Lenin’s Five Point Definition of the Economic Aspects of Capitalist Imperialism and its Relevance Today

It is of central importance for Maoists to understand the nature of capitalist imperialism. While there have been older types of imperialism (e.g. the Roman Empire was a slave-holding empire and the Mughal Empire a feudal one), at present we live within a capitalist imperialist world system. This is a result of the development of the contradictions of the capitalist system, as it spread across the globe and as the various colonial territories were grabbed by the big powers for loot and plunder. By the turn of the twentieth century, things had developed in such a way that capitalism had reached a new stage in which huge monopolistic corporations, cartels, and trusts of various advanced capitalist countries had divided the whole world up between themselves according to their relative might.

In order to grasp the basic nature of imperialism it is helpful to review Lenin’s “Five Point Definition” from Imperialism: The Highest Stage of Capitalism. This definition is often cited without reading the surrounding context, including Lenin’s crucial remarks on the limitation of definitions and the specifically economic focus of this particular definition. Ignoring Lenin’s important words of caution about this definition lay the ground for dogmatic and even revisionist understandings of imperialism. So let’s look at what Lenin says:

If it were necessary to give the briefest possible definition of imperialism we should have to say that imperialism is the monopoly stage of capitalism. Such a definition would include what is most important, for, on the one hand, finance capital is the bank capital of a few very big monopolist banks, merged with the capital of the monopolist associations of industrialists; and, on the other hand, the division of the world is the transition from a colonial policy which has extended without hindrance to territories unseized by any capitalist power, to a colonial policy of monopolist possession of the territory of the world, which has been completely divided up.

But very brief definitions, although convenient, for they sum up the main points, are nevertheless inadequate, since we have to deduce from them some especially important features of the phenomenon that has to be defined. And so, without forgetting the conditional and relative value of all definitions in general, which can never embrace all the concatenations of a phenomenon in its full development, we must give a definition of imperialism that will include the following five of its basic features:

(1) the concentration of production and capital has developed to such a high stage that it has created monopolies which play a decisive role in economic life; (2) the merging of bank capital with industrial capital, and the creation, on the basis of this “finance capital”, of a financial oligarchy; (3) the export of capital as distinguished from the export of commodities acquires exceptional importance; (4) the formation of international monopolist capitalist associations which share the world among themselves, and (5) the territorial division of the whole world among the biggest capitalist powers is completed. Imperialism is capitalism at that stage of development at which the dominance of monopolies and finance capital is established; in which the export of capital has acquired pronounced importance; in which the division of the world among the international trusts has begun, in which the division of all territories of the globe among the biggest capitalist powers has been completed.

We shall see later that imperialism can and must be defined differently if we bear in mind not only the basic, purely economic concepts—to which the above definition is limited—but also the historical place of this stage of capitalism in relation to capitalism in general, or the relation between imperialism and the two main trends in the working-class movement. The thing to be noted at this point is that imperialism, as interpreted above, undoubtedly represents a special stage in the development of capitalism.

Lenin specifically emphasizes “the conditional and relative value of all definitions in general” and also notes that this definition involves “purely economic concepts.” Despite such limitations, a solid understanding of these five points is essential to grasping the nature of capitalist imperialism.

The Concentration of Production and Capital

The nature of capitalist development is such that it inevitably tends towards the concentration of more and more capital in a smaller and smaller number of hands. As Lenin showed, this process proceeds particularly rapidly during periods of crisis, in which many companies go out of business and are gobbled up by larger firms. During the major economic crises of the late 19^th century, the concentration of capital greatly accelerated, creating huge corporations which largely (but not absolutely) monopolized production in various spheres. With the creation of these monopolies, this process of the concentration of capital intensified to new degrees. In Imperialism, Lenin provides the example of the German electric industry, which had already been reduced to a handful of companies by 1900, and saw even more rapid consolidation after this point: “As a result, after 1900, concentration in Germany progressed with giant strides. Up to 1900 there had been seven or eight ‘groups’ in the electrical industry. Each consisted of several companies (altogether there were 28) and each was backed by from 2 to 11 banks. Between 1908 and 1912 all these groups were merged into two, or one.” Similar trends played out in the major capitalist powers around the world.¹

