Keywords

Just how much financialization has come to dominate contemporary Western capitalism was underlined when the first and most fulsome response of public authorities to the novel coronavirus pandemic in March 2020—the response that has taken priority not only over saving lives but even over saving economies—was to issue liquidity on a truly epic scale, orders of magnitude greater than in any previous crisis, involving support for a greater diversity of assets (Brenner 2020). The purpose was to reverse the historic plunges in asset markets as they registered the seriousness of the pandemic and the economic damage it could do, plunges that affected even markets for the safest of asset classes, which usually rise during crises.

The intervention was successful, so much so that asset markets recovered within two months and continued soaring even as economies tanked. The pandemic became infamous for minting billionaires at a faster rate than any other period in history. As the pandemic wore on, exposing the productive debility of neoliberal financialized capitalism further, not only did inflation return but, this time around, thanks to practically trillions parked in highly leveraged asset markets in the form of financial wealth of the obscenely wealthy, the conventional remedy—tightening monetary policy—faced an unprecedented obstacle. Reversing over two decades of monetary laxity threatened this wealth. However, so did inflation. Allegedly ‘independent’ central banks that had done so much to augment the wealth of their political masters were now said to face a tough choice between ensuring monetary stability and ensuring financial stability.

Does Rudolf Hilferding’s Finance Capital (1910/1981) have anything to contribute to an understanding of financialization, arguably the overwhelming reality of contemporary capitalism? According to the most serious Marxist scholars who have contributed to the vast literature on the financialization of capitalism in recent decades, little. Costas Lapavitsas’s verdict is that Hilferding’s concept of finance capital, which denoted the relation between banks and industry in the monopoly phase capitalism entered in the late nineteenth century, also considered the most developed and mature form of the relation, needs to be treated ‘with considerable caution’. While monopoly has certainly characterized capitalism since the late nineteenth century:

in practice, a broad range of relations has prevailed among contemporary industrial and financial capitals, often with national characteristics. Moreover, … [contrary to Hilferding] there is no universal long-term tendency for industrial capital to rely on bank loans to finance fixed capital formation.

In short, finance capital does not adequately capture the complexity and range of relations between industrial and banking capital in the course of the twentieth century. (Lapavitsas 2013, 60)

For Lapavitsas, if the concept of finance capital is important, it is only because it focuses attention on the new types of links between bank and industrial capital, ‘merely incipient when Marx wrote Capital’, that had arisen some decades later and were analysed by Hilferding under that rubric.

Meanwhile, François Chesnais employs the term finance capital in Hilferding’s original sense ‘not for reasons of “orthodoxy” but of analytical clarity’. For him, it designates ‘the simultaneous and intertwined concentration and centralisation of money capital, industrial capital and merchant or commercial capital as an outcome of domestic and transnational concentration through mergers and acquisitions (M&As)’. In his analysis of contemporary financialization, including its international aspects, however, he supplements the concept of finance capital in Hilferding’s sense with the companion concept of ‘financial capital’, meaning ‘concentrated money capital operating in financial markets’ (Chesnais 2018, 5).

The implication here is that Finance Capital is outdated, at best a good guide to what happened at a particular stage in the development of capitalism, and perhaps to some limited elements of the structures of contemporary capitalism, but of little general relevance today. If so, this is pretty damning indictment of a work which argued that finance capital was the ‘supreme and most abstract’ expression of capital (21), ‘the highest stage of the concentration of economic and political power in the hands of the capitalist oligarchy … the climax of the dictatorship of the magnates of capital’, and one, it must be pointed out, which was ripe for transformation into ‘the dictatorship of the proletariat’ (370)Footnote 1. Considering that Finance Capital (hereafter FC) was considered in its time ‘the fourth volume of Capital’, and given that it was taken up in good part with a further development of Marx’s understanding of money and credit, it also puts a question mark over Marx’s understanding of these critical matters. Just how much rides on how we judge Hilferding’s, and by extension, Marx’s understanding of money and finance and their relevance today becomes clearer when we pause to consider that Marx’s critique of Say’s Law, the pivot of his understanding of capitalism, rested on pointing to the independent role of money in capitalism and Hilferding concurred.

Against these judgements, which, at best, damn Hilferding and, by extension, Marx, with faint praise, this chapter argues firstly that Hilferding’s analysis in FC has a wider and deeper resonance. He was neither unaware of the varieties of relationships between money and industrial capital to which Lapavitsas refers, nor of ‘financial capital’ of the sort that Chesnais distinguished from finance capital. In FC, Hilferding contrasted the development of the financial sector in ‘free trade England’ with that of the ‘protectionist countries’, particularly Germany and the United States. In the former, short-term, market-based, money-dealing capital focused on trading fictitious capital in a parasitical relation with industrial capital have been dominant. In the latter, the ‘model states’ of finance capital, the relation between the banks and industry in capitalism’s monopoly phase—the phase which takes the socialization of labour to its pinnacle as the socialization of labour within giant firms—is one where banks become the effective planners of vast chunks of the economy, engineering their productive and industrial expansion.

We may note two important things about these contrasts. On the one hand, these contrasts resonate with the many overlapping contrasts between two contrasting models of capitalism and the relation of money and industrial capital in them, that have come to pervade the critical literature on capitalism and financialization in recent decades. Linked to Alexander Gerschenkron’s (1962) formative idea of ‘late development’ (itself, as we shall see, part of the Marxist idea of uneven and combined development), they have acquired wide currency in recent contrasts between ‘Anglo-Saxon’ or ‘Stock Market’ capitalism and ‘welfare’ or ‘Rhineland’ capitalism of the continental variety (made, for instance, by Dore 2000, and Hutton 1995) and in the proliferating literature on models and varieties capitalism (respectively Coates 2000 and Hall and Soskice 2001).

Free trade England model

Protectionist country finance capital

Market capitalism

Relationship capitalism

Short-term capital

Long-term or ‘patient’ capital

Stock market capitalism

Welfare capitalism

Anglo-Saxon capitalism

Rhineland capitalism

Wall Street

Main Street

Speculative

Productive

Shareholder capitalism

Stakeholder capitalism

On the other hand, Hilferding’s contrasts were also rooted in Marx’s own historical understanding (on this Hudson 2010 is very useful) of the two very different models of industry-finance relationships. Both saw the English model as historically closer to pre-capitalist usury which ‘just like trade, exploits a given mode of production from outside. Usury seeks directly to maintain this mode of production, so as to constantly exploit it anew; it is conservative, and simply makes the mode of production more wretched’ (Marx 1894/1981, 745). In the long history of capital’s emancipation from this form, whose culmination would be a developed credit system subordinated to industrial capital, the English model was stuck at the emancipation of commercial capital, while in the protectionist countries, Hilferding’s FC brings out clearly, finance capital represented the emancipation of industrial capital from the pre-capitalist form.

