If a company fails, the private capitalist loses their capital, and source of income, and the day to day managers of companies, production managers etc., paid salaries, lose their jobs along with other workers. But, shareholders, who have taken out in dividends and capital transfers, over several years, far more than they paid for the shares that enabled them to do that, simply take all of that and use it to speculate in the shares of some other company, or financial asset. The Directors are in the same position, and never stay at any company for long, as well as usually getting millions of pounds when joining or leaving a company, and often holding Directorships in several companies at the same time.
Huge monopolies have similarly huge balance sheets, so that the process of effectively asset stripping the company, by excessive amounts of dividends or capital transfers, can go on for a long time, before the company fails, and, as seen, often, when that happens, the capitalist state intervenes to bail it out. That is what the Attlee government did, in Britain, after WWII, with its nationalisation programme of all those core industries, in transport, energy and so on that had been bled dry by shareholders in the previous decades. Its what happened with the nationalisation of banks after 2008, and with the big car companies in the US. Once recapitalised by the capitalist state out of taxes, the companies are sold back to the same ruling-class of speculators that bled them dry in the first place.
But, also, in the 1980's, and 90's, as the new technological revolution produced by the microchip resulted in a huge rise in the mass and rate of profit, companies could, for a long time, fund any real capital accumulation out of those profits, whilst still leaving large amounts that could be paid out as dividends. As I have set out before, the technological revolution massively reduced the value of fixed capital, and large swathes of circulating constant capital, producing a huge release of capital. So, any given mass of profit represents a significant rise in the rate of profit. But, as wages fell, so the mass of profit also rose.
A greater mass of profit, with proportionally less of it required for capital accumulation, i.e. the supply of money-capital rises relative to the demand for it, causes the rate of interest to fall. Falling interest rates lead to higher capitalised values of assets, and falling yields, but shareholders, then, respond by increasing dividends, hence dividends go from 10% of profits in the 1970's, to 70%, today, and, similarly, as asset prices rise, including land prices, land goes from 10% of the price of a new house, to 70% of the price of a new house.
The market value of shares, therefore, is not the same as the market value of the real capital of a company. Over the years, even if 70% of profits are taken out as dividends, that leaves 30% that could be accumulated as additional real capital. The company buys additional buildings, machines, materials and so on, all of which sit on its balance sheet. It is the size of the balance sheet that, also, enables the company to buy up the shares of other companies, and to borrow from banks etc., to do so. So, a company whose shares have a market value of £10 million may have a balance sheet of £100 million. The shareholder who bought £3 million of shares, thereby, has control over £100 million of capital.
But, more than that. Company A, with its £100 million of capital, now, uses it as leverage to buy the shares of company B, with a market capitalisation of, say, £6 million. However, in similar fashion, company A need only buy £2 million of company B's shares to obtain a controlling interest. If company B's balance sheet amounts to £60 million, our shareholder, who bought £3 million of shares in A, now, exercises control over £160 million of capital, and so on. This is also a feature of imperialism.
As I have set out, elsewhere, this is also a characteristic of the nature of the global ruling-class of speculators or coupon-clippers as Marx and Engels referred to them, whose objective interests are quite different to, and, indeed, antagonistic to the objective interests of real, large-scale, industrial capital. It is fundamental to the nature of imperialism, today, but, having already digressed to an extent I had not intended, I cannot go into that further, here. I will deal with it in my future book on imperialism.
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