Translated from Gegenstandpunkt: Politische Vierteljahreszeitschrift 2-2021, Gegenstandpunkt Verlag, Munich

Competition of Capitalists
IV. Growth through centralization of capital: The competitive struggle to overcome competition

§ 19 Concentration of capital in one hand[1]

1. Size of capital: a company’s prime means of survival, because it is the weapon that excludes others from using the market and its ability to pay

To survive in the competition for growth through increased capital productivity, the crucial thing for a progress-minded industrialist is the size of his capital. His means of competition is to equip the workplaces in his factory so as to make the work performed at them more effective. The point here is of course not to increase performance altogether, but to increase the efficiency of paid labor. Labor is treated as a cost factor, with its performance as a production factor — the two together constituting labor’s productivity — being crucial for how profitable the company is. The capitalist is willing to spend quite a bit to improve this relation between the wage bill and the mass of salable product; he invests plenty to make his labor yield more as the source of profit he pays for. The important thing to him here is not merely to obtain more profit per labor cost as such, but to be better at it than competitors. That costs a pretty penny. The consequence is that the increased return on total capital, i.e., the growth potential generated with all that “technical progress,” lags behind the increased productive force of labor.

Industrialists encounter this contradictory consequence in the market for their products, where their investments in more productive labor must pay off with profits that are all the higher. After all, the ability to pay they lay claim to does not grow accordingly just because businessmen want to achieve a higher return with more product per wage payment. Rather, when “labor-saving progress” becomes established everywhere, the opposite tendency occurs: reduced wage payments limit “buying power.” When the trade unions notice this, their main argument for higher wages is, of all things, what the whole purpose of businessmen’s “rationalizing” investments is and altogether a necessary effect of the general “technical progress” the trade unions themselves welcome. For, all in all, by competing against each other capitalists establish the general business condition that, with every success of theirs, at the same time makes it harder for them to earn money. In their struggle to survive by gaining price advantages when it comes to exploiting the labor factor, they force each other to make the same kind of changes in their factories to lower the prevailing market price and thus curtail or completely eliminate the yield of their progress. In this way they compete for the market’s reduced ability to pay that their competition has led to — shifting to the market the contradiction they get going in their factories between labor productivity and the capital productivity this labor productivity advances and at the same time reduces.

On balance, competing becomes more and more expensive, success more and more questionable. For a company’s growth, and ultimately its survival, everything depends on it being large enough to be able to mobilize sufficient advances for investments in more effective workplaces whenever required. But the more costly the investments, the more problematic the rate of growth that can be achieved with them. This is not what sure survival looks like.

However, the way out is already clear to the capitalist competition pros. To them, the reason they are compelled to keep fighting for the required yield of their expensive progress over and over again and with ever harsher measures lies with their competitors, who they are constantly pressuring and who are constantly pressuring them accordingly. And it is no solution to keep investing in ever more productive work. The matter has to be brought to an end, i.e., one must explicitly and resolutely pursue what has always been part, and actually an intention, of competing for growth through superior productivity. One must eliminate competitors, whose actions and reactions are constantly ruining the well-deserved advantage of one’s efforts to achieve superiority. They must be pressured so hard that they have no chance to counter with the means of increased capital productivity that they can attain. Now the size of a company’s capital is all the more important. It is no longer merely a means of confronting competitors with productivity advances that force them to make expensive — perhaps too expensive — adjustments to the new competitive situation in the form of a lower price level; it is now also and primarily a weapon for denying them access to the market’s ability to pay altogether. Investment is required in making one’s own own production operations more effective, but above all in directly expanding them. It must be on a scale calculated to prevent the strongest rivals from keeping up, on a scale aimed from the outset at taking up the entire ability to pay the industry lives on. The order of the day is to build up excess capacities the company can use for flooding the market. This may lead to economies of scale that even relieve the balance sheet, but that mustn’t be crucial for the mass offensive. What counts is the size of one’s capital making it possible to forego a return that would make the oversized advance worthwhile, or even to forego profit altogether — at least longer than competitors who can’t afford to pay for a similarly powerful grip on the market. The company might have to set cutthroat prices, incurring losses until it has driven its opponents to give up or has ruined them. Such losses are not the unintended side effect of an advance that has turned out to be too large, but are strategically planned and deployed to eliminate opponents and subsequently reap all the profits to be had on a market serviced so comprehensively. Assuming sufficient power of capital, this makes a deficit in the balance sheet productive for growth. Achieving growth solely through the power of capital size, by excluding others from making profits — this can also be done on other fronts, for example through massive, targeted investments for expanding the vertical integration of production operations. By taking over their suppliers’ business all the way back to raw material extraction, and their commercial buyers’ business all the way forward to the final product, companies can oust business partners from value creation in their line of work as they see fit. They start treating them only as adversaries that are no longer entitled to any profit from the market for their products, and proceed to appropriate their sales and profits.

The opportunities and risks of this struggle for survival are constantly present in the capitalists’ calculations in the form of such odd — strictly speaking, not even economic — inspirations as a “war chest”: managers build up such reserves as a precaution in order to be able to finance an effective attack or the necessary defense if required.

2. Growth before and instead of competing? Or after and without? In any case, it is clear that the capital of others is a barrier that has to be removed

Capitalists keep streamlining their operations in order to force their competitors out of the market with all their might so that they themselves have exclusive use of the market’s ability to pay. What they do in their factories turns the logic of growth upside down, the logic they have been obeying and that has brought them their capital power. The growth of their productive assets now no longer comes after or follows from the competitive success they are achieving, bit by bit. They are investing in a way and on a scale that anticipate the competitive success the investments are to achieve. Of course, this is always true to some extent; it already holds, strictly speaking, for an advance of capital that is to return a yield; likewise when earnings are invested in expanding operations; and especially when a capitalist then comes up against the barriers of the market and makes increasing productivity his means of competing for sales and profit. But now something else is at hand. None of that guarantees lasting growth or sure survival. That is why, if their capital is big enough, businessmen break free of this kind of competition and make a leap with a different speculative quality: they anticipate a kind of success in supplying the market, i.e., exploiting its ability to pay, that is definitive, because it is exclusively theirs. They build up capacities that are based on the competition already being won since they outdo all their rivals’ potential. They flood the market with their own goods as if they had already secured all the sales the market has to offer allowing them to secure these sales. They forego profit, even knowingly incur losses, being sure that they will end up with all the profit they have always been competing for.

The capitalists are following a strategy that is somewhat contradictory but definitely quite ambitious from a speculative point of view: to expand production in advance of competing over sale of the products so as to get out of actually having to compete on the market, which is never a sure thing. Or, to put it the other way round, exclusively “owning” the market is the main idea behind and criterion for expanding production operations, without paying any attention to their competitors’ machinations, strategies, or successes. The standpoint they set to work with is that of having no competition.

The success the big industrialist is after, and that he is banking on by taking it for granted, stands or falls with the size of the capital he is able to deploy. The quantity of his operating assets compels and empowers him to go the way of overcoming competition in order to continue to grow; it is the means of achieving this end. When it is expediently used, this puts it to the test, thereby putting it at stake. This makes its increase by driving out competitors, its given purpose, into a necessity. This purpose, to which there is no alternative, is delivered on with every competitor that is eliminated, and only that way. The presumptuous standpoint of having no competition comes true with every other business that has to give up. So it is practiced ruthlessly and unconditionally. Now the point has been reached where it is, once and for all, no longer necessary to overcome any specific rivals with their successes and particular initiatives. Every capital in others’ hands that is still roving the market that one has claimed for oneself is a disturbance that has to go. This is only logical for a company that has geared its operations in anticipation of total market success.

This radical way of proceeding is the end point of how capitalists typically see and deal with the limit they put on their own growth by engaging in the contradiction between increased labor productivity and resulting capital productivity. This limit presents itself to them as the disparity between the general ability to pay created by capitalists in their totality and the claim on this ability to pay that each growth-seeking capitalist raises for himself and against all the others. Being market-economy pros, their reaction is to see their competitors as limiting and challenging them. In this case too. But the challenge here is to follow through with the point of view of not having to compete after putting it into practice in one’s own operations; that is what gives this antagonism its new quality. In the large-scale industrialist’s clean sweep to become the real collective capitalist of his metier, he directly runs up more and more against the limits of his market’s ability to pay, and that makes his company’s growth so definitely incompatible with the capital of others.

And this happens in such an abstract and fundamental way that capitalists do not merely find themselves immanently incompatible with competitors in their own market segment, but start looking this way at all spheres of capitalist business.