A second argument this chapter makes is that, in addition to distinguishing these two models and positing a succession from the more primitive English model to the more productive finance capital, Hilferding, following Marx, also gave a historical account of how and why finance capital was triumphing over the English model. His argument here took the form of a version of the logic of uneven and combined development (UCD), a quarter century before Trotsky coined the expression in the first chapter of his famous History of the Russian Revolution. This was not surprising because, as I have argued elsewhere (Desai 2013), while Trotsky may have coined the term, the idea can be traced to Marx and Engels and was inherited and developed by Marxists of later generations. Interestingly, as Marcel van der Linden (2012) has demonstrated, Gerschenkron’s idea of late development was rooted in this understanding even though, for political reasons, he neglected to reference it.

Many Marxist scholars are simply unaware of the distinction Hilferding made between the free trade English model and that of the protectionist countries even though it was central to Hilferding’s argument in FC (see, for instance, the discussion in Brangsch et al. 2018, 256-8). More careful scholars, such as Lapavitsas and Chesnais, do note the distinction. Lapavitsas realizes that ‘the future of capitalism for Hilferding lay in Germany, a late developer that relied on her banks, not England’ (Lapavitsas 2013, 137), rightly references the aforementioned literatures on varieties of capitalism and realizes that contemporary ‘[f]inancialization … can be considered as the ascendancy of Anglo-Saxon, market based finance’ (Lapavitsas 2013, 137). Chesnais, for his part, not only notes the historical differences between the two models, but also discusses contemporary individual national models very intricately.

However, these discussions fail to note roots of these contrasts in Marx’s thinking and Marx’s and Hilferding’s common conviction that the subordination of credit to the needs of industrial capital, the highest form of the relation of finance to industry that Hilferding labelled finance capital, would also form the basis of a transition to socialism. And they do not ask the historical question as to why, if both Marx and Hilferding considered the productive, long-term, finance capital to be the more advanced model of the bank-industry relation, our economies are, over a century later, laden down with the more backward, parasitical speculative, short-term English model. Nor do they ask what this says about Hilferding’s and Marx’s understanding of money and credit.

The third argument this chapter makes is that the answer to this question lies in a twist of history itself. In the decades spanning the intensification of imperial competition in the last decades of the nineteenth century and in the Thirty Years’ Crisis (1914–1945) that opened with World War I, the dominance Britain enjoyed over world capitalism, thanks to her early industrial lead, was successfully challenged by the productively superior ‘protectionist’ countries, particularly Germany and the United States. The superiority of the protectionist model of finance capital over the English free trade model of short-term credit was becoming apparent, and most observers expected that the world would now witness a number of competing major powers approximating the more advanced model of finance capital. Pressures towards this were noticeable in England itself.

However, as I have argued (Desai 2013), early twentieth century US policy-making elites, who could already see that Britain’s hold on the world economy was waning, had begun nursing the desire to replace Britain as the ‘managing segment of the world economy’, if not by acquiring a comparable territorial empire, then by making the dollar the world’s money to replace sterling and New York its financial centre to replace London (Parrini 1969, 13). The outcome of two world wars, both of which boosted the US economy while destroying those of its capitalist rivals, prepared the ground for it to attempt to realize this ambition. It was never realized, not least because sterling and London’s centrality to world money was based on Britain’s territorial empire, something which the US did not and, in the historical circumstances prevailing, could not have. However, US was sufficiently powerful that its vain pursuit of this ambition put the world on a decades-long detour during which the US financial system was itself transformed into something more closely resembling the English model. Britain’s still archaic financial structure played an important ancillary role in this transformation.

Today, as capitalism’s most somnolent and difficult decade and a half is followed by the pandemic that has exacerbated as well as exposed capitalism’s productive debility and social injustice, that detour may finally be ending. While the core capitalist world will continue its decay as long as working people do not take matters into their own hands, the rise of China’s socialist market economy, with a financial sector more closely resembling the finance capital of FC, confirms Marx’s and Hilferding’s analyses about the historically superior finance-industry relation (Desai 2022) and suggests that Marx’s and Hilferding’s prognostications of the direction of capitalism’s development are relevant again, though in an unanticipated manner.

In what follows, we first outline Hilferding’s understanding of money and credit, commercial and industrial, and its relation to Marx’s. We then examine Hilferding’s understanding of the emergence of finance capital in contrast to the English pattern of bank-industry relations. We go on to show how his understanding of finance capital as the most developed form of capitalism, facilitating a transition to socialism, was foreshadowed by Marx in Capital, Vol III. We conclude by outlining the explanation, first indicated in my Geopolitical Economy (Desai 2013) of why their expectations were not fulfilled, though it cannot be fully fleshed out here.

Hilferding’s Understanding of Money

Hilferding’s concept of finance capital emerges from his development of Marx’s understanding of money and credit to comprehend new developments since Marx’s time. Finance capital was only ‘the most mature form’ of ‘the more elementary forms of money and productive capital’ (21) discussed by Marx. This aspect of FC, which occupies more than a quarter of the book, has been dismissed or neglected. Schumpeter dismissed it as ‘old-fashioned monetary theory’ (Schumpeter 1954/1986, 881). Later Marxists, whether Sweezy or Lapavitsas or Chesnais, have ignored this aspect entirely, undoubtedly reflecting, at least in part, the considerable confusion caused among Marxists about Marx’s views on money by their belief that Marx has a ‘commodity theory of money’.

While that matter deserves much fuller treatment than is possible here, we must establish, at least in outline, Hilferding’s claim to be taken seriously both as a sufficiently faithful follower of Marx and as having a sufficiently accurate understanding of the capitalism of his time and its monetary and financial aspects.

The belief that Marx had a commodity theory of money is simply wrong. Indeed, a commodity theory of money is an oxymoron because money is precisely that which is not a commodity. This is clear, for instance, from the opposition of money and commodities that Marx’s critique or Say’s Law relies on. Marx not only discusses the dynamics of state-issued paper money and various kinds of credit money, but also demonstrates a complex historical understanding of money as predating capitalism. What he does argue is that capitalism needs to impose on money certain commodity dynamics, hence the intrusion of gold and silver, both of which are commodities. (I plan to develop this point in a future work. However, its main elements appear in my discussion of the close relationship between Marx’s understanding of money and Karl Polanyi’s understanding of money as a fictitious commodity, a relationship in which Ferdinand Tönnies is a critical link. See Desai 2020).

