Foreign trade and world monopolies

The tremendous importance of cheap raw materials to the level of the rate of profit and thus to the valorisation of capital was first established through practical experience. However the classical economists found it difficult to explain the fact theoretically due to their confusion of the rate of profit with the rate of surplus value. Marx was the first to establish the connection clearly through his own exposition of the laws that govern the rate of profit:

Since the rate of profit is s/C, or s/c + v, it is evident that everything causing a variation in the magnitude of c, and thereby of C, must also bring about a variation in the rate of profit, even ifs and v, and their mutual relation, remain unaltered. Now, raw materials are one of the principle components of constant capital ... Should the price of raw material fall ... the rate of profit rises ... Other conditions being equal, the rate of profit, therefore, falls and rises inversely to the price of raw material. This shows, among other things, how important the low price of raw material is for the industrial countries. (1959, p. 106)

Marx goes on to point out that the importance of raw materials to the level of profitability is constantly growing with the development of capitalist industry:

the quantity and value of the employed machinery grows with the development of labour productivity but not in the same proportion as productivity itself, ie, not in the proportion in which this machinery increases its output. In those branches of industry, therefore, which do consume raw materials ... the growing productivity of labour is expressed precisely in the proportion in which a larger quantity of raw material absorbs a definite of labour, hence in the increasing amount of raw material converted in, say, one hour into products ... The value of raw material, therefore, forms an ever-growing component of the value of the commodity product. (1959, p. 108)

The growing importance of raw materials is also obvious in the fact that as industrialisation advances every capitalist country becomes increasingly dependent on raw material imports. For instance in Germany imports of raw materials for industrial purposes increased by between 40 to 55 per cent between the late 1880s and 1912.

A further point is that monopolistic controls in the world market are easier to carry through in the sphere of raw materials where the range of possible applications is very wide. Competition among the capitalist powers first exploded in the struggles to control raw material resources because the chance of monopoly profits were greatest here. Yet this is not the only factor. Control over raw materials leads to control over industry as such. F Kestner says:

Because only raw materials or means of production are susceptible to long-term monopolisation, which is generally not the case with finished products - unless raw material syndicates intervene - cartelisation necessarily shifts the economic balance in favour of heavy industry, both in terms of price formation, and in terms of the fact that the processing industries fall under the sway of the raw materials industries. (1912, p. 258)

The struggle for control of raw materials is thus a struggle for control over processing industries, which is itself finally reducible to the drive for additional surplus value. Because raw materials are only found at specific points on the globe, capitalism is defined by a tendency to gain access to, and exert domination over, the sources of supply. This can only take the form of a division of the world. A world monopoly in raw materials means that more surplus value can be pumped out of the world market. For competitors who face such a monopoly it means that the breakdown of capitalism is intensified. The economic roots of imperialism, of the incessant drive to dominate territories capitalistically and later politically, lie in imperfect valorisation.

Perhaps the most obvious case of this is the Anglo—American struggle over oil. The struggles for petroleum in the Caucasus, Mesopotamia and Persia are already well known so I shall be brief here. Oil first became a burning issue for Britain when the discovery of the diesel-engine made it possible to substitute liquid fuel for coal in shipping. Yet the biggest reserves of crude oil and the bulk of oil production were concentrated in American hands. Britain saw the American monopoly as a threat. F Delaisi points out that for close to a century the whole power of British trade and industry was founded on her control over coal. Superiority in the coal market, and especially in the production of bunker coal, enabled Britain to consolidate its traditional maritime dominance. Britain could afford to charge cheaper rates on return-freight than her competitors:

Thus commodities destined for Britain paid lower transport costs than those destined for other countries. Hence British industry enjoyed a real premium on all overseas raw materials. This was an enormous advantage over all competitors in the struggle to win international markets. (Delaisi, 1921, p.0)

Once shipping converted to oil all this could change. Britain produced no petroleum. British domination over sea transport was seriously threatened. Then there was the experience of the World War which showed the importance of automobiles and aircraft. The decisive strategic significance of allied control over oil reserves became more and more obvious the longer the War lasted. The oil politics of the postwar period was a direct consequence of these experiences.

