ISJ Index | Main Newspaper Index
Encyclopedia of Trotskyism | Marxists’ Internet Archive
From International Socialism, No.45, November/December 1970, pp.25-28.
Transcribed & marked up by Einde O’Callaghan for ETOL.
The Age of Imperialism
Harry Magdoff
Monthly Review, 54s hardback, 18s paperback
Magdoff’s work is, in part, an extensive compilation of statistics relating to several aspects of the United States economy, especially in the sphere of its international connections. This kind of information is absolutely crucial to any revolutionary socialist, and we are all indebted to Magdoff in this regard. In part – patchily, with odd hints scattered throughout the five essays which constitute this volume – his work is an attempt to theorise and capture the reality of modern US capitalism. Here Magdoff proves to be on less sure ground, as we shall show later.
The central thesis of these studies is the one-ness, the cohesion and interdependence of US economic, political and strategic interests and the world capitalist system. The core of the book (Chapters 2-4) attempts to understand the imperialist system and to identify the various inter-relationships of US business and finance and US international activity. Magdoff’s argument is basically as follows:
A new imperialism arose in the late 19th century based on ‘the competitive struggle among the industrial nations for dominant positions with respect to the world market and raw material sources’, a development associated with the concentration of capital and the emergence of the giant corporation. The development of a new technology, based on the direct application of science and scientific research rather than on mere mechanical ingenuity was central to this change. The main developments occurred in the fields of steel, electricity, industrial chemistry and oil: one of their most important consequences was the drive for raw materials.
Modern imperialism is characterised by a number of shifts of emphasis from this late 19th century variety, the two most important of which are the shift from rivalry in carving up the world to the struggle against the contraction of the imperialist system (which begins post-1917), and the new role of the US as organiser and leader of the world imperialist system (post-1945).
It is this second change which informs most of’ Magdoff’s researches, and a number of significant points emerge:
(1) The US has become pre-eminent in the export of capital. Its share of the world total of foreign investments has risen from 6.3 per cent in 1914 to 59.1 per cent in 1960. As far as manufacturing is concerned the huge foreign involvement is concentrated mainly in Europe and Canada (75.1 per cent in 1966). By 1965 the sale of foreign affiliates in the fields of paper, chemicals, rubber products, metals, machinery (both electrical and nonelectrical) and transportation was higher than exports from US-based plants: indeed, in the period 1957-65 the sales of foreign-owned plants rose 140 per cent while sales from exports rose only 55 per cent.
In attempting to assess the significance of these figures Magdoff makes the point, which is often ignored, that while the export of capital in any year may be smaller than exports in the same period, the economic involvement which arises from exports of capital depends on the cumulative effect of the annual flow of investment. That is to say exports are a once and for all thing, exported capital piles up and accumulates.
(2) The US has become a ‘have-not’ nation for a wide range of both common and rare minerals. Despite technical innovations, the production of substitutes etc, the US economy has been transformed from being a net exporter of raw materials in the 1920s, to being a net importer. In 1961 14 per cent of raw materials consumed were imported and the trend is upward. Furthermore, for 52 out of 62 materials which the US stockpiles (regarding them as crucial to its war potential) at least 40 per cent has to be supplied from abroad. That is, a growing dependence on the import of raw materials, one of the features of classic imperialism, is suggested.
(3) The expansion of US industrial and military interests has been accompanied by a corresponding expansion of banking and financial interests beyond her borders. At once it should be said that Magdoff s material here is less developed. There has been a rapid expansion of branch banks (i.e. branches of US banks) especially since 1955, but there are only hints or odd illustrations as to the volume or type of business they handle and their actual importance is difficult to assess. It is however clearly dependent upon and secondary to the expansion of investment in manufacturing.
What is important, and Magdoff expounds this well-known information clearly and concisely, is the position of the dollar as the world currency, since it was made equivalent to gold in the International Monetary Fund Treaty (Article IV). Through it a relationship of dependency of all capitalist, countries on the US was set up: in the final analysis holders of IOUs from the US can only use them to purchase US goods at US prices.
Furthermore, because of its privileged position the US has been able to run a balance-of-payments deficit in every year except one since 1950 – a deficit which is used to finance military expenditure, military aid and investment in foreign countries. It is financed by the expansion of the supply of US dollars via the credit created by the Government and the banks, and is dependent ultimately on the willingness of the rest of the capitalist world to hold dollars as a reserve asset. In May 1968 for example the dollar assets held by foreigners were $31.5 billion, while the gold reserves were only $10.7 billion.
