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Issue #1802      November 8, 2017

Imperialism – Part II

Relations between banks and industry

In Part I of this series on Lenin’s Imperialism: the Highest State of Capital, Anna Pha looked at how Lenin defined the economic characteristics of imperialism and the question of monopoly capitalism and bank capital. This week, in Part II, she looks at the relationship between banks and industry and what Lenin referred to as finance capital.

“In Unity is strength! – Victory in the struggle!”

Lenin defines finance capital in terms of the merger of bank and industrial capital and describes it as a defining feature of imperialism.

Finance capital

“Finance capital is capital controlled by banks and employed by industrialists,” Lenin wrote. (VI Lenin, Imperialism, the Highest Stage of Capitalism*, Progress Publishers, Moscow 1986, p 45)

“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.

“We now have to describe how, under the general conditions of commodity production and private property, the ‘business operations’ of capitalist monopolies inevitably lead to the domination of a financial oligarchy.”

Lenin points to the growth of banks from modest middlemen “into powerful monopolies having at their command almost the whole of the money capital of all the capitalists and small businessmen.” (p 30)

The power of finance capital is principally derived from the vast amount of capital it has at its disposal. It can decide what investments go ahead, buy governments, and bankrupt corporations, farmers and individuals.

This merging or coalescence of the banks with industry occurs at a number of levels, including through personal ties:

“At the same time a personal link-up, so to speak, is established between the banks and the biggest industrial and commercial enterprises, the merging of one with another through the acquisition of shares, through the appointment of bank directors to the Supervisory Boards (or Boards of Directors) of industrial and commercial enterprises, and vice versa.

“The German economist, Jeidels, has compiled most detailed data on this form of concentration of capital and of enterprises. Six of the biggest Berlin banks were represented by their directors in 344 industrial companies; and by their board members in 407 others, making a total of 751 companies.” (p 40)

Jeidels also found that 51 of the biggest industrialists, including the director of Krupp, of the powerful “Hapag” (Hamburg-Amerika Line), were on the Supervisory Boards of the six largest banks (in 1910).

Two-way coalescence

Thus the personal links arising from the merging or coalescence of the banks with industry, as Lenin points out, work in both directions.

A quick look at the board of most listed companies reveals the personal links between the banks and non-financial companies.

For example, the directors of the board of the US-based Citigroup, one of the largest global financial conglomerates ranked 13 by Business Insider with US$1.79 trillion in assets. These cover a range of companies, including Roche Holding Ltd, General Atlantic LLC, Hewlett Packard Enterprise, Citius Tech, Rockefeller Foundation, the Carlyle Group, Atrevida Partners LLC, Oracle, Intel, Ernst & Young, and many more including some financial institutions.

A study of the boards of the top non-financial companies listed on the Australian Stock Exchange reveals the presence of personnel from the banks, insurance and investment companies on most of their boards. To take a few examples:

  • Wesfarmers Board – one member is Director of AMP and chair of AMP Capital Holdings
  • BHP Billiton Board – three members of its board hold directorships in financial institutions
  • Telstra Board – members hold directorships on Westpac, Bank of Queensland Ltd.

At the time of Lenin, leading representatives of industry were found on the boards of banks. This is still true. To take two examples from ANZ’s Board:

  • ANZ – David Gonski who according to Wikipedia has held or holds directorships on more than 40 boards and many consultancies including with the Australian Stock Exchange, Westfield Group, Consolidated Press and Fairfax
  • ANZ – Ilana Atlas whose other directorships include Coca-Cola Amatil Limited, Westfield Corporation Limited, Treasury Corporation of New South Wales and former directorships include Suncorp Group and GIO General Limited.

There is considerable cross-over between leading business figures and representatives of finance capital. The same names keep popping up.

The presence of representatives of finance capital on the boards of other companies provides them with detailed knowledge and puts them in an advantageous financial position which they are able to use to their own benefit. This is in addition to the inside information obtained through handling requests for corporate loans. This is particularly useful if they are involved in asset management and other investment products, currency trading and purchase/sale of shares.

These financial monopolies can influence boards, exercise control over investments through such means as loans and ultimately decide the fate of corporations, even governments.

The persistent refusal of the Coalition government to hold a Royal Commission into the scandal-ridden banks in Australia demonstrates how they are seen as not only “too big to fail” but “too big to touch”.

Dominance of finance capital

Five of the top ten corporations on the Australian Stock Exchange (ASX) are banks – the Big Four, the Macquarie Group.

