Classical Imperialism (1895 – 1945)

The main driver of economic growth under capitalism is the capitalists’ feverish search for surplus profit, that is, profits well above the average rate of profit. In the period of Free Competitive Capitalism (1789 – 1895), the main sources of surplus profit were within the now industrializing countries of Europe. At the beginning of the 19th century, there was no large-​scale capitalist industry in the world at all. The value of a commodity was initially determined by the far greater labor time required to produce it by hand. The few capitalists who, for example, had fabrics produced with mechanical, steam-​driven looms had far lower costs and were able to make considerable surplus profits. Thus, at the beginning of the capitalist era, these surplus profits were achieved primarily in Department II, the production of consumer goods, while the means of production were initially still produced by hand.

The slow decomposition of the crafts – for example, the weavers – and the enclosures in agriculture released large masses of people; far more than found employment in industry. The industrial reserve army was thus very large. This caused wages to be low and to continue to fall until the middle of the 19th century. The rate of surplus value was correspondingly high.

With the generalization of large-​scale industry in Western Europe from 1850, these surplus profits slowly disappeared. The value of goods was increasingly determined by industrially manufactured products and declined. As a result, profits also declined. The industrial reserve army ceased to grow, or grew only slowly, as the dirty work of dismantling the traditional craft and agricultural sectors was largely done in the most highly developed capitalist countries, Britain, France and Belgium. Meanwhile, the labor movement developed into a real power and further propelled this dynamic by its pursuit of higher wages.

New inventions such as the Cowper stove, the Bessemer and Thomas processes, and the Siemens-​Martin furnace made large-​scale industrial production of raw materials possible in Department I, i.e. the production of manufacturing goods with a correspondingly increasing minimum amount of capital. The organic composition of capital increased significantly, especially in Division I. This led to the fact that the organic composition in Department I slowly began to approach that in Department II, and then rapidly surpassed it. A transfer of surplus value from Department II to Department I, accompanying the equalization of profit rates, began. However, the considerably increased production capacity of Department I could no longer be fully utilized in the 1870s and 1880s. A significant part of the surplus value realized by Department I, and of the surplus value produced in Department II and appropriated in Department I, lay idle.

At the same time, commodity prices rose. This is because, as the productivity of labor rises, the output of the quantity of goods that can be produced by a given quantum of labor and machinery constantly increases. This leads to a decrease in the share of constant fixed capital (machinery) and variable capital (wages) in the value of goods. Accordingly, the share of constant circulating capital, i.e. raw materials, increases. In the last decades of free competitive capitalism, this led to a relative, and later absolute, increase in commodity prices. This tendency was exacerbated by the fact that commodities were produced in many countries with pre-​capitalist modes of production, such as slavery or serfdom. All these factors caused a long-​term decline in the rate of profit in the 1870s and 1880s.^[1]

Capital reacted to these crisis phenomena in various ways. Taken together, they led to the end of free competition capitalism and the emergence of imperialism, which had taken hold in the main industrialized countries around 1895.

In his work Imperialism: the Highest Stage of Capitalism Lenin, describes the following central features of imperialism:

Monopolies, cartels and price agreements emerged in many sectors, especially in the mining, iron and steel industries, from the crisis-​ridden 1870s onward. Initially, they were still the exception, but by 1900 at the latest they dominated economic life. Initially, agreements between independent companies dominated, but later these companies were more often combined in groups or trusts. With monopoly, competition in price and quality came to a standstill in the effected industries By the beginning of the 20th century, there were also international monopolies, for example the electrical monopoly of 1907, which divided the whole world between the German AEG and the American General Electric. However, these international monopolies were still unstable and often collapsed — only to be formed anew after a few years, of course.^[2]

Banking capital and industrial capital coalesced into finance capital. There was also a massive concentration and centralization of capital in the banking sector. At the turn of the century, there were only six large commercial banks in Germany, which were also strongly interconnected. These commercial banks, in turn, controlled the majority of shares in the large corporations, on whose supervisory boards their directors were regularly represented. Large, closely intertwined monopoly complexes emerged, which could consist of hundreds of companies. The modern »big three« German commercial banks – Deutsche Bank, Dresdner Bank and Commerzbank — were already, then, amongst the top banks^[3]– and they have in the interim absorbed their few past competitors, such as Disconto-​Gesellschaft and Darmstädter Bank.

For free competitive capitalism, the export of goods was characteristic. An important feature of imperialism was the export of capital. This was because at the threshold of the 20th century, a large surplus of capital was created in the advanced capitalist countries. This could no longer be invested profitably at home, so it was exported to underdeveloped countries.

