Dictionary of Revolutionary Marxism

FICTITIOUS CAPITAL
The value (“capitalized value”) of securities, the ownership of which brings income which comes ultimately from the surplus value extracted from the workers during the employment of real (or productive) capital in the capitalist production process. Thus the market value of stocks, bonds, and all sorts of derivatives is one major form of fictitious capital. The word ‘fictitious’ is meant only to show that this is not the same as what is being talked about with real or operational capital in the actual production process.
Fictitious capital does not have any intrinsic value and does not perform any function in the current process of capital reproduction. In a severe financial crisis the value of all the stocks listed on the stock markets may fall in half, which might represent a loss of many trillions of dollars to the owners of these stocks. But this is a destruction of fictitious capital, and not the destruction of real factories, machinery and other productive wealth. Over time the amount of fictitious capital grows much faster than the amount of real productive capital. This is part of what is meant by the financialization of modern capitalism.

“The formation of fictitious capital is known as capitalization. Any regular periodic income can be capitalized by reckoning it up, on the basis of the average rate of interest, as the sum that a capital lent out at this interest rate would yield. For example, if the annual income in question is £100 and the rate of interest 5 per cent, then £100 is the annual interest on £2,000, and this £2,000 is then taken as the capital value of the legal ownership title to this annual £100. For the person who buys this ownership title, the annual £100 does actually represent the conversion of the capital he has invested into interest.” —Marx, Capital, vol. III, ch. 29. (Penguin ed., p. 597; International ed., p. 466.)

FINAL CAUSE
[In Aristotle’s philosophy:] The purpose, end, aim, or goal of something.
        Aristotle defined 4 different kinds of “causes” which he thought most things must have. The first, the “material cause”, was the mere material composition of the thing, and the second, the “formal cause”, was just the form or shape that this material had to take on. (Weird things to call causes!) The third of these, the efficient cause, is the one that sounds most like what we normally mean by the “cause of something” today, namely how the thing is created or comes to be. But what Aristotle called the fourth type of cause, the final cause (or, in Greek, telos), is the aim or purpose of the thing. Thus the efficient cause of a table is the work of someone creating the table out of wood or other raw materials. And the final cause is the purpose of the labor (e.g., to create the table to put other objects on).
        To most of us today there seems to be no real point in calling the purpose of something its “final cause”; why not just call it its purpose and be done with it?! But by calling this a different sort of “cause”, Aristotle was helping to convince himself that a purpose is something which most natural things must have. However, in reality, some things have a purpose, and other things are not the result of anyone’s purpose or goal. The chemical composition of the water molecule or the shape of the Andes mountain range are natural things, and were not the result of anyone’s goal or purpose. And even Aristotle did recognize the possibility of chaos, that some things arise from chance events and thus have no final cause.)
        The notion of a “final cause” is therefore a teleological concept, and should really only exist where there was some genuine purpose or goal involved in the creation of the thing. But according to idealists like Aristotle, there is some “final cause” to all sorts of things that in reality merely evolved or otherwise naturally developed. Thus, according to him, the final cause of the existence of animals and plants (since he could think of no other) must be to serve the needs and purposes of human beings. Aristotle himself argued that a final cause can exist even when there is no intelligence or consciousness behind it. But why should animals and plants have come to exist for the benefit of human beings if there was no purposeful intelligence guiding the process—in other words a God? Religious people of course find such erroneous conclusions to their liking, and this is one of the important reasons that Thomas Aquinas and other theologians have enthusiastically embraced at least aspects of Aristotle’s thought.
        See also: PURPOSE, TELEOLOGY

“This is a review article of a new economic history of the Nazi economy by Adam Tooze which cuts through the debate between economics and Hitler’s mistakes as fundamental causes of the outcome [of World War II]. Instead, Tooze argues that the invasion of the Soviet Union was the inevitable result of Hitler’s paranoia about the land-starved backwardness of German agriculture as contrasted with the raw material and land resources of America’s continent and Britain’s empire. The American frontier expansion that obliterated the native Indians provided Hitler with an explicit precedent, which he often cited, for pushing aside the native populations in the east to provide land for German Aryan farmers.
“Germany’s agricultural weakness is summarized by its low land-labor ratio, but Poland and the Ukraine had even less land per person. Thus simply acquiring the land to the east could not solve Germany’s problem of low agricultural productivity without removing the native farming populations. Far better than other histories of the Third Reich, Tooze reveals the shocking details of General Plan Ost, the uber-holocaust which would have removed, largely through murder, as many as 45 million people from eastern agricultural land. Tooze, like the Nazis before him, fails to emphasize that the solution to Germany’s agricultural problem was not acquiring more land for the existing German farm population, but rather by raising the land-labor ratio by making the existing German land more efficient, mechanizing agriculture and encouraging rural-to-urban migration within Germany.” —Robert J. Gordon, from the abstract of “Did Economics Cause World War II?”, a review article, NBER Working Paper No. 14560, December 2008. [This brings out the horrific genocidal imperialist nature of the Nazi quest for Lebensraum. Perhaps the best student of the genocide against Native Americans by white capitalist America was none other than Adolf Hitler! —S.H.]