3. “Fight” for investment spheres

Growth by concentration of capital in one hand is restricted by particular use-values that a company has become large and powerful by producing (often in an increasingly monopolistic way). Such use-values are no longer a tried and tested means for attaining its capitalist objective, but improperly constrict and hold back the development of of its operating assets’ productive force. The capitalist now gets even more serious about the principle that has been decisive for his actions from the beginning: that use-values are indifferent vehicles for the growth of his capital and are of interest solely as such vehicles, i.e., they are absolutely interchangeable. So his calculation does not merely go beyond his traditional industry, considering that an option available any time. It takes aim unconditionally at the capitalist business world as a whole, regardless of the sector. He looks everywhere, using any kind of product, to take up societal ability to pay to benefit his own growth. It is not simply a matter of like-minded colleagues getting active in other business areas, but rather competitors getting active everywhere whose profits are taken to be a deduction from the potential that should basically be within reach of one’s own wealth and needs to be monopolized to increase that wealth.

In this strategic view of things, the whole wide world of capitalist business presents itself as a multitude of investment spheres to be functionalized for one’s own growth. So companies that are big enough go into sectors that are new to them. They do not have the modest intention of participating in these accumulation processes as well and working their way up within the framework set by shrewd competitors. They instead have the power and the will to take over production as a whole, industry-wide. Regardless of whether or to what extent a company actually manages to do it, successful capitalists pursue a growth strategy that ultimately boils down to wanting to extend their regime over entire sections of society’s total capital; against all others and to their detriment.

They are not content to invest in business spheres that already exist: they create new ones. Sometimes they become inventive themselves, sometimes they take advantage of the fact that their successes in monopolizing entire industries inspire ambitious capitalists on the rise and business-minded inventors to start experimenting with new use-values and production methods. Companies founded on such a basis, depending on how successful they are or promise to be, become takeover targets and an additional means of growth for large corporations. So busy capitalists are constantly bestowing new things on everyone. They establish the corresponding branches of production including workplaces and employment, and create the “markets of the future” that go with them. They do not shy away from the speculative nature of these markets nor from the exorbitant costs required for introducing something really novel and keeping its complete production in their own hands as far as possible. This not only involves quite a bit of development work, it requires that one’s in-house technology departments be tightly sealed off from outside and hostile industrial espionage be warded off, while one of course constantly tries to steal other companies’ trade secrets. These are expensive by-products of the way big progressive capitalists struggle to survive. Companies that can do all that thanks to their size bring products into the world that set society’s living and work processes on a new track in decisive areas, without that having been planned for or foreseeable from the start. They keep on proving over and over — much more solidly than their advertising people do in their way — that people’s needs are the product of all the new, so grandly promoted commodities and of the manifold demands and necessities that working people have to comply with due to the modified manufacturing processes of these goods. And such companies show just as clearly the logic that this evolution is following: with the might of the capital concentrated in their hands, strong companies launch industries never before seen — their launch often being termed a “revolution” later — solely according to the exigencies and in the rhythm of their growth, periodically causing them to reach the limits of the needs that society is able to pay for. Society’s labor and life are materially subsumed under the capitalists’ needs in ever new forms, the only reason for this being that nothing counts but boundless capital growth, and the size of these companies’ capital gives them the power to keep recreating the bourgeois world as a derivative of their capital growth. And the only purpose and the only result of this are that everything remains the same when it comes to the essence of this kind of political economy: capital keeps growing beyond all the limits that are reached, resulting in the constant necessity to seek and create new business areas.

4. Monopoly — Expropriation

When large corporations “fight” for control over entire sectors of society’s production, whether traditional or newly created, they are working to realize an ideal that all capitalists harbor because it is an ideal of competition quite generally: to have a monopoly on profit. They pursue their growth directly against others, strategically aiming at them. The private owners of capitalist wealth are of course not the least bit interested in growth as an increase in such wealth in toto. They are competing for a monopoly, and growth should either go lock, stock, and barrel to their own company or it is undesirable because it increases the capital of others. Thus, the antagonism characterizing the capitalists’ business activities from the beginning — the incompatibility of their identical interests — now reaches a new level. According to the logic of the political economy of productive private property that they are putting into practice, what they are ultimately after is expropriation. It is the purpose of their economic activity, and at the same time the means serving this purpose, to attack the property that is the basis of their competitors’ existence.

This attack is so extensive that it is essentially directed against the basis of all their competitors’ existence, i.e., the entire class of capitalists. The biggest of them are out to get exclusive possession of the legally protected capitalist “business model,” private enrichment through wage labor being made ever more productive. And every step of the way they expropriate their class comrades a bit more: a remarkable “highest stage” of the competition of capitalists.[i]

This is not to be confused with any self-abolition of the regime of private property over society’s work and material wealth. The big business players are out to complete this regime, which they equate with their regime. This involves following a script of their own. The free-market agenda now includes new customs when it comes to how capitalists deal with each other when getting their hands on the market (§ 20). It is a challenge for the state to protect private property against the might of the expropriators (§ 21). Capitalist property takes on entirely new forms that combine competition and credit and even collectivism, new economic figures enter the stage (who have become quite usual nowadays), growth changes into episodes of capital destruction (§ 22). Political rulers manage business cycles and globalization (§ 23).

§ 20 The struggle for control over the market

Nothing beats the free market. It offers every enterprising citizen opportunities and scope for freedom. It automatically ensures efficiency and optimal satisfaction of all needs. That is how the free-market system sees itself. And which enlightened capitalist or manager would want to disagree? The only thing is that what they do looks a little different. Equal opportunities only mean something to them as long as they expect better ones for their own business. They do everything they can to ward off the risks of free competition by taking steps to adjust — or, as rivals would say, manipulate — market developments in their favor. No activist of the system will bow to the judgment of the market just because that is supposed to be a principle of the brand of economy bearing the name. Especially when a company is out to subject the market to its own working capital’s power that is programmed to monopolize profitable production. Here is why.

1. Strategies for overcoming free competition

In the struggle for growth by taking over and incorporating others’ capital, it is not enough to expand one’s own production capacities and develop expedient business procedures. From the outset, expanding operations on a scale calculated to leave no room for competitors goes hand in hand with taking over competitors’ market shares. And this is not done by establishing a lower selling price as the new market price putting competitors at a disadvantage; that path has proved increasingly unsuitable if the profit rate is to justify the growing capital outlay. It is done by directly intervening in market developments at others’ expense. Objectives such as “securing market shares,” “controlling market access,” and ultimately “dominating the market” become decisive for acquiring possession of others’ capital.

In the day-to-day market economy, this starts out with shaky alliances even between smaller companies: with price-fixing, cartels, deals to divide up markets, in terms of region or product type. Such alliances — like all associations in the bourgeois world — are as durable as they are useful for the purpose at hand, in this case eliminating third parties. They are shaky because they are based on the self-interested calculations of contracting parties who are acting autonomously. More control is achieved by mergers with colleagues; whether by “merger of equals,” or by friendly or hostile takeover, i.e., by buying out the other with or without its consent. Under the heading “Mergers & Acquisitions,” capitalists have invented various ways to centralize capital via free market relations. When they are successful, experts praise the result as “consolidating the market.” In the case of up-and-coming young entrepreneurs, it is a good idea to buy them out by way of generous support before a rival snatches away a potentially interesting business idea. And so on. Another invention that helps establish market relations unfettered by equal opportunities for autonomous profiteers is the vertical networking of companies: an exclusive kind of cooperation with suppliers and buyers including the establishment of value chains that ideally do away with the partners’ independence altogether. That too might start off with shaky agreements; forming a “vertically integrated” large concern may be the final solution, but need not even be the best one. In any case, such business relationships are one way for companies to use the market to bring about their growth by concentrating capital in their hands, ultimately expropriating and acquiring others’ capacities. They handle each other aggressively to resolve the contradiction that in their growth strategy, the achieved size of their capital is supposed to be the means for growing to surpass themselves.

After all, such methods of attacking other market participants do not make it unnecessary for companies to continue using their techniques of streamlining and expanding their production operations so as to ruin other firms’ prospects of asserting their independent existence. Rather, the market methods are based on a company trusting in its tried and true exploitation and business procedures, being ultimately worth only as much as a company’s capacity to monopolize business with the mass and productive force of its capital. But they are an indispensable means for a self-surpassing company to bring to bear, in accordance with its self-imposed goal of growth, the command over society’s labor, productive force, and productively usable resources that its production operations embody, without hindrance. These market methods are a way of avoiding being obstructed by autonomous competitors, by unpredictable effects of free competition. They eliminate the anarchy of the market as the acid test for the strategy of investing in expanding one’s own potential to overwhelm and eliminate, expropriate, and swallow up competitors.

2. How commerce contributes to the fight to control the market

The market is subjugated by and to the power of centralized capital by way of companies’ competitive struggle to be autonomous and subordinate others. Their strategies therefore vary between more or less voluntary agreements and blackmail and destruction of others as circumstances require. Having a monopoly does not remain a distant ideal, but becomes the serious object of corporate sales planning and the goal of competition. The other competitors include not only other manufacturers but of course also the greats of the merchant class. The manufacturers are doing everything they can to use their power and influence to make suppliers and customers dependent on them, subject them to their command, unite production and trade under their control, and outmaneuver competitors. The merchants have long since stopped merely serving the industrialists’ business and are now themselves actively working from their side to abolish the separation between the production of goods and their circulation. They make manufacturers dependent on the intermediary services they offer with increasing reach and perfection, nowadays at ever higher levels intensively and extensively via the Internet. They are in charge of entire branches of production. And they can’t be easily driven out of the creation of integrated value chains: as they grow in size, the leading merchant companies become interested and able to go beyond merely organizing commercial transactions and start intervening with software “solutions” in their corporate customers’ bureaucracy and in the control of their production processes.