Capital was invested there primarily in the production of raw materials and in transportation routes such as railroads and ports. However, there was little incentive to make significant use of machinery in such countries, because of the very large amount of cheap labor. In commodity production, an essentially pre-​industrial, manufacturing capitalism emerged. In other areas, the degree of mechanization was higher, but even there the emphasis was on the production of absolute surplus value. This development provided for a considerable cheapening and acceleration of the export of raw materials and thus contributed to a lowering of the organic composition of world capital.^[4]

In the age of imperialism, the independent development of capitalism in the colonies and semi-​colonies was practically impossible, because the economic structure of these countries was shaped by capital in a fashion complementary to the needs of capitalist production in the metropolises. Investments emanated directly from the metropolises and were made only in those sectors that corresponded to the interests of the imperialist bourgeoisie. The emergence of domestic manufacturing industries in the periphery was often even directly prevented.^[5]

In this period, capitalist were able to make surplus profits because of the following factors:

• In the less developed countries, the organic composition of capital was lower, and consequently the rate of profit was higher than in the West.
• In these less developed countries the rate of surplus value was also higher, since due to the growing industrial reserve army the price of the labor power fell far below its value, which was already significantly lower than in the already industrialized countries.
• The concentration of capital exports in commodity-​producing sectors ensured significant surplus profits for the capital invested there due to high commodity prices. Later, it contributed to a reduction in the organic composition of capital in the metropolises.
• The massive export of capital reduced the idle capital in the metropolises and for this reason led to an increase in the rate of profit there as well.^[6]

Towards the end of the 19th century, the division of the world among the six great powers England, France, Germany, Russia, the United States and Japan had largely come to an end. The state of affairs in 1914 is shown in the following table cited by Lenin:

Table 3.1. division of the world according to Lenin. Square kilometers and inhabitants in millions.^[7]

Semi-​colonies were countries with an archaic social structure, such as the Ottoman Empire, China, Persia and Ethiopia. They were formally independent, but could not counter the economic and political penetration of the great powers.

In addition to the smaller European countries such as Belgium and Switzerland, the Latin American countries should be mentioned. The latter were still more or less characterized by feudalism in agriculture.

Great Britain was the leading industrial power of the 19th century. It was here that capitalism had established itself most early and radically, as early as around 1790. In1870, the country still claimed 32 percent share of world industrial production, ahead of the USA with 23 percent, France’s 10 percent, and Germany’s 13 percent. Great Britain was also the most important world trading power in 1870, with a 22 percent share of world trade, ahead of France’s 10 percent and Germany’s 13 percent. The U.S.’s share was only 12 percent.

England was able to secure the lion’s share of colonial acquisitions, while France was already falling significantly behind and Germany was largely left empty-handed.

In the last decades of the 19th century, the ranking of the industrialized countries changed considerably. New great powers rose, especially Germany, the United States and Japan. The old great powers, France and Great Britain, which still dominated free competition capitalism, experienced a relative decline in importance. Austria-​Hungary was still considered a great power in the 19th century, but by the early 20th century had declined to the status of a middle power.

In 1914, the above countries’ respective shares of world industrial production were as follows: Great Britain: 14 percent, France 6 percent, Germany 16 percent, USA 36 percent. World trade at the time was similarly divided: Great Britain 15 percent, France 8 percent, Germany 13 percent and USA 11 percent.

German industrial production had thus overtaken that of Great Britain before 1914 and continued to grow at a rapid pace. In world trade, Germany ranked second, only slightly behind Great Britain.^[8]

Between 1882 and 1907, the number of industrial workers in Germany doubled from just under 6 to 11 million, with a slight decline in the number of industrial enterprises. The number of large^[9] companies grew particularly rapidly, employing 47 percent of all workers.^[10] Numerous new large cities and industrial districts such as the Ruhr region were created. Among the working class, however, living conditions were indescribably miserable.

The electrical industry and the chemical industry — both new at the time — developed rapidly in Germany. Monopolization was particularly strong in these sectors: the electrical industry was dominated by AEG, Siemens & Halske and Bosch; the chemical industry by Farbwerke Hoechst, BASF, Bayer and Agfa.