“In 1865, the Gold Hill News of Nevada put the matter bluntly, urging ‘a final solution of the great Indian problem: by exterminating the whole race, or driving them forever beyond our frontier.’” —Scott Lankford, Tahoe Beneath the Surface (2010), p. 71.

FINANCE CAPITAL (Book by Hilferding)
An important book by Rudolf Hilferding, a semi-Marxist economist, published in 1910, which strongly influenced Marxist thought about the nature of capitalism in the imperialist era. In particular, Lenin made extensive use of the ideas in this book when he wrote his own very important work, Imperialism, the Highest Stage in Capitalism in 1916.
        The full title of the original German edition of the book is Das Finanzkapital: Eine Studie über die jüngste Entwicklung des Kapitalismus, which was published in Vienna in 1910. An English translation did not appear until more than 70 years later: Finance Capital: A Study of the Latest Phase of Capitalist Development, edited by Tom Bottomore, (London: Routledge & Kegan Paul, 1981).
        Finance Capital put forward a number of ideas, many of them new and correct, but also some quite incorrect ideas and conceptions. Hilferding pointed out that banks had shifted their credit practices as industrial companies became larger, in the direction of much bigger and more long-term loans, which in turn gave them a deeper interest in the long-term prospects and management of the industrial corporations they loaned to, instead of just a simple concern as to whether a short-term loan would be repaid or not. Banks became more like silent partners in the industrial corporations, and thus also tended to receive a greater share of the surplus value which the corporations extracted from their workers. He said that the typical capitalist was no longer the owner/manager of a company, but rather a shareholder in a corporation, and explained this change as being a necessary consequence of the growth of giant companies into monopolies or semi-monopolies. And these shareholders, he said, have become in effect money capitalists, not entrepreneurs.
        The book shows how the competitive and pluralistic pre-monopoly form of “liberal capitalism” had been transformed into monopoly capitalism controlled by “finance capital”, a merger of bank and industrial capital. But Hilferding tends to generalize too much on the precise way that had occurred in Germany. He puts too much emphasis on the role of cartels and trusts, and doesn’t forsee that these might be broken up to a considerable degree through a combination of international conflict (such as came to a head just a few years later in World War I) and anti-trust laws (even if they have had only a partial and fairly weak effect). Hilferding did foresee the more total domination and centralized direction of the state by this new form of capitalism, however.
        One of the more serious weaknesses in Finance Capital, and one that has been far too influential, is the falling rate of profits theory of capitalist economic crises that Hilferding presents. This comes, of course, originally from Capital, where it was one of three major crisis theories put forward by Marx. But this particular theory is incorrect, and Hilferding’s championing of it has done a lot of additional harm in Marxist political economy. For one thing, it led him to modify his theory of finance capitalism a few years later by putting forth the totally erroneous notion that an “organized capitalism” is possible, based on national and international cartels and monopoly stabilization of profits, which could supposedly prevent the development of economic crises entirely! Hilferding also thought that turning capitalism into socialism had become primarily a matter of just nationalizing the big trusts and cartels. This showed the essential bourgeois core of his understanding of just what socialism is all about.

“In 1910, there appeared in Vienna the work of the Austrian Marxist, Rudolf Hilferding, Finance Capital (Russian edition, Moscow, 1912). In spite of the mistake the author makes on the theory of money, and in spite of a certain inclination on his part to reconcile Marxism with opportunism, this work gives a very valuable theoretical analysis of ‘the latest phase of capitalist development’, as the subtitle runs.” —Lenin, Imperialism, the Highest Stage of Capitalism (January-June 1916), LCW 22:195.