The false impression that Marx had a commodity theory of money has certainly been reinforced by the considerable inroads made into Marxism by the antithetical and anti-Marxist neoclassical economics. It has led to the questioning of Marx’s analysis of capitalism as contradictory value production on the grounds that it suffered from a ‘Transformation Problem’ and to the dismissal of the key crisis mechanisms Marx identified, such as its demand deficits and the Tendency of the Rate of Profit to Fall (as discussed in Desai 2010, 2016 and 2020a). Undoubtedly, neoclassical economics’s inability to distinguish between money and commodities, and consequent conflation of capitalist exchange with barter, played a role. As both Marx and Keynes pointed out in different ways when they distinguished between a money and a barter economy in their respective critiques of Says’ Law, this distinction is critical to understanding capitalism (on this commonality, and connection, between Marx and Keynes, see Sardoni 1997).

In his brief and measured commentary, Tom Bottomore, who introduced the English translation of FC, considers Hilferding’s discussion of Marx’s theory of money ‘the least successful part of the book’ (Bottomore 1981, 5). On the other hand, however, in a long footnote, he defends it, at least minimally. While he criticizes Hilferding for ‘rejecting the possibility of a pure paper currency’ and insisting on ‘the need for gold in international transactions’, he considers Schumpeter’s judgement (mentioned earlier) unjust, not least given the less-than-satisfactory prevailing understanding of money in general. Bottomore called for ‘a social rather than narrowly economic theory of money’ of the sort Marxism is capable of (Bottomore in Hilferding 1910/1981, 372, n).

Undoubtedly, Hilferding’s is a complex case. On the one hand, he lucidly defended Marx’s value analysis (on which any properly Marxist account of money must be based) against Böhm-Bawerk’s attack. Hilferding showed that there was no ‘Transformation Problem’ and acknowledged the centrality of both capitalism’s demand deficits and the downward pressure on profit rates (Hilferding 1904/1949, 156, 170, see also Hilferding 1910/1981, 30-31). On the other hand, however, there are distinct signs that the ‘policy of theoretical conciliation’ (as Bukharin called it, see Bukharin, 1914/1972, 163) that most Marxists adopted towards neoclassical economics did not leave Hilferding unaffected (Desai 2020b).

So, on the one hand, Hilferding appears prey to the neoclassical fairy tale of the origin of money in commodity exchange: ‘Money thus originates spontaneously in the exchange process and requires no other precondition’ (36). On the other hand, at other places, Hilferding offers precisely the sort of social theory of money Bottomore believes necessary. In the first part of FC he says ‘money is a knot in the skein of social relationships in a commodity producing society’ (34); a commodity-producing society ‘only becomes a society through exchange, which is the only social process it recognises from an economic standpoint’ (29). He appears to distinguish money from other commodities, at least as a general equivalent: ‘Money is … is differentiated from all other commodities by being the equivalent of all of them’ (33); and ‘Money is … forced into the unique position of acting as a general equivalent for all the others’ (33. Emphasis added). He insists that not gold, a commodity, but coins, symbols authorized by the state, are money. Here Gold is only ‘money material’ (36). Money needs state authorization and that is why it cannot work in international transactions, where barter indeed reigns through gold payments (33): the state establishes the monetary standard in every country, ‘outside of which it becomes unacceptable. On the world market gold and silver are accepted as money, but they are measured in terms of their weight’ (36) as commodities. Money in the form of coins of currency is not acceptable.

If Hilferding rejects the possibility of a ‘pure paper currency’, as Bottomore complains, it is only because he emphasizes, correctly, that a capitalist society requires paper money to be governed by the laws of commodity circulation. For Hilferding (and here he references Marx 1867/1977, 224),

The volume of circulation is extremely variable because, given the velocity of circulation of money, it depends, as we know, upon the sum total of prices. This sum changes constantly, and is affected particularly by the periodic fluctuations within the annual cycle (as when farm products enter the market at harvest time, increasing the sum of prices), and by the cyclical fluctuations of prosperity and depression. Hence, the volume of paper money must always be kept down to the minimum amount of money required for circulation. This minimum can, however, be replaced by paper, and since this amount of money is always necessary for circulation there is no need for gold to appear in its place. The state can therefore make paper money legal tender. (38)

Like the chapter on money in Capital, Vol. I, the first part of FC also contains extensive discussions of historical instances in which these laws were violated, exploring the effects of such violations, and how bourgeois theory itself, including Ricardo, struggled to impose some commodity discipline on the behaviour of money.

Hilferding’s insistence on gold, a commodity not money, as ideally necessary for international transactions also follows Marx and is entirely correct. Only those who look away from the difficulties the use of both the pound sterling in the ‘gold standard’ era and the US dollar thereafter in international transactions created and continue to create, those who naturalize an international paper money in a capitalist world, can object. (Keynes was keenly aware of the imperial and managed nature of the gold standard as well as the power dynamics of any dollar standard. See also De Cecco 1984, Desai 2013, 2019 and Desai and Hudson 2021).

The Development of Credit: From Circulation to Production

On this account of money in capitalist societies, Hilferding builds his account of credit money emerging from circulation. Here too he follows Marx (Marx 1867/1977, 232-40). Unlike state paper money, credit money ‘has no inflexible minimum which cannot be increased’. Rather it ‘grows along with the quantity of commodities and their prices’ (65). Credit money ‘requires special institutions where obligations can be cancelled out and the residual balances settled and as such institutions develop, so is a greater economy achieved in the use of cash. This work becomes one of the important functions of any developed banking system’ (66). Such a system inevitably has a dual character: while it aids ‘the expansion of production [and] the conversion of obligations into monetary obligations’, it also leads to ‘the growth of fictitious capital’ (66).

Credit money is, however, a mere promise to pay, second-grade money, fine while the going is good but not ‘when the debtor cannot meet his obligation and the promise to pay becomes worthless. Real money must now take its place’ (66). So, in a crisis, credit money dries up, prices decline, sales fall and obligations remain unmet. In such circumstances, ‘it is perfectly rational policy to expand the circulation of state paper money or the bank notes of the central bank, the credit of which has not been impaired’. In these circumstances, the superiority of central bank credit, paper money and liquid commodities like bullion makes itself felt.

