Ten months after the Russian Federation’s invasion of Ukraine, some interesting essays have come out analyzing the new geo-political situation and reflecting on possible international trends[1]. Among them, the recent contribution by Emiliano Brancaccio, Raffaele Giammetti, and Stefano Lucarelli, The Capitalist War. Competition, Centralization, New Imperialist Conflict, Mimesis, Milan, 2022, released in bookstores last November 25.
The book is divided into three parts, with the addition of three final appendices and an afterword by Roberto Scazzieri. The first part begins with the “disconcerting acknowledgement of a Marx ‘kidnapped by the enemy’: as much forgotten by the self-styled tribunes of the oppressed of our time as studied and reevaluated by the agents of capital” (p. 10). Such a starting point is particularly useful for dwelling on the Marxian “law of centralization,” the theoretical knot that has most fascinated mainstream rediscovery of Marx in the aftermath of the 2007 global financial crisis. In the text, in fact, the authors propose “a new theory of reproduction and the tendency toward capitalist centralization, an approach that opposes the mainstream theoretical paradigm but also raises objections to the strands of critical thought that have reduced Marxism to an untouchable anti-scientific reliquary, or that have long been silent on the great issue of general ‘laws’.” (p. 10).
Beginning with these premises, the second part delves into the empirical evidence of the trend of capitalist centralization, which is called “an unprecedented in the relevant scientific literature” (p. 10). This evidence starts from the use of modern techniques of ownership “networks,” with reference to share ownership. Since this phenomenon mainly affects the United States and Anglo-Saxon countries as well as China and Russia, the analysis conducted rightly highlights how talking about oligarchy by referring exclusively to Russia is not only improper but also misleading, since the oligarchic structure is by far prevalent in the United States and Western countries.
The third part of the book contains revised and updated excerpts from interviews and articles by Emiliano Brancaccio alone inspired by the war in Ukraine, but centered on the more general question of the relationship between the centralization of capital and military conflict and the two most important imperial blocs emerging: on the one hand, the consolidated imperialism of debtor countries (U.S. and Uk in the lead), with Europe in tow, and on the other hand, the emerging imperialism of creditor countries, starting with China and India.
The thesis of the book is very simple and clear. According to the authors, in contemporary capitalism there is discernible, data in hand, a “law” of tendency toward the centralization of capital, which inevitably leads to the destruction of democracy and foments war.
Such a reading is therefore not aligned with the dominant journalistic interpretations regarding the current war, which exclusively emphasize Putin’s aggression against a state’s independence and sovereignty and thereby justify the sending of arms by so-called “democracy-friendly” countries in order to support the Ukrainian resistance and its civilizational battle for peoples’ freedom. The political context in which the war was born has much deeper and more complex origins.
Attention is therefore turned to the concept of centralization, a concept coined by Marx. The authors acknowledge that “the term ‘centralization’ is often replaced by the expression ‘concentration.’ Marx and Hilferding themselves, in some circumstances, use these terms as synonyms” (p. 38) […] “but it also alludes to the possibility that the controlling groups of corporations govern a larger mass of capital than they formally possess” (p. 39). However, for Marx the two concepts are different: centralization is the outcome of an incessant struggle between competing capitals for the conquest of markets, while the term concentration corresponds to “the creation of new means of production and the consequent growth of their total mass, both in absolute terms and in relation to the available labor power” (p. 39).
What is meant by the term “conquest of markets”? Marx probably means what he calls “the expropriation of the capitalist by the capitalist,” that is, the conquest not so much of market share but of property. This is a process of enterprise selection, the outcome of competition between individual enterprises. Concentration, on the other hand, indicates a process of market hierarchy toward oligopolistic forms, regardless of changes in ownership structures. We can add, however, that the process of centralization induces market concentration. This is something different from the creation of new means of production, that is, the Schumpeterian effect of technological innovation.
It is no coincidence that Hilferding, beginning with the seminal 1910 text The Financial Capital[2], following Marx, identifies two main ways in which the process of ownership centralization and the process of productive concentration are fostered: the failure of weaker firms that fail to submit to market hierarchies, and takeover and merger strategies that “prey” on smaller, more innovative firms that become inviting to the greed of the big ones.
Marx’s and then Hilferding’s analyses refer to the “factory” system, or the development of large-scale industry, masterfully described by Marx in Ch. XIII of Book I of The Capital. In this context, the reorganization of production allows for the exploitation of labor, the activation of positive economies of scale leading to increasing returns to scale and thus fostering both a process of productive concentration and the centralization of ownership with the spread of the managerial form of enterprise.
This process will come to full fruition with the full establishment of the Taylorist-Fordist paradigm of the post-World War II period, which was widely predicted by Marx’s analysis. The process of valorization of capital through tangible commodity production (D-M-D’) reaches its zenith here.
