Ch. 3: The Dwindling of Competition in the World Market

The mingling of international capital signifies a mingling of interests. The relationship between the entrepreneurs of different countries ceases to be one of reciprocal struggle for markets and consumers, and becomes instead a joint struggle in the market against the consumers. The allied industries of the respective countries no longer underbid one another. They form a ring to maintain prices. The more intimate the community of interests between the capitalists of different nations, and the larger the number of nations participating, the more does this ring tend to assume the characteristics of a world-wide monopoly.

I. International Cartels in the Past.
In earlier days there have been successful attempts to secure world-wide monopolies. Before the war, an international community of capitalist interests had been so successfully organised in certain fields, that these international ties were not wholly severed during the war, even when the industrials concerned were, officially speaking, enemies.* The form taken by such organisations was that of international cartels – agreements between groups of entrepreneurs engaged in enterprises of like character. The usual aim of these cartels was to define the areas of markets, to fix prices and conditions of sale, and to specify conditions of production. Liefmann estimates that before the war there were about one hundred international cartels in which German entrepreneurs were participators.

The best known international cartels are those connected with the shipping trade. An American investigator has shown that before the war there were at least eighty cartels of the kind. This remarkably high figure must not be supposed to imply a disintegration of the shipping interests. For the most part they were agreements between shipping companies of different countries. Practically, the freight market was monopolised by the International Mercantile Marine Co. A British royal commission held in the year 1909 showed that nearly all the steamship lines of Europe and America were members of this organisation. Those that tried to hold aloof from the combine were fought until they decided to join and to accept the freightage rates prescribed by the international cartel. An especially close connection between the members was secured through the establishment of a common treasury out of which definite sums were paid annually to those members who had been faithful to the terms of the agreement, whereas those that revolted were left in the lurch. The report of the before-mentioned commission showed that the cartel had enabled its members in various branches of the shipping trade and at various times to secure far higher freights than were economically essential. Generally speaking, said the report, shippers have to pay higher freights than they would, pay under the regime of free competition.*

The foregoing statement is phrased with studious moderation. To some of the members of the commission, the effect of the shipping combine seemed so disastrous that in a minority report they demanded legislative interference. It was impossible, they said, to tolerate this monopolisation of the sea by a combine of private entrepreneurs.

Even stronger is the position of an international cartel that relates to mineral wealth, for such wealth is restricted to particular parts of the world, and is thus endowed by nature with monopolist characteristics. Pre-eminent among natural resources of the land is petroleum. That is why the exploitation of petroleum wells was accompanied at an early date by the formation of colossal and almost incredibly ramified agglomerations of international capital. This tendency is especially favoured by the circumstance that large quantities of capital are needed to work the oil wells. For the most part these lie remote from the highly developed industrial areas, and not more than two per cent. of the world’s supply of petroleum is as yet derived from European Wells. The first stage in the oil industry, the obtaining of the oil from the wells, is the least costly process. Far more costly are the requisites for the storage, transport, and refining of the petroleum. Until a few decades back, one great organisation, the Standard Oil Co. of the United States, had an almost exclusive monopoly and dominated the world market. Attempts at European competition were beaten down, with one exception. The only organisation that was able to hold its own against the American petroleum trust was a combine formed out of the Koninglijke Nederlandsche Petroleum Mij. and Shell Mex., Ltd., a British firm. This owns petroIeum wells in the United States, the Dutch Indies, Mexico, Venezuela, Rumania, etc., and controls about ten per cent. of the world’s production. The struggle between these two combines still continues, chiefly in consequence of the important part played by the control of petroleum in war time, but it is rather a fight for raw materials than a fight for markets. Price cutting has been almost unknown. Last winter a price cartel was established between the above-mentioned oil trusts and the Anglo-Persian Oil Co., Ltd. (which is mainly the property of the British Government). The formation of this cartel was merely the written record of what had long been a working agreement.

