As I have set out elsewhere, and which I cannot go into further, here, however, its necessary to, also, understand the nature of modern imperialism, and of the role of the global ruling-class, in its characteristics and interests, which also reflects the maturity of the contradictions within the modern social-democratic state. The dynamic of imperialist capital, as described by Lenin and Trotsky, is the need to produce on an ever larger scale, and so to continually require ever larger single markets, and states. But, the nature of large-scale, socialised capital, in the form of the corporation, is that control over that capital rests not with its collective owners – the associated producers, i.e. workers and managers – but with a select group of creditors, i.e. the shareholders.
When we examine the takeover of companies, therefore, what we see is not the purchase of the capital of one company by another, but the purchase of a controlling portion of the shares of one company by another. In effect, that is more akin to the behaviour of feudal landowners than the processes of centralisation and concentration of capital described by Marx, Engels, Lenin and Trotsky and others. There was no objective basis driving one feudal lord to take over the domain of another, in the same way that competition between capitals leads to such concentration and centralisation, to survive.
The reason feudal lord A takes over the domain of B is not that any economies of scale etc., and rise in productivity is obtained, but solely that, in doing so, the total amount of feudal rent and taxes they obtain increases proportionately. In terms of share ownership, if the dividend yield is given, there is similarly no significant economies of scale, or increased productivity for the individual shareholder, whether they own 1,000 shares or 1 million shares. The only benefit, as with the landlord, is that with a yield of 5% the first produces £50 of revenue, and the second £50,000 of revenue. The real advantage, however, comes from the fact that, with a very large shareholding, the shareholder gains control over the real capital of the company. They get to appoint Directors, who act in the interest of those shareholders, and not the interests of the company, and its real capital.
Take the point made earlier in relation to takeovers. If the market value of shares in company A is £10 million, with 10 million shares issued, it is usually only necessary to have control of around 30% of shares to exert control, because the other 70% of shares are in diffused ownership, with many of the small shareholders never bothering to vote. With £3 million, therefore, its possible to have control of a company with a market capitalisation of £10 million. In fact, this market capitalisation is only the current value of its shares, but the company will have assets, real capital, usually, way in excess of that.
The market capitalisation of shares is based on the capitalised value of the revenue of the shares, i.e. the amount of dividend each share produces for its owner. If a share produces £0.10 of dividends, and the market rate of interest is 10%, then the capitalised value of the share is £1, if the rate of interest is only 5%, the value of the share is £2. However, the amount paid as dividends is only a fraction of the actual profits produced by the company. As Haldane noted, in the 1970's, dividends amounted to only 10% of profits, as against 70% today.
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