“Finance Capital has proved to be the most influential text in the entire history of Marxian political economy, only excepting Capital itself. It is difficult to think of any significant theme in Lenin’s theory of imperialism, for example, that does not feature, usually prominently, in Finance Capital. There is the central concept of finance capital, seen as the ‘highest stage’ of capitalist development; the growth of monopoly in place of free competition; the repudiation of free trade by the capitalists and their increasing reliance on tariffs to bolster their cartels; the emphasis on capital exports and colonization, together with the mounting international tension that they generate; and finally the apocalyptic tone of Hilferding’s conclusion. All these can be found, in simpler language and considerably less depth, in Lenin’s Imperialism.” —M.C. Howard & J.E. King, A History of Marxian Economics: Volume I, 1883-1929 (Princeton University Press, 1989), p. 100.
[It is probably true that Hilferding’s book has been the most influential single book on Marxist political economy other than Capital itself. But this has also had plenty of quite bad results, as well as some good ones! For example, it certainly would have been much better if Marx’s Theories of Surplus Value had been more influential than Finance Capital in the areas where they disagree (such as on the central cause for capitalist economic crises)! And while it is true that most of the major themes in Lenin’s Imperialism, the Highest Stage of Capitalism were prefigured in Hobson’s Imperialism and Hilferding’s Finance Capital, Lenin never claimed otherwise. In fact he properly credits both authors and both books. (It is interesting that Hilferding does not credit Hobson, who came before him!) Moreover, Lenin subtitles his pamphlet as “A Popular Introduction”, so it is hardly surprising that it does not go into the issues as thoroughly as Hilferding does in his much longer book. Moreover, besides the good and correct things in it, Hilferding’s book also puts forward a number of wrong ideas, a number of which Lenin strongly criticizes. Finally, in the years after Finance Capital was published, Hilferding retracts and abandons some of his correct ideas in it, and instead promotes some very wrong notions in their place, such as his theory of “organized capitalism” which can supposedly avoid economic crises, which he began putting forward in 1915. —S.H.]

“Thus Finance Capital changed the landscape of Marxian economics.... Hilferding provided not only new concepts, new analyses, and a new vocabulary, but an attempted synthesis. Nevertheless the defects of the book are readily apparent. He achieved neither a single coherent account of economic crises nor a clear explanation of their relationship with the longer-term contradictions of advanced capitalism. He had neither a theory of economic breakdown nor a refutation; although the germ of his subsequent concept of a largely crisis-free ‘organized capitalism’ can be found in Finance Capital ... the book contains no unequivocal prognoses. Hilferding’s treatment of capital exports is also imprecise.” —M.C. Howard & J.E. King, ibid.

FINANCE CAPITALISM
The form of capitalism in the imperialist era characterized by the overwhelming dominance in the economy of giant banks and financial institutions, and the financialization of the economy in general. The term finance capitalism is used, rather than capitalist-imperialism or monopoly capitalism, when it is desired to emphasize the financial aspects of monopoly capitalism.
        There have been two main bursts in the expansion of finance capitalism (and globalization):
        1) the period in the late 1800s up until World War I; and
        2) the period from roughly the 1980s up until the financial crisis broke out in 2008.
        The first of these bursts of financialization correspondended to, and was an important part of, the advent of capitalist-imperialism. After World War I finance capitalism further developed a bit in fits and starts during the 1920s, but then suffered a major breakdown in the Great Depression of the 1930s. With the tremendous destruction of capital during World War II, the stage was set for a new quarter-century capitalist boom that initially did not require any further qualitative exaggeration of financialization in the world capitalist economy. (This period was, however, still part of the capitalist-imperialist epoch dominated by finance capital.) But as the post-World War II boom petered out in the 1970s, the world capitalist-imperialist system began to rely more and more on a combination of neoliberalism and a renewed burst of qualitative expansion of the financial aspects of the economy. This meant the huge further growth of debt, and rampant speculation in that debt, that finally began to collapse in a major way in 2007-2008.
        Until capitalism is overthrown worldwide, its specific form as finance capitalism will continue to exist, even during periods of severe crisis and depression.

“Translated into ordinary human language this means that the development of capitalism has arrived at a stage when, although commodity production still ‘reigns’ and continues to be regarded as the basis of economic life, it has in reality been undermined and the bulk of the profits go to the ‘geniuses’ of financial manipulation. At the basis of these manipulations and swindles lies socialized production; but the immense progress of mankind, which achieved this socialization, goes to benefit ... the speculators.” —Lenin, “Imperialism, the Highest Stage of Capitalism” (1916), LCW 22:206-7.