The international collaboration of capital has also made considerable progress in the armaments industry, although this is apt to be regarded as a region where State secrets must be carefully preserved. Since, for other reasons than those hitherto considered, this aspect of international combination is exceptionally worthy of attention, I shall go into the matter more fully, availing myself of a vivid account penned by the German writer Hans Wehberg.#

“Before the war there was an international powder cartel. This was composed of the Nobel dynamite trust of London, with seven branches in England, five in Germany, and one in Japan; the Rhine-Siegener group comprising three explosives factories; the Cologne-Rottweiler powder factories, which collaborated with British, Russian, and Spanish firms; the Deutsche Waffen- und Munitionsfabriken, which also had close ties with numerous German and foreign companies; the Société Française de Dynamite and the (likewise French) Société Franco-Russe de Dynamite. The two last-named firms were in close touch with similar undertakings.

“From 1901 to 1903 there existed the United Harvey Steel Co., an organisation in which the great armour-plate manufacturers and cannon kings of the world coIlaborated on friendly terms. Almost all the big German, French, British, American, and Italian firms were represented here: for instance, the great British works of Vickers, Ltd., and W. G. Armstrong & Co., Ltd.; the American Bethlehem Steel Co.; Schneider-Creusot; Krupp and the Dillinger Hütte; the Società degli Alti Forni Fondiere Aciaiene di Terni. The last-named firm had close relationships with Vickers, and this latter was connected in its turn with another Italian armaments firm. The firm of Krupp was interested in the Austrian Skoda works and in the Russian Putiloff works. This Russian company, in which Schneider-Creusot had a financial interest, was a link between Krupp and the great French armour-plate manufacturers. An interesting detail is that Armstrong and Vickers jointly owned half the capital of the Mutoran armour-plate factories in Japan. Armstrong and Vickers, once more, this time jointly with the British firm of John Brown, have an interest in the Spanish dockyards known as the Naval Construction Establishments of Ferrol. Six well known English firms have combined to form a Portuguese Naval Construction Syndicate which is to aid the Portuguese government in the building of a strong navy. The rebuilding of the Russian navy after the Russo-Japanese war was the joint work of British, French, German, Belgian, and American firms. Thus the armour-plate manufacturers throughout the world are intimately linked.

“In the years 1905 and 1907 the Deutsche Waffen- und Munitionsfabriken of Berlin and Karlsruhe, the Mauser arms factory of Oberndorf-on-the-Neckar, and the Fabrique Nationale d’Armes de Guerre of Herstal in Belgium, on the one hand, and the Oesterreichische Waffenfabrik-Gesellschaft on the other, entered into an agreement. The most important clauses of this agreement ran as follows:

“¤ I. Contracts for the delivery of new rep eating rifles or carbines to Russia, Japan, China, and Abyssinia are to be utilised for the common advantage of the combine, the profits being divided according to a pre-arranged scale…

¤ 3. The factories belonging to the respective groups will give one another all possible mutual support, so that each factory can carry on its work as quickly and cheaply as possible. To this end, the drawings and dimensions of the models ordered and to be made shall be exchanged gratis, on loan, and the requisite apparatus shall be exchanged at cost price…

¤ 4. The parties to this agreement shall always come to an understanding regarding the price of the arms they deliver or offer for sale…

¤ 6. For the purposes specified in ¤ I, a common fund shall be established, and to this fund every factory working under this agreement shall pay the sum of fifteen francs for each rifle or carbine manufactured…’ Orders given to either firm separately were not covered by the agreement. Still this reservation does not mean very much, seeing that the Deutsche Waffen- und Munitionsfabriken owns nearly all the shares of the Mauser undertaking.”~

No doubt these cartels were spontaneously disrupted at the outbreak of the war, but this did not alter the fact that in many instances a country’s troops were slaughtered by weapons that had been manufactured by the armaments’ industry of their own “fatherland.” Wehberg stresses this.
“At the Dardanelles,” he writes, “the British were bombarded with cannon supplied by British firms”.