(4) The bulk of foreign aid is ultimately military or political. Only 1/3 of aid since World War 2 has gone on economic development as such. In the ten year period following the end of Marshall aid, the pattern of US aid has been as follows: 13 per cent to developed countries, 37 per cent to ‘client’ countries (i.e. countries bordering on the USSR or China) and 50 per cent to underdeveloped countries. A substantial amount of the latter has been military in some form or another. This aid is also used to enforce open-door policies, allowing the US free access to sources of raw materials and allowing US business to invest freely. In addition, investment guarantee treaties have been signed with more than 70 underdeveloped countries which receive US aid.
Furthermore a large proportion of US exports are financed through tied loans (the recipients having to buy US goods). For example, some 30% of agricultural exports are so financed: were these goods sold on the open market world prices would fall, thus also reducing the value of the other 70%. In addition aid-sponsored commodities are generally required to be carried in US flag vessels, so a further profit is notched up here.
The way in which aid-receiving countries are tied are complex and numerous. For instance when aid is given in ‘the form of commodities the receiving Government is often required to deposit the income from these sales in a special fund, 10 per cent of which is used to pay such things as US embassy expenses, the other 90 per cent of which, though the property of the receiving Government, cannot be spent in other than US-Government approved ways. This leads in effect to huge blocked funds – US-owned or US-controlled.
In addition to this direct US involvement, there is also the involvement, dominated by the US, but in which the rest of the leading capitalist countries participate, through such institutions as the IMF and the World Bank. Any country which has to appeal to the World Bank in desperation is forced to accept certain conditions (‘sound monetary and fiscal policies’ such as balanced budgets, devaluation, elimination of controls over imports and exports, wage policies etc) all of which are designed to ensure that the structure of the international world system is not upset or threatened in any way.
At the same time the changing structure of world trade has led to a severe and growing disadvantage for sellers of raw materials and primary produce. From 1938-63 world trade in raw materials grew by 66 per cent while that of manufactured goods rose by 250 per cent. The demand for oil is the only exception to this trend.
The result of all these factors, over time, has been for the dependence of the underdeveloped world on the advanced countries to increase in staggering fashion. For instance the external indebtedness of the underdeveloped countries increased 4-fold in the period between 1956 and the end of 1966 (from $9.7 billion to $41.5 billion). In 1966 approximately 44 per cent of aid from the advanced to the underdeveloped countries was needed to service past debt.
This then, in broad outline is the world picture which Magdoff paints. His substantive chapters are a mine of information from which only a tiny fraction has been extracted and presented above. Despite their value however, it is worth pointing out that at times they tend to be illustrative and suggestive rather than quantitative or even descriptive. A detailed study of the relations of the US with a single underdeveloped country (such as that of Pakistan in The Burden of US Aid, Pakistan Today, Autumn 1961) provides in many ways a more insightful, though less generalised picture of the way US imperialism actually operates.
The significance which Magdoff attributes to his information is dealt with in passing throughout the book, and more fully, but still sketchily, in the Introduction and the final chapter The American Empire and the US Economy and it is to this question that we must now turn.
It must be stated at the outset that Magdoff’s use of the term ‘imperialism’ is rather fuzzy. For Lenin, imperialism signified the ‘highest stage’ of capitalism: a number of historically concrete factors were involved in any rigorous use of the term, and a number of propositions of crucial significance for the working-class movement in its struggle for State power followed from it.
Lenin’s definition included five essential features: the concentration of capital and of production, the dominance of finance capital, the export of capital as distinct from the export of commodities, the formation of international capitalist monopolies and finally the territorial division of the whole world among the great capitalist powers. The inapplicability of Lenin’s analysis to the developments of recent years has been argued repeatedly in this journal (especially by Michael Kidron in IS 9 and IS 20) and won’t be repeated here except insofar as it has direct bearing on Magdoff’s arguments. But what is so striking about Lenin’s essay, and worth stressing again and again, is his striving for concreteness, for an accurate historical characterisation of a particular phase in the evolution and continual transformation of modern capitalism.
It is here that Magdoff goes astray. He shows many changes and shifts of emphasis in the system since Lenin’s day, but ends up still regarding it as in some way the same as the world-system which Lenin characterised. This is because he sees the special value of Lenin’s theory as
‘... the highlighting of all the principal levers that have moved international economic relations. These levers are the ones associated with the new stage of monopoly and the essential ways monopoly operates to achieve, wherever and whenever feasible, domination and control over sources of supply and over-markets. The fact that these are still the principal levers explains why the theory is still relevant.’ (39-40)
But this is both to over-rate and to underestimate Lenin’s achievement. It was Marx after all who described capitalism as a ‘world-historical’ system, bringing every part of the globe under its sway, Marx who captured the compulsive nature of the system with its necessity to accumulate, achieved it will be recalled through the extraction of surplus-value from the working-class, Marx who pointed out that the individual enterprise under capitalism was always planned, so that attempts at domination and control over sources of supply and over-markets as such is nothing new. What Magdoff states as the ‘significant theme’ of modern imperialism, ‘the different degrees of dependence in an international economy’ (39) has always been a feature of capitalism – what else does the ‘combined and uneven development’ of the system refer to? In a word, Magdoff’s characterisation of modern imperialism is left at too abstract a level: the volume of information he supplies is in general illustrative, not integrated into a coherent analysis.
Lenin’s real contribution, as stated above, was to point out concretely the nature of this world-historical system at a particular time. The fact is that the principal levers which Lenin identified have been radically transformed. The particular inter-relationships between the parts of the capitalist world which led many socialists to believe that imperialism could be snapped at its weakest links which were in the colonial and semi-colonial countries, have been altered fundamentally. (This view, by the way, has little in common with Lenin’s: his emphasis on ‘weak links’ was political rather than economic, concerned with the oppressed nations within Europe, rather than with the colonies).
Magdoff is aware of how the integration of the world economy has been altered and shows how trade in manufactures (i.e. trade among developed countries) has far outstripped the trade in raw materials and primary products. He still tries to hang onto the ‘dependency’ thesis however; the belief, that is, that although a declining proportion of world trade, raw material imports are of increasing significance for the well-being of the US economy.
But even here the figures can be misleading. The US will be importing only 20 per cent of its raw materials by 1975. Such supplies are crucial to manufacturing industry (as is skilled labour, or capital investment on unprecedented scales) but one mustn’t equate existing patterns and trends with the only possible ones. Modern corporations get their raw materials where it is cheapest and most convenient, and not usually because there are no other possible sources of supply. That is, if one country tried to put up its prices, or opted out of the world-market altogether, then other sources of supply might well become economic. For instance the heavy US imports of iron ore are not because there are not available supplies in the US but because at present prices it can be obtained more economically elsewhere.
Nor is this ‘dependence’ a dependence on the raw materials of underdeveloped countries. In the case of nickel which Magdoff cites as of crucial importance, 71 per cent of US requirements come from Canada. Australia too is an important potential and actual supplier of US mineral requirements.
It is true of course, that if South Africa, Southern Rhodesia, Turkey, the Phillipines and Iran all stopped supplying chromium to the US tomorrow, acute dislocation would probably result as they account for 92 per cent of US chromium requirements. But short of instantaneous world revolution the US rulers rest assured that this will not happen.
Of course monopolies try to protect their sources of supply and their markets, but their strength derives from the successful way they have been able to diversify their risks. They are not all hanging on by the skin of their teeth about to be swept away at the first rumble of revolt in the underdeveloped countries.
Indeed the dependency works the other way as Magdoff points out elsewhere:
‘The integration of less developed capitalisms into the world market as reliable and continuous suppliers of their natural resources results, with rare exceptions, in a continuous dependency on the centres of monopoly control that is sanctified and cemented by the market structure which evolves from this very dependency.’ (197)
From this arises what many on the left see as the only possibility for underdeveloped countries (which Magdoff hints at but does not develop) – opting out of the capitalist world economy and choosing the ‘socialist’ road in the manner of Cuba, Russia, China and the rest. But economic autarchy has nothing to do with socialism, and the only alternative facing an underdeveloped country is integration into the Eastern economy. Had Magdoff troubled to look at this at all he would have found that the type of relationships which Russia has tried to establish with her satellites are precisely equivalent to those kinds of relationships which he calls imperialist when indulged in by the US. That hoary Polish joke – ‘We export coal to the Russians, and they import oil from us’ – is not far of the mark. The dependence of the ‘independent’ third world economies upon the world imperialist network, constituted by the competition between two major imperialist blocs, with a host of subsidiary imperialisms operating within this framework, is indeed much more complete than Magdoff suggests. Indeed, the more crucial an area is in the global competition between East and West, the better its chances are quite often of being able to strike a better bargain with the invading imperialist host, of being able to opt partially out of the world market, and then back again on slightly more favourable terms (as Egypt for example has often done). At the same time it is worth noting that 10 years of going it alone, or with Russian aid, has not been enough to transform the Cuban economy from being primarily a sugar producer. If dependence on the world economy is debilitating, isolation from it can also be devastating.