Industrial credit is, however, very different from commercial credit. It is needed not to circulate commodities but to serve industrial investment and rectify certain problems peculiar to it, particularly the need for sizeable hoards of money that it inevitably entails.

While hoards may occur in circulation and commerce, they are essential to industrial investment, occurring at various points in the cycle of industrial capital, whether because of its length, the need to prevent interruptions in production, depreciation or high initial investments. The need for such inactive capital that earns no profit is a problem, ‘a mortal sin from the standpoint of capitalists’ (74). So, ‘every effort is made to reduce this idleness to a minimum’ (79). These investment-related hoards become particularly important in the second industrial revolution with its vastly expanded manufacture of producers’ goods such as machinery and larger-scale processing of raw materials in the steel and chemicals industries. These forms of investment needed much more capital than previously.

In this scenario, banks help not only to finance the high capital requirements of investment in the monopoly phase of capitalism but also to reduce the idleness of money. Whereas commercial credit is extended by the seller to the buyer, industrial credit, credit for capital investment, requires the transfer of one person’s idle money to someone who can ‘employ it as capital’. It involves ‘a transfer of money which already exists’ and, unlike circulation credit, involves little or no economizing of money or reduction in costs of circulation. ‘Its primary purpose is to enable production to expand on the basis of a given supply of money’ (88).

The provision of industrial credit changes the relationship between banks and their borrowers for good. Where bank credit is confined to commercial credit, the banks’

only interest is the condition of an enterprise, its solvency, at a particular time. They accept bills in which they have confidence, advance money on commodities, and accept as collateral shares which can be sold in the market at prevailing prices. Their particular sphere of action is not that of industrial capital, but rather that of commercial capital, and additionally that of meeting the needs of the stock exchange. Their relation to industry too is concerned less with the production process than with the sales made by industrialists to wholesalers.

By contrast, when banks start providing investment credit, the bank

can no longer limit its interest to the condition of the enterprise and the market at a specific time, but must necessarily concern itself with the long-range prospects of the enterprise and the future state of the market. What had once been a momentary interest becomes an enduring one; and the larger the amount of credit supplied and, above all, the larger the proportion of the loan capital turned into fixed capital, the stronger and more abiding will that interest be. (94, emphasis added)

This is the crux of his argument about finance capital. Much of FC is taken up with discussions of various aspects of money and banking, including the determination of interest rates, the emergence of promoters’ profit (a new form of profit Hilferding identified), the functioning of stock and commodity markets and banks, and the new forms crises take in this new stage of capitalism. However, the main trunk of the argument now leads through his discussion of joint-stock companies, the new, more concentrated, form of industrial organization, to the even greater productive centralization involved in the formation of cartels and trusts under the aegis of finance capital and how they lead to imperialism.

The Development of Industrial Organization: From Private Individual to Private Collective Ownership

The transition from commercial credit to industrial credit as the dominant function of banks took place against the backdrop of the second industrial revolution. Under its force, capitalism went from being organized in smaller enterprises producing light industrial consumer goods to much larger units producing heavy industrial producers’ goods and from being the individually owned enterprise to the joint-stock company, capable of mobilizing larger quantities of capital. There are several elements here.

Ownership of Money Capital, Control of Industrial Capital and Promoter’s Profit

First, joint-stock companies separated ownership from control, leading to ‘the liberation of the industrial capitalist from his function as industrial entrepreneur’ and to the transformation of the owner into a ‘money capitalist’ (107). Once the money originally invested was transformed into the elements of productive capital, the shares owned by this new type of owner became merely ‘capitalized claims[s] to a share in the yield of the enterprise’ (110). Their price

is not determined as an aliquot part of the total capital invested in the enterprise and therefore a relatively fixed sum, but only by the yield capitalized at the current rate of interest. … It is a claim to a part of the profit, and therefore its price depends, first, on the volume of profit (which makes it far more variable than it would be if it were part of the price of the elements of production of the industrial capital itself), and second, on the prevailing rate of interest. (110)

Hilferding introduces here the category he considers his original formulation, promoters’ profit. Since the prices of shares depend on their yield and the rate of interest, the latter forms the floor below which the price-earnings ratio cannot sink in normal circumstances. Therefore, the prices of shares can be pushed up (and their yields, which move in the opposite direction, can be pushed down) to the point where the yield is equal to the going rate of interest, which is determined quite independently by the supply and demand for money.

In these circumstances, promoter’s profit is earned by banks who promote or float the shares companies offer to the public when they exploit the ‘the difference between capital which earns the average rate of profit and capital which earns the average rate of interest’ (the former usually being higher). It becomes possible because banks can raise the price of the shares up to the point where the yield matches the rate of interest, or just below it. Hilferding considered this a new, sui generis, economic category belonging to the era of finance capital. It emerges when to loans, the floatation of shares is added as a key line of bank business. Not only can ‘bank capital … expand industrial credit by the issue of shares’, ‘encouraged by the prospect for promoter’s profit [it] acquires an ever increasing interest in the financing of enterprises. Other things being equal, promoter’s profit depends upon the overall level of profit. Hence bank capital becomes directly interested in industrial profit’ even more (190). Thus, promoter’s profit plays the key role in binding banks to the fate of industry and its profits in Hilferding’s conception of finance capital.

The Transformation of Competition: Concentration and Combination

In the age of the second industrial revolution, there was a great ‘inflation’ (186) in the amount of capital required for initial investment, lengthening the turnover time of capital, making its transfer from less profitable to more profitable sectors more difficult and making entry costs higher (186). All this contributed to a tendency to monopoly, gumming up the processes of competition and equalization of rates of profit. Although the increasing sophistication allows capital to be mobilized with greater ease (187), this does not offset the obstacles the tendency towards monopoly and the ‘centralization of capital’ places in the path of the equalization of profit rates. On the contrary, it can increase them by removing ‘the limitations which arise from the magnitude of the capitals required for new investment’ (188). The competitive struggle now transcends the phase when its chief function was to permit the strong to eliminate the weak through price competition. Now, in the branches of industry affected,

it is well nigh impossible to equalize the rate of profit by withdrawing capital, and extremely difficult to write off the capital. These highly developed industries are precisely the ones in which competition eliminated the small firms most rapidly, or in which there were no small firms to begin with (as in many branches of the electrical industry). Not only does the large firm predominate, but these large, capital-intensive concerns tend to become more equally matched, as the technical and economic differences which would give some of them a competitive advantage are steadily reduced. The competitive struggle is not one between the strong and the weak, in which the latter are destroyed and the excess capital in that sphere is eliminated, but a struggle between equals, which can remain indecisive for a long time, imposing equal sacrifices on all the contending parties. (189)

Thus, to the depression in the rate of profits among small capitalists is added profit depression in precisely the most advanced sectors with the greatest concentration of capital (191). In these circumstances, the banks, which are themselves undergoing a process of concentration of their own (191), often have interests in the losing as well as the winning side.

