NEW ROLE OF BANKS - Banks as organizational centers of industry.
This
is where all the money capital of modern company is poured, regardless of
whether it is credit capital for its intended purpose or whether it is
temporarily released from production.
From
here all the capitalists who are in need of money draw the capital they need.
The
entire free public money capital passes through the hands of the banks, which
they distribute among the individual capitalists.
Just pointing to this fact is enough to understand that in a modern company where the dominant form of enterprise is the joint-stock company, banks should play an exceptional role.
The
money flowing into the bank does not go to its permanent use. All deposits are made for a very specific
period. By these terms, the bank is bound hand and foot in the matter of using
the capital at its disposal.
He
cannot invest them in organizing an industrial or commercial enterprise,
because that would mean fixing the capital entrusted to him for a long time in
business and depriving himself of the opportunity to pay off his obligations on
time. Prior to the widespread distribution of the network of joint-stock
companies, the only field of activity of banking capital is, therefore,
credit.
At
the same time, it is important to note that the main attention of banks is
directed to short-term credit (under working capital) and trade credit, which
do not require long-term capital investment.
The
process of mobilizing capital, the process of wide development and expansion of
joint-stock companies, creates a new favorite field of activity for banks.
The
purchase of shares proves for banks in many way are more profitable operation than purely credit
operations.
1)
The capital spent on the purchase of shares is invested into action without a
time limit.
At
any time, at its first request, the bank can sell the shares and receive the
money necessary to pay off creditors.
2)
Due to the fact that the bank always has significant amounts of money at its
disposal, it has the ability to buy a significant number of shares and dominate
a number of joint-stock companies, thereby securing for itself a large credit
market.
3)
A large accumulation of money capital in the bank's cash desks makes it
possible not only to buy up shares of already existing joint-stock companies,
but also to organize new ones. Banks take over the issuance of shares and
thereby ensure the receipt of both dividends and founders' profits.
4)
Having a large number of shares, banks are able to regulate their prices on the
stock exchange and, thanks to this, stock exchange speculation without any
risk.
Thus,
the bank's income is replenished with still high stock exchange profit.
As a result of the listed advantages of joint-stock business over credit,
banks are investing an increasing part of their capital in industry.
(Statistics)
If
banks used to be exclusively credit institutions. However, now, as a result of
the mobilization of capital, they are increasingly overgrown with industrial
enterprises that depend on them and are subordinate to them, they are becoming
more and more organizing centers of industry, and more and more are turning
into commanding nodes of impersonal social capital.
The
great interest of banks in the joint-stock business pushes them to master the
entire "ladder of subordination" of mobilized capital. The large
accumulation of money-capital in their hands helps them to realize this
striving for dominance over corporatized industry.
At the present time, every bank of any size
dominates a number of joint-stock companies, keeps dozens of joint-stock
enterprises belonging to the most diverse branches of production, dependent on
it.
The
power of the bank extends simultaneously to the railway company and to the
editorial office of an influential newspaper, to a mining enterprise and to an
advertising establishment. In all
enterprises that are financially subordinate to it, the bank promotes “its own
people” to senior positions.
Thus,
he strengthens his connection with the joint-stock companies subordinate to
him, through the so-called "private (or personal) union."
“The
six largest Berlin banks were represented through their directors in 344
industrial companies and through their board members in another 407, in total
in 751 companies .. In 289 companies, they had either two members of the
supervisory boards or seats of their chairmen.
Among
these commercial and industrial companies, we find the most diverse branches of
industry: insurance business, communications, restaurants, theaters, the art
industry, etc. On the other hand, on the supervisory boards of the same six
banks was (in 1910 .) 51 major industrialists, including the director of the
Krupp firm, the giant steamship company Hapag (Hamburg-Amerika), etc., each of
the six banks from 1895 to many hundreds of industrial companies, namely from
281 to 419.
“According
to the latest data book of 1909, there are 12,000 directors and members of
councils in the management bodies of industrial companies in Germany, but 2,917
seats, 197 persons occupy the councils.
The
record was broken by r Karl Fürstenberg of the Berliner Handelsgesellschaft
with 44 mandates; Evgeny Dutman from Dresdener Bank occupies 35 seats. In
general, of the various professions represented in the composition of the
councils, the banking profession is most strongly represented, and therefore
the greatest part-time job falls to its lot.
The
same is true in the States of North America. The famous banking firm of Morgan
in 1906 was represented in 109 enterprises. Among these enterprises there were
5 banks, 50 railways, 3 shipping companies, 8 trusted companies, 8 insurance
companies, 40 industrial enterprises, etc.
One
can judge what a huge role participation in joint-stock companies plays in the
operations of German banks, if only by the fact that Deutsche Bank receives 10%
of its entire profit from participation in industry, Darmstiidter Bank - 15-1 /
2% and “Berliner Handelsgesellschaft" -18%.
Banking Concerns (Merged
Business Groups).
