Finance capital A study of the latest phase of capitalist development Rudolf Hilferding Edited with an Introduction by Tom Bottomore From Translations by Morris Watnick and Sam Gordon Routledge & Kegan Paul London, Boston and Henley‘ubliuhed i» Viema as Das Fisanckapital: Eine Stale aber de jt Entwicklung des Kapitalismus Mewie This translation first published in 1981 by Routledge & Kegan Paul Lid 39 Store Street, London WCIE 7DD, Broadway House, Newtown Road, Henley-on-Thames, Oxon RGD 1B} 9 Park Street, Boston, Mase. 02108, USA and ‘Set in Monophoro Times 11 on 13 pt ‘and printed in Great Britain by Thomson Litho © Rudolf Hiferding 1910 Drawn from ove translations by Morris Weimick © 1981 ‘Sam Gordon © 1981 ‘This edition Tom Bottomore © 1987 ‘No part of this book may be reproduced in ‘any forma without permission from the publisher, except for the quotation of Brief passages in criticism British Library Cataloguing in Publication Data Hilferding, Rudolf Finance capital 1. Capitation 1 Title 1H, Bottomore, Thomas Burton IL, Watnick, Morris: 1. Gordan, Sam 390122 HBSOI80-41226 ISBN 07100 0618 7 at 2 B 14 15 Contents ‘Acknowledgments Note on the translation Introduction to the translation FINANCE CAPITAL Preface Part I Money and eredit The necessity of money Money in the circulation process Money as a means of payment. Credit money Money in the circulation of industrial capital ‘The banks and industrial credit ‘The mate of interest Part IL The mobilization of capital. Fictitious eapital ‘The joint-stock company ‘The stock exchange ‘The commodity exchange Bank capital and bank profit Part [I Finance eapital and the restriction of free competition ‘Surmounting the obstacles to the equalization of rates of profit Cartels and trusts ‘The capitalist monopolies and commerce ‘The capitalist monopolies and the banks. The transformation of capital into finance capital Price determination by the capitalist monopolies ‘and the historical tendency of finance capital vii ix ai 27 37 60 67 82 107 130 151 170 183 204 208 223 227Fart t¥ Finance capital and erises ‘The general conditions of crises The causes of crises Credit conditions in the course of the business cycle Money capital and productive capital during the depression ‘Changes in the character of crises, Cartels, and crises Part ¥ The economic policy of finance capital ‘The reorientation of commercial policy ‘The export of capital and the struggle for economic territory Finance capital and classes The conflict over the labour contract The proletariat and imperialism Notes Bibliography The principal writings of Rudolf Hilferding IF Works on Hilferding TIT Other works mentioned in the ‘oa Introduction and in the text. 239 237 267 282 288 301 3 337 351 364 am 438 439 445 Acknowledgments “The publishers and the editor are grateful to the late Professor David Spitz (who was the literary executor of Professor Morris Watnick) and to Mr Sam Gordon and the Monthly Review Press for permission to make use of the translations which were in their possession, and to Rudolf Hilferding’s son, Dr Peter Milford, for his permission to publish this English edition. Tam also grateful to Dr Milford for his advice on some matters ‘concerning the translation, and especially for the additional information and extensive comments which he ‘provided in connection with my Introduction. He is not, of course, in any way responsible for the interpretation of Hilferding's theories and political views which I have presented ‘After the death of Professor David Spitz in April 1979, his widow, Professor Flaine Spitz, was kind enough to send me the manuscript material on Hilferding which formed part of Morris Watnick’s literary ‘estate, and I have acknowledged my use of this material more fully in the Introduction ‘The English version of a passage from Aristophanes’ The Frogs, translated by David Barret, is reprinted on pp. 381-2 by permission of the publishers, Penguin Books Ltd. Finally, | should like to express here my very great appreciation of the ‘work of my secretary, Bileen Plume, and of Pat Bennett, who between them produced, with great accuracy and dispatch, an excellent typescript from a much revised and untidy original Tom BottomoreIntroduction to the translation* ‘When Rudolf Hilferding’s Finance Capital first appeared in 1910 it was at once recognized as a major original contribution to Marxist economic theory. Otto Bauer, in a review published in Der Kampf! observed that the book could almost be regarded as a further volume of Capital, in which Marx's bold anticipations of the concentration of capital and of the next stage in the developmen: of the capitalist economy were shown to correspond with the real course of events in the period since his death. Similarly Kari Kautsky, in a long essay in Die Neue Zeit,> described the work as a continuation of Capital; a brilliant demonstration of the Fruitfuiness of the Marxist method, applied particularly in a study of those phenomena which Marx himself, in the unfinished second and third Volumes of Capital, had not succeeded in investigating or analysing fully Somewhat later Lenin based his study ofimperialism ? upon Bilferding's ‘very valuable theoretical analysis’, and distinguished the principal features of imperialism — monopolies, finance capital, export of capital formation of international cartels, teritorial division of the world ~ in terms which were obviously derived from Hilferding’s work. Nikolai Bukharin, who was the most talented of the Bolshevik social theorists, particularly in the economic field, showed his indebtedness to Hilferding’s work ina number of his own writings.