Since this point, these monopolies (and oligopolies, more on these later) have played what Lenin calls “the decisive role in economic life” around the world—with the exception of when socialist countries existed in the 20^th century. This does not mean that these monopolies exercise absolute control, but rather that the dominant way in which production is carried out around the world is to serve their interests and designs.² What people eat, where/if they work, how and where infrastructure is built, and much more is all largely carried out according to the interests of these monopolies. Relations of production, including mutual relations between people in productive processes, are structured to serve the interests of the very small handful of monopoly capitalists in the world.

It’s also important to note that while imperialism is the monopoly capitalist stage of the capitalist mode of production (as opposed to the earlier stage of “free” competition),³ this does not mean that competition between capitalists disappears. Actually the dominance of monopoly over competition creates new and more intense forms of competition the likes of which had never before been seen in human history. These forms of competition include large-scale economic competition like Saudi Arabia and Russia collaborating to drive down oil prices globally at the start of the pandemic to bankrupt the US shale industry, and thus destroy some of their key competition. World War I was another example of the unprecedented competition created by capitalist imperialism, in which competing blocs of monopoly capitalists launched a “war to end all wars” in their struggle to redivide the world.

Finance Capital: The Merger of Banking and Industrial Capital

Today in the US it is common to refer to the big banks and see, to one extent or another, how they control large portions of the economy. However, multinational financial institutions such as these are a relatively new development in the history of capitalism. Prior to the rise of capitalist imperialism, capital was generally divided into three relatively distinct sectors: industrial, banking, and commercial capital.

Industrial capital carried out the production of both means of production and means of consumption, and the vast majority of the surplus value produced in the society was generated there. Banking capital received a portion of this surplus value through extending loans to other capitalists, allowing them to expand production beyond the limits of the immediate capital at their disposal. Commercial capital generally purchased the various means of consumption from the industrial capitalists below their values—thereby allowing the industrial capitalists to turn over the capital quicker and not have to invest in commercial enterprises—and thus appropriated a portion of the surplus value produced in the industrial productive process (in addition to generating some in certain aspects of commercial enterprises as well).⁴

However, with the development of monopoly capitalism and the concentration of capital into an extremely small number of hands (presently represented in the US as various multinational corporations with significant overlap in large shareholders and boards of directors, etc.) the nature of both industrial and banking capital is changed (and even commercial capital⁵ as we can see with corporations like Amazon engaged in all three sectors). These previously distinct forms of capital have largely fused, forming finance capital, in which the major banks no long merely advance loans to the industrial sector, but instead are fused at the hip with it. Lenin notes the implications of this: “Finance capital, concentrated in a few hands and exercising a virtual monopoly, exacts enormous and ever-increasing profits from the floating of companies, issue of stock, state loans, etc., strengthens the domination of the financial oligarchy and levies tribute upon the whole of society for the benefit of monopolists.”

In order to grasp how finance capital achieves such immense profits it is important to note that, under capitalism, an average rate of profit forms. While there are variations between different industries—and such variations determine to a significant extent cross-sector investment in expanded reproduction by the capitalists—the formation of the average rate of profit nonetheless is an essential feature of the overall capitalist economy. However, under capitalist imperialism, finance capital is able to use its monopoly position to consistently obtain above-average rates of profit, known as monopoly profits. These are only obtainable only insofar as others (small capital and the petty-bourgeoisie) obtain a below average rate of profit, insofar as the people have to pay monopoly prices for commodities, insofar as the monopoly capitalists can plunder the oppressed countries via unequal exchanges, insofar as they have a monopoly on key technology and heavy industry, and more.⁶

Monopoly capitalists are able to use their monopoly position to extract tribute in various forms, and they become a financial oligarchy, “clipping coupons” as Lenin describes it. This stands in contrast to the earlier period of free competition in which various industrialist played the leading role in directing the overall direction of capitalist development.