The
banks themselves, which need huge capitals for their foundation, in turn, are
built on joint-stock principles, they themselves represent joint-stock
companies. This allows the most powerful banks to subjugate smaller banks with
all credit, industrial and other enterprises associated with them. It often
happens that a bank that controls a significant number of enterprises itself
falls under the influence of a larger bank and finds itself in the position of a
"subsidiary" or even "grandchild" enterprise.
On
the eve of the war, the firm "I. I. Morgan and Co. itself controlled
enterprises with a capital of 22½ billion dollars, which at that time amounted
to 1/3 of the national property of the States. Closely connected with the firm
were 18 other enterprises, together with which it subordinated to its influence
a capital of 40 billion in the most diverse branches of the national economy,
including 15.8 billion in industrial enterprises, 17.3 billion in railways, 4 billion
in banks and other financial enterprises, 1-1/2 billion in mining and oil
enterprises. The gigantic steel trust of the United States, the famous
"United Stats Steel Corporation" with its 300,000 workers and
employees, is Morgan's enterprise.
In
the United States, 89 individuals hold over 2,000 directorships in various
industrial, transportation, and other companies, with Morgan and Rockefeller
directly or indirectly controlling almost all of these enterprises. Among the
banks within the sphere of influence of the Morgan group are the two largest
French banks (Credit Lyonnaise and Union Parisien), as well as the large
English bank Schroeder.
Most
recently (at the end of 1924), the Morgan Group, together with the Schroeder
Bank, through the International Corporation for the Financing of Continental
Industry organized by them, acquired 1.3 shares of the reorganized Deutsche
Bank the business of this bank will go well, to acquire an additional number of
its shares. Deutsche Bank thus became almost entirely a "subsidiary"
of Morgan. However, Deutsche Bank itself is an organization that has not only
subsidiaries, but even grandchildren and great-granddaughter companies.
Before
the war, Deutsche Bank was a permanent participant in 17 other · banks, which
were thus its "subsidiaries". These 17 "subsidiary" banks,
in turn, participated in 34 "grandchildren" banks, and
"grandchildren" banks have 7 "great grandchildren". In
addition, the German Bank participated "for an unknown time" and
"FROM time to time" in 13 banks, of which 5, in turn, participated in
14 banks, and 2 of these 14 dominate in 2 more .
In
total, the sphere of influence of the German Bank included 87 banks, among
which there were large foreign firms (for example, Vienna Banking Union,
Siberian Trade Bank, Russian Bank for Foreign Trade, Accounting Bank,
Petersburg International Bank "and many others).
Each
of the banks included in the group, of course, controls a huge number of
industrial and commercial, transport, insurance companies and, thus, the
dominance of the "Deutsche Bank" over a number of banks provides it
with the opportunity to manage not only enterprises directly related to it, but
also by all enterprises subordinate to its "subsidiaries",
"great-grandchildren" and "great-grandchildren" banks.
All
enterprises dependent on the same bank form a banking group. A banking group
can be depicted using the following diagram (see page 43).
The
banking concern includes not only joint-stock companies, but also individual
enterprises. There are enough funds in the hands of the banks to subdue them.
Every
capitalist needs money from time to time. He receives this money from the bank.
If it is more or less easy to get a short-term loan from a bank (a loan against
working capital), then a loan against fixed capital is much more difficult.
Giving money for a long time, the bank always. runs the risk of losing them if
the position of the enterprise is shaken during this time.
Therefore,
the bank, issuing a loan for fixed capital, sets the debtor a number of
conditions. The debtor must allow permanent control over his enterprise. The
debtor is obliged not to resort to the help of other banks and henceforth to be
credited only in the bank that gave him the loan. The debtor undertakes to
comply with the directives of the bank in the field of trade policy and
coordinate its actions with the actions of enterprises subordinate to the bank,
etc.
Credit
is a powerful tool with which the bank brings individual industrial enterprises
into subjection.
Thus,
not only joint-stock companies, but also individual enterprises become
dependent on banks.
At
the present time it is difficult to find even a tiny little shop that,
in one way or another, directly or indirectly, would not depend on this or
that bank and would not obey its directives in its trading activities.
Concentration of Banks.
Along
with the change in the scope of banks, the nature of competition between them
also changes. In the past, banks only clashed with each other in the area of
credit. Now, however, when banking capital is strongly interested in the
affairs of industry, when the profits of each bank depend on the state of
affairs of the enterprises associated with it, every collision of two
industrial enterprises leads to a collision of banks interested in their
affairs.
Banks
have now turned from only credit institutions into credit, industrial, and
commercial institutions at the same time, and, accordingly, the struggle
between banking concerns is carried out simultaneously in all areas of capital
investment. In all places where capital
is invested, in which the bank is "interested", it can be hit equally
hard. The bank suffers both if it is deprived of credit links and if the
enterprises associated with it go bankrupt. For each bank, the front of the
struggle expands, lengthens. Now, for a successful struggle, the bank needs to
have exceptionally large capitals, for it must itself defend itself against the
pressing enemy and support its “offspring” (“subsidiaries” and “grandchildren”
enterprises) with capital and expand its influence, capturing more and more new
enterprises.