Commerce makes a really decisive contribution when it comes to eliminating the enormously bothersome element of unpredictability in final sales to the end user. It is of course already working on the great project of trying to make the ideal of manipulation come true by means of advertising in the interests of getting a firm grip on the market’s ability to pay. A crucial breakthrough has been achieved in this area by telecommunications companies, the manufacturers of versatile handheld computers, internet providers, and, in a leading function, the “social media,” those advertising concerns that are omnipresent in the private lives of modern smartphone users. They have all succeeded in establishing a matching service between offered goods and buyers’ ability to pay that is so all-encompassing, across-the-board, active around the clock, while even addressing the end consumer quasi-personally, that practically no company that has anything to sell to the general public can get around paying to use this function. In the tradition of retail chains that set up production firms to supply them, service providers with plenty of capital integrate large parts of trade and production under their control going backwards from the end point of the capitalist business process. These companies and a handful of others are working to go beyond the sales act and make consumption itself the object of a salable service, thereby combating the final customer’s arbitrary choices as the last element of uncertainty when it comes to capturing his buying power. Together with financially strong speculators who are betting on this, they promise another one of those technological “revolutions” by which capitalist industry, in its struggle to keep unfettering its growth anew, turns people’s accustomed world of life and work completely inside out so that capital can continue expanding the same as always.

3. Sovereignty over the price of labor, undisturbed

The capitalists’ competition for control of the market gives rise to common fronts against third parties, and ends them. The same fanatic need to be free of all inaccessible business conditions that is at work here leads to steadfast unity in the propertied class’s relationship to the wage-dependent class. Capitalists are faced with a permanent adversary interest here. They are fundamentally in agreement on this front, putting their antagonisms aside in favor of their common demand for optimal conditions for exploitation. Large companies, whose interest in growth and resulting strategy extend beyond their traditional metier to all branches of business, take the wage and work performance relations in all industries as directly relevant to their own operations. In this respect they actually calculate and act as agents of society’s total capital.

With this claim to sovereignty over the market price of the entire nation’s labor and the working hours in all sectors of capitalist business, capitalists face an opponent that they really never asked for, but that they created every reason for by pursuing their strategies of depressing wages and constantly increasing labor productivity as a means of capital productivity. They face trade unions, which represent labor’s defensive interest in earning a livelihood under tolerable working conditions. This interest is left by the wayside when workers do what their jobs require, under the regime of the factory owner. So they have no choice but to fight for their livelihood — alongside doing their jobs — as free participants in the market, i.e., the labor market, who face the capitalists as contractual partners. The experience of being powerless as individuals makes them — or at least a respectable minority of the class — realize it is necessary to suspend their competition among each other, act as a collective, and make the terms of their employment a subject for negotiation. In order to be taken seriously in this by the other side, they need a countervailing power against the factory owner’s command. This can only be achieved where they are needed, in the workplace; by refusing to do the work they are paid to do, i.e., by the paradoxical means of interrupting their own earning of money — which they need to live — in order to force the employer to make concessions: through industrial action. On the workers’ side, this does not merely require the virtue of solidarity, it requires a permanent organization financed by its members to introduce the refusal to work as a form of struggle, set strike objectives, lead the struggle, compensate for the loss of wages with dues collected in advance, and withstand the employers’ counterattacks involving strikebreakers, lockouts, etc.

And to decide when to stop fighting too. For the power struggle the two sides are waging pits irreconcilable existential interests against each other, but is actually quite asymmetric. One side is fighting to enrich itself by being able to use its power over society’s labor without hindrance. Unionized workers are suspending services they have agreed to do, but not their willingness to serve. By going on strike they are putting their livelihood at risk, but they are not fighting against their dependency, against the reason why they have to keep putting up a fight, only for corrections to be made in the modalities of their wage labor. They are fighting for collective agreements for wage earners of one industry, one occupational group, sometimes only one company. This is the context of their militant actions when necessary, and that also defines their scope. Moreover, the state makes sure that they exist only as fighting organizations in conformity with the system. Thus, the capitalist class, united in its will to control the labor market, is faced with trade unions that prove to be a reliable contractual partner for its need to have market conditions for the “labor factor” that secure and keep increasing the productivity of labor.

The latter applies particularly to large companies that succeed in consolidating the market by eliminating smaller firms, possibly integrating them into their own corporation, or in merging with a rival. It is then routinely necessary, under the rubric of ‘synergy effects,’ to dismiss a whole lot of personnel who have suddenly and quasi-automatically become redundant. This lightens the wage bill both directly and over the medium term by intensifying the selection that is carried out as competition in the workplace. Supplying the labor market with additional jobless workers adds to the employers’ power over the price of labor as a whole.

Of course, this boon has its downside:

4. This is not the exclusive control over the market that is desired

Capitalists save wage costs by uniting against possible industrial action on the part of their staff, eliminating competing firms together with their presumably overpaid workforce, through the quasi-automatic saving effects of centralizing capital in one hand, through the biggest companies’ growing power to drive technological progress when it comes to exploiting the labor factor, etc. This saving of wage costs at the same time reduces the general ability to pay that capitalists lay claim to and need. So it inevitably leads back to the contradiction between size and return on capital that shows itself in sales problems slowing down company growth. Monopolies, when achieved at least approximately, empower successful companies to get hold of profits previously earned by others. But the profit itself that the monopolist can now make does not grow at the same time. Even monopoly prices at best redistribute this profit so that it becomes all the more attractive for other firms to enter into intensified competition over it. And its relation to the larger capital it accrues to does not improve. This also applies to a company opening new business spheres when it might be able to do so due to the size it has appropriated from others. This only means reproducing at an ever higher level the contradiction inherent in its successful growth, the contradiction between the ability to pay that capital has created in society and the ability it is laying claim to.

The reason for this contradiction does not lie where the capitalists are relentlessly fighting it: in the multitude of competing claims on the market’s ability to pay. It is precisely when big successful companies make headway in this area, when they succeed in organizing market developments to meet their sales and profit needs, that the limits of society’s ability to pay show themselves to be a barrier to further business. And this reveals the real politico-economic reason: the capitalist contradiction of equating labor productivity with capital productivity. But the consequence for committed capitalists is already certain: they will try all the harder, with their methods of controlling the market, centralizing the capitals competing for it, monopolizing buying power and profit, to definitely overcome this barrier once and for all. That is why they are constantly doing away with competitors and rearranging ownership relations within their class — thereby achieving accordingly fierce competition with their rivals and, together with them, constantly overtaxing the market, claiming more victims among their peers.

What they do not achieve, in any case, is control over the market the way they want it and need it. Instead, they create a challenge for the state as a regulatory power.

§ 21 The state: Guardian of a capital location

Within its borders

1. How the state objects to cartels, monopolization, and the like: Principles and practice

In their efforts to overcome their growth being dependent on the unpredictable course of competition, to prevail in the market by gaining a monopoly, the big capitalists meet with resistance from the bourgeois state. The authority that uses its power over society to do everything it can for the growth of the capitalist business whose success it lives on, the supreme power that guarantees market-economy freedom, sets administrative and political limits on how the largest and most successful companies use this freedom. It stops following the usual rule that success is all that counts and that the interests of the largest, i.e., of the most important economic performers, are what defines the common good. The constitutional state prohibits cartels and price fixing, has the last word on company mergers, does not tolerate large companies taking a “dominant market position,” and intervenes in all this by way of its own agencies, regulatory bodies, courts, etc.

The general line it follows here testifies to a rather fundamental mistrust of its industrialists with their striving for progress and growth. “It is the purpose of competition law … to prevent the abuse of market power.” Mergers of companies are not allowed “when [they give] the companies involved a scope of action that is no longer sufficiently controlled by competition. Such a scope of action would enable a company to raise its prices, lower product quality, cut back on innovations or worsen its offer in some other way without running the risk of losing customers.”[ii] Thus, Section 1 of the German Act Against Restraints of Competition reads, “Agreements between competing undertakings, decisions of associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition shall be prohibited.”[iii] The state guardian of the market economy has no illusions about self-interest being the motivating force of its economy; nor about the bad effects this has. And it doesn’t see it as a moral problem to be dealt with by appealing to the ideals of competition. It sees it rather as a real danger, a danger to the good that the same self-interest inevitably does when it is “controlled by competition.” Free competition doesn’t do the trick, however; there is a need for powerful state supervision. The freedom-promoting constitutional state commits firmly to competition as a coercive regime that it imposes on its free legal persons, especially on those it entrusts the country’s economy with and who have their reasons for canceling their rivalry on the market and making common cause. So it actually foils the plans of its national economy’s biggest and most successful “growth engines.” And it still maintains its basic legal objection even when, in a second pass, it does show understanding for the demands of the struggle for survival that capitalist competitors wage against each other: “Mergers between companies are generally allowed and even welcomed as products of a free economic and social system. Mergers enable companies to reorganize their areas of business or increase their innovation potential and thus stimulate competition.”[iv] What mergers are said to enable here is actually the condition for them to be approved.