The background to this strong growth of the productive forces was the second industrial revolution, which made particularly rapid progress in the new industrialized countries such as Germany. It was based on the following technical developments:

• The development of large-​scale chemical synthesis, which raised chemical production to a new technical level.
• The progressive harnessing of electrical energy after solving the technical problem of electricity distribution and transmission in the 90s. This made it possible to provide energy at any place and in any desired quantity, and spurred the invention of a wealth of new electrotechnical working and control apparatus.
• The perfection of the internal combustion engine enabled the development of the automobile, the tractor and the airplane. They supplemented the steam engine’s relatively rigid and limited means of action with smaller, more mobile power units that could be used almost anywhere.
• There was also a revolution in news and communication technology (wireless telegraphy, telephone, film).
• Advances in mechanical engineering led to the development of a variety of new, highly specialized machines that could produce workpieces of high precision.
• Increasing soil fertility through artificial fertilizers, agricultural machinery, and scientifically based crop rotation greatly increased annual average yields per hectare.^[11]

Individual monopolies and the state set up research companies both to conduct basic research in the latest research fields and to advance applied research for the benefit of industry.

The German chemical industry used its surplus profits from the production of synthetic dyes, for which it held a world monopoly, to finance elaborate research projects that secured it a further monopoly-​like position on the world market in the production of remedies, drugs and photographic materials.

Germany was also one of the leading countries in medical research. In 1907, for example, Paul Ehrlich discovered penicillin as a cure for syphilis.

In 1908, Fritz Haber developed a process for producing ammonia from atmospheric nitrogen and hydrogen, and Fritz Hofmann discovered the synthesis of synthetic rubber in 1909. However, the high-​pressure process for coal hydrogenation (Fischer-​Tropsch) discovered in 1913 was not ready for production until the 1920s. This meant that Germany was largely independent of raw materials such as Chile saltpetre and natural rubber, the supply of which was blocked by the British naval blockade during the First World War.

Starting in 1900, numerous electric power plants were built and inner-​city transportation was electrified. From 1910, the light bulb became widespread. In 1901, wireless telegraphy was possible, and from 1916, radiotelephony. By the 1890s, Germany already had an extensive telephone network, the largest in Europe.

From 1900, the gas engine became widespread in Germany. By the beginning of the World War, it already had 9,000 trucks, 5,500 cars and 20,000 motorcycles. Since 1890 airships were built, the Zeppelins. From 1891 Otto Lilienthal carried out flight experiments. During the first world war there were already regular air battles between enemy planes.

Film screenings had been held in Germany since 1895. Until the World War, however, they mostly consisted of short flicks.^[12]

Precisely because of the considerable scientific and industrial advances, there was a surplus of capital in Germany, which means that, especially in Division I, all accumulated capital could by no means be profitably exploited. German colonial possessions were insignificant. Access to the colonies of other powers was generally denied to German capitalists. Therefore, they expanded mainly in the direction of Latin America, the Balkans and the still independent semi-​colonies such as Morocco, the Ottoman Empire and China. This put Germany in a conflict of interests with Great Britain, the strongest power in the world at the time. This was further intensified by the naval arms race that began in 1897. In order to be able to assert German imperialist capital interests globally, Germany built up a strong ocean-​going fleet and thus directly threatened British interests.

Under Kaiser Wilhelm II (r. 1888 – 1918), Germany took a particularly aggressive and overbearing posture all over the world. In the pre-​war period, military and diplomatic incidents with other great powers became more frequent. Germany set course for the military redivision of the world.^[13]Corresponding ideas are documented in the so-​called September Program, which was adopted by Reich Chancellor Bethmann-​Hollweg in 1914 shortly after the outbreak of the First World War. It provided for the following measures in the event of a victorious war:

• Creation of a Central European economic association in the form of a customs union. It was to include: Germany, Austria-​Hungary, Belgium, the Netherlands, France, Denmark, Sweden and Norway. These states were to remain formally independent, but de facto belong to the German sphere of influence.
• Annexation of the French iron ore-​rich territories around Briey and Longwy and the western slope of the Vosges.
• Annexation of the Grand Duchy of Luxembourg extended by some Belgian territories.
• Restoration of Belgium, but it was to be reduced to the status of a vassal state.
• Creation of a contiguous Central African colonial empire consisting of Belgian Congo (now Democratic Republic of Congo), Portuguese West Africa (now Angola) and Portuguese East Africa (now Mozambique)
• A high war tribute from France.^[14]

Aggressive capitalist circles raised even more far-​reaching annexation demands. The central demand of the capitalists was the creation of the Central European Economic Union. With this, they wanted to create optimal expansion opportunities for themselves. Ultimately, this was to lay the foundation for replacing Great Britain as the leading imperialist power.

All the other great powers allied against this aggressive expansionist program. Germany was militarily stronger than each individual power, but not stronger than all of them combined. At the end of World War I in 1918, Germany was defeated and the old regime was overthrown. The revolution was prevented by Social Democracy from continuing in the direction of socialism, that is, the expropriation of the capitalists.