Therefore,
the last decades have been marked by a rapid increase in concentration in the
field of banking.
The situation is somewhat
different in Germany. Here, one can speak of a reduction in the absolute number
of banks only as applied to Berlin. In Berlin in 1895 there were 16 banks, in
1900 - 18, and in 1912 - only 9. In the provinces, the number of banks, under
the influence of the feverish industrial development of Germany, even grew.
However, this does not mean, of course, that there was no concentration of bank
capital. The size of the average bank increased.
(stats)
The
process of concentration of bank capital in Russia was carried out in a similar
way.
Of
the several dozen banks that exist in each country, not all reach the same
size. The bulk of banking capital is concentrated in a few of the largest
banks, which thus dominate both the credit market and all branches of the
national economy.
The
rest of the banks play a secondary role, are on the way to death and, in most
cases, are completely dependent on one or another large bank.
In
1914, the capital of 47 Russian banks amounted to 584.9 million rubles; 62.3%
of all this capital - 364.5 million. rubles were in the hands of 1 7 St.
Petersburg banks.
The
same picture in Germany. In 1912 the capital of all credit banks in Germany
amounted to 2.963 million marks. More than "3/5 of this capital (1.250 million
marks) belonged to the 9 largest banks (Berlinsl (them), while the share of the
remaining 147 banks accounted for less than 3/5.
The
capital of each of the 9 largest banks reached, on average, 139 million. marks,
while the average capital of each of the rest did not even reach 12 million.
stamps; The 9 largest banks play almost the same role in the economic life of
the country as the 147 others. This is worth thinking about. The picture
becomes even more striking if we remember that of the 147 banks mentioned, a
good half are nothing more than "subsidiaries" of the largest banks.
That this estimated figure is not exaggerated is proved by the fact that
already in 1911 6 of these banks "permanently participated" in 63
German banks, and the sphere of influence of Deutsche Bank alone included 87
large and small banks.
(Stats
)
France
is dominated by only 4 major banks. “Their position is so predominant that they
determine the functions of all other banks, presenting them with a field for
the full application of labor only where, due to their internal structure, they
could not take an active part. They cover the whole country with their network
of branch offices, through which they are able to absorb a significant, if not
most, part of the free money capital.
Merging industrial
capital with credit.
Things
should not be conceived in such a way that, to the extent that industrial
enterprises are subordinated to banks, industrial capital is subordinated to
credit capital.
This is precisely the essence of modern (financial)
capitalism, that banks act here, not only as representatives of credit
capital, but as representatives of both credit and industrial capital at the
same time. The following illustration
will make the statement more understandable:
“In
the late 1860s and early 1870s, the Standard Oil Company began operations, at
first with a capital of $1 million, which by 1892 had increased to millions of
dollars. Thanks to huge profits, in the hands of leaders; The aforementioned
company accumulated a large cash capital, which already in 1886 exceeded 17
million dollars.
Rockefeller
and his associates chose National City Bank as their main base. The choice was
successful. Not being particularly large, this bank gained fame for itself
Rockefeller
and his associates chose National City Bank as their main base. The choice was
successful. Not being particularly large, this bank gained fame for its
cautious, non-speculative policy, and enjoyed the full confidence of the public
... The merger was beneficial to both parties.
Banking
capital greatly increased the cash of the Standart Oil Company, which it needed
to develop the business and various financial transactions.
The
bank, with the help of millions of capitals of the Standard Oil Company, was
able to expand its activities to a grand scale ... The bank annexed a number of
other banks. The combined capitals and deposits of all these banks reach $700
million.
It
is not surprising that the bank becomes the main monetary center of the country
and takes part in all more or less large transactions, whether it is the
financing of industrial and other companies, the sale of various securities,
and the like.
We
see that Rockefeller acts simultaneously as head of both credit and
industrial capital.
If
he subjugates this or that industrial enterprise through the mediation of his
bank, this, of course, will in no way indicate the subordination of industrial
capital to credit capital, but will undoubtedly be a case of the subordination
of small capital, regardless of the sphere of their application, to large
capital, which is a synthesis of industrial and credit capital - stock or
finance capital. Rockefeller is no exception, of course.
Another
major financial king of the United States - Morgan is at the same time the
head of one of the largest banks in the world - the National Bank of
Commerce and a group of banks adjacent to it, which had a total capital of more
than 600 million before the war. dollars. At the same time, Morgan is the
head of the largest "Steel Trust" (United States Steel
Corporation) and one of the largest railway kings (225 railways-4-7.206 miles
of track).
What
kind of capital does Morgan represent
- industrial or credit? Both taken together, merged together,
represent finance capital. The subordination of one-third of the entire
economy of the United States to the Morgan Bank is, therefore, not the
subordination of industrial capital to credit capital, but the subordination of
small industrial and credit capital to big finance capital.
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