Rudolph Hilferding: Finance Capital: A Study of the Latest Phase of Capitalist Development (edited by and with an introduction by Tom Bottomore), Routledge and Kegan Paul, 1981, £22.50.
It is a measure of the destructive and retrogressive effects wrought upon the socialist movement by fascism and Stalinism that it has taken seventy years for Hilferding's book to appear in English translation. It was one of the major works of the period which Isaac Deutscher often referred to as classical Marxism, and when first published in 1910 was hailed by most reviewers as a worthy continuation of Marx's own three volumes of Capital. Subsequent comment has not always been as uncritical, yet none have ever called into question the tremendously important contribution made by Hilferding. The book itself was a remarkable achievement for a young man of 33, and placed him amongst the very top flight of Marxist economists of the period.
In Finance Capital Hilferding set out to examine in a systematic, theoretical manner the development and changes within capitalism since the death of Marx and Engels. In the process a number of questions that Marx had only briefly dealt with were elaborated and amplified. However, the book is far more than a mere 'filling in' of some of Marx's own work, left unfinished by untimely death: it is a fundamental extension of the whole edifice.
The necessity for such a work had become obvious by the turn of the century because of the qualitative changes that had occurred within the capitalist system, both on a national and international scale: the extension of the joint-stock companies into cartels, trusts and monopolies; the development of bank capital as an independent fraction of capital, and according to Hilferding its domination of industrial capital; the major importance of the export of capital as opposed to the export of commodities. Associated with these trends were the creation of tariff barriers to maintain high profits in home markets and the rapid extension of colonialist imperialism, the division of the globe amongst a few powers and the racialist ideologies that went with this. The similarities with Lenin's later exposition of these problems in his Imperialism will be noted.
Finance Capital deals with all these and other questions in an exhaustive manner, The theory of imperialism derived from it has long since passed into common currency amongst Marxists; even if various glosses are put on this or that aspect, they all have some common roots in Hilferding's book.
If one were to choose the dominant theme of the book it is the role of bank capital as a force which speeded up the process of monopolisation and regulation of the capitalist economy, whilst acquiring for itself a dominant position in the resulting structure. The validity of Hilferding's theory of dominance has subsequently been challenged, yet it cannot be denied that the role and function of bank capital did undergo a metamorphosis in the period under consideration and that today it plays a crucial role within the system, particularly on an international scale.
One of the central problems posed by Hilferding was that of the theory of money, and the book opens with a fairly long discussion of this, Although the subject matter and the presentation may appear somewhat dry, it is an essential element in the process of Hilferding's exposition and is still essential for a proper understanding of modern capitalism.
Marx developed his own theory of money upon the basis of commodity-money. When Marx wrote, money was gold; with certain exceptions even paper money was readily exchangeable for gold coin. Marx was aware of the existence of credit money, but for purposes of exposition in Capital this is practically ignored,
The problem Hilferding attempted to tackle was: how can paper money which is not convertible into gold, and hence has no intrinsic value of its own, measure value and carry out all its other functions. He argued that: '... The value of paper money is determined by the value of the total quantity of commodities in circulation. A mere slip of paper thereby acquires a value which is out of all proportion to its negligible value as paper... paper has a value only because commodities are impregnated with value by social labour. It is therefore a reflection of labour value which converts paper into money...' (p.40)
Even though Hilferding came to the conclusion that such a paper money could not be maintained for any length of time, he was on the right track with his attempt to link such money with social labour.
Unfortunately his definition as it stands has an element of circularity in it. This arises because he refers to commodities in circulation as one undifferentiated mass, whereas there are three quite distinct categories of commodity which appear on the market under capitalism. These are (1) means of production, (2) means of consumption, and (3) labour-power. The first two, of course, are produced by capitalists; but labour-power is 'produced' by the working class, and therein lies the difference.
The problem with unconvertible paper money is not to ascertain if it has value, but if it measures value, and for it to carry out this function it is not necessary for it to have an intrinsic value of its own.
Since labour power is the one commodity that enters into the production of all other commodities, this means that the value of labour-power — in the form of socially necessary labour — is the crucial determinant of the value of all commodities. However, the value of labour-power is determined by the value — socially necessary labour — embodied in the commodities necessary to reproduce this labour-power.
The price of such commodities can be determined in the following manner: with any given output of consumption goods the price of all of them is — individually — the sum of the money wages paid to productive workers divided by the volume of consumption goods minus that portion unproductively consumed. In this sense the 'value' of paper money, i.e. its purchasing power, is determined by the class struggle. This is a highly simplified manner of presentation, but is adequate as a starting point.
So Hilferding's theory of paper was inadequate because it was underdeveloped, not because it was basically defective. He was certainly conscious of the role of social labour in determining the purchasing power of paper money. In this respect he was many years ahead of most bourgeois and Marxist economists, who remained wedded to the idea of gold and money being synonymous.
It took the great crash of 1929, the Second World War, and finally the cutting of the link between the US dollar and gold for the system of state paper money to become fully operative in the capitalist world. The subsequent orgy of inflation in all the capitalist countries indicates how inadequate is the control of this new form of money, and the relative autonomy of bank capital linked with the multinational corporations faced with a working class that has not been defeated in the manner of the 1930s. In this respect Hilferding's analysis of the extended role of credit and fictitious capital will still remain a starting point for an appreciation of modern capitalism and the endemic inflation that is part of it.
Finance Capital has achieved a reputation mostly through hearsay via the work of such theorists as Bukharin, Lenin and Sweezy. This reputation can now be appraised directly, and the full measure of the work assessed. The book is not easy reading and does require a fair degree of knowledge of Marxist political economy. Nevertheless it should be studied not as an antiquarian curiosity but as a necessary aid to understanding current realities.