Furthermore, inasmuch as the Austrian Skoda works had established on behalf of the Nevsky factory of St. Petersburg some steel-smelting works for the manufacture of artillery material, the Austrian soldiers on the Galician front were mowed down by artillery fire for which Austrian firms were partly responsible.”

It was repeatedly proved during the war that other industrials of a country besides the armament manufacturers were ready to supply the enemy with materials while the struggle was still in progress. Interesting details concerning this matter are to be found in a book entitled “Die Tragödie Deutschlands” [“The Tragedy of Germany”]:

“Our own heavy industry continued during the war to send such large quantities of material abroad (this meaning, as every child must know, to supply the Entente) that at times there was not enough left for the needs of our own army. These industrial circles were the very ones in which “fight to a finish” was most vigorously proclaimed. “Fight to a finish” was a very useful motto. The struggle on the Somme almost decided the issue against the Central Powers owing to lack of war material, and yet during eight months in the year 1916 German heavy industry was supplying the neutral powers with large quantifies of iron and steel – the monthly average was 150,000 tons, and in one of these months the export amounted to 250,000 tons. At the front, thousands of Germans were sacrificed because scarcity of material made it impossible to construct a sufficiency of barbed-wire entanglements.

Der Kampf, a daily organ of the independent social democrats, published on May 26, 1920, and in subsequent issues, an almost incredible collection of facts under the caption ‘The Treason of Heavy Industry.’ Although the t’s were crossed and the i’s were dotted, as far as I know there has been no prosecution. The issue of June I, 1920, contains amazing instances of the ‘business enterprise of German heavy-industry firms. ‘Especially characteristic was what happened at the Stinnes Differdingen works. The military authorities had sent to these works large quantifies of scrap iron to be made into rails that were urgently needed. The rolling of the rails was put off week after week. To pressing official enquiries, Differdingen replied that the cause of the delay was the lack of trucks. authorities, on further investigation, found that this was a mere pretext, seeing that the requisite trucks had been sent long ago. Driven into a corner, the manager of the rolling-mills at Differdingen explained that he had had instructions from his chiefs in Dortmund to postpone the manufacture of rails for the front, and to devote his energies to filling export orders, which were extremely profitable.”

An item that appeared in the Züricher Post during the autumn of 1917 affords direct evidence that the iron exported from Germany to “neutral” countries actually went in large quantities to France, so that the German heavy industrials were arming our enemies against us.

The passage runs:

“The address to the Bundesrat from the machine and textile industries points out that German iron has been sent from Switzerland in large quantities to France and Italy. Two members of the Bundesrat are to go to Paris in a few days to arrange for the sending of goods in exchange”.

The “goods in exchange” were duly forthcoming. They took the form of nickel, which the German munitions manufacturers needed as urgently as the French munitions manufacturers needed German iron and German steel. Evidently, in both countries, heavy industry had a strong interest in clamouring for “a fight to a finish”. §

The reciprocal supplies during the war have nothing to do with the cartel system in the proper sense of the term. I have only referred to them here because they show how vigorously the mutual interests of the industrialists remain at work even in war time. We can readily infer how powerfully these interests must operate when the inhibitions of war sentiment are removed.

Returning to the main theme, I may give a third example of an international cartel of pre-war days. I refer to the bottle makers’ cartel, which is worthy of special mention owing to its peculiar characteristics. The impulse to the formation of this cartel was given by the invention of a machine which revolutionised bottle manufacture. The whole bottle industry of the world was threatened with ruin by this invention, for none of the old-established factories could hope to compete with the new process. For self-protection, the bottle manufacturers formed national combines and an international combine, bought the patent jointly, came to an understanding as to the number of new machines that were to be built in the various countries, and thus took effective measures to avoid competition in the world market and a fall in the price of bottles. The movement towards the formation of international cartels was active in other domains than those hitherto enumerated, and made its influence felt in all branches of industry and commerce during the years immediately before the war. In some instances these international cartels practically replaced the system of protective tariffs.