Hence the bank has an overriding interest in eliminating competition among the firms in which it participates. … In this way the tendency of both bank capital and industrial capital to eliminate competition coincides. At the same time, the increasing power of bank capital enables it to attain this goal even if it is opposed by some enterprises which, on the basis of particularly favourable technical conditions, would perhaps still prefer competition. (191–2)

In addition to such concentration, banks also facilitate another sort of amalgamation of industry: combination. Hilferding conceives this as a process through which enterprises expand to include within themselves their backward or forward linkages. In an argument closely matching Marx’s (Marx 1894/1981: 213), Hilferding points out that, given the different conditions of production in the extractive industries such that it is difficult to expand production fast enough, boom times result in price and profit rate rises in extractive industries at the expense of processing industries, which also suffer from raw material shortages just when they need more (193–4). In a depression, the tables are turned: ‘the drain of money and the curtailment of production are more marked and produce greater losses in the industries which supply raw materials than in the manufacture of finished goods’ (194). This discrepancy gives rise to a tendency to the combination of the two sorts of concerns (195) with the initiative being taken by the disadvantaged enterprise. Such combination is also critical to Hilferding’s understanding of the new phase of capitalism: it ‘involves a contraction of the social division of labour, at the same time as it gives an impetus to the division of labour within the new integrated concern, extending increasing to management functions as well’ (196). In Marx’s terms, capitalism, having completed the socialization of labour among firms in its competitive phase of coordination through ‘free’ and competitive markets, moves on to socializing labour within firms through ever more intricate technical divisions of labour coordinated through authoritative and planned allocation within firms.

Consortia and Cartels

While concertation and combination, whether involving vertical integration or horizontal integration, may take place for technical as well as economic reasons, and involve integration at the ownership level, the formation of cartels and consortia involves ‘concentration of production without any concentration of ownership’ (199). Banks are also involved in these as they can make their credit more secure and offer greater opportunities for further business, whether in the loan or share floatation departments (199). Cartels, syndicates and trusts, are the organizational forms of concentrated production without concentrated ownership, each representing a greater degree of central control than the previous. The purpose of these forms of productive concentration is the same as the earlier concentration through merger: to restrict competition. They achieve this through agreements on prices and through, where necessary, the elimination of low-productivity plant.

Tendencies Towards National and Imperial Economies

The cartelization of capitalism makes it at once more national and more imperialist. Whereas the likes of List and Carey had supposed that the protectionism necessary for countries to industrialize in the face of British domination of world markets would no longer be necessary once industry in the protectionist country became competitive, Hilferding argues, things turned out quite differently. ‘Today it is just the most powerful industries, with a high export potential, whose competitiveness on the world market is beyond doubt and which, according to the old theory, should have no further interest in protective tariffs, which support high tariffs’ (307).

This apparently paradoxical outcome is the result of ‘a complete realignment of interests with respect to commercial policy’ (304). With industrial development, the landowners stop exporting their products and become protectionist, making common cause with protectionist industry and with banks associated with it. Protection itself aids cartelization as does the fact that in countries like Germany, industry did not develop ‘so to speak organically and gradually from small beginnings’ as in England (305). So the seeds of the transformation of the old ‘educational tariffs’ of the List variety into the new commercial policy were sowed early on: ‘The victory of protectionism in 1879 … marked the beginning of a change in the function of the tariff from an ‘educational’ tariff to a protective tariff for cartels’ (305).

Not only did protection make it easier to form cartels by keeping foreign competition out, but it also permitted cartelized industry to exploit tariffs in a new way, by keeping domestic prices high and making an extra profit on them by artificially restricting domestic supply (308). For instance, coal and iron producers can appropriate extra profits to industries that use their products by raising prices.

This extra profit no longer originates in the surplus value produced by the workers employed by the cartels; nor is it a deduction from the profit of the other non-cartelized industries. It is a tribute exacted from the entire body of domestic consumers, and its incidence on the various strata of consumers—whether, and to what extent, it is a deduction from ground rent, from profit, or from wages—depends, as with any other indirect taxes imposed on industrial raw materials or consumer goods, upon the real power relations and upon the nature of the article which is made more expensive by the cartel tariff. (308)

If such domestic price increases reduce the size of the domestic markets, there is always the world market where, thanks again to the new functionality of protection for cartelized industry, cartelized industries can even use the extra profit made domestically to undersell their competitors.

If in the early development of capitalism, the unification of national territory was important, if the development of capitalism had led to the division of the world market into ‘distinct economic territories of nation-states’ (311), now, with the advance of industry and its cartelization, the expansion of this territory, under the command of a given state, that is to say, imperialism, becomes urgent. ‘[C]artelization greatly enhances the direct importance of the size of the economic territory for the level of profit (313)’ resulting in ‘the desire to extend as much as possible the economic territory, surrounded by a wall of protective tariffs’. For now, in addition to the export of goods, the export of capital, ‘the export of value … intended to breed surplus value’ (314) whether in ‘interest bearing’ or ‘profit yielding’ (315) forms, one of whose purposes is to ‘cancel out’ ‘the falling rate of profit’ (314), takes on greater importance. Since all advanced capitalists compete to export capital, to finance capital,

free trade appears superfluous and harmful; and it seeks to overcome the restriction of productivity resulting from the contraction of the economic territory [through protection], not by conversion to free trade, but by expanding its own economic territory and promoting the export of capital. (314)

Typically, capital is exported to areas where due to the cheapness of labour and/or raw materials, a higher rate of profit can be expected. Where such price structures restrict the size of the domestic market, loans can be employed to enlarge it.