The Export of Capital

From the early stages of development of capitalism, the formation of a world market was essential. However, with the rise of the monopoly stage, the export of capital, as opposed to the export of commodities, acquires a decisive importance. In the earlier stage of free competition, Britain, for example, had tremendous influence globally as “the workshop of the world” and opposed the protectionist measures of other European powers in its efforts to gain various footholds in commercial markets to which it exported industrially produced goods. However, over time, these powers developed into capitalist countries in their own right, thus increasing competition with Britain, and a surplus of capital developed simultaneously in these countries.

This was not an absolute surplus (in the sense that it could still be productively invested at home), but a relative surplus. Given the growing organic composition of capital in these countries the rate of profit on investing in domestic industry had significantly fallen. What’s more, the rise of the labor movement and, in particular the revolutionary working class movement, wrested from the capitalists a series of concessions, such as limiting the hours of the work day,⁷ the banning of child labor, and passage of various safety regulations. These new rules and regulations helped to spur the various capitalists to shift some of their production abroad.⁸

In exporting capital to the colonies and semi-colonies the capitalists were able to set up production to achieve higher rates of profits, and even super-profits (profit far in excess of the average rate of profit). These were obtained by a series of means, including monopoly pricing, super-exploitation of labor (paying workers in these countries far less than the socially necessary labor time to reproduce their labor power), use of child and semi-slave labor, and more.⁹ The warped development of these colonies and semi-colonies by imperialism also has created massive surplus populations from displacing the peasantry on huge scales, and this in turn intensifies competition between workings for jobs, thus further depressing the price of labor power.

The central importance of the export of capital under monopoly capitalism greatly intensifies the contradiction between the imperialist powers and oppressed countries, as the colonies, semi-colonies, and neocolonies become a central source (but by no means the only source) of the surplus value generated by multinational corporations. As Marx noted, “capital is dead labor, which, vampire-like, lives only by sucking living labor, and lives the more, the more labor it sucks.”¹⁰ Therefore, it must be kept in mind that the massive export of capital by the monopoly capitalists is not just about “making money” but actually allows them control the lives of billions of people and the overall direction of the economic development of whole countries. In this sense, it is clear that the struggle for the true liberation of the colonies, semi-colonies, and neocolonies from imperialist predation is inextricably wrapped up in struggle for the emancipation of labor from capital.

Territorial Division of the World

In the earlier period of colonialism, the various colonial and rising capitalist powers were able to expand and conquer new colonies without generally having to seize them from rival capitalist powers. However, by the turn of the 20^th century, especially after the “Race for Africa,” all of the territory in the globe was seized by one power or another. From that point on, any future territorial gain (or related gain of market share) by one power had to come at the expense of another. This leads to a series of significant changes in the colonial policies of these powers.

As Lenin notes in Imperialism:

Even the capitalist colonial policy of previous stages of capitalism is essentially different from the colonial policy of finance capital.

The principal feature of the latest stage of capitalism is the domination of monopolist associations of big employers. These monopolies are most firmly established when all the sources of raw materials are captured by one group, and we have seen with what zeal the international capitalist associations exert every effort to deprive their rivals of all opportunity of competing, to buy up, for example, ironfields, oilfields, etc. Colonial possession alone gives the monopolies complete guarantee against all contingencies in the struggle against competitors, including the case of the adversary wanting to be protected by a law establishing a state monopoly. The more capitalism is developed, the more strongly the shortage of raw materials is felt, the more intense the competition and the hunt for sources of raw materials throughout the whole world, the more desperate the struggle for the acquisition of colonies.¹¹

And so we can see that the territorial division of the world is not only a result of the continuation of colonial expansion from the earlier stage of capitalism, but also an objective requirement for monopoly capitalists, who, in order to maintain the monopoly position, must do all they can to secure control, not only of cheap labor in the colonies and neocolonies, but also access to the various raw materials. And by securing access, they not only preserve and expand their own monopoly position, but prevent rivals from gaining control of these raw materials. In the present system of neocolonialism, territorial control—during periods of relative peace between imperialist powers—is somewhat less important than in the old-style colonialism where each colony was the exclusive domain of one imperialist power. However, as inter-imperialist competition intensifies the question of territorial control becomes increasingly important, as we are seeing, for example, in the Ukraine War.

