Comparing Lenin and

Schumpeter on Imperialism
Arnav Mahurkar
Roadmap
• Marxian Economics
• Vladimir Lenin
• Lenin on Imperialism
• Austrian Economics
• Joseph Schumpeter
• Schumpeter on Imperialism
Marxian Economics
• Stage Theory
Slavery  Feudalism Capitalism  Socialism Communism

• Historical Progress: Thesis + Antithesis: Synthesis (Class Struggle &

Violent conflict lead to new stages)
Marxian Economics: Theory of Value
• Labor Theory of Value: Exchange value of a commodity determined by
the quantity of socially necessary labor.

• Quantity of Socially Necessary Labor: Average amount of Time

required in the production of commodity under normal
conditions…average degree of skill and intensity…most advanced
technology available.

• Technology enhances productivity.

Marxian Economics: Wages and Market Value
of Labor Power
• Labor Power: Commodity sold by a worker. Its value is also determined by
socially necessary labor time required for that labor
power(subsistence[food, clothing etc.] for the worker and his family).

• Competition in market place between capitalists and between the workers

also determines the value of labor.
Marxian Economics: Capital
• Capital: Money/funds expended by capitalist in production. Two
types:

• Constant Capital: Raw material, auxiliary material etc. This type of

capital does not go through quantitative change in value.

• Variable Capital: Part of capital represented by labor power,

reproduces equivalent of own value and also produces an excess
value.
Marxian Economics: Surplus Value
• The surplus of the total value of the product, over the sum of values of its
constituent factors, is surplus of the expanded capital over the capital
originally advanced

• Surplus Value Created by labor power, but expropriated by capitalist as he

purchases the worker’s labor power.

• Eg. The worker is able to produce the equivalent of his cost of labor value
in a few hours, but the labor is hired to work for longer hours.

This surplus value is then used for capital accumulation.

Vladimir Lenin
• Leader of the Russian Communist Party.

• Studied effects of capitalism on peasants. Attempted to understand

the stratification of farmers.

• Inspirer and leader of Bolshevik Revolution.

Lenin On Imperialism
• Emphasizes massive industrialization that had occurred in all
industrialized capitalist countries during the late 19th and 20th
centuries.

• Highlights the Importance of banks & finance capital in bringing about

the phenomenon of capitalist imperialism.

• Highlights the historical trend of capitalists’ withdrawal from the day

to day managing of industrial enterprises. This leads to the creation of
a managerial class, which is subservient to the capitalist class.
Lenin on Imperialism: Reasons
• Concentration of capital has lead to monopolies.
Monopolies have captured of the most important sources of raw material.

• The merging of bank capital and industrial capital to form finance capital used by the monopolies.
Banks control bulk of the capital and income.

• This finance capital is being used to export capital, which gains prominence over the export of
commodities.
Colonial policies reflect intensified struggle over sources of raw materials.

• The development of international capitalist associations that divide the world.

competition becomes bitter in obtaining markets and sources of raw materials.
Lenin on Imperialism: Conclusion
• “Private property based on the labour of the small proprietor, free
competition, democracy, all the catchwords with which the capitalists
and their press deceive the workers and the peasants are things of
the distant past…

Capitalism has grown into a world system of colonial oppression and of

the financial strangulation of the overwhelming majority of the
population of the world by a handful of “advanced” countries”
Austrian Economics: Theory of Value(Jeevons)
• Jevons: Utility for central in economic analysis.

• Calculus of pain and pleasure has subjective features.

• Utility theory: Effects of utility can be ascertained eg. In decisions regarding price.

• 4 factors determining Utility: 1) Intensity 2) Duration 3) Certainty 4) Nearness/remoteness.

• Diminishing Marginal Utility: Decline in marginal consumption with increasing consumption of same good.

• U = f(X). Utility is determined by quantity of consumption of good X.

Austrian Economics: Jeevons’ Budget
Allocation
• Individual’s maximizing behavior in discussing a person’s allocation of any given commodity among
alternative uses.

• If an individual starts with a fixed stock of S of a commodity X and the uses of that commodity are
represented by x and y, then the stock must be divided up between those uses such that S = x + y.

• But as we use an additional unit of any good, the marginal utility declines – so we keep using the good that
gives us more marginal utility than another, until the marginal utilities are equal – then we are indifferent.

• MUx = Muy –> the equimarginal condition.

• We buy until the last dollar spent on each item brings us the same utility.
Austrian Economics: Menger

1. Refutes the labor theory of value and replace it with a theory of value centred around valuing
individuals(subjective value of utility).

2. Argues how this better theory of value could serve as an organizing principle for historical
investigation in theory to use with history.

3. Methodological individualism: People’s behaviour is explained by prices in rational choices in

terms of prices and incomes.

4. Equilibrium in the market: individuals are going to exchange until marginal utility from one
commodity is equal to the marginal utility from the other.

5. Mentions how economics is value free.

Austrian Economics: Walrasian Economics
• There are markets not only for consumers' products but also for land, labor,
and capital.

• General Equilibrium: In these markets the factors of production receive

returns equal to their contributions to production.

• The existence of excess supply in one market must be matched by excess

demand in another market so that it balances out.

• Conditions: 1) Property Rights 2) Small Firms in a competitive market 3)

Measurable marginal utility schedules.
Joseph Schumpeter
• Austrian political Economist

• Worked at University of Bonne and Harvard College.

Josef Schumpeter & Stages of Economic
Development
• Circular flow in the economy
condition where economic activity produces itself continuously at constant rate through time.

• Innovations
New product, technology, market, raw materials etc.

• Role of entrepreneur
Innovator
initiates developments.
’Private Kingdom’

• Business Cycles
Booms and busts
• The decay of capitalism
Schumpeter on Imperialism
• Views imperialism as a primitive form of human behavior.

• "the objectless disposition on the part of a state to unlimited forcible

expansion.”
Schumpeter on Imperialism: Reasons
• Necessities of the social structure.

• The inherited dispositions of its ruling class.

• The personal whims of rulers, imperialist individuals who need ever

new military successes to maintain their positions.

• Tradition, and the availability of appropriate means.

Schumpeter on Imperialism: Conclusion
• Capitalism and democracy are forces of peace.

• Further development of capitalism will lead to end of imperialism.

• The disciplines of industry and the market train people in "economic

rationalism"; the instability of industrial life necessitates calculation.

• When free trade prevails, no class gains from forcible expansion due
to the easy accessibility of raw materials.
Discussion Questions:
• Was imperialism the highest stage of capitalism or was it a remnant of
feudalism?

• How do Lenin and Schumpeter’s views on entrepreneurs differ?