Hilferding’s detailed description of the competitive struggle among the advanced countries to expand their territories, the methods used, the economic effects on the colonies, the inevitable political reaction to them in the form of the rise of independence movements among them, the different situation of England and the new imperialist countries, and the unfolding of the logic of uneven and combined development between them is remarkably accurate. It predicts the coming World War: as England also becomes protectionist:

The disparity which exists between the development of German capitalism and the relatively small size of its economic territory will … be greatly increased. …Germany has no colonial possessions worth mentioning, whereas not only its strongest competitors, England and the United States (for which an entire continent serves as a kind of economic colony), but also the smaller powers such as France, Belgium and Holland have considerable colonial possessions, and its future competitor, Russia, also possesses a vastly larger economic territory. This is a situation which is bound to intensify greatly the conflict between Germany and England and their respective satellites, and to lead towards a solution by force. (331)

The Historical Specificity of Finance Capital

Hilferding’s understanding of finance capital, and the specificity of the relation between banks and industry it denotes, is built on the distinction between the antiquated English model and the protectionist countries. In understanding this distinction and its contemporary relevance, we need to understand exactly what Hilferding meant by the domination of finance. Rather than money capital parasitically subordinating industrial capital, the concept of finance capital means, on the one hand, that

with the increasing concentration of property, the owners of the fictitious capital which gives power over the banks, and the owners of the capital which gives power over industry, become increasingly the same people. As we have seen, this is all the more so as the large banks increasingly acquire the power to dispose over fictitious capital. (225)

On the other hand, ‘this does not mean that the magnates of industry also become dependent on banking magnates’. Rather, ‘the finance capitalist, increasingly concentrates his control over the whole national capital … Personal connections also play an important role here’. (225)

Here, Hilferding is developing an important point first made by Marx. Though financial capital is older than industrial capital, though, therefore, early industrial capital encounters an already existing finance capital focused on usury, Marx anticipated that capitalism’s maturation would lead to the ‘subordination of interest-bearing capital to the conditions and requirements of modern industry’, principally through the ‘transformed figure of the borrower’: no longer a supplicant in financial straits but a capitalist to whom money is lent ‘in the expectation that he ... will use [it] to appropriate unpaid labour’ (Marx 1894/1981:735). Whereas the initial states of this process of subordination had led to calls for using ‘violence (the State) ... against interest-bearing capital [to effect] a compulsory reduction of interest rates’, mature industrial capital, Marx opined, would achieve it much more thoroughly and effectively through ‘the creation of a procedure specific to itself—the credit system [which] is its own creation and is itself a form of industrial capital which begins with manufacture and develops further with large scale industry’. When it first emerged, therefore, this more modern credit system, as a creature of industrial capital, took a ‘polemical form directed against old-fashioned usurers’ (Marx 1979: 468-9. Emphasis added).

In line with this understanding, Hilferding says

At the outset of capitalist production money capital, in the form of usurers’ and merchants’ capital, plays a significant role in the accumulation of capital as well as in the transformation of handicraft production into capitalism. But there then arises a resistance of ‘productive’ capital, i.e. of the profit-earning capitalists—that is, of commerce and industry—against the interest-earning capitalists. Usurer’s capital becomes subordinated to industrial capital. As money-dealing capital it performs the functions of money which industry and commerce would otherwise have had to carry out themselves in the process of transformation of their commodities. As bank capital it arranges credit operations among the productive capitalists. (226)

Modern bank capital arose from the ‘resistance of “productive” capital, i.e. of the profit-earning capitalists ... against the interest-earning capitalists’. Though ‘[t]he power of the banks increases and they become founders and eventually rulers of industry, whose profits they seize for themselves as finance capital, just as formerly the old usurer seized, in the form of “interest”, the produce of the peasants and the ground rent of the lord of the manor’, the relationship never reverts to pre-capitalist forms (95). Instead, there is a further development that results in finance capital which ‘appropriates to itself the fruits of social production at an infinitely higher stage of economic development’ (226). Such appropriation is not parasitical. On the contrary, it is a higher, more developed, form of capital which seeks constantly to throw itself into production to expand productive accumulation.

The contrast between the early subordination of industry to finance and the later reversal of this relationship overlapped with another, that between England and the ‘protectionist countries’ that were models of finance capital.

The Geographical Specificity of Finance Capital

Throughout FC, Hilferding contrasts English development with that of the protectionist countries: its free trade policy and ideology versus the protectionism of the others; its less elastic monetary system; its very different banking structures; its different, less monopolized and cartelized industrial structure; and, of course, its far larger empire (see particularly, 301–10). The contrast was also a historical one, having to do with the earlier industrialization of England and its consequences for the other countries: English free trade was a result of England’s early lead and the decades of industrial supremacy from which the later industrializers had to protect their industry.

In Hilferding’s account of the uneven and combined development of capitalism, by the era of finance capital, England was suffering from the disadvantages of her early lead. Contrasting the organizational superiority of German industry over English, Hilferding says,

English industry developed so to speak organically and gradually from small beginnings to its later greatness. The factory was an outgrowth of co-operation (simple division of labour) and manufacture, which first developed principally in the textile industry, an industry which required comparatively little capital. Organizationally it remained, for the most part, at the stage of individual ownership; the individual capitalist rather than the joint-stock company predominated, and capitalist wealth remained in the hands of individual industrial capitalists. (305)

Not only is the English industry less concentrated, but also the relationship of banking to industry is quite different. Whereas in the protectionist countries, bank capital became increasingly important in the financing of industry by the late nineteenth century, laying the basis for the emergence of finance capital, in England

There emerged gradually, but at an increasing pace, a class of wealthy industrial entrepreneurs, owning large capital resources, whose property consisted of their productive plant. Later on, when joint-stock companies acquired greater importance, especially with the development of large transport undertakings, it was mainly these large industrialists who became shareholders. It was industrial capital, in terms of both its origin and its ownership, which was invested in these companies. (305-6)

Not only did industrial and bank capital remain thus separated, like industrial capital, ‘bank capital—and notably the capital used in share issuing activities—remained exclusively in the hands of individual capitalists’ (306).

In the protectionist countries, as capitalism developed, so too did bank deposits and lending, leading to an increase in ‘the dependence of industry upon the banks’ (224). Whereas banks had earlier attracted deposits by paying interest from earnings derived from ‘speculation and circulation’, as capitalism developed, ‘[w]ith the increase in the available funds on one side, and the diminishing importance of speculation and trade on the other, they were bound to be transformed more and more into industrial capital’ (224). This situation contrasted with that of England. Whereas in the protectionist countries, bank direction of deposited funds into production kept up a relatively healthy rate of interest, in England, ‘the deposit banks only furnish credit for commerce, and consequently the rate of interest on deposits is minimal’. In England, ‘deposits are continually withdrawn for investment in industry by the purchase of shares’, meaning that, ‘so far as industry is concerned it involves less dependence on bank capital in England as compared with Germany’ (224–5. Emphasis added). In the English financial structure,

the joint-stock banks only provided circulation credit and so acquired little influence upon industry. The bankers who specialized in share issues had equally little influence, since as a result of their activities they had ceased to be bankers and had become, at least to some extent, industrialists themselves. This predominance of capital accumulation in the hands of individual capitalists, one of the earlier and, as it were, organic features of English capitalism, was lacking both on the continent and in the United States. (306)

Moreover, England’s vast empire made its own contribution to this structure of English capitalism: ‘the large sums flowing in from the colonies, especially India, and from the exploitation of England’s trade monopoly, were also accumulated in the hands of individual capitalists’ (306), a feature lacking in Germany or the US.

