Both theorists linked the problem of shrinking continental markets driving European capital overseas to an inequitable distribution of wealth in industrial Europe. They contended that the wages of workers did not represent enough purchasing power to absorb the vast amount of capital accumulated during the Second Industrial Revolution.
Hobson, a British liberal writing at the time of the fierce debate on imperialism during the Second Boer War, observed the spectacle of what is popularly known as the "Scramble for Africa", and emphasized changes in European social structures and attitudes as well as capital flow (though his emphasis on the latter seems to have been the most influential and provocative). His so-called accumulation theory suggested that capitalism suffered from under-consumption due to the rise of monopoly capitalism and the resultant concentration of wealth in fewer hands, which apparently gave rise to a misdistribution of purchasing power. Logically, this argument is sound, given the huge impoverished industrial working class - then often far too poor to consume the goods produced by an industrialised economy. His analysis of capital flight and the rise of mammoth cartels later influenced Lenin in his Imperialism, the Highest Stage of Capitalism (1916)which has become a basis for the modern neo-Marxist analysis of imperialism. Thus some have argued that the New Imperialism was caused essentially by a flight of foreign capital.
New Imperialism was one way of capturing new overseas markets. By the eve of World War I, Europe, for instance, represented the largest share (27 %) of the global zones of investment, followed by North America (24 %), Latin America (19 %), Asia (16 %), Africa (9 %), and Oceania (5 %) for all industrial powers. Britain, the forerunner of Europe's capitalist powers, however, was clearly the chief world investor, though the direction of its investments underwent a striking change, becoming oriented less toward Europe, the United States, and India, and more toward the rest of the Commonwealth and Latin America. In non-industrial regions that lacked both the knowledge and the power to direct the capital flow, this investment served to colonize rather than to develop them, destroying native industries and creating dangerous political and economic pressures which would, in time, produce the so-called "north/south divide." Dependency Theory, devised largely by Latin American academics, draws on this inference.
Some have criticised J.A. Hobson's analysis of over-accumulation and under-consumption, arguing it does not explain why less developed nations with little surplus capital, such as Italy, participated in colonial expansion. Nor does it fully explain the expansionism of the great powers of the next century — the United States and Russia, which were in fact, net borrowers of foreign capital. Opponents of his accumulation theory also point to many instances in which foreign rulers needed and requested Western capital, such as the hapless moderniser Khedive Ismail Pasha.
Since the "Scramble for Africa" was the predominant feature of New Imperialism and formal empire, opponents of Hobson's accumulation theory often point to frequent cases when military and bureaucratic costs of occupation exceeded financial returns. In Africa (exclusive of South Africa) the amount of capital investment by Europeans was relatively small before and after the 1880s, and the companies involved in tropical African commerce exerted limited political influence. First, this observation might detract from the pro-imperialist arguments of Léopold II, Francesco Crispi, and Jules Ferry, but Hobson argued against imperialism from a slightly different standpoint. He concluded that finance was manipulating events to its own profit, but often against broader national interests. Second, any such statistics only obscure the fact that African formal control of tropical Africa had strategic implications in an era of feasible inter-capitalist competition, particularly for Britain, which was under intense economic and thus political pressure to secure lucrative markets such as India, China, and Latin America.
Lenin argued that capitalism necessarily induced monopoly capitalism - which he also called "imperialism" - in order to find new markets and resources, representing the last and highest stage of capitalism. This theory of necessary expansion of capitalism outside the boundaries of nation-states - one of the foundations of Leninism as a whole - was also shared by Rosa Luxemburg and then by liberal philosopher Hannah Arendt. Since then, however, Lenin's theory has been extended by Marxist scholars to be a synonym of capitalistic international trade and banking.
While Karl Marx never published a theory of imperialism, he referred to colonialism in Das Kapital as an aspect of the prehistory of the capitalist mode of production. In various articles he also analyzed British colonial rule in Ireland and India. Moreover, using the Hegelian dialectic, he predicted the phenomenon of monopoly capitalism in The Poverty of Philosophy (1847), hence the slogan "Workers of the world, unite!"). Lenin defined imperialism as "the highest stage of capitalism" (the subtitle of his outline), the era in which monopoly finance capital becomes dominant, forcing nations and corporations to compete themselves increasingly for control over resources and markets all over the world.
Marxist theories of imperialism, or related theories such as dependency theory, focus on the economic relations between countries (and within countries, as outlined below), rather than the more formal political and/or military relationships. Imperialism thus consists not necessarily in the direct control of one country by another, but in the economic exploitation of one region by another, or of a group by another. This Marxist usage contrasts with a popular conception of 'imperialism', as directly controlled vast colonial or neocolonial empires.
