Lenin’s teaching on the role of banks in the monopoly stage of capitalism

We are witnessing a significant rise in the degree of concentration of banking capital in our country today, following the mergers that have been implemented recently.  In this context, it is useful to recall Lenin’s teaching on the role of banks in the imperialist stage of capitalism.

Lenin’s work Imperialism,  the Highest Stage of Capitalism explains the changed role of banks when they become monopolies.

The primary function of banks is to serve as middlemen in the making of payments. Banks collect money from various sources and place them at the disposal of the capitalist class. In doing so, they transform inactive money capital into capital yielding a profit.

Alongside with the development of monopolies in different branches of industry and transport, banks also grew from modest middlemen into powerful monopolies in the leading capitalist countries by the beginning of the twentieth century. Lenin wrote:

“These banks had at their command almost the whole of the money capital of all the capitalists and small businesses and also the larger part of the means of production and sources of raw materials in any one country and in a number of countries.”

Lenin pointed out that

“This transformation of numerous modest middlemen into a handful of monopolists is one of the fundamental processes in the growth of capitalism into capitalist imperialism”.

The domination of banks and other finance companies like insurance has increased enormously in the past 100 years since Lenin analysed this phenomenon.

The global list of top companies (Forbes, 2020) is dominated by giant financial institutions. Eight of the top ten companies of the world are financial institutions. In India, 19 of the 50 top companies are financial institutions, including four of the top five.

With increasing concentration of capital in fewer and fewer banks and the growth of bank turnover, the role of banks in the economy is transformed. Lenin describes this as follows:

“Scattered capitalists are transformed into a single collective capitalist. When carrying the current accounts of a few capitalists, a bank, as it were, transacts a purely technical and exclusively auxiliary operation. When, however, this operation grows to enormous dimensions we find that a handful of monopolists subordinate to their will all the operations, both commercial and industrial, of the whole of capitalist society; for they are enabled-by means of their banking connections, their current accounts and other financial operations—first, to ascertain exactly the financial position of the various capitalists, then to control them, to influence them by restricting or enlarging, facilitating or hindering credits, and finally to entirely determine their fate, determine their income, deprive them of capital, or permit them to increase their capital rapidly and to enormous dimensions, etc. “

 This change in role of banks, as a result of their becoming monopolies, explains why there is fierce struggle amongst the capitalist class for influence and control over the banks. Those capitalist groups who control the banks have the possibility of greatly increasing their wealth through this control, and to restrict the growth of their rivals.

The close connection between banks and industry is a striking feature in the new role of banks. When the running of a current account for a given firm enables the bank to obtain fuller and more detailed information about the economic position of its client, the result is that the industrial capitalist becomes more completely dependent on the bank.

Lenin pointed out to the ever growing merger of industrial and banking capital through “personal link ups” between the banks and the biggest industrial and commercial enterprises. This happens through the acquisition of each other’s shares, as well as through appointments of bank officials in the board of directors of companies, and of representatives of industrialists in the board of directors of banks.

Lenin further pointed out that this personal link up between banks and industry is supplemented by the “personal link up” between both and government. Seats on the boards of banks as well as industry are freely offered to ex officials from the government, who would be expected to use their connections with the government to advance the interests of the company.

Lenin describes finance capital as follows:

“The concentration of production; the monopolies arising therefrom; the merging or coalescence of the banks with industry—such is the history of the rise of finance capital and such is the content of that concept.”

As far as state monopoly in the financial sector is concerned, it is very clear that the class that controls the state power also controls the moneys that are entrusted to the government banks, post office savings etc. Further, as Lenin pointed out,

“…state monopoly in capitalist society is merely a means of increasing and guaranteeing the income of millionaires in some branch of industry who are on the verge of bankruptcy.” 

In our country, commercial banks were nationalised more than 50 years ago.  State monopoly over banking served to guarantee maximum profits for the Tatas, Birlas and other industrial houses through the ups and downs of capitalist business cycles. A network of personal links have been established between the biggest commercial banks, both private and state-owned, the largest industrial and service providing companies, and the highest levels of the bureaucracy and political leadership.

Over the past 20-25 years, state monopoly has been eroded by permitting the growth of private monopoly banks, again at the behest of the monopoly houses.  Banking capital is now being further concentrated through mergers of state-owned banks,   The plan is to reach an even higher level of concentration through a combination of further mergers and privatisation. 

Control over the means of production and exchange is getting concentrated more and more in the hands of a few multi-billionaires.  The fate of 135 crore people is being decided by this profit hungry elite who are engaged in a race to join the club of most wealthy persons in the world.  

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