2. Developments of the Post War Period.
Most of these cartels were dissolved by the war. There were two main reasons why they were not revived on the same scale immediately after the war. First of all, there had been such extensive changes in the national units of Europe; and, in the second place, the national currencies were in so disturbed a state. Depreciation enabled many of the industrials to underbid their competitors in the world market, and thereby to realise greater profits than had been derived before the war from membership of an international cartel. Such chances of profit-making had to be turned to account. The principle of free competition held full sway once more. International agreements would have restricted the possibilities of gain.

But such possibilities are always exceptional, and are fugitive. The arrest of the movement toward the formation of international cartels could only be transient. As soon as the relationship between the various currencies is stabilised (not, as yet, by a return to the parity of exchange of pre-war days, but simply by a prolonged arrest of foreign exchanges) the hindrances to the cartel-isation movement disappear. Thereupon, international trusts, cartels, and concerns spring into being betwixt night and morning-organisations of a more formidable character than ever before. These new international organisations of capital are of a very different type from their predecessors. They are no longer the mere expression of a temporary understanding between interests which harmonise to-day, but may perhaps conflict to-morrow; they are the final outcome of the international organisation of huge industrial combines which have assumed a stable form. The international mingling of capital has united the employing class internationally for good or for ill. The community of interests is more intimate, the mutual dependence closer.

We have not now to do with an alliance into which the parties enter of their own free will. Nor have we to do with an alliance of capitalist magnates who have recognised the madness and the curse of industrial imperialism, men whose consciences have been stirred at the very brink of the pit. Humanist impulses have nothing to do with the formation of this alliance. Industrial kings of the calibre of Stinnes and Schneider are not moralists. It is not their aim, through a mutual accommodation of interests and through a partition of markets, to show that they have Iearned by the dread experiences of the world war, and that they hope to avoid new devastations, a fresh unleashing of millionfold slaughter. The only motive that influences the international capitalists when they make peace with one another is the desire to safeguard the millions and the milliards into which they have cunningly minted others’ blood and others’ deaths.

For there is one memory which remains very active in their minds. In its final convulsions, the world war took a dangerous turn, threatening to become a war of mankind against the sowers of strife. Thrones were tottering the old instruments of dominion were collapsing. Those who were returning from the field of murder and death were making more extensive claims upon life, and were beginning to undermine the very foundations of capitalism.

At that juncture the bourgeoisie in all lands felt that it would be inexpedient to do anything that would increase the discontent of the labouring masses. Almost unresistingly, the capitalist class acceded to the workers’ demands, so that with very little trouble the latter was able to secure advantages for which it had long been fighting. The bourgeoisie was compelled to confine itself to a defensive attitude; and even those who were sharing out the world at Versailles thought it as well, in their blood-stained ledgers, to make a few entries to the advantage of the working class.

For the first time the bourgeoisie realised that a new and world-wide power had come into existence, prepared to challenge the economic and political supremacy of the capitalist class. For the first time the bourgeoisie became aware of the existence of this horny-handed opponent, who was ready to interfere with capitalist schemes of world conquest, and aimed at the complete overthrow of the propertied classes.

The international bourgeoisie has not forgotten the writing on the wall. The red flag still waves above the Kremlin to remind the capitalists of the letters of fire traced in the days of revolution. “United we stand, divided we fall”. This is a familiar alternative, and it is the one which faces the capitalists of all lands to-day.

The foregoing exposition shows that they have made their choice. They have renounced the idea of expansion at the cost of rival capitalise groups. They have renounced the old imperialist aim, in pursuit of which one section of the bourgeoisie hoped to raise itself to the detriment of other sections. The dream of subordinating the world to the interests of the capitalists of one particular country, the dream of ruling lands and seas from one metropolis, has been dreamed to a finish. The need to safeguard their possessions is forcing the national bourgeoisie to bury the hatchet, for behind every international conflict looms the proletarian revolution, with its menace to the old foundations of power. More important than the question whether German capital or French or British is to exploit the mineral treasures of the world, has become the question, whether capitalism as a system of exploitation can endure. Perforce, capital had to free itself from the weaknesses and limitations which it had brought upon itself through the world war. In other words, bourgeois imperialism can no longer take the form of an attempt to establish dominion over the bourgeoisie of other lands; it must be directed against the common people within the frontier, against the working class of the capitalists’ own country.