“The FINANCIAL CRISIS” or “The GREAT FINANCIAL CRISIS”
The specific financial crisis associated with the Great Recession, which peaked in 2008-2009. This financial crisis was so severe, and even seriously dangerous for the capitalist system, that it really scared the American bourgeoisie. Moreover, the bourgeoisie is more concerned with the financial aspects of a crisis than they are with unemployment and other problems for the workers and masses. In addition, as time goes on, they want to downplay the seriousness of that whole crisis, and prefer to stop talking about the “Great Recession” or the “Great” anything.
This specific reference to the last major financial crisis will continue only until there is some new, even worse, financial crisis. I.e., probably not for that much longer. —S.H. [February 20, 2024]

U.S. FINANCIAL CRISES, 1982-2009
Year	Rescue	Government Methodology
1982-92	Mexico, Argentina, Brazil debt crisis	Federal Reserve (“Fed”) and Treasury Dept. relief package to avoid domino effect on U.S. banks
1984	Continental Illinois Bank aid	$4 billion Fed, Treasury, and FDIC rescue package
Late 1980s	Discount Window bailouts	Fed provided loans to 350 weak banks that later failed, giving big depositors time to exit.
1987	Post-stock market dive rescue	Massive liquidity provide by Fed, and rumors of Fed clandestine involvement in futures market.
1989-92	S&L bailout	U.S. spent $250 billion to bail out hundreds of Savings & Loans which had been mismanaged into insolvency.
1990-92	Citibank and Bank of New England (BEN) bailouts	$4 billion to BEN, then government help in arranging for Saudi infusion for Citibank.
1994-95	Mexican peso rescue	Treasury helped support the peso to backstop U.S. investors in high-yield (i.e., risky!) Mexican debt.
1997	Asian currency bailout	U.S. government pushed IMF to rescue embattled East Asian currencies to save American and other foreign lenders.
1998	Long-Term Capital Management bailout	Fed chairman Greenspan helped arrange bailout for shaky hedge fund with high-powered domestic and international connections.
1999	Y2K fears (due to computer date coding problems)	Liquidity pumped out by the Fed to ease Y2K concerns helped fuel final NASDAQ stock market bubble.
2001-5	Post-stock market crash rate cuts	Fed cut U.S. interest rates to 46-year lows to protect the U.S. “FIRE” (financial, insurance and real estate) sector and their assets.
2007	SIV and subprime mortgage bailout	Treasury Secretary Paulson proposed super-SIV fund to rescue top banks and and negotiated subprime mortgage relief mechanism.
2008-09	Massive bailouts of banks, insurance & other corporations	The near collapse of the entire U.S. financial system which led to unprecedented hundreds of billions of dollars of bailouts, zero interest rates, flooding the economy with trillions of dollars of bank credit, a very large stimulus plan—and which all still led to the worse economic crisis since the Great Depression of the 1930s.
[Based on figure 2.7 in Kevin Phillips, Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism (2008)]

FINANCIAL OLIGARCHY
The very top echelon of the monopoly capitalist bourgeoisie representing finance capital, which in the imperialist era includes not only the owners and top managers of banks and financial institutions, but also those who own or control the biggest industrial corporations. The financial oligarchy controls not only the economy but also pretty much dominates, controls, or a minimum very strongly influences the governments of imperialist countries. This is the core of the modern capitalist ruling class.

“Over the past generation—ever since the banking deregulation of the Reagan years—the U.S. economy has been ‘financialized.’ The business of moving money around, of slicing, dicing and repackaging financial claims, has soared in importance compared with the actual production of useful stuff. The sector officially labeled ‘securities, commodity contracts and investments’ has grown especially fast, from only 0.3 percent of G.D.P. in the late 1970s to 1.7 percent of G.D.P. in 2007.” —Paul Krugman, a liberal bourgeois economist, “The Joy of Sachs”, The New York Times, July 17, 2009. [Krugman fails to note: 1) that the securities sector he mentions is only one small part of the entire financial sector; and 2) that this financialization of the economy has all along been a prominent feature of capitalism in the imperialist era, as Lenin noted as far back as 1916! But it is true that this financialization has been carried to even more absurd lengths during the last few decades. —S.H.]

“The money that’s made from manufacturing stuff is a pittance in comparison to the amount of money made from shuffling money around. Forty-four percent of all corporate profits in the U.S. come from the financial sector compared with only 10% from the manufacturing sector.” —Raymond Dalio, Bridgewater Associates, 2004. [Quoted in Kevin Phillips, Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism (2008).