Britain realised the implications of this situation quite early on and, at the beginning of this century, quietly and unobtrusively started to acquire reserves of oil that were still going. Against Rockefeller’s Standard Oil Trust, Britain founded a series of oil trusts: Royal Shell (later expanded into Royal Dutch Shell), Mexican Eagle, Anglo-Persian Oil, etc. Britain even settled down in the USA to take on the competition of Standard Oil. By 1919 The Times could report a speech by G Prettyman, a well-known oil expert, who on the inauguration of the new Anglo-Persian refinery was quoted as saying:

At the outbreak of the War the position was such that the British Empire with her enormous worldwide interests controlled only two per cent of world petroleum reserves ... On the currently prevalent foundations and methods of work used, about which he would not like to go into detail, he feels that once differences are settled, the British Empire should not be very far from controlling over half the world’s known reserves of petroleum. (7 May 1919)

This result could be achieved thanks to a powerful vertical concentration of the entire industry from production down to distribution, and the corresponding conglomeration of capital which could exert fantastic pressure.

The British oil industry was thus welded together into a single block which today embraces 90 per cent of all Britain’s oil interests. At the end of 1920 Anglo-Persian Oil unified some 77 companies with a nominal capital of around £120 million, and Royal Dutch Shell 50 firms with £300 million. Apart from these, there were another 177 companies representing a capital of £266 million. Altogether these firms represent a total capital of £686 million; 52 per cent of this is invested in production, 16 per cent in trade, 12 per cent in transport and 11 per cent in refining.

What was the point of this huge effort? Military security is only part of the answer. Delaisi notes that ‘Britain no longer needs to fear the American monopoly’ (p. 58). Just prior to the War Britain controlled all the most important coal stations. For the future it sought to control the major oil stations through a tightly organised petroleum industry. One of the basic objectives of Britain’s oil strategy was to attain a near monopoly over the transportation of oil. How far this succeeded can be gauged from a report in The Times of March 1920, cited by Delaisi, which quotes Sir Edgar Mackay as saying:

I can say that two thirds of the fields in operation in Central and South America are in British hands ... The Shell group controls interests in all the important oilfields on earth, including those in the USA, Russia, Dutch East Indies, Rumania, Egypt, Venezuela, Trinidad, British India, Ceylon, the Malay States, north and south China, Siam, the Straits Settlements and the Philippines. (Delaisi, 1921, p. 64)

The economic significance was drawn out when Mackay said:

Assuming their current curve of consumption rises further, then after ten years the United States will have to import 500 million barrels a year which makes, even supposing a very low price of $2 per barrel, an annual expenditure of $1 billion, and most of that, if not all, will go into British pockets. (p. 64)

The idea of joint international control over raw material resources has been mooted time and time again. Even the International Congress of Mineworkers, which took place in August 1920, formulated a resolution calling for the creation of a central international office in the League of Nations. Such an office would not only produce a detailed inventory of all existing resources and gather statistics on them; it would also look after the ‘distribution of fuels, minerals and other raw materials’. Such proposals are utopian. I have already shown that the antagonisms of world economy find their deepest source in the lack of valorisation which goes together with the general advance of accumulation. A shortage of surplus value in one national economy can only be compensated at the expense of other economies. Even capitalist attempts to create joint world monopolies have ended in failure, due to irreconcilable interests among the various parties.

The conflict of interests remains the basic aspect in the sense that the whole function of world monopolies lies in the national enrichment of some economies at the cost of others. As a result the increasingly frequent projects to evolve joint control and distribution schemes for raw materials remain pious wishes. Marx already pointed out, with prophetic foresight, that the attempts to regulate production that are often discernible in periods of crisis vanish:

as soon as the principle of competition again reigns supreme ... All thought of a common, all-embracing and far-sighted control over the production of raw materials gives way once more to the faith that demand and supply will mutually regulate one another. And it must be admitted that such control is on the whole irreconcilable with the laws of capitalist production and remains for ever a pious wish, or is limited to exceptional cooperation in times of great stress and confusion. (1959, p. 120)