The finance sector (banking, insurance, investment, etc) holds 56 percent of the wealth of the ASX top 100 Index. (As measured by capitalised value) (S&P/ASX 20 List)

Coming a poor second are the mineral resources (BHP etc) and other materials with 11.3 percent.

These financial conglomerates continue to accumulate more and more wealth at the expense of small businesses and working people in particular and through takeovers. Macquarie Group’s growth took in at least 15 takeovers of other companies.

Australia’s Big Four also consumed smaller banks, including privatised state banks. This is part of the process of monopolisation.

Concentration of ownership

In 1963, the Communist Party of Australia published The 60 Families Who Own Australia * by EW Campbell. This publication illustrated the concentration of wealth in the hands of 60 rich families. These included the Myer, Baillieu, Knox, Darling and Fairfax families. The book explains how “monopoly arises out of concentration and centralisation of production and capital.”

It is quite revealing to compare what EW Campbell had to say about directorships and concentration of capital with Jeidel’s figures that Lenin draws on:

“The 60 Rich Families who are in Australia in 1962 provided directors for 230 companies with a total paid-up capital of £855 million. These companies included six of the seven private trading banks, five of the seven major life insurance companies, all the big finance and hire purchase companies, all the major retail and chain stores and all major mining and industrial enterprises, except those owned by foreign, mainly British and American capital, which have no Australian board of directors”. (page 22)

Since then corporate structures and ownership of major corporations has become far more complex. Family names have dissipated through marriage, trusts and nominee companies. It is hard to imagine how a similar publication would be possible today.

Yet the process of monopolisation through concentration and centralisation of capital has accelerated since then and the domination of finance capital developed to the point where the top corporations are owned or at least controlled by finance capital. In some instances, nominee companies with large holdings of shares may be investing on behalf of and even under instruction from individuals. Who knows?

The top five shareholders in three of the four largest non-financial corporations – Wesfarmers, CSL, Telstra – are:

  • HSBC Custody Nominees (Australia) Limited
  • J P Morgan Nominees Australia Limited
  • Citicorp Nominees Pty Limited
  • National Nominees Limited
  • BNP Paribas Nominees Pty Ltd (Agency Lending DRP A/C).

These are the four largest non-financial corporations listed on the Australian Stock Exchange (ASX). There is a similar pattern for many of the others.

These non-banking institutions – nominee companies, pension funds (super), insurance funds, managed funds, etc now own over 50 percent of the shares in the majority of top 100 companies listed on the ASX. This is monopoly at its peak.

Note here the names of foreign banks, the only exception being National Nominees Ltd. As shareholders these financial parasites make their profits, not from their own capital, but essentially through the fees they charge for managing the funds of others and the gains they make through directing these investments.

They can also move billions of dollars in and out of investments here and overseas to serve their own interests. They do not necessarily prioritise the interests of their customers.

From this information it is impossible to know who really owns and controls Australia’s industry.

Financial Institutions

But it does not stop there. The obvious question is who owns these financial institutions who wield so much power. The individual workers whose savings they invest have no say in their operations. Whether it be retail or industry superannuation funds, it is the same financial conglomerates that are investing workers’ savings.

The top five shareholders in order of size of shareholding in the five major banks and AMP are identical for the Commonwealth Bank, ANZ, NAB and AMP:

  • HSBC Custody Nominees (Australia) Limited
  • JP Morgan Nominees Australia Limited
  • National Nominees Limited
  • Citicorp Nominees Pty Limited
  • BNP Paribas Nominees Pty Ltd.
  • For Westpac there is a small variation with Cogent Nominees taking fifth position and BNP Paribas dropping to sixth.

Unlike in 1963, the top 20 shareholders are not individuals but institutional investors. In other words, on the surface they are owned and controlled by nominee companies set up by financial institutions holding investors’ funds. We know nothing about who these investors might be.

The only exception to this is the listing of Nicholas Moore on the list of top 20 shareholders of the Macquarie investment banking Group. He is its Managing Director and CEO.

The essence of what Lenin said about finance capital remains valid today but the concentration of capital, facilitated by modern technology, would likely have been unimaginable in his time.

There is a similar concentration of wealth in Australia (measured by index weight) by the finance sector.

* EW Campbell, The 60 Families who Own Australia, Current Book Distributors, Sydney 1963

Next week in Part 3: state monopoly capitalism and globalisation.

Next article – Whence the republic?

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