat, the main relation between them being one of increasing exploitation. The accumulation of capital was understood to inevitably lead to a polarisation of capitalist society. And to Kautsky above all, the law of accumulation of capital was a scientific law from which the revolutionary socialist perspective and the necessity of overthrow- ing the capitalist system of exploitation could be scientifically deduced. The strategy of the working-class movement was thus based on scientific know- ledge of the development of capitalism. Scientific socialism was supposed to prove both the necessity and the possibility of the goal of the socialist movement. Even though the overthrow of capitalism can – in the last instance – only

9 Kautsky 1910–11, p. 883.

Jukka Gronow - 9789004306653 Downloaded from Brill.com09/26/2021 02:22:05AM via free access 34 chapter 1 be the outcome of conscious action by the proletariat organised in a socialist party, the dissolution of capitalism is not a problem as such; it is the necessary and law-like result of the historical tendency of the accumulation of capital.

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