* In Imperialism and World Economy. which was completed some months before Lenin's study (and was used by Lenin), Bukharin’s ‘starting point and essential inspiration’* was Finance Capital; bat he presented Hilferding’s theory in a more intransigent way. by insisting that “finance capital cannot pursue any policy other than ar ‘imperialist one’ leading inevitably to war, and also extended it by arguing that the structural changes in capitalism had resulted in a system of ‘state capitalism’, in which an interventionist state acquired immense new Details of the works, other than minor articles and reviews, refered to in tit Totoduetion and in Hilferdiag’s text are given inthe Bibliography at the enc of the volume.2 Introduction to the translation powers, regulating and ‘militarizing’ the whole economy. This conception of modern capitalism underlay much of Bukharin’s subsequent work, including his well-known book The Economies of tke Transformation Period (1920), and as will be seen later it had some alfinities with Hilferding’s notion of ‘organized capitalism’, although its politcal signific- ance was conceived in a different way. Jt was Hilferding’s theory of imperialism, set out in the final patt of his book, which had the greatest immediate influence, as may be seen not only from the response of Marxist thinkers, but also from the attention which @ critic such as Joseph Schumpeter gave to it in his references to the Austro- Marxist school.© Finance Capital, however, contained many other new conceptions, dealing with the nature of modern capitalism, the class structure, the state, and working-class politics, which Hilferding continued to develop and revise in his later writings; and before embarking upon a ‘loser examination of its principal themes it will be useful to set the book in the context of Hilferding’s life and work as a whole. 0 Rudolf Hilferding was born on 10 August 1877 in Vienna, the only son of Emil Hilferding, who was chief cashier of the ‘Allianz’ (an old-established insurance company) and of Anna Hilferding (net Liss). After attending the Staatsgymmnasium in District 2 of Vienna (Leopoldstadt) he centered the University of Vienna to study medicine, obtaining his doctorate in 1901. After graduating he practised as a doctor at least until 1906 (and again during his military service in the First World Wat) but he also devoted much of his time to economic studies, in which he had been interested since joining the Association of Socialist Students at the age of fifteen. He began to write on economic and social questions while stil at university, and some of his earliest articles appeared in Le Mouvement Socialiste Paris) in 1899-1900. From 1902 he was a frequent contributor on economic subjects to Die Neue Zeit (the leading Marxist theoretical Journal of that period, edited by Karl Kautsky), and he became more widely known when he published, in 1904, his rejoinder to Bohm-Bawerk's criticism of Marx’s economic theory.” At this time Hilferding was also engaged in establishing, with Max Adler, the Marx-Studien (published irregularly from 1904 to 1923) which were intended to provide & means of expression for Austrian socialism and for the newly emerging Austrian version of Marxist theory. Shortly after- wards, in 1906, he was invited to become a lecturer in economics at the Introduction to the translation 3 Social Democratic Party school in Berlin, but had to give up this position when the appointment of aliens as lecturers was prohibited, and then became the foreiga editor of Vorwiiris. From 1907 he contrbuted Frequently (sometimes under the pseudonym ‘Karl Emil?) to Der Kampf, the newly established monthly journal of the Austrian Social Democratic Party, and he was also engaged during this period in completing his major work, Finance Capital. In 1904 Hilferding married Margarethe HOnigsberg, also a doctor, whom he had first met in the socialist student movement, and had two sons, Kari Emil (1905~42) and Peter (b. 1908), but later divorced and remarried, (On the outbreak of the First World War Hilferding associated himself with the minority in the German party who opposed the voting of war credits. He was mobilized as a doctor in the Austrian army in 1915, and spent the rest of the war on the Italian front. Immediately after the war he was invited back to Berlin by the leaders of the Independent Social Democratic Party of Germany’ as editor of its journal Freihe't. He opposed aliliation of the party with the Third International, took part in the discussions which led to the creation of the ‘Second-and-a-hal?” International? and eventually rejoined the majority German Social Democratic Party after its reunification in 1922. Having acquired Prassian itizenship in 1920 Hilferding was appointed to the Reich Economic Council, became Minister of Finance, from August to October 1923, in the coalition government of Gustav Stresemann, and was again Minister of Finance, from June 1928 until December 1929, in the government of Hermann Miller. He was elected to the Reichstag in 1924, and remained a member until 1933, During this time he also edited the journal Die Gesellschaft, to which he contributed many articles, and he took a prominent part in the activities of the Social Democratic Party. ‘After Hitler's accession to power Hilferding went into exile, intially in Denmark, thea in Zirich. He participated actively in the work of the Social Democratic Party while it was in exile in Czechoslovakie, and contributed frequently to the socialist press.!° In 1938 he went to Paris, where he joined his friend Rudolf Breitscheid, and after the collapse of France in 1940 they moved to the unoccupied zone, living at the Hotel Forum in Arles. Here Hillerding began to write his last work-a reassessment of the materialist conception of history - entitled Das fistorische Problem. But on 11 February 1941 the Pétaia government, yielding finally to repeated demands from the German authorities, handed Breitscheid and Hilferding over to the SS liaison officer, Hugo Geissler, in Vichy. They were then taken to Paris, where Hilferding either comnitted suicide, or more probably was murdered, after being tortured by the Gestapo."