We are in the presence of a stock model of production, where ownership of the means of production is central to defining capital’s command of labor. The tendency toward centralization is manifested by direct ownership of the stock assets of large enterprises. Ownership rhymes with control, although these elements require two differentiated and often, in the years of Fordism, potentially conflicting actors: majority shareholders, on the one hand, and management, on the other. The power of capital and its infighting result in increased concentration of production and increased firm size[3].
With the crisis of the Taylorist-Fordist paradigm in the early 1970s, the scenario changes. The spread of the new linguistic-communicative technological paradigm opens up new modes of production and market organization. The prevalence in the 1990s of the model of internationalized subcontracting, based on management by flow of production nodes, leads to the centrality of financial and technological leverage as the two main factors capable of redefining market hierarchies and international geo-economic arrangements. We are witnessing the most powerful process of financial and technological concentration in the history of capitalism that the history of capitalism remembers, to put to shame the period of the formation of large trusts in the American economy at the turn of the 19th and 20th centuries.
This process is analyzed with examples in the second part of the book, where the centralization thesis is put to the test. The analysis refers to earlier studies conducted by Brancaccio himself and others, in which the concept of “net control” is introduced as a measure of the concentration of share ownership. This term may create some misunderstandings, since in the empirical part of the book a clear distinction between ownership and control is not then drawn, despite the fact that an entire chapter is devoted to managerialism and its theories (from Marx, to Weber until today). Here the term “control” refers to the control of shares.
The results the authors arrive at are not surprising. The increasing concentration of markets that we have seen in recent decades, in the aftermath of the period of increased competition that accompanied the late 1970s in the start of the internationalization process, has been accompanied by a very strong centralization of capital in a few hands.
With reference to the two years considered, 2007 and 2017, we obtain.
“two overviews of equity ownership networks. In both years, financial companies occupy a crucial position in the central nodes. Specifically, the top three (equity) control holders in 2007 are Fidelity Management & Research Company, Capital Research & Management Company, and BlackRock Institutional Trust Company, NA. In 2016, the ranking of the top three control holders is similar: Vanguard Group, Inc, BlackRock Institutional Trust Company, NA, Fidelity Management & Research Company. Interestingly, post-crisis, while the number of hands pulling the strings of global capital decreases conspicuously, the core of financial giants located at the helm of the global capital network does not change much” (p. 118-119).
The primacy of financial markets is not surprising. In contemporary capitalism (that of bio-cognitive and financialized capitalism, of the hegemony of intangible production, of life placed directly at value through platforms), financial markets have become the center of capitalist accumulation and valorization. In an article published more than 10 years ago, shortly after the global financial crisis of 2007-08, I wrote:
“The biopower of financial markets has greatly increased with the financialization of the economy. If the Gross Domestic Product of the entire world in 2010 was $74 trillion, finance surpasses it: the world bond market is worth $95 trillion, stock exchanges around the world 50, derivatives 466 (eight times more than real wealth). All this is well known, but what is often forgotten to note is that this process, in addition to shifting the center of capitalist valorization from material to immaterial production and exploitation from manual labor alone to cognitive labor as well, has given rise to a new “original accumulation,” which, like all original accumulations, is characterized by a high degree of concentration. In the banking market, about 11,500 mergers occurred from 1980 to 2005, an average of 440 per year, thus reducing the number of banks to less than 7,500 (Federal Reserve data). As of Q1 2011, five investment firms (J.P Morgan, Bank of America, Citybank, Goldman Sachs, Hsbc USA) and five banks (Deutsche Bank, Ubs, Credit Suisse, Citycorp-Merrill Linch, Bnp-Parisbas) have control of more than 90 percent of the total derivative securities (OCC data, Office of Comptroller of the Currency). In the stock market, merger and acquisition strategies have substantially reduced the number of listed companies. As of today, the top 10 companies with the largest market capitalization, accounting for 0.12 percent of the 7,800 registered companies, hold 41 percent of total value, 47 percent of revenues, and 55 percent of recorded capital gains.”
Over the past 10 years the players have changed but the music has remained the same. In the U.S., data from the Office of Comptroller of the Currency (an independent supervisory body that reports to the U.S. Department of the Treasury) tell us that a total of $193,731,717 million worth of derivatives were traded in the U.S. market in the second quarter of 2022. 95.35 percent were handled by only five investment banks-Jp Morgan Chase Bank for 29.01 percent, Goldman Sachs Bank 25.54 percent, Citibank National 23.47 percent, Bank of America, 11.42 percent, Wells Fargo Bank, 5.92 percent.
Unlike equity control, it should be remembered that these securities are not owned by the banks but are managed on behalf of the actual owners. In this case, the centralization process takes on new forms. To “net control” is added another form of control: that which does not exclusively assume “bare” ownership, but management of others’ property. This, however, is not at odds with the trend toward ownership concentration in the equity field, quite the contrary.