This involves a complete change in bourgeois policy. Hitherto, in each country, the members of the capitalise class, in the pursuit of their imperialist aims, have had to avoid acrimonious quarrels with the workers. These latter were needed by capital as fighting forces, and had to be kept in a good humour when capital was internationally embroiled. This consideration no longer comes into play. The truce between the capitalists and the workers directed against all foreign capitalists, has been replaced by a truce between the bourgeoisie of all nations directed against the working class of each nation. The design to expand the sphere of influence at the cost of the bourgeoisie of other lands has been abandoned. At most, it persists only in the brains, or rather in the mouthing of a few frenzied nationalists. The bourgeoisie of high finance and heavy industry holds other views.

Reparations are to be collected from the working class. One indication of this is given by the joint action of the German, French, and Belgium industrial representatives at the conference of the International Labour Office held in the end of January 1924. But there are other plain indications. Read, for instance, the following extract from the 1923 report of the Société Générale de Belgique, the most powerful banking and industriel corporation in Belgium:

“The year 1924 opens under favourable auspices. There is good reason to hope for a sensible improvement if the country only has the wit to grasp that in no other way than by a notable increase in production shall we be enabled to compensate the excess of imports and thus avert the anticipated failure to make good the damages caused by the war.

“Everywhere, indeed, people are at length beginning to realise that solely by hard work and by thrift can the wealth squandered and destroyed during the war be recreated.”

This is a very different tune from that which the heavy-industry press has hitherto been accustomed to play. Both in Belgium and in France, the tune was “le Boche payera” (the Germans will pay). The new tune is, “The working class must pay.” To-day, to the Belgian capitalist, the Belgian worker has become the “Boche,” the worker who for years bore the hardships of the fighting front in the belief that he was defending home and life against the foreign destroyer. Everyone now understands perfectly well that the formula “increased production” is simply a euphemism for “a longer working day.” This is put in plain words in the before-mentioned report:

“The fact that all our workers are now busily employed, and the fact that our total imports are less than they were in 1913, suffice to prove that we are not producing a sufficiency under the regime of the eight-hour day.”

Enough said. My only object in quoting the report of the Société Générale de Belgique is to show that heavy industry is deliberately changing its front, is deliberately proceeding to levy reparations from the working class.

But the truce of the international bourgeoisie has another notable consequence. It is leading the capitalists of each land to revise their attitude towards their own State. Hitherto, in each country, it was of great importance to the capitalists that their State should be an imposing one, that it should take a formidable place among the other industrial States. It was to their interest that the State should possess fighting forces that might help them against attempts to exclude them from extant markets and might aid them in the opening of new markets. The State could only protect their interests in the world market officially by using, or by threatening to use, the strong hand. Even in the remotest corners of the world, and even as against the greatest of the great powers, their national flag must inspire respect.

This interest in national predominance is a thing of the past. To-day large-scale capital can dispense with the State as an instrument of power in the world market. The capitalist class in various countries has resolved its discords into a harmony, and in each country the bourgeoisie finds that the bourgeoisie of other lands can defend its interests better than the national State could defend them. Bourgeois interests have taken a new turn. The bourgeoisie has no interest in a State which not merely fails to inspire fear in other States, but is actually afraid of itself. The State has ceased to be a factor in world politics. Capital has degraded the State from the role of world conqueror, to the role of policeman.

That is the real, the decisive political significance of the general onslaught of private industry upon State capitalism in all its forms. The State is to be excluded from economic functions. The whole field of economic life must be the preserve of private industry, and the State is to be subordinated to private industry.

The reader must not imagine that this overshadowing of the State by trusts, concerns, and cartels is a peculiarity of the development of Germany and France. The attempt to subordinate the State and its institutions is international, and advances just as fast as the concentration of capital advances, and just as rapidly as (thanks to the organisational and intellectual development of the labour movement) democracy is tending to become an instrument that can be used against capital.