Thus, when the state legally decrees competition, it is not obligating businessmen to simply compete as such but to go at each other on the market the right way, i.e., using the weapon of constantly increased capital productivity, also known as “innovations.” So the state actually goes against its biggest capitalists’ calculations to confirm the capitalist logic it has tied its society down to: the harsh comparison of competing capitals’ productivity is the basis and decisive means of economic success. This comparison of productivity must not be suspended; that is the first, fundamental element of the critical idealism of competition that the state is putting into practice. The second element is the state’s practical goal of preventing the power of big money from ultimately destroying companies whose business is doing quite well in terms of actual profit-making and contributing to the country’s general economic growth. This is how indirectly it reflects the contradiction that competition between big companies and smaller ones whose survival is at stake means that the growth that a handful achieve by their superiority is at the expense of the overall economic growth it is after. And, thirdly, the constitutional state insists on the principle that the conditions of market success for businesses to exploit are set by the state and not by corporations or agreements between private companies using the might of their wealth to fabricate their own rules. The state owes this to itself as the jealous monopolist on the use of force and sovereign rule-maker.

So the most successful companies are faced with their unequivocal growth strategies being objected to by the supreme power. Violations of the rules are punished; if they continue without permission being granted that costs money, possibly quite a lot. However. this sensational reaction on the part of the political power does not go so far as to spoil the capitalists’ profession for them. They have become accustomed to living with an antitrust law and its exceptions. They know how to test where and when bans take effect and for whom. When there are no prompt sanctions, they take this as permission, and every loophole in the law authorizes them to act. When maneuvers such as buying companies for the sole purpose of cannibalizing them and shutting them down are politically condemned as being vulture attacks, this is taken as encouragement in two senses. First of all, name-calling is not a ban. And secondly, that means that whatever is on this side of a political ban is recognized as part of the honest merchant’s repertoire.

Even though the state promises to control the use of their power so strictly, big companies never hesitate to demand its support — including massive advance payments — for their growth in whole new dimensions, and to seek monopolies. They especially like to focus their eager gaze on areas of essential services for society that have been taken over by the public sector because of their importance and size and in view of private capitals not having enough financial strength or interest to invest in them. They emphatically remind the politicians in charge that it is the prevailing reason of state to entrust the economy to private money owners. They declare the state and public servants to be bad businessmen across the board, and insist that such socialist monopolies on business be dissolved so that competition can free the polity from the burden of such undertakings. But of course not without the treasury, as a last step, taking over all liabilities that have piled up in the past. As for “vertical integration,” by which they seek to take over command of companies on the supply side and on the further-processing side, big companies demand that the state provide material infrastructure, ideally by financing their making money on it as their monopolies, and that it subsidize their expenses for setting up “clouds,” developing “artificial intelligence” and the like, because the progress they are making to open up new growth areas is quite simply what a modern industrial location needs. The same applies to all those “markets of the future” that companies plagued by growth worries discover for themselves, especially when the future of a market is so far away that conquering it would be a lot easier with some start-up financing from state funds. And so on.

In this connection, capitalist businessmen rediscover their need for a very different kind of solidarity with their peers: an association not for influencing the market as a cartel but for influencing politics as a lobby. For as long as it is up to state authorities to shape the conditions of competition, then that is the path to take when trying to overcome being coerced into free competition. This is all the more so since there are very many matters in which the capitalist class is by no means in the same boat, but rather — after all, competition reigns — groups of powerful firms, factions of the nation’s business that are united in social blocs and have quite conflicting interests, are competing for influence. There are also the small and medium-sized enterprises (SMEs) — the mass of the country’s capitalist producers and merchants far removed from commanding significant portions of society’s capital — that are in urgent need of state support, both in material terms and with regard to rules of fair competition whether irksome or beneficial. Here, too, what is politically convincing is of course primarily the power resulting from the size of the capital — the power over jobs, over nationally important value chains, or over the future of the national business location itself…

Ultimately, the constitutional state will of course not be blackmailed; certainly not in questions of power it defines as such. But why should that even be necessary? It allows sections or even the entirety of the nation’s businesses to represent their interests collectively, and takes this seriously enough to legitimize it by a slightly restrictive legal framework for lobbying. A democratic government finds it quite helpful for the representatives of special or general capitalist interests to offer their expertise and suitable text blocks for formulating regulations on business matters. The constitutional state always protects its sovereignty well enough by making it illegal to bribe its officials, who in turn are prohibited from taking bribes. The inevitable transgressions are watched over not only by the competing businessmen and good-government organizations, ‘commoners’ of the ‘third estate,’ but also particularly keenly by the investigative journalists of the ‘fourth.’

2. Granting a license for the power struggle between the classes

Competition law is an imposition on a nation’s capitalists, but its fairness rules time and again turn out to be favorable for some of them. What is much harsher is the license the modern constitutional state grants to trade unions. This affects the entire class of company owners and managers; and affects them in such a way that the state leaves them in the lurch when workers collectively refuse to fulfill contracted labor obligations. It allows workers to breach the law to bring the company’s exploitation of the labor factor to a standstill in order to extort concessions on the wage issue from their bosses. The capitalists can rely on their property in the means of production being protected; striking workers are not allowed to destroy or appropriate any of it (that would really be the limit!). Strikebreakers also have to be tolerated. But the monopolist on the use of force allows a social power struggle over the conditions under which workers are made use of. This it has conceded to do under the pressure of outraged workers organized in political groups and unions. It has agreed to grant unions a permanent right to object to how employers treat wage earners, something the state itself has no objection to.

Of course, this license comes with a few conditions. First of all, the only permissible strike objective is to reach an agreement on payment and working conditions, i.e., to resume work in the service of capital. This matches the defensive standpoint and the perspective that wage earners have when joining forces for industrial action in the first place. But that is not certain enough for a public power granting an entire social class the right to a militant walkout. After all, it is allowing a struggle that is necessary for a reason — wage labor is basically a bad way to make a living — that reaches far beyond the purpose of industrial action, which is to correct the conditions for making money this way. So it would rather stipulate by law that its license is contingent on the fight pursuing a purpose that conforms with the system. A few additional legal norms are provided to prevent the right to strike from being used improperly as it nevertheless might. There is a fundamental obligation to keep industrial peace; votes must show clear approval for industrial action, and deadlines must be observed; labor courts or boards (industrial tribunals) make sure the whole business keeps to its intended purpose. The unions consistently understand all these restrictions as confirming their legal status, enjoy being recognized as collective bargaining parties, and act with the greatest self-assurance as partners of the employers in making contracts to cast management’s power to manage workers in the form of reciprocal legal claims. The representatives of capital (whom the state grants a right to respond to a strike by locking out non-striking workers in the interests of “a level playing field”) criticize a collective agreement as damaging their right to purchase labor freely, and reject the state-permitted unionization of their employees in principle as a cartel of precisely the kind they themselves are forbidden to form. In practice, however, they get along quite nicely with this imposition. Above all, they have nothing against their collective bargaining partner securing for them — for one industry or even across industries — equal business conditions for their competition against each other, so that the weapons of technological progress and mighty capital size can take full effect. This does not alter the fact that the capitalists did not ask for there to be a right to strike and unions to use it, and see no need for it. But both sides have gotten used to each other and to a licensed class struggle, the result of which is that the regime of capital over the mass of society degraded to the status of labor factor is constantly reaffirmed by mutual agreement.

For the state, the risky venture of permitting industrial action has turned out to be an enormous gain. The state takes charge of the class antagonism in its society extremely effectively and expediently even when it comes to a head over the wage issue. It simply makes this antagonism the business of the opposing parties to take care of, the only rule being that they have to come to an agreement. It regulates the conflict and decrees that it be handled in accordance with the system, without involving itself as a party to the conflict. It ends up making sure there is a generally accepted national wage level, or a pluralism of wage levels recognized as valid both in particular cases and as a whole, without having to find it, stipulate it, or enforce it itself, which the two sides would surely not be grateful for. How one class lives from its wage labor and the other profits from it is their own responsibility; they have only themselves to complain to. Thus, the liberal state’s license to wage class struggle is its method for creating a reliable social peace.

At the same time, its authorizing trade unions for constructively taking up the workers’ cause in accordance with the system provides the social state with an optimal partner for looking after the wage-dependent class the right way. It is assigning them the task of making sure its social policy is shaped in line with the particular state of the economy. And the unions meet the task with a great deal of responsibility for this honorary appointment to serve society.