With the increasingly hegemonic and pervasive role of financial markets the process of centralization/concentration therefore changes. It is no longer manifested only in equity ownership but in the ability to direct and organize speculative conventions through the setting in motion of expectations capable of self-fulfillment if accompanied by an adequate volume of investment that only the large multinationals of finance are capable of making. That is, we are in the presence of a virtuous circuit for capital. Financial centralization of share ownership fosters concentration in the management of financial portfolios with the dual effect of profiting from high capital gains thanks in part to the techniques of “payback” and “shareback,” that is, the mutual exchange of shares among the same financial companies with the aim of raising both capital gains and the level of share ownership.
The phenomenon of centralization thus takes on unprecedented aspects today compared to the past. This is an aspect that, in my opinion, has not been sufficiently investigated. It is also the result of a tendency to redefine world geo-economic arrangements, which tends to challenge American hegemony and push toward a multipolar trend.
Related to this aspect, it is appropriate to speak of different forms of centralization. Indeed, to the U.S. case, masterfully described in the second part of the book, it is necessary to add that a similar process is developing in China but with very different characteristics. The acronym BATX (Baidoo, Alibaba, Tencent and Xiaomi) is increasingly becoming the alter ego of the Silicon Valley giants, and investment funds linked to these large Chinese companies, partly state-owned, are becoming more and more common: for example, the Fidelity Funds – China Consumer Fund A.
China’s growing role also in the field of finance is now one of the most relevant aspects also in explaining the growing tensions on the global geo-economic level and on the hold of the dollar as the international reserve currency dollar and of the U.S. stock exchange as the symbolic place of the financial oligarchy. A trend, the latter, already partly foreshadowed by Giovanni Arrighi in his Adam Smith in Beijing, recently republished but strangely ignored in this book.
Finally, the complexity and heterogeneity of the current situation compels us to reflect on a methodological nature. The book by Emiliano Brancaccio, Raffaele Giammetti, and Stefano Lucarelli believes that the capitalist system and its evolution can be described by laws that, regardless of time and spatial contexts, are able to define “scientifically” (thus rigorously and incontrovertibly) the main lines of trend underway.
The best-known and most discussed law within the Marxist debate is surely the law of the tendential fall in the profit rate. The law of the centralization of capital is less well known but equally important and is relevant to understanding Marxian analysis. Indeed, it is possible to identify a connection between these two laws, which is not the case here. However, the question of whether these laws are universally valid in capitalist time and space remains open. In this regard, the text by Brancaccio, Giammetti and Lucarelli is very clear: Marx’s analysis proves to be scientifically correct under the test of history, at least with regard to the law of the centralization of capital. The data confirm its validity even in our own day. Any interpretation of Marx’s thought that fails to grasp the objectivity of this great law of tendency are at odds with the correct interpretation of Marx’s thought. The critique is clearly aimed at those heretical Marxist currents that originated mainly (but not only) from the operaist thought of the 1960s and its declinations in current neo-operaist thought and that are called “unscientific” (p. 10).
A theory is scientific only if it is able to suggest which experiments and observations might prove it false. This is Karl Popper’s well-known principle of the falsifiability of science. In our case (property centralization), the refutation of the theory lies in applying it in a non-capitalist context of production and, consequently, in a capitalist context it is confirmed if experiments and observations invalidate it.
But in the humanities (as opposed to the natural sciences), the field in which one seeks to show the validity of a theory is historically contextualized, and the ways in which a given phenomenon manifests itself are in constant metamorphosis. A metamorphosis that more often than not is triggered by human action (as well as natural occurrences), action that is itself subjective and unmeasurable, despite the various attempts undertaken in this regard, especially with regard to the study of political economy.
Marx’s laws of tendency are valid only if one defines the precise historical period of reference even within the capitalist period itself. In fact, the dynamics of capitalism is not linear but cyclical and marked by ruptures; it is characterized by the succession of paradigms of a technological (Kondratieff), social and political nature, each time redefining the two pivots that define the capitalist system itself: private property and the capital-labor relationship as basic factors from which to extract exchange value. But their role is not immutable in the course of capitalism’s evolution. As a result, the resulting laws of tendency (not coincidentally relating to these two aspects: centralization with regard to the form of property and the tendential fall of profit with regard to the extraction of value) cannot repeat themselves indefinitely in the same way, but change as the socio-economic paradigm prevailing at the time changes.
NOTES
[1] See, for example, Raffaele Sciortino, The United States and China at the Global Clash. Structures, strategies, contingency, Asterios, Trieste, 2022; Marco Ottaviani, Reglobalization. From interdependence between countries to new economic coalitions, Egea, Milan, 2022; Giulio Palermo, The Russian-Ukrainian conflict. American imperialism in the conquest of Europe, L.A.D. Gruppo Editoriale, Rome, November 2022.
[2] Of which the latest edition is published by Mimesis with an introduction by Emiliano Brancaccio himself, 2012.
[3] See the seminal text by Paul Baran and Paul Sweezy, Monopoly Capital. An Essay on the American Economic and Social Structure, Einaudi, Turin, 1968 (orig. ed. 1966).
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