“‘The business of corporate America is no longer business—it is finance,’ said Rana Foroohar [of Time magazine]. Companies are increasingly focused on profiting not by investing in improvements to their products and services, but simply by moving money around. Apple, which has $200 billion in cash, has borrowed billions of dollars in recent years to buy back its own shares in order to boost the company’s stock price. ‘Why borrow?’ Because it’s cheaper than repatriating profits and paying U.S. taxes. And Apple isn’t alone ‘in eschewing real engineering for the financial kind.’ Airlines now make more money hedging oil prices than selling seats, even though the strategy increases global commodities volatility. Pharmaceutical companies—which have cut nearly 150,000 jobs since 2008, mostly in research and development—are now so focused on ‘creative accounting’ and tax optimizations that they ‘look suspiciously’ like portfolio management companies. ‘Even Silicon Valley is not immune,’ with tech behemoths anchoring huge new bond offerings just as investment banks do. ‘None of this is good for the real economy.’ A wealth of research shows financial engineering impedes growth and ‘destroys long-term value within companies.’ Corporate America’s addiction to financialization is a recipe for ‘more economic stagnation—and more political populism.’” —“Moving Money to Make Money”, The Week [bourgeois news magazine], May 27, 2016, p. 34.

“With expanded powers under congressional legislation in 2007 and 2008 that legalized [President George W.] Bush’s once illegal program, the NSA launched PRISM, a program that compelled nine Internet service providers to transfer what became billions of emails to its massive data farms. And the FISA courts, originally created to check the national security state, instead became its close collaborator, approving nearly 100 percent of government wiretap requests and renewing the NSA’s mass metadata collection of all US phone calls thirty-six consecutive times from 2007 to 2014.” —Alfred W. McCoy, In the Shadows of the American Century: The Rise and Decline of US Global Power (2017), p. 122.

FISCAL STIMULUS
The same thing as Keynesian deficits.
See also: FISCAL POLICY above.

“The five-point principle of putting politics in command is: a) creatively study and apply Chairman Mao’s works and, in particular, make the utmost effort to apply them; regard Chairman Mao’s works as the highest instructions on all aspects of the work of the army; b) persist in the ‘four-firsts’ and, in particular, make great efforts to grasp living ideas; c) leading cadres must go to the basic units, give energetic leadership to the campaign to produce ‘four-good’ companies, guarantee that the basic units do their jobs effectively and at the same time that a good style of leadership by the cadres is fostered; d) boldly promote really outstanding commanders and fighters to key posts of responsibility; and e) train hard and master the finest techniques and close-range and night fighting tactics.” —From a short glossary accompanying an article in Peking Review, vol. 10, #3, Jan. 13, 1967, p. 10.

“They must be genuine Marxist-Leninists and not revisionists like Khrushchov wearing the cloak of Marxism-Leninism.
         “They must be revolutionaries who wholeheartedly serve the overwhelming majority of the people of China and the whole world, and must not be like Khrushchov who serves both the interests of the handful of members of the privileged bourgeois statum in his own country and those of foreign imperialism and reaction.
         “They must be proletarian statesmen capable of uniting and working together with the overwhelming majority. Not only must they unite with those who agree with them, they must also be good at uniting with those who disagree and even with those who formerly opposed them and have since been proved wrong in practice. But they must especially watch out for careerists and conspirators like Khrushchov and prevent such bad elements from usurping the leadership of the Party and the state at any level.
         “They must be models in applying the Party’s democratic centralism, must master the method of leadership based on the principle of ‘from the masses, to the masses,’ and must cultivate a democratic style and be good at listening to the masses. They must not be despotic like Khrushchov and violate the Party’s democratic centralism, make surprise attacks on comrades or act arbitrarily and dictatorially.
         “They must be modest and prudent and guard against arrogance and impetuosity; they must be imbued with the spirit of self-criticism and have the courage to correct mistakes and shortcomings in their work. They must never cover up their errors like Khrushchov, and claim all the credit for themselves and shift all the blame on others.” —From a short glossary in Peking Review, vol. 10, #3, January 13, 1967, p. 10.

FIXED CAPITAL
The portion of the constant capital employed in a capitalist enterprise which is not used up in a single production cycle. Thus, such things as machinery and the factory building itself, as opposed to raw materials.

Dictionary of Revolutionary Marxism

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