Wang Danzhu and Chen Jisheng: An Analysis of the Contemporary Virtual Economy from the Perspective of Lenin's Critique of Financial Capital
Lenin’s critical theory of finance capital is centrally embodied in Imperialism, the Highest Stage of Capitalism (hereafter referred to as Imperialism). In this work, Lenin revealed the process of the formation and expansion of finance capital and systematically analyzed its essence, providing the theoretical support for a correct understanding of finance capital. In the 1950s and 60s, the economies of capitalist countries represented by the United States and Western Europe developed rapidly, but following the occurrence of the "oil crisis," these countries fell into "stagflation" one after another. To cope with this predicament, Western economists represented by Harry Magdoff and Paul M. Sweezy proposed the theory of "financialization as a response to stagnation," attempting to rely on large-scale financialization to counter economic stagnation. Consequently, the virtual economy based on financial transactions expanded rapidly. However, the excessive swelling of the virtual economy did not solve the problem of slowing economic development; rather, it intensified the destructive severity of events such as the 1997 Asian financial crisis and the 2008 international financial crisis. Facing the risks brought by the expansion of the virtual economy in today's world, revisiting Imperialism and reviewing Lenin’s critical theory of finance capital is of great significance for us in seeking the key to cracking the risks of the virtual economy and responding to its challenges.
I. The Generative Logic and Core Content of Lenin’s Critical Theory of Finance Capital
After the 1870s, capitalist countries represented by the United States and Germany launched the Second Industrial Revolution, further stimulating industrial development and the concentration of production; "concentration, at a certain stage of its development, can be said to lead directly to monopoly." During this period, banks gradually transformed from intermediaries into monopolists, and finance capital subsequently gained control over a large number of productive enterprises. Lenin profoundly grasped the epochal shift from the "rule of capital in general to the rule of finance capital" and, on this basis, deepened the understanding of finance capital held by Marx and Engels. He analyzed the generative conditions and essential characteristics of finance capital in the era of monopoly capitalism, as well as the social crises it triggered, thereby establishing a critical theory of finance capital.
(1) The generative logic of Lenin’s critical theory of finance capital
Before the birth of Lenin’s critical theory of finance capital, Marx had conducted systematic research on virtual capital. In Capital, Marx explained the generation of virtual capital, arguing that "with the development of interest-bearing capital and the credit system, all capital seems to be doubled, and at times even trebled... the greater part of this 'money capital' is purely fictitious." From this, it is evident that interest-bearing capital and the credit system are important prerequisites for the emergence of virtual capital. At the same time, the virtual capital understood by Marx is actually "a form of capital existence independent of real assets in the form of shares, government bonds, corporate bonds, bank bonds, real estate mortgages, financial derivatives, etc." This virtual capital cannot exist apart from productive capital (literal: "entity capital") [1], yet it enables the holder to obtain a value higher than the productive capital it represents. This drives profit-seekers to "favor" virtual capital, which subsequently undergoes rapid development. Lenin fully absorbed Marx's theory of virtual capital, clearly pointing out that finance capital is parasitic, and maintained that "finance capital is the bank capital of a few monopolist largest banks, merged with the capital of monopolist combines of industrialists"; thus, it cannot exist apart from productive capital. However, it is worth noting that in Marx’s era, virtual capital had not yet achieved substantive dominance over productive industries, whereas by the late 19th and early 20th centuries, this substantive dominance had basically formed. Lenin accurately grasped the new changes appearing in capitalism at the end of the 19th century. In Imperialism, he analyzed the division of the world by imperialist powers during this period, the concentration of production in Germany and the United States, and the number of institutions owned by the six large Berlin banks, finally reaching the conclusion that "monopoly is the latest achievement of the 'latest stage of capitalist development'." Where did monopoly come from? Lenin provided the answer: "monopolies have grown out of the banks." Banks are, in fact, financial monopolists; they control industrial capital while embedding their agents into government agencies and, relying on the export of capital, cast a "dense network" of finance over the colonies of capitalist countries. Finance capital at this time was no longer content to operate within the circles of the financial aristocracy but wanted to control everything. As Lenin pointed out, "the financial oligarchy throws a close network of dependence relationships over all the economic and political institutions of present-day bourgeois society without exception," and "the dense network of finance capital is, so to speak, spread over the whole world." Based on these epochal changes, Lenin believed that modern virtual capital had become a financial monster. He studied the virtual capital of financial imperialism, analyzed the changes in virtual capital across different fields such as production and circulation, revealed the essential characteristics of the virtual capital of financial imperialism, and established a critical theory of finance capital.
(2) The core content of Lenin’s critical theory of finance capital
The core content of Lenin’s critical theory of finance capital includes the following aspects. First, finance capital is the product of the "intergrowth" (长合) [2] of bank capital and industrial capital under monopoly conditions. Lenin noted: "The concentration of production; the monopolies arising therefrom; the merging or intergrowth of the banks with industry—this is the history of the rise of finance capital and the content of that concept." To fully reveal the conditions for the generation of finance capital, Lenin explained the concentration of production and monopoly: "Combining different branches of industry in a single enterprise" advanced the concentration of production, "and the concentration of production at a certain stage of development leads to monopoly." Under monopoly conditions, the degree of socialization of production increases significantly, yet "the socialized means of production remain the private property of a few," and "the greater part of the profits go to the 'geniuses' of financial manipulation." Under monopoly conditions, ultra-large-scale enterprises often have a hugh demand for large amounts of capital to consolidate their monopoly positions. As the entire banking industry became increasingly dominated by a few large-scale banks, large enterprises had to rely on large banks to obtain large sums of capital. At this point, bank capital already "dominates almost the entire money capital of all the capitalists and small businessmen," and industrial capital and bank capital have achieved deep intergrowth. This intergrowth gave birth to finance capital under monopoly conditions.
Second, the monopoly of finance capital has intensified the polarization between the rich and the poor. For individuals, capitalists can exploit the public by virtue of the monopoly of finance capital. This exploitation is more severe than in the past; massive social wealth is concentrated in the hands of the financial oligarchy, while ordinary laborers are even repeatedly exploited and fall into abject poverty, thereby creating a hugh wealth gap between the financial oligarchy and the laborers. For industries, the trusts controlled by the financial oligarchy continuously suppress small and medium-sized enterprises, creating a "wealth gap" within industries. Lenin took the balance sheets prepared by the financial oligarchy as an example to illustrate the "difference in fate" between the financial oligarchy and small and medium-sized entrepreneurs. He pointed out: "the latest statