Guiding Question: What is finance, and what is its relationship to imperialism, and later, neocolonialism?
Corporate finance the area of finance that deals with providing money for businesses and the sources that provide them (see intro on the problem of businesses needing money to grow). “The purpose of corporate finance is to maximize shareholder value”
“When execs determine that there is no more value growth, they are expected to pay out dividends or stock repurchase using surplus of capital - adds perceived value to corporation cuz of its ability to pay out extra cash to investors”
Capital = “a good that can be used now” (from study.com)
Common stock an investment security which represents ownership in a company. STOCK IS SHARES! When a company goes public, those revenues are used to expand or reduce debt. It is also voting stock. Shareholders can vote against Board of Directors and shareholders proposals. Common stock dividends are never guaranteed.
Preferred stock an investment security which can represent ownership along with being a debt instrument.
Securities = rights to assets in the form of shares.
Stock, shares, bonds, and securities are somewhat synonymous.
For small companies, shares are great because they generate revenue even if they are not making sales. (So… advertising encourages share purchases - i.e., not always primarily directed at consumers.)
Value of Germany’s biggest 30 companies is summarized in the DAX Share Index. This is the DOW in the U.S.
Dow is defined as the Dow Jones Industrial Average, a stock market index that tracks the daily price of shares of stock of 30 large publicly-owned companies sold on the US stock exchanges.
An example of the Dow is a stock market index that was named after Charles Dow, the Wall Street Journal editor, and Edward Jones, a statistician.
Joint stock Joint-stock company, a forerunner of the modern corporation that was organized for undertakings requiring large amounts of capital. Money was raised by selling shares to investors, who became partners in the venture. One of the earliest joint-stock companies was the Virginia Company, founded in 1606 to colonize North America. By law, individual shareholders were not responsible for actions undertaken by the company, and, in terms of risk exposure, shareholders could lose only the amount of their initial investment.
Ch 2: The Banks
“The transformation of numerous modest intermediaries into a handful of monopolists represents one of the fundamental processes in the transformation of capitalism into capitalist imperialism. For this reason we must first of all deal with the concentration of banking” (31).
Joint stock bank (31) deposits increased.
· What is “joint stock”?
“Large-scale enterprises, especially the banks, not only completely absorb small ones, but also ‘join’ them to themselves, subordinate them, bring them into their ‘own’ group or concern (to use the technical term) by having ‘holdings’ in their capital, by purchasing or exchanging shares, by controlling them through a system of credits, etc. etc. Professor Liefmann has written a voluminous ‘work of about 500 pages describing modern ‘holding and finance companies,’ unfortunately adding theoretical reflections…” (32)
“The ‘decentralisation’ that Schulze-Gaevernitz, as an exponent of the modern bourgeois political economy, speaks of in the passage previously quoted, really means the subordination of an increasing number of formerly relatively ‘independent,’ or rather, strictly local economic units, to a single centre. In reality it is centralisation, the increase in the role, the importance and power of monopolist giants.” (34)
Trusts vs. cartels (37)
“The change from the old type of capitalism, in which free competition predominated, to the new capitalism, in which monopoly reigns, is expressed, among other things, by a decrease in the importance of the Stock Exchange” (39).
· What does this mean??? Isn’t a stock exchange a principal institution of capitalism??? What is a stock exchange??
Ch 3: Finance Capital and Financial Oligarchy
“From these figures we at once see standing out in sharp relief four of the richest capitalist countries, each of which controls securities to amounts ranging from 100 to 150 billion francs” (61).
· What are securities? How does controlling them make a rich capitalist country?
“A steadily increasing proportion of capital in industry,” writes Hilferding, “ceases to belong to the industrialists who employ it. They obtain the use of it only through the medium of the banks which, in relation to them, represent the owners of the capital. On the other hand, the bank is forced to sink an increasing share of its funds in industry. Thus, to an ever greater degree the banker is being transformed into an industrial capitalist. This bank capital, i.e., capital in money form, which is thus actually transformed into industrial capital, I call ‘finance capital’.” “Finance capital is capital controlled by banks and employed by industrialists.”
This definition is incomplete insofar as it is silent on one extremely important fact—on the increase of concentration of production and of capital to such an extent that concentration is leading, and has led, to monopoly. (47)
It is characteristic of capitalism in general that the ownership of capital is separated from the application of capital to production, that money capital is separated from industrial or productive capital, and that the rentier who lives entirely on income obtained from money capital, is separated from the entrepreneur and from all who are directly concerned in the management of capital. Imperialism, or the domination of finance capital, is that highest stage of capitalism in which this separation reaches vast proportions. The supremacy of finance capital over all other forms of capital means the predominance of the rentier and of the financial oligarchy; it means that a small number of financially “powerful” states stand out among all the rest. The extent to which this process is going on may be judged from the statistics on emissions, i.e., the issue of all kinds of securities. (59)
· What does it mean to “issue a security” ??
As a matter of fact, experience shows that it is sufficient to own 40 per cent of the shares of a company in order to direct its affairs, since in practice a certain number of small, scattered shareholders find it impossible to attend general meetings, etc. The “democratisation” of the ownership of shares, from which the bourgeois sophists and opportunist so-called “Social-Democrats” expect (or say that they expect) the “democratisation of capital”, the strengthening of the role and significance of small scale production, etc., is, in fact, one of the ways of increasing the power of the financial oligarchy. Incidentally, this is why, in the more advanced, or in the older and more “experienced” capitalist countries, the law allows the issue of shares of smaller denomination. In Germany, the law does not permit the issue of shares of less than one thousand marks denomination, and the magnates of German finance look with an envious eye at Britain, where the issue of one-pound shares (= 20 marks, about 10 rubles) is permitted Siemens, one of the biggest industrialists and “financial kings” in Germany, told the Reiclistag on June 7, 1900, that “the one-pound share is the basis of British imperialism”. This merchant has a much deeper and more “Marxist” understanding of imperialism than a certain disreputable writer who is held to be one of the founders of Russian Marxism and believes that imperialism is a bad habit of a certain nation....
· How/Why would a one-pound share be a basis of British imperialism? What is a share?