Beyond its borders

The state uses its law to place limits on the might of capital when businessmen and their lobbies exert “undue” influence on the conditions of market activity and social life in general. This is taken by constructively critical citizens to be a democratic imperative and required for the common good. Politicians are seen as having a duty to protect SMEs, to ensure truly fair competition, to preserve jobs, to protect social cohesion from overly powerful individual interests, the behind-the-scenes power of the lobbies, and the dangers of an “unleashed capitalism” in general; all in the interest of the larger whole and “ordinary people.” An attentive public is accordingly critical when hearing stereotypically recurring reports about how large corporations artfully evade the burdens and just demands of the polity whose order and infrastructure they profit most from; about business associations powerfully manipulating politics; about global companies — especially foreign ones — reaping monopoly profits by paying below-scale wages, destroying jobs, etc. And they deplore the state evidently letting all this happen, doing nothing or far too little to prevent it, handling the economically powerful firms with kid gloves and harassing the little ones. Whether this is more because those in charge are powerless or more that they are negligent, or maybe even corrupt or ill-willed, is a matter of differing opinion among more right-wing and more left-wing advocates of the people. What they agree on is that the social constitutional state should be the decisive, and maybe even last, bastion against the worldwide power grab of internationally operating monopolists and should use its sovereign might accordingly.

It is indeed undeniable that state administrators react to the multinationals’ worldwide power struggle by (de facto or even officially) lifting restrictions they have imposed on capitalists competing for maximum market power. The reason, however, is not that they are failing to implement an imagined different policy, but rather the state interest they are pursuing.

1. The state makes corrections to its anti-monopolistic economic policy in its capacity as a ‘trading nation’

As the administrator of a capital location where, and out of which, particularly the large companies have to fight to survive in global business, the state finds advancing its economy requires more than just promoting capital productivity in general and in special cases. It has to recognize that national growth comes about by conquering the world market, and that this depends on two things. Capital has to be big enough, and it has to be strategically deployed, for the very purposes of expropriating weaker firms and dominating the market that the state restricts within its borders in order to tie capital down to productivity as the decisive means of competition and to guarantee a “level playing field.” The state is taught these global necessities by the country’s large concerns, which want to and have to use their size to win and leave behind the competition within the country in order to hold their own on world markets. And it sees proof when foreign corporations use the power of their globally accumulated wealth to roll up national markets and capture the business of domestic firms. In its capacity as administrator of a trading nation, the state has no choice but to adopt the competitive standpoint of its globally competing large capitalists and make it its business that the champions of its economy conquer world markets.

This requires a revision of its economic policy. It becomes a priority for amply sized companies to form. It becomes less important to protect SMEs from being expropriated by methods that are questionable under competition law. A capital with a dominant market position can, indeed must, be permitted when the nation’s standing in global business depends on it. When it has to struggle to acquire the necessary size and market power, it needs to be supported. The state uses special funds or banks of its own to participate in the corresponding growth of small and medium-sized producers who, basically but not quite, have what it takes to get a monopolistic hold on segments of the world market. When corporations with the necessary capacity fail to arise within the country on their own for exploiting emerging business spheres, or actual key positions in capital’s global cycle, then they must be created by the state, brought about by mergers, secured by government guarantees.

The criterion for the kind of success the state is interested in here is the nation’s increasing, and increasingly exclusive, enrichment on the world’s sources of wealth. The claims to cross-border monopolistic use that the multinationals domiciled in its country have are now put in a national possessive form. Resources under foreign sovereignty that its nation’s capitalism needs and has considerable access to are called — for example — “our oil.” The worldwide sale of goods from domestic production at the expense of foreign competitors goes under the name of “our export markets.” Especially the world market for energy sources that enter the nation’s entire production and life process physically and in terms of price is a battlefield for very big concerns. They are reared by their home countries into powerful commercial leaders when it comes to extracting and procuring the required raw materials as well as to industrially producing “renewable” energies and the means of producing them, and are sent out into the competition over monopolies that span countries and continents. The same applies to the transport sector, which long since includes outer space, and to all those areas proudly bearing the attribute “digital.” In their efforts to achieve growth by dominating the world market, capitalists are at the same time carrying out a political mandate that the state, their “partner,” supports with its power and with material means. Complementary to this, the market power of foreign corporations that latch on to the nation’s cycle of capital causes a state to worry about domestic sources of growth being sold out. Foreign companies that threaten to expropriate domestic producers and merchants and take over their market shares are not simply accepted neutrally as competitors, much less welcomed as basically desirable contributions to capitalist growth at home, but are suspected of misappropriating the nation’s productive wealth to the detriment of its economy and standing in global business. The state counters real or even just feared machinations of this kind with the tried and tested rules of its competition law along with additional tailor-made ones, or else directly with interventions that invalidate the golden principle that the market alone should decide on success and failure in a free economy. Economic policymakers do not merely react to the organization of cross-border value chains from abroad, the establishment of sales platforms including digital infrastructure by foreign corporations, and the like, with a reflexive “We want that too!” They also invent regulations — an example being for the import and distribution of natural gas — for separating business areas to make it difficult for a foreign monopolist to do business. They subject its branches in their country to restrictive rules that thwart the power of the head office to have free disposal over the costs and revenues of its operations scattered all over the world. They get hold of monopoly profits that they know how to shield from taxation by foreign sovereigns when domestic businessmen are involved. And so on.

All that has to be — the state intervening in the competition of multinationals by strengthening the strategically deployed capital power of its national champions, and by warding off foreign encroachments that might expropriate domestic business — because national competitiveness on a global scale depends precisely on the productive force lying in the power that capital derives from its size.

2. Monopoly competition on global markets leads the state to identify and drop any misplaced consideration for welfare cases

Some of the revisions of its economic, especially competition, policy that the state sees a need for as a trading nation involve its actions as a welfare state. These actions have been following the logic of sustainability: its capitalist economy requires the place to be taken care of in all the “questions” that the free market economy raises but does not answer, thus making work for those politically responsible for the system: how to support its class society, to form and maintain the collective labor force’s will and ability to perform, to protect or restore natural living conditions, etc. And although the economically ‘ruling’ class would manage quite well without trade unions, at least in their own majority view, political rule has conceded to grant a license even for constructive labor struggles, thereby delegating responsibility for the price of the production factor labor, i.e., workers’ livelihood, to the beneficiaries and workers themselves.

Throwing all this away is out of the question for a class state. But it has to deal with the fact that its nation’s businesses, struggling to survive in competition with large concerns both national and international, will not accept the burdens of maintaining a serviceable people and a useful environment. Large corporations, which can afford to compete so as to ruin their competitors but also have to for the sake of their boundless growth, are not keen on additionally bearing the costs of the business conditions the state provides for them. They are hardly more willing than the weaker firms they expropriate in order to fuel their growth. After all, they are competing not only with each other but also with foreign companies, whose growth may be hindered by rules applying abroad but certainly not by their own class state’s social policy and the regulations it issues. This, of course, makes every single regulation a nuisance, however well-intentioned and however important it may be in itself. Businesses demand that these nuisances be done away with, and when the state examines them it often enough comes to the same conclusion. For if the important thing for the major corporations — in general and in international competition all the more so — is to use the power of their corporate size to make the productivity of their capital take effect without hindrance, that turns many a national business condition that they have to respect into an unacceptable restriction on their competitiveness. And if the nation can only persist as a world-economic powerhouse if its multinationals succeed on the world market, then the state will make corrections to the regulatory and social policies it has conceived and implemented for its own class society.

There is no way around this, in its view, for another reason: the situation the capitalists have produced. The multinationals’ global power struggle for monopolies disrupts the world of work to such an extent that social achievements rich in tradition become obsolete or unacceptable anyway. As smaller capitalist firms are expropriated and internationally successful corporations become increasingly powerful, this power of course also extending to how they make use of the globally available labor power, the job supply dwindles worldwide in relation to the demand from masses without income. This accordingly affects the relative social strength of the two classes. It also means there will be fewer and fewer workers employed full-time and lifelong whose useful poverty has been the basis for the state’s social policies. Instead it is becoming normal to have “employment gaps,” and this has devastating consequences on the proletariat’s will and ability to fight for their survival needs to be taken into account. Trade unions are in any case losing their power of resistance; and what they can still bring to bear at best, they are giving up through their pseudo-offensive, paradoxical struggle for jobs. In the name of their wage-dependent members not being used, they urgently request that they be used. That means they are also losing their influence on politics, as the workers’ lobby. The social state acts accordingly, taking note of “developments” and responding with “adjustments” that do away with much of the customary organization of workers’ lives. And it becomes an anachronism for professional worker representatives to have the co-determination rights that union-friendly policies have granted in some countries. They have almost never applied to multinationals from abroad anyway, and survive at best as a reminder of times when corporate lords liked to secure their elite employees’ constructive willingness to participate in management. The modern constitutional state corrects itself accordingly here as well: it certainly does not want to be accused of having an affinity with trade unions.

So the state knows how, and does what it can, to serve the success criterion of global competition for monopolies: the productive force of pure capital power through size and through its unscrupulous strategic deployment. It makes this criterion valid without any alternative. At the same time, it is additionally giving its capitalist elite a moral gift they do not need but are glad to accept: it is not just authorizing them but encouraging them to make no concessions in all those cases when it once deemed restrictive rules necessary.

§ 22 The fusion of capital and credit

1. It is not only such governmental support that makes it unnecessary for capitalists to put up a real fight to attain the capital size they are after. Credit stands them in better stead

In their competitive struggle for monopolistic domination of the market, capitalist businesses have to cope with a contradiction. In order to strategically deploy the power of their operating assets and their influence on market activity so as to be definitively successful, free themselves from their rivals and appropriate their market shares, they already need the capacity — i.e., the unassailable operating size and the exclusionary access to the market — that they are out to acquire by overwhelming and eliminating their rivals and appropriating their productive capabilities and taking over their market shares. This makes big companies accordingly ruthless when they go at small ones, powerful corporations taking over or eliminating SMEs without batting an eye. In fact, they are so consistent and effective at it that the state sees a need to curb their encroachment by issuing all kinds of fairness rules and setting up a competition regulator. In the broader context of global competition, on the other hand, domestic multinationals actually meet with governmental support in their efforts to achieve size as a means of growth. It is permissible, even desirable, for entire markets to be conquered by a nation’s corporations; but the businesses going by the abbreviation SME are not supposed to be directly expropriated. The fight for exclusionary appropriation of ever more sales and profits is to be waged civilly, only with permissible means.

That can be done. Capitalists find the most powerful weapon in their fight for growth to be the financial system, which centralizes private monetary assets and makes them available as credit. When money dealers provide liquidity to bridge payment periods and bottlenecks in the capital cycle, this allows a businessman to use his assets in full as a capitalistically effective advance. Borrowed capital enables him to increase the productive force of his business beyond the limits of his private property in such a way that the greater advance pays off even after he has serviced the debt. And, of course, corporations also get credit to finance their encroachment on competitors and expenditures in anticipation of matchless size. However, borrowed liquidity and size on loan are not the last word if the company is out to grow beyond the barriers to its own growth by its own efforts and force the competition out of the market by its own size. As a borrower, it can always be potentially separated from its increased capacity. The loan has a limited term, and the money capitalist has the power not to renew it or even to terminate it. Moreover, income from the increased mass of available funds does not add to the firm’s growth potential without restriction. The obligation to pay out interest and to repay the loan, regardless of whether the investment it has financed has actually been successful, shows that the gain in means and in clout that one has acquired by borrowing involves letting an alien interest into one’s private capitalist business. The lender’s ability to provide money may not initially be limited, but his willingness to do so is predicated on trusting the debtor’s ability to pay the interest and repay the loan on time as agreed. This does not fit in with the power and freedom that a businessman needs to beat the competition as a monopolist.

But the financial system, this great achievement of providing private businessmen with the power of other people’s money, itself gives capitalists a downright revolutionary way out. Driven by their interest in acquiring a corporate size crucial for competition, they join forces with each other and with other money owners, create a joint undertaking, and share the profits. Which, of course, is much less simple than it sounds, since this joining of forces goes decidedly beyond the pooling of private assets in the banking business. Free private businessmen are practicing a form of collectivism that is essentially alien to them. Pooling assets, voluntarily abolishing the exclusionary privateness of property in the middle of the private-property system: that comes close to squaring the circle. But even that is possible when size is the all-important means in the fight to overcome competition. The result matches, of course; it ultimately does work reliably but only in the form of an unending superstructure of conflicting interests, attempts to mediate between them, and ever new contradictions between private and collective property.

2. Joint stock and its company

By issuing shares, a company offers interested money owners a share in its profit production and in return procures money that irrevocably belongs to its equity capital. So it can make free and unrestricted use of this money, just as it can of the former owner’s private assets now converted into shares, the former owner having thus become a joint owner himself. On the one hand, the share represents proportional ownership of the company, but without the power of disposal that ownership technically involves. This power passes to the company’s management, which is appointed and supervised by a body that is elected by all the shareowners and accountable to the shareholders’ meeting, whereby they indirectly retain an element of disposal power. On the other hand, the share vests a right to income from the company’s profits; not a fixed sum, but a dividend, corresponding to the ownership share, of the sum specified as profit to be distributed. Consequently, the shareowner’s certificate represents for him a money capital that does not consist in the sum transferred to the company’s equity capital— that money is gone for good — but rather arises from the vested right to a dividend. This income is regarded as deriving from a fictitious source of money; the share is the real representative of that and as such a piece of property to be freely handled. Thus, this peculiar separation between capital assets and capitalist power of disposal means that the capital exists twice. As operating assets belonging to the company as a legal entity itself, the capital creates profit. As private property, it represents a money capital that is capital, quite separately from the operating assets and their capitalist performance, due to the right to income that is based on that but has become independent of it.

This progress in achieving the capitalist purpose alters the politico-economic identity of the capitalists pursuing it. The profession divides up as well, existing twice so to speak. The job of management is undertaken by salaried functionaries. There is no longer a staff of procurators serving as the owner’s “right hand,” but a real boss at the top acting with the power of the combined property. His job profile independently realizes the capitalist businessman’s interest as such as a profession in the hierarchy of bourgeois occupations. The regime of private property over the firm’s assets and personnel becomes an impersonal matter to be served by a paid specialist.[2] The capitalist owners, as shareholders, now have a corresponding impersonal relationship with their firm, a relationship which is in principle actually open to all money owners, even to the public at large. They possess the same detachment and freedom vis-à-vis the firm that an investor has, who chooses his equity participation. In accordance with this role description, they realize their interest in private enrichment in a separate area: in the valuation of the fictitious capital that they hold in their hands in the form of the share.

For a remarkable feature of this value — which lies in the nature of this peculiar thing — is that as soon as a share is listed, its value no longer matches the sum that the company books as its equity capital and uses for its growth, but is determined by a comparison. It is compared with the standard local interest rate that the money-capital trade calculates for its loans. The interest rate is the first point of reference, the first yardstick for calculating the sum that as money capital would yield a return equal to the prospective dividend and is therefore attributed to the share as its value. However, it is only the first factor in the process of actually determining the share value. This is done in the bartering between investors who trade in shares and have created a sui generis market for the purpose.

3. The stock exchange

The stock exchange is where the shares are valued. Through continual buying and selling at the price agreed on by suppliers and demanders with their opposing interests, the size of the monetary capital the security represents is constantly determined, with institutional supervision and second-by-second reporting. This decides how rich the shareholder is, even if he only leaves his shares in the safe. Traders on this market calculate in such a way that the dividend paid, the comparison of this financial yield with that from alternative credit transactions (including dividends on other shares) and the capitalization of the income weighted in this way are, from the outset, not fixed quantities but rather the basis for speculating how all these figures will change, making it advisable to buy or sell in time. It goes without saying that this speculation also takes account of countless economic, political, maybe even socio-psychological considerations. The result is a share price, whose ups and downs — alongside the dividend and much more importantly — decide if and how much the money capital represented by the share at a particular point in time has gained — or in the worst case lost — value at a later point in time. This result is in turn critical for how investors and shareholders continue speculating and, as they make the corresponding transactions, for how the share price consequently develops. That is how sensibly things are done when private property separates from the actual expansion of the capital it is incorporated in for the capital to reach its required fighting weight, and leads a life of its own as self-expanding money capital.

So what comes into the world as a means for the businessman to overcome the limits of his individual wealth and give his capital the size required for monopolistically dominating the market, this thing — credit — becomes, on the stock exchange, the material for a barter trade that gives rise to capitalistically effective wealth (self-increasing wealth that can be realized in money if necessary) without any labor, solely on the basis of the right to a yield, through speculation and transactions between speculators. And on the same path, without any consumption, the stock exchange may make this wealth vanish. The role played by the joint-stock company’s business, by its profit-making through purchase, production and sale, is that of a riskone risk among countless others — when it comes to speculating on the share value steadily going up. The method of enrichment here is to productively exploit these risks, i.e., swap back and forth between alternative investments, always being on the right side, and successfully managing a whole portfolio of securities this way. Mastering this method is what makes a clever stock-exchange operator, and consequently also what a service involves that can be purchased from a separate species of stock exchange pros. Speculating on risks like these — and therefore what “asset management” has to offer — includes, as the next floor of the finance-capitalist superstructure, doing business by offering hedges for speculative ventures. In the next step, this splits off from the conservative purpose of insurance and develops into a subsystem of bets on or against speculatively anticipated changes in the value of anything whatever. In the end, fantastic sums, albeit only with a fraction “backed” by money, act as a source of enrichment solely because they involve taking a risk of loss.[3]

4. The company as an object of speculation; modern mergers

The independent trade in fictitious money capital and its derivatives that develops on the stock exchanges and in the computers of the speculator world puts the strategic efforts of large companies to grow through additional size on a new footing. After all, forming a joint-stock company by no means puts an end to the option of enlarging a company beyond the limits of its accumulated operating assets and what they can achieve. Established on the stock exchange as an object of speculation, the joint-stock company attracts a general finance-capitalist interest and can thus access practically unlimited funds in ways it can itself actively shape. According to its own interests and calculations, its board of directors can decide to issue new shares, i.e., transform the company’s capital needs as they result from past and planned growth into an offer for money owners to participate in the profits as shareholders, and thereby procure additional equity capital. It doesn’t need to fear any lack of money; there are no capital needs too great for the power of the credit markets to create and refinance fictitious capital and provide a promising company with it. The company’s management must of course arouse such an interest in exposure; basically by the success the business has already achieved on the market and the good prospects of new success. But that it is not what a bank’s bureaucracy takes a critical look at to gauge whether a definite loan sum will properly yield interest and be repaid. Joint-stock companies approach the financial markets to enlarge their mass of capital without much regard for particular projects; the proof that they are worthy of investment already exists in the way speculation itself rates their past performance and their future prospects, i.e., in the value of their shares and especially its trend. When finance-capitalist experts realize and anticipate an increase in the market value of a company’s shares that altogether make up its stock-market value, this increase decides on the quality of the offer that all money owners and credit creators are invited to accept. The speculators, for their part, decide freely, according to their criteria for comparing competing offers of this kind, whether to buy into the company and, if so, to what extent. This depends on how much they think the real capital will be able to increase the value of their fictitious capital.[4]

So for joint-stock companies there is a new form of creditworthiness. It consists in how satisfied old shareholders are and, above all, how willing new ones are to invest, hence in the value of the shares. This is determined initially, and basically, by the company’s market success, the headway it has made in competing to monopolize society’s ability to pay. Thus, the growth of the company’s stock-market value — the shareholders’ enrichment — and growth on the market by eliminating competitors should be two sides of the same thing. Standing in between, however, is the freedom of the owner, who is only bound to “his” company by speculation, i.e., can always abandon it even if it is successful. He is constantly comparing his exposure with alternatives and switching to them the faster the more professional he is. A corporation’s stock-market value and its market success are distinct as a matter of principle. And there is no lack of reasons and occasions for the company’s own interest in wieldable capital power to diverge from, and even come in conflict with, the interest that investors have in increasing the value of their fictitious capital better than by other capital investments.

Thus, it is already a matter of constant dispute how to split the surplus generated on the market into dividends, on the one hand, and funds available for growth strategies, on the other. Shareholders are confronted with calculations from the world of wages, prices, profit and technical progress, calculations relating to market conditions and competitors. To gauge whether they are sound or not they have to rely on their executives. These people in turn have to base their own planning and calculation on the standpoint of increasing the company’s stock-market value. This they owe to their employer, the collective owner, but also to the company’s creditworthiness and thus its growth. Logically, the next matter of dispute is whether, and how, this credit power achieved with the share price and stock-market value can be exploited for growth. Issuing new shares provides the company with more equity capital but can reduce the value of shares and thus what the shareholders possess. Shareholders in turn become immediately richer if the company buys back its own shares, thereby increasing their value.[5] And so on.

Finally, existing as an object of speculation opens up to a company the perspective of eliminating competitors and appropriating their assets in a most elegant business-like way, but also, conversely, the chance to realize its own productive capital one last time upon its elimination if it is no longer sufficiently successful. When a company traded on the stock exchange is incorporated into the assets of a monopolist-to-be, this is done through the purchase of its shares — gradually or in one fell swoop, by mutual agreement or as a hostile takeover, in any case quite in accordance with the civil stock-exchange rules. Newly issued shares give the acquiring company the means to pay for its acquisition directly or indirectly, by compensating the previous owners or by swapping shares. So when a merger is done through stock trading, both the winners and the losers of a competition programmed for elimination have an amicable way of getting their money’s worth.

5. Not the end of competition, but rather preparations for it and additions to it

When it matters, capitalists are quite willing and able to pool their private property with each other. In groups, open to all interested parties, they get together to form joint companies. They delegate the competition between their businesses to functionaries, while shifting their private enrichment to the area of peaceful trade in securities from the most diverse sources. They communize the private capitalist power of their property, and do business as private owners with papers that actually represent collectivized capital.

This is not the end of competition; on the contrary. When private financial assets are merged into joint-stock companies, when entire businesses are brought into joint companies, then this is the prelude to using the weapon of capital size to successfully finish fighting to expropriate and appropriate others’ productive wealth. Then the company is permanently competing for monopolized market power, and at the same time for its stock-market value, i.e., for finance capital’s interest and support, and for one as a means for the other. To properly meet this double requirement it needs its entire staff of full-time functionaries. On the one hand, maximum exploitation of the labor factor and manipulative control of the market become an impersonal matter once and for all, making the abstraction “capital,” in a suitable multiplicity of competing capitals, a practical reality. This is the basis for professions that there are academic textbooks for. On the other hand, dealing with shareholders and, above all, with possible investors definitely requires more than the boss’s personal persuasiveness. A separate hierarchy of professionals is likewise created for the job of letting the company present itself as a profitable future-proof investment and procuring funds. The essential requirements here take the form of the corporation in turn having to deal with pros on the capital market who have society’s money and credit at their disposal: investment funds, credit balances and receivables, savings deposits of all kinds, assets to be managed. These pros have their own quite special competition with each other for available funds, and therefore for the maximum increase in the value of the fictitious capital they are having the funds entrusted to them act as. Their job therefore consists in constantly comparing financial exposures with each other and swapping them right on target within seconds. For companies existing as speculative objects, this means they are constantly subjected to a competitive comparison according to criteria that do not coincide with those of their own growth. They have to pass this test.

This is a demanding task because the financial pros’ calculations confront them with the harsh truth of jacking up their growth by winning over investors. Their struggle to monopolize markets cannot possibly produce winners only, it cannot end well for everyone. This does not matter to the speculators financing this mad competition of companies in accordance with their own competition. It is at any rate no obstacle to business; if anything it just goads them into being even more distrustful. They of course bet their money and credit on the corporations they expect to beat the competition, thereby opening up their chances of winning. However, they do not rely on that in their own competitive strategy. They invest in securities of different, even competing, companies and are busy enough always buying and selling exactly the right thing at the right time and increasing their capital that way. The fate of the firms they are temporarily involved in financing leaves them professionally cold. This makes it all the more a question of survival for firms to remain present on the stock market as speculative objects and arouse investors’ interest. The size they need is only to be had as the work of finance capitalists, who have control over society’s money and credit. The firms’ existence is a derivative of financial speculation.

At least firms can rely on this speculation. Not on something as dubious as solidarity among owners, but on investors competing for the better finance projects.

6. Instead of controlling the market, being indifferent to it …

Equipped with the power of communized private property, thereby freed in terms of their size from the limits of previous and current market successes, companies develop a growth strategy that emancipates them from the bounds of society’s ability to pay they vie with each other for. Speculators’ financing gets them beyond these bounds, allowing them to act as if the mere size of their capital they outcompete others with were the true source of their growth and as if it were entirely in their power to make it take effect. The fact that they create the market’s ability to pay, causing it to have limits that set limits to their growth, plays no part in view of their interest and the power they mobilize to conquer the market and monopolize the realizable profit. They need not care that this does not work out for everyone, i.e., generally does not work out, as long as there are still rivals to overpower on their own particular market — and ultimately in the market-economy world altogether; and as long as finance capitalists keep the money coming, with their speculative expectations and the funds derived from them and multiply covered by self-referential bets. Where some win the fight for free self-determined growth there are always losers, of course; that is the whole point. Companies of all sizes fail on the market, and loans dissolve into empty legal claims, fictitious capital into nothing. But this does not change the fact that credit-financed competition allows, indeed forces, its own undeterred continuation. No consideration can be shown for individual capitalist fates.

So the financial world’s involvement by no means fulfills the demand that every capitalist makes on the market, that it function as a source of profit to meet the company’s autonomously programmed growth. What finance does instead is to enable companies to consistently treat the limits of the market as a matter of competition that is to be decided by the weapon of sufficient size, and thus to disregard them. It empowers companies to be offensively indifferent to the business condition they themselves create by subsuming society’s reproduction under the imperative of profitable labor productivity and thereby at the same time restricting the ability to pay that they create. Equipped with the power of fictitious capital, capitalists make a huge practical reality out of that basic element peculiar to the logic of capital expansion in the unending market-economy process of buying, producing under the criterion of profit, and selling to realize this profit: the growth grinding forward in this cycle knows no “enough.” By necessity it constantly overshoots the measure of the total ability to pay that capital creates in relation to the mass of commodity values created with paid labor. It creates victims among large and small capitalist competitors, whose necessary failure offers practical proof that capitalist enrichment takes place as over-accumulation of capitalist wealth.