From Division to Redivision

Under capitalist imperialism the division of the world is decided according to relations of might and force; it is determined principally by the relative military and economic strength of the various imperialist powers. Control of colonies, neocolonies, and sphere of influence, however, does not change in accordance with every shift in the relative might of these empires. As part of the overall uneven development of capitalism, different powers will develop their productive forces and accumulate capital at different rates.¹² These varied rates of development and accumulation are related to the decadence of declining imperial powers (including but not limited to a significant portion of overall economic investment being shifted away from productive enterprises and towards various forms of speculative ventures), the higher organic composition of capital in the older imperialist powers, and a myriad of other factors. We can see these dynamics at play today with the relatively higher rate of economic growth and capital accumulation in China compared to the US, EU, and Japan.

As the relative economic, political, and military might of various powers change, the declining imperialist powers resist efforts by the rising ones to redivide the world. Today, the United States is extremely reticent to let China take control of various markets where the US has traditionally been the “top dog.” And so we see maneuvers like encouraging allies to ban Huawei, efforts to stop or limit neocolonial countries’ participation in China’s Belt and Road Initiative, new conditions attached to IMF loans (e.g for Pakistan to reveal the extent and conditions of its loans from China), etc. On the other side of things, we see China’s diplomatic grandstanding about “multi-polarity” aimed at appealing to many countries’ frustrations with the heavy-handedness of the US, its efforts to replace the US and IMF as the source of USD funding for many countries (through the Belt and Road Initiative), and even military coups like the one in Myanmar¹³ aimed at outflanking such measures by the US.

Given the relatively more rapid economic growth in China and related accumulation of capital, China has likely already surpassed the US economy as the largest in the world. And yet, the US, EU, and Japan still have dominant positions in many markets globally. This situation is growing increasingly unstable, as evidenced by the Ukraine War,¹⁴ recent escalations over Taiwan, and the related efforts by the US state to get US capitalists to shift their production out of China. In reference to the similar situation that existed prior to WWI (with the rise of German imperialism and its rapid growth compared to the old colonial powers), Lenin asked “what means other than war could there be under capitalism to overcome the disparity between the development of productive forces and the accumulation of capital on the one side, and the division of colonies and spheres of influence for finance capital on the other?”¹⁵

Since this time, it has become clear that the collapse of one imperialist power is also a possibility, as happened with the social-imperialist USSR between 1989-1991.¹⁶ However, before this collapse, there were a series of very intense proxy wars and conflicts between the US (and its allies) and the USSR which killed tens of millions of people (e.g. Afghanistan, Angola, etc.). A New Cold War has effectively begun between the US, EU, Japan, and other US allies on the one hand, and Russia, China, and their allies on the other. We are already seeing the beginnings of various military conflicts to redivide the world according to the new balance of economic and military might. Such “peaceful” competition between monopoly capitalists is itself quite brutal.¹⁷ However, when things escalate to significant proxy wars and even world wars, the horrors of the capitalist imperialism system are unleashed on a different scale entirely.

An exceedingly small number of monopoly capitalists¹⁸—in cooperation and competition with each other and organized into blocs along national lines—dominantly control the direction of development of human society and do so to further enrich and empower themselves. The natural development of this system is towards brutal imperialist wars to redivide the world between the various blocs, and to sacrifice tens of millions of the working class and peasant masses to do so. Framed in this way, the barbarism of the present mode of production comes into clear focus. It is both the duty and obligation of communists everywhere to resolutely struggle against imperialism; however, in order to do so consistently and effectively one must have a clear grasp of the capitalist imperialist world system. Given the dominant global position of US imperialism, it is of particular importance for communists in the US to gain and promote clarity on imperialism generally and US imperialism specifically (including through pointing out both its strengths and weaknesses globally), so as to aid in the struggle to overcome it.

Our hope is that this brief analysis of Lenin’s five point definition of capitalist imperialism can help to clarify key aspects of this system and encourage comrades in the US and internationally to take up further study of capitalist imperialism.