Lenin held that imperialism was a stage of capitalist development with five simultaneous features as outlined below:
1) Concentration of production and capital has led to the creation of national and multinational monopolies - not as understood in liberal economics, but in terms of de facto power over their enormous markets - while the "free competition" remains the domain of increasingly localized and/or niche markets:
Free competition is the basic feature of capitalism, and of commodity production generally; monopoly is the exact opposite of free competition, but we have seen the latter being transformed into monopoly before our eyes, creating large-scale industry and forcing out small industry, replacing large-scale by still larger-scale industry, and carrying concentration of production and capital to the point where out of it has grown and is growing monopoly: cartels, syndicates and trusts, and merging with them, the capital of a dozen or so banks, which manipulate thousands of millions. At the same time the monopolies, which have grown out of free competition, do not eliminate the latter, but exist above it and alongside it, and thereby give rise to a number of very acute, intense antagonisms, frictions and conflicts. Monopoly is the transition from capitalism to a higher system. (Ch. VII)
[Following Marx's value theory, Lenin saw monopoly capital as plagued by the law of the tendency of profit to fall, as the ratio of constant capital to variable capital increases. In Marx's theory only living labor or variable capital creates profit in the form of surplus-value. As the ratio of surplus value to the sum of constant and variable capital falls, so does the rate of profit on invested capital.]
2) Industrial capital as the dominant form of capital has been replaced by finance capital (repeating the main points of Rudolf Hilferding's magnum opus, Finance Capital), with the industrial capitalists being ever more reliant on finance capital (provided by financial institutions).
3) The export of the aforementioned finance capital is emphasized over the export of goods (even though the latter would continue to exist);
4) The economic division of the world by multinational enterprises, and the formation of international cartels; and
5) The political division of the world by the great powers, in which the export of finance capital by the advanced capitalist industrial nations to their colonial possessions enables them to exploit those colonies for their resources and investment opportunities. This superexploitation of poorer countries allows the advanced capitalist industrial nations to keep at least some of their own workers content, by providing them with slightly higher living standards. (See labor aristocracy; globalization.)
The Soviet Union, which claimed to follow Leninism, proclaimed itself the foremost enemy of imperialism and supported many independence movements throughout the Third World. However, at the same time, it asserted its dominance over the countries of Eastern Europe. Some Marxists, including Maoists and those to the left of the Trotskyist tradition, such as Tony Cliff, claim that the Soviet Union was imperialist. The Maoists claim that this happened after Khrushchev's seizure of power in 1956, while Cliff claims it happened in the 1940s with Stalin's policies. Harry Magdoff's Age of Imperialism is a 1954 discussion of Marxism and imperialism. Globalization is generally viewed as the latest incarnation of imperialism among Marxists.
Wallerstein's conception of imperialism as a part of a general, gradual extension of capital investment from the "centre" of the industrial countries to an overseas "periphery" coincides with Hobson's. According to Wallerstein, "Mercantilism became the major tool of (newly industrialising, increasingly competitive) semi-peripheral countries (i.e, Germany, France, Italy, Belgium, etc.) seeking to become core countries." Wallerstein hence perceives formal empire as performing a function "analogous to that of the mercantilist drives of the late seventeenth and eighteenth centuries in England and France." Protectionism and formal empire were characteristics of this era of neo-mercantilism, the major tools of "semi-peripheral," newly industrialized states, such as Germany, seeking to usurp Britain's position at the "core" of the global capitalist system.
The expansion of the Industrial Revolution thus contributed to the emergence of an era of aggressive national rivalry, leading to the late nineteenth century scramble for Africa and formal empire. Hobson's theory is thus useful in explaining the role of over-accumulation in overseas economic and colonial expansionism while Wallerstein perhaps better explains the dynamic of inter-capitalist geopolitical competition.
In this sense, contemporary imperial historian Bernard Porter argues that formal imperialism for Britain was a symptom and an effect of its relative decline in the world, and not of strength. Symbolic overtures, in fact, such as Queen Victoria's grandiose title "Empress of India", celebrated during the second premiership of Benjamin Disraeli in the 1870s, helped to obscure this fact. Joseph Chamberlain thus argued that formal imperialism was necessary for Britain because of the relative decline of the British share of the world's export trade and the quick rise of German, American, and French economic competition.
Porter, however, notes that Britain, "Struck with outmoded physical plants and outmoded forms of business organization... now felt the less favorable effects of being the first to modernize." He contends that "a kind of vicious circle had been set up, with domestic industry lagging because capital was going elsewhere because industry was lagging." Unlike J.A. Hobson, however, who links under-consumption to a mis distribution of purchasing power, Porter argues that "the best thing that Britain could have done to correct [its balance of payments] would have been to make her export industry more competitive —improve her methods of manufacturing and marketing in order to sell more abroad."
As mentioned, contemporary historians, such as Bernard Porter, P.J. Cain, and A.G. Hopkins, do not downplay the influence of financial interests of "the city" either, but contest Hobson's conspiratorial overtones and "reductionisms." Nevertheless, they often acted as repositories of the surplus capital accumulated by a monopolistic system and they were therefore the prime movers in the drive for imperial expansion, their problem being to find fields for the investment of capital.