However, credit’s productive force, which allows companies and makes it their task to compete for excess growth, has its price for the financial world too. It is not that easy to limit the failure of credit-financed ventures to individual cases and to the bilateral relationship between creditor and debtor. Defaults that devalue loans or shares and, consequently, all kinds of fictitious capital never merely affect individual investors and speculators. The interconnected refinancing transactions by which financial-sector firms recognize and bring into effect each other’s creation of credit mean that defaults tend to affect the entirety of credit creators and speculators. Their losses, in turn, rebound on the business world, which needs fresh money capital for their hard-programmed growth and is no longer getting it or facing tougher conditions. This inevitably leads to further defaults and possibly to drops in overall capitalist growth. How serious these are is, in turn, a question of their speculative valuation. The only sure thing is the fact that when barriers to capitalist growth are removed by the power of communizing private property in accordance with the system, this periodically changes into a contraction of credit and credit-financed profit-making, even ending up paralyzing business life altogether more or less across the board. Then we have it:

7. … Crisis

Market-economy actors and experts have agreed that if there is “negative growth” for so and so many quarters one may speak of recession. The consensus is also that such a dramatic decline in business is due to a lack of business opportunities. After all, it can’t be ignored that there is no lack of business means. The goods to sell are there, more than enough. Means of production are found to have overcapacities. People able and willing to work are in plentiful supply. What is lacking is money taken in by firms: they are not making it for lack of sales and not getting it from the financial sector either. Financiers are not handing out anything because they see no business prospects and have lost faith in their own products, which they may have gone overboard creating and high-pricing and which are now lying around en masse and have become worthless because no one wants them anymore. That’s why some rich people even have money to spare that they know nothing better to do with than to put aside. All this leads to the finding that business is collapsing because the conditions for its growth are lacking.

Opinions differ as to what the reason for that is and what to do about it. One cannot always distinguish whether the proposed therapy follows from the reason identified for economic crisis, or vice versa; in any case, the main concern is to get business going again. According to one school of thought — tending to be considered more “left-wing” — there is not enough ready demand to clear the markets, and the state should jump in as a quasi-external authority and use its own money tokens to remedy the lack of demand that these thinkers do not want to blame on the market economy as such, since it is having such trouble remedying the lack of buying power and needs help. In contrast, the majority of experts, and certainly the affected practitioners of capitalism, are sure that the reason why goods remain unsold, production is stagnating and no loans are flowing in is that producing and selling can no longer pay off; and the reason for that is too little has been done to keep things profitable. Too little money has been mobilized to make the right investments — in means of production that are more productive — and improve the ratio between advance and surplus. Instead, too much money has still been spent on the “factor labor” at the cost of returns, despite all the “rationalizations” that have taken place. So what is called for is a sweeping fire-sale, across the board like the crisis, as the only way to get it under control: cutting jobs that are no longer profitable along with redundant personnel, and selling off below cost all goods and objects of value that can fetch any money at all in order to at least service some of the accumulated debts one has to pay back.

This consequence definitely occurs in practice, with or without any theory about the business conditions lacking. And it testifies in its own way to the real reason for the recession that afflicts capital from time to time. There has evidently been far too much capital mobilized for it to be able to get a return and growth out of the market that it itself makes. This is at any rate the politico-economic state of affairs that takes effect in a crisis as a setback for society’s economic life. The class of competing capitalists runs up against the contradiction that its economy of unconditional growth endlessly increases its wealth and for this purpose makes the source of its wealth and enrichment, paid labor, ever more productive — thus making the wage-dependent masses ever poorer in relation to the value of the commodities they have to purchase to live on. This excess of capitalist growth is what leads the market economy to its dead end and to capitalist wealth being annulled. Businessmen also see this setback to their fine growth as a matter of excess themselves, but a bit differently: it’s their competitors. There are too many of them — hell is other people, as Sartre says — and that’s why they have to go. This is what matters in a crisis all the more. The actors of free competition can’t do enough to achieve that end. And that is exactly how they create the general "too much," consequently getting themselves back into their crisis over and over again.

Where it starts, how it gets going and progresses, is up to the anarchy of the market and speculation on results. It may be that credit-financed buying, producing and selling fails due to the limits of society’s ability to pay, the markets are overfilled and hopeless overcapacities are identified, so that the financial industry, which is supposed to help get through such scenarios, sees no way out. It may be real or feared price changes on a large scale, caused naturally or politically, or a “bubble” bursts in the realm of derivatives and certificates, and the financial world answers with a crash in stock-market values and by terminating the services that business depends on to continue. Such disruptions of the economy turn into a crisis when they cause a reverse chain of devaluations in the world of communized capitalist wealth, i.e., where loans and stock-market values are created and authenticated by circular refinancing transactions, and nobody stops this reverse chain, at first. In the end, not only a lot of securitized values of the financial trade go to the dogs, but also this trade’s so mutually nourishing symbiosis with that other part of the capitalist economy called “real” in this context. This symbiosis changes into a harsh clash between unfulfilled claims: nonperforming loans and devalued investments on the one hand, rejected credit needs and canceled capital investments on the other. Despite all devaluation, however, private property arising from the documented right to earnings retains the upper hand over property arising from capitalist production: means of production, wage labor and salable goods are sacrificed in order to save, if not every loan, at least the credit business itself.

This antagonism is, of course, no reason for the capitalist factions to fall out with each other forever, and certainly no reason to be humble in view of the disaster they have jointly caused. They forget their antagonism to adopt an even more resolute shared sense of entitlement. The propertied class, i.e., those managing property and those investing in it, insist on the systemic relevance of their particular interests and demand, across all sectors, that the rest of society be made to serve the restoration of their might as an indispensable service provider for societal reproduction. The fact that their business and its failure due to its own excessiveness have damaged society’s productive forces and endangered its material survival is, to them, unbeatable proof of how absolutely essential it is for the general public that the capitalist class’s calculations work out and their wealth grow. It is not business life that has to adapt to the material necessities of a secure existence for all, but rather the general public that has to adapt to the conditions of success for the decisive minority’s business interests.

And that is fine as far as the system is concerned. For if the wage-earning class does not set any limit to the capitalists’ regime over society’s work and life, then it has to pay the price and fall in line to fix things up when capitalists periodically fail due to the limit they themselves set to their success.

Once again the last word is had by the public power, without which nothing works in this system of freedom.

Translators’ Notes

[i] A nod to Lenin’s Imperialism, the Highest Stage of Capitalism.

[ii] German Federal Cartel Office []

[iii] Gesetz gegen Wettbewerbsbeschränkungen, semi-official translation from the German Law Archive

[iv] German Federal Cartel Office, op. cit.

Authors’ Notes

[1] Chapter I, The elementary determinations of capitalist business: Social production for private profit, appeared in GegenStandpunkt 3-17; Chapter II, Accumulation of capital: Expansion of production and commerce, in GegenStandpunkt 1-18; Chapter III, Increasing growth: The productivity of capitalism, in GegenStandpunkt 1-19; § 12, The dogma of growth as the good purpose of all economic activity, and the solution to all the problems it creates, in GegenStandpunkt 4-19; § 18, Success alongside failure, the standpoint of real and imagined victims & beneficiaries as an opinion-forming productive force, in GegenStandpunkt 3-20.

[2] When their term of service comes to an end, top managers can expect a seat on the board of directors — that, too, an office taken out of the complex figure of the simple capitalist, which oversees the management’s link back to the shareholders’ private property and to their demands on their company.

[3] Managing all such risks and constantly expanding on them, constructing and marketing ever new derivatives, is something the banks have made their business as the established custodians of society’s financial assets and as professional money creators. They do so both as trustees of other people’s property and for their own account. For handling this speculation soundly and safely, it is an essential business condition to have absolutely available financial resources allowing failures to be compensated or bridged. Recourse to the financial market for refinancing commitments must in any case be guaranteed, but this is not enough. What is needed is an entirely in-house capital base big enough to convince critical financial markets of the institution’s unquestionable solidity for any sum that may be required. This requirement is a separate reason for why banking-business big-timers usually operate their trade as joint-stock companies, i.e., with the collective capital power of a majority of money owners.

[4] Under the extreme conditions of overabundant monetary wealth in search of interesting investment opportunities, and of special success stories that are recognized as valid paradigms of capitalist enrichment, speculation can also completely abandon the point of view of solid sales and realized profits. It can massively inflate the stock-market value of companies without at least some medium-term prospect of profit to justify it and, under the peculiar rubric of ‘venture capital,’ finance projects whose capitalist earning capacity is no more than a hope, appropriately labeled “start-ups.” Even though this sort of thing has faithfully accompanied the history of capitalist speculation since the historic Dutch tulip crisis, fans of the scene like to think they have kept reinventing capitalism this way, nowadays a “new economy.”

[5] Ultimately, ownership has the final say about the capital that has to wage its competitive battles on the market. It is true that no shareholder can detach his ownership share from the company and take it home with him. But the community of owners can, with the necessary majority, take the company private altogether, they can break it up into parts and turn them into money, etc.

© GegenStandpunkt 2022