England also had a very different capital export profile. In early capitalism, when England dominated, most international credit was commercial. British banks extended credit to purchasers of British products. In the new phase, however, while British ‘credit is not provided exclusively or mainly in the form of commercial credit, but for capital investment’, this credit remains in the form of interest-bearing capital; it does not partake in profits. Such investment, for instance when England supplies investment credit by investing in US railway bonds, ‘has a negligible influence on the American railway barons’ (325). Though Hilferding detects some movement in England towards a more protectionist model, in the main, England remains set in its old ways, supplying chiefly commercial credit or merely interest-bearing investment credit.

By contrast, capital exports from the protectionist countries follow the logic of finance capital already described. Moreover, while the logic may be contrasted, they are also connected.

[W]e see the strongest drive towards the export of industrial capital in those countries which have the most advanced organization of industry, namely, Germany and the United States. This explains the peculiar circumstance that these countries on the one hand export capital, and on the other hand also import a part of the capital required for their own economies from abroad. They export primarily industrial capital and so expand their own industry, while obtaining their working capital, to some extent, in the form of loan capital from countries with a slower rate of industrial development but greater accumulated capital wealth. In this way they not only gain from the difference between the industrial profit which they make in foreign markets and the much lower rate of interest which they have to pay on the capital borrowed in England or France, but also ensure, through this kind of capital export, the more rapid growth of their own industry. Thus the United States exports industrial capital to South America on a very large scale, while at the same time importing loan capital from England, Holland, France, etc., in the form of bonds and debentures, as working capital for its own industry. (326. Emphasis added)

Here, England, Holland and France are the rentier nations while the protectionist countries are the productive ones. While the former earn a lower rate of interest, the latter earn a higher rate of profit.

Finance capital drives the expansion of production instead of squeezing it. Earlier banks supplied only short-term commercial credit, as City of London banks still did in England. The continental bank, however, financed production. As such, it had to ‘necessarily concern itself with the long-range prospects of the enterprise and the future state of the market’. The ‘momentary interest’ in firms to which banks offered commercial credit was displaced by ‘an enduring one’ in firms to which they offered industrial credit and ‘the larger the amount of credit supplied and, above all, the larger the proportion of the loan capital turned into fixed capital, the stronger and more abiding will that interest be’ (Hilferding 1910/1981: 95). Such a bank may remain ‘the more powerful party’ with access to ‘capital in its liquid, readily available, form’, but it focuses on long-term productive investment (95).

Finance Capital and Socialism

Hilferding has been criticized, even ridiculed, for arguing that finance capital set the stage for socialism through such observations as ‘taking possession of six large Berlin banks’ would constitute an important step in the transition to socialism (368. see, for instance, Brangsch, 256). Counter-intuitive as such statements may appear in our age of financialization when financial institutions have wreaked such havoc on our economies, increased inequality, resulted in periodic devastating crises and strangulated production, it should now be clear that this is only because we fail to distinguish between the two models that Hilferding so clearly contrasted. When speaking of finance capital laying the foundations for socialism, Hilferding was referring to finance capital proper, the form it took in the protectionist countries, with its vested interest in the productive well-being of industry, rather than the English model with its more attenuated relationship to industry. Hilferding referred, after all, to six large Berlin banks, not six large London banks. His argument was only a further development of Marx’s.

In chapter 27 of Capital Vol. III, Marx had seen the emergence of joint-stock companies as a huge advance in the socialization of capital. In joint-stock companies, formerly individual private capital

receives the form of social capital (capital of directly associated individuals) in contrast to private capital, and its enterprises appear as social enterprises as opposed to private ones. This is the abolition of capital and private property within the confines of the capitalist mode of production itself. (Marx 1894/1981, 567)

Now the capitalist is replaced on the one hand by the manager paid for a particular kind of skilled labour and on the other by a ‘mere money capitalist’ whose profit ‘is still drawn only in the form of interest, i.e. as a mere reward for capital ownership which is now completely separated from its function in the actual production process’ (567–8). The result is a historical, rather than merely conceptual, clarification: profit, it is now clear, is

simply the appropriation of other people’s surplus labour, arising from the transformation of means of production into capital; i.e. from their estrangement vis-à-vis the actual producer; from their opposition, as the property of another, vis-à-vis all individuals really active in production from the manager down to the lowest day-labourer. (Marx 1894/1981, 568)

Such ‘capitalist production in its highest development’ is a

necessary point of transition towards the transformation of capital back into the property of the producers, though no longer as the private property of individual producers but rather as their property as associated producers, as directly social property. It is furthermore a point of transition towards the transformation of all functions formerly bound up with capital ownership in the reproduction process into simple functions of the associated producers, into social functions. (Marx 1894/1981, 568)

Engels’s observation at this point that tendencies towards cartelization and towards concentrating ‘the entire production of the branch of industry in question into one big joint-stock company with a unified management’ prepared ‘in the most pleasing fashion its future expropriation by society as a whole, by the nation’ (Marx 1894/1981, 569) is hardly different from Hilferding’s proposition about the six large Berlin banks.

Marx continues by observing that ‘[t]his is the abolition of the capitalist mode of production within the capitalist mode itself … which presents itself prima facie as a mere point of transition to a new form of production’ (Marx 1894/1981, 569). Increasing monopoly leads to rising state intervention and ‘a new financial aristocracy’ with all the speculation and swindling it involves. This, he says, is ‘private production unchecked by private ownership’ (Marx 1894/1981, 569). The realities of capitalism are exposed: saving can no longer pose as the origin of capitalism when the speculator demands that ‘others should save for him’; abstinence goes by the wayside when luxury ‘becomes a means of credit’ (Marx 1894/1981, 570). Capitalism, which begins in expropriation comes full circle when the expropriation of small and medium and even some large enterprises by the giant ones, greatly aided by the credit system, lays the foundation of the expropriation of the few remaining owners. The credit system not only accelerates capitalist development, but also accelerates crises and the dissolution of capitalism itself. He concludes:

The credit system has a dual character immanent in it: on the one hand it develops the motive of capitalist production, enrichment by the exploitation of others’ labour, into the purest and most colossal system of gambling and swindling, and restricts ever more the already small number of exploiters of social wealth; on the other hand however, it constitutes the form of transition towards a new mode of production. It is this dual character that gives the principal spokesman for credit, from Law through Issac Péreire, their nicely mixed character of swindler and prophet. (Marx 1894/1981, 572-3. Emphasis added)

Hilferding’s views on finance capital representing a stage towards the development of socialism are entirely in line with this vision of Marx.