These tendencies were plainly manifested by the International Chamber of Commerce when it unanimously approved a report presented in the autumn of 1923 by Mr. Ferdinand I. Kent, the vice-president of the Bankers’ Trust CO. of New York. The relevant passages in the report run as follows*:

“To restore the normal vitality of Europe will need continuous attention and a great deal of patience. The means will be the persistent application of reason to the problems of government, which represent the outward form of the present difficulties of Europe… The business world must play its part in this matter. We believe that it would be a great step in advance if in every country the men of industry and commerce were to appoint special committees in close touch with the International Chamber of Commerce. The latter would function as a Clearing House, and would transmit to the committees of other lands the ideas sent in by the committee of any particular land… To promote the attainment of these ends, it is hereby resolved to make the present report as widely known as possible; it is agreed that the international Chamber of Commerce shall set vigorously to work to establish committees in every country in which it has members; and that it shall open up relationships with economic groups in other lands”.

What is the net upshot of the suggestions made in Mr. Kent’s report? His proposal is to establish a worldwide organisation, international in its operations, elaborating schemes in consultation with the industrialists of all lands, schemes that will then be laid before the individual governments and dictated to these. It is the proposal to establish an economic world parliament, which shall override the powers of the old governments, and shall enforce the will of internationally organised industrial and commercial capital upon governments and parliaments.

In this scheme, class divisions find their sharpest expression. Such an economic world parliament has absolutely nothing to do with democratic principles. The only voices that will have any weight in its councils will be those with which the great concerns and the great trusts speak. There is no place for any interests but theirs. The petty entrepreneur will vanish from the scene, and the decline of the middle class will be finally achieved.

Mankind will not even be indebted to international capital for the one and only advantage, which might have accrued from such an international understanding of the industrialists. For three reasons the system of national armaments will not be allowed to lapse. In the first place, there is not sufficient confidence in the durability of the present reconciliation. In the second place, the manufacture of armaments has been, too lucrative for the profit-makers to be willing to abandon it.

The industrials will continue to insist on the need for “being prepared,” even when they are on the best possible terms with the enemy against whom the preparations for war are ostensibly directed-and though in the future the enemy will be allowed to participate as far as possible, just as he participated in the past, in the profits of the armaments trade. Last of all, the capitalists do not overlook the fact that artillery and machine guns may have a political value in home affairs, should the victims of their ruthless economic policy rise in revolt. The State remains to exert its functions as guardian of “law and order.” The capitalists are not afraid that the police forces of the State will be turned against themselves, and one of the great advantages of this ingenious division of labour is that capital will not have to pay for the services of these protective troops.

I. International Cartels in The Past
* Robert Liefmann, in his book Kartelle und Trusts, writes: “By no means all the international cartels, not even those which connected us with enemy lands, were dissolved during the war.”
# See F.M. Wibaut, Scheepvaartkartels, in “Ekonomische Kronieken”.
~ Die internationale Beschränkung der Rüstungen, Politische Bücherei, Stuttgart, 1919.
§ J.T. Walton Newbold’s “How Europe Armed for War”, Blackfriars Press, London, 1916, contains valuable intimations of the early stages of this interlacing of capitalist interests in the armaments industry. Furthermore, the volume ends with a remarkable forecast which bears closely upon the main topic of the present work. On p. 149 Newbold writes: “The shadow of a terrible despotism looms athwart the workshops of the world wherein the workers, bound by legal enactments, fettered by official regulations, forbidden the right to strike, deprived of their trade-union rules, driven on by fears of national disaster and kept in control by military authority, may yet become the helpless serfs of an all-powerful combination of employers, at whose head are the armament syndicates.”

2. Developments of the Post War Period
* Unfortunately the original English of this document is not accessible before going to press. We retranslate from a German version of an Italian translation. The form may have suffered, but the substance is what matters. – E. & C.P.

NEXT: The Dangers that Beset the Working Class