Returning to the centre of Magdoff’s argument, however, he seems to imply that US capitalism is rational in its own terms. So he is able to make short-shrift of those reformist critics of US involvement in Vietnam who see it as merely an aberration or even as ‘bad for business’. But the real point here is neither that the Vietnam war is an inevitable result of US imperialism nor that it is a mere aberration. The question is incorrectly posed, and US involvement in Vietnam can only begin to be grasped in terms of the irrationality of the system, and its contradictions and tensions (which in his introduction Magdoff admits are only touched on incidentally, a rather strange lack of development in a work purporting to deal with ‘The Age of Imperialism’).
Part of the answer is clearly stated: ‘what matters to the business community, and to the business system as a whole, is that the option of foreign investment (and foreign trade) should remain available.’ (20) The other half of the argument and central to an understanding of the reality is that US capital is unable to take advantage of such open investment opportunities in other than a totally parasitic way (as Magdoff himself shows). That is, the logic of the system requires the maintenance of investment opportunities, while the same logic prevents these opportunities from being realised. The need to retain the possibility of investing private capital in underdeveloped countries keeps these countries underdeveloped, and underdeveloped countries, as Magdoff shows again, do not provide the same kinds of aggregate profits which US investment finds in Europe or Canada.
When we turn to the export of US capital we find it bears little resemblance to the export of finance capital which Lenin was concerned with. Well over half of it is in manufacturing and petroleum refining and distribution, concentrated overwhelmingly in Canada and Europe: it is direct investment by industrial concerns and certainly not rentier capital. Indeed what many US corporations are doing is in fact reproducing themselves abroad, exporting capitalism rather than capital, .using such subsidiaries to avoid tariff barriers and the like. Only 8 per cent of direct US investment is in mining (1964), an extraordinarily low percentage if indeed the US economy were as vulnerable on this front as Magdoff maintains. It seems undeniable that this pattern of investment of exported capital, this internationalisation of industrial investment, represents a qualitative change from the imperialism of Lenin’s day.
Allied to this changing pattern of relationships between the industrialised nations (increased trade in manufactures, increased foreign investment in manufactures) is the changing role of the State. Again this is not central to Magdoff’s analysis, but in his final chapter he provides enough information for an alternative theory to be glimpsed. Crucial to this is a table (XLII, 188) which shows the percentage of total output attributed to exports and federal purchases in 1958. For 24 categories of industry listed the combined percentage comes to over 20 per cent in all except that of farm machinery and equipment. For 21 categories the total is between 20 per cent and 50 per cent while in two (aircraft and parts, ordnance and accessories) it is much higher.
Magdoff discusses only the aggregates, but a further breakdown of his table shows that federal purchases are much more important than exports in accounting for the percentages of total output. For 11 categories of industry it accounts for more than twice the percentage going on exports, for eight categories for more than the percentage going on exports, and only in five of the 24 categories do exports account for a greater percentage than do federal purchases.
One of Magdoff’s comments on this table is that ‘exports and military spending exert a distinctive influence on the economy because they fortify a strategic centre of the existing industrial structure.’ (189) This is certainly true, with federal purchases clearly the decisive factor. State intervention of this kind, or even nationalisation as in Western Europe, is clearly a second qualitative transformation in Western capitalism. More information on this theme, plus a theory of how the US economy function, rather than a mere agglomeration of statistics, could lead Magdoff in the direction of the permanent arms economy and the contradictions it encompasses. In these studies however he has not chosen this road.
On the theoretical level then Magdoff’s work is disappointing. His failures arise, I think, from the absence of any theory as to how the US economy functions, and how it has overcome or diverted the ‘contradictions and tensions’ within it. Instead he seems to hope that a theory of imperialism will arise fiom the facts and patterns of US involvement in the export of capital, of commodities and of military involvement. His achievement however is not to be under-rated. For he has turned to the serious study of modern capitalism, providing compilations of facts and figures which the revolutionary movement should never have been without. He has successfully captured the international nature, scope and ramifications of US capital, and the combined and uneven development of the system taken as a whole, through his conclusions as pointed out above are often untenable. One can only hope that he will stimulate others, more theoretically sophisticated or asking more significant questions, to turn to the available material with the same degree of rigour and enterprise as he has done. His book should be read by every socialist, for its weaknesses as well as for its strengths.
ISJ Index | Main Newspaper Index
Encyclopedia of Trotskyism | Marxists’ Internet Archive
Last updated on 24.1.2008