The socializing function of finance capital facilitates enormously the task of overcoming capitalism. Once finance capital has brought the most important branches of production under its control, it is enough for society, through its conscious executive organ—the state conquered by the working class—to seize finance capital in order to gain immediate control of these branches of production. Since all other branches of production depend upon these, control of large-scale industry already provides the most effective form of social control even without any further socialization. A society which has control over coal mining, the iron and steel industry, the machine tool, electricity, and chemical industries, and runs the transport system, is able, by virtue of its control of these most important spheres of production, to determine the distribution of raw materials to other industries and the transport of their products. Even today, taking possession of six large Berlin banks would mean taking possession of the most important spheres of large-scale industry, and would greatly facilitate the initial phases of socialist policy during the transition period, when capitalist accounting might still prove useful. (Hilferding, 1910/1981, 367-8)

Indeed, Hilferding adds:

There is no need at all to extend the process of expropriation to the great bulk of peasant farms and small businesses, because as a result of the seizure of large-scale industry, upon which they have long been dependent, they would be indirectly socialized just as industry is directly socialized. (Hilferding, 1910/1981, 368)

If this view appears to us a strange, perhaps even reactionary, it is because the development of the financial sector took an opposite turn to the one anticipated by Marx and Hilferding. The finance capital of the protectionist countries, with its focus on organizing and expanding production through long-term investment and its development of the contradictions of capitalism to their highest form, did not come to dominate. Instead, it was the more speculative, short-term financial model of England, divorced from production, that dominates the world today, though a variety of other more and less different national financial systems also exist which manage their relationship with this worldwide financial system. We conclude this chapter by reflecting on why this happened.

The Triumph of the English Model and Beyond

The explanation is necessarily a historical, rather than a ‘theoretical’, one and can only be outlined here.

The age of competing imperialisms, to understanding which FC is such a great aid, with its fast-growing contender nations challenging Britain’s early industrial supremacy had, as I have argued (Desai 2013), already inaugurated the age of multipolarity in the late nineteenth century. However, whereas most observers anticipated a world of competing powers, the US began nursing a rather more vainglorious ambition—to ‘build an international commercial system which would allow American business to topple and replace British business interest as the managing component of the world economy’ and to ‘create new institutional means of performing the politically stabilising task which Great Britain alone had performed before 1914’ (Parrini 1969: 1, emphasis added). This ambition could not extend to acquiring a territorial empire to match Britain’s; that would involve taking on powerful established empires and rising nationalisms. Therefore, the US confined itself to seeking to make the dollar the world’s money to replace the pound sterling and New York its financial centre, to replace London.

This aim was never achieved, nor could it be. Sterling’s world role had rested, in any case, on Britain’s empire: the key to the operation of the gold standard was Britain’s ability to supply the world with sterling liquidity by investing the surpluses it drew from its non-settler colonies, particularly India, to its white-settler colonies and its former colony, the US, both facts pointed to by Hilferding. Without such surpluses, the dollar’s world role relied on providing liquidity through current account deficits and this method of providing liquidity was inherently unstable. It was subject to the Triffin Dilemma: the greater the deficits, and thus the liquidity provision, the greater the downward pressure on the dollar’s value. This downward pressure originally took the form of the outflow of gold to the point where the US was forced to close the gold window in 1971.

What happened thereafter is deeply connected with contemporary financialization. For, after 1971, the US counteracted the Triffin Dilemma through a series of measures aimed at expanding purely financial dollar-denominated transactions which increased demand for dollars, beginning with the recycling of OPEC oil surpluses in the 1970s and culminating in the blowing of successive financial bubbles, of which the stock market bubble that burst in 2000 and the housing and credit bubble that burst in 2008 were the most recent. Indeed, I have argued that, since 1971, the dollar’s world role has been reliant on a series of ever-greater dollar-denominated financializations or asset bubbles.

These financializations required financial structures vastly different from the ones Hilferding described. This transformation was slow and, until quite recently, incomplete. The US lifted capital controls in the 1970s to facilitate them. However, not only had the US financial sector conformed to the finance capital model described by Hilferding in the early twentieth century, Depression-era legislation had turned into one of the most regulated in the world. Its deregulation did not begin until the 1970s and initially remained slow. It accelerated once Alan Greenspan became Chairman of the Federal Reserve in 1987 though the repeal of most important Depression-era regulation, the Glass Steagall Act, had to wait until 1999. In the intervening three decades or so, London, which was and remains one of the most deregulated financial environments in the world, greatly aided processes of dollar-denominated financialization. It was a role which London gratefully accepted, sterling having lost its former position, dollar-denominated transactions became the financial center’s new lifeline (see Ingham 1984, Norfield 2016).

London’s presence on the periphery of Europe, meanwhile, also played a role in the undermining of the continental model of finance capital. In the early post-war decades, it continued to characterize European capitalism, becoming the core of the famed ‘Rhineland Model’. However, a combination of factors including German unification and the advance of European monetary integration set European finance on the road to Western-style deregulation. The City of London enabled the participation of European financial institutions in the US housing and credit bubbles and outside the US and the UK; they were the chief victims when the bubble burst in 2008. The weakening of the European financial sector laid the groundwork for the 2010 Eurozone crisis.

The dollar never stably served the world as its money (Desai 2013) and current trends towards dedollarization amid advancing multipolarity, may well mark the end of the long detour that vain US aspirations to emulating British nineteenth-century dominance had led the capitalist world to. While the end of the detour will not put world history back where it was before the detour began, while, therefore, Hilferding’s and Marx’s expectations of the relationship between banks and industry will be unlikely to reacquire their former relevance, they can acquire a new one as we seek to make sense of the financialized capitalisms we are left with, particularly when contrasted with China’s market socialism, with its greater proximity to both finance capital and socialism.