Centralization of Capital

The process in which many small and medium-sized capitals are united into a few large ones, another form of increasing the sum of the individual capitals.

The centralization of capital is the process of expanding the sum of the individual capitals without increasing the sum total of social capital by regrouping small and medium-sized capitals among individual capitalists and forming a few big capitals through annexation or association.

The centralization of capital has two characteristics: first, it presupposes a change in the combination of the already available and functioning capital; it is a recombination of the originally individual capitals; it does not increase the sum total of social capital; second, its effect is not limited by the absolute limits of the absolute growth or accumulation of social wealth, thus, it can centralize a large amount of capital in a relatively short period of time. The centralization of capital can be achieved mainly through two ways: first, through the annexation of small and medium-sized capital by big capital in competition; second, through the association of several capitals in the form of joint-stock companies, where the originally scattered capitals are united into bigger capital.

The centralization of capital can centralize a large amount of capital in a short period of time and can break through the limitations of the accumulation and concentration of capital. However, centralization and concentration of capital also have a close connection: the centralization of capital makes the sum of the individual capitals larger and larger, promotes the expansion of the scale of production of individual capitals, the adoption of new technologies, the increase of the productivity of labor, and the acquisition of more extra surplus-value, thus accelerating the process of accumulation and concentration of capital. Under the capitalist system, accumulation and concentration of capital are the two ways to increase the sum of individual capitals. They promote and strengthen each other and make sum of the individual capitals expand rapidly.

Competition and credit are the two most powerful levers of the centralization of capital. With the development of capitalist production and accumulation, these two levers also develop. Through the leverage of competition and credit, the centralization of capital develops rapidly.

The effect of the centralization of capital on capitalist development is twofold: on the one hand, the centralization of capital can achieve a rapid expansion of the scale of capital in a relatively short period of time, increase the degree of socialization of production, and further the development of capitalist production; on the other hand, the centralization of capital can lead to monopoly, so that social wealth becomes centralized in the hands of a few big capitalists, and intensify the contradiction between the socialization of capitalist production and private appropriation.