This set the stage for the rise of German fascism under Adolf Hitler, who sought revenge for the defeat of 1918 with even more adventurous policies and plunged the world into World War II (1939 – 45). German fascism wanted to conquer all of Europe as a springboard for its world domination. On the basis of eugenics, which was sharpened into an aberrant racial theory, the entire Jewish population of the world was to be exterminated and the Slavic peoples substantially decimated by starvation and mass extermination. The ancient civilization of Russia was to be reduced to a nation of helots, with its entire intellectual elite destined for annihilation. In place of the Slavs, Germans were to be settled in the vacated eastern territories. Germany allied itself with Japan, also fascist, which wanted to create a large empire in East Asia.

Against this insane claim to world domination, the three great capitalist powers, the USA, France and Great Britain, allied themselves with the socialist Soviet Union.

The latter emerged from the October Revolution of 1917, the world’s first socialist revolution. Rapid Soviet industrialization beginning in 1928 ultimately made possible the victory of the anti-​Hitler coalition. Its heavy industry produced so many tanks, guns, rocket launchers, and aircraft that the Red Army was able to counter the German war machine. Nevertheless, the outcome of the German-​Soviet war hung in the balance during the battles for Moscow in 1941 and Stalingrad in 1942.

Against Japan, the U.S. waged a bitter war in the Pacific, culminating in the first use of atomic bombs against the cities of Hiroshima and Nagasaki in 1945.

At the end of World War II, Germany had been defeated militarily once again, after tremendous sacrifices of human lives. Instead of the six great powers, there were only two superpowers, the United States and the Soviet Union.

Footnotes

^[1] Ernest Mandel, Der Spätkapitalismus, (Frankfurt am Main: Suhrkamp, 1974) p. 54 (Henceforth, Mandel, Spätkapitalismus).

^[2] Der Imperialismus als höchstes Stadium des Kapitalismus, Berlin, 1988, p. 20. English Translation: Vladimir Lenin, Imperialism, the Highest Stage of Capitalism, (Chippendale NSW: Resistance Books, 1999) https://​www​.readingfromtheleft​.com/​B​o​o​k​s​/​C​l​a​s​s​i​c​s​/​L​e​n​i​n​I​m​p​e​r​i​a​l​i​s​m​.​pdf (Henceforth, Lenin, Imperialism).

^[3] Ibid. p. 37.

^[4] Mandel, Spätkapitalismus, p. 56.

^[5] Ibid. p. 51.

^[6] Ibid. p. 76.

^[7] Lenin, Imperialism, p.92.

^[8] Fritz Klein, Deutschland 1897/​98 — 1917, Lehrbuch der deutschen Geschichte, vol. 9, (Deutscher Verlag der Wissenschaften: Berlin, 1972). p. 18 (Henceforth: Klein, Deutschland 1897/​98 — 1917).

^[9] I.e., more than 50 workers.

^[10] Klein, Deutschland 1897/​98 — 1917, p. 18.

^[11] Ibid. p. 395.

^[12] Ibid. p.p. 401, 404.

^[13] Fritz Klein et. al., Deutschland im Ersten Weltkrieg, Vol.1: Vorbereitung, Entfesselung und Verlauf des Krieges bis Ende 1914, (Berlin, 1970), p. 60.ff (Henceforth: Fritz Klein et. al., Deutschland im Ersten Weltkrieg). 

^[14] Ibid. p. 366. It should be noted that in 1914, there were not yet demands for Germany to expand eastward. This is because the prospect of establishing a new kingdom in the territory of modern Poland, which was to be united with Austria-​Hungary in personal union, was still being considered. When the weakness of the Austro-​Hungarian army became obvious in the following years, these plans were obsolete and Germany shifted the focus of its expansion plans to the East. This tendency was substantially increased during the Second World War.

Works Cited

Klein, Fritz. Deutschland 1897/​98 — 1917, Lehrbuch der deutschen Geschichte, vol. 9. Deutscher Verlag der Wissenschaften: Berlin, 1972.

Fritz Klein et. al., Deutschland im Ersten Weltkrieg, Vol.1: Vorbereitung, Entfesselung und Verlauf des Krieges bis Ende 1914, (Berlin, 1970)

Mandel, Ernest. Der Spätkapitalismus. Frankfurt am Main: Suhrkamp, 1974.

Lenin, VI. Der Imperialismus als höchstes Stadium des Kapitalismus, Berlin, 1988.

Cover Image: »Imperial Federation, map of the world showing the extent of the British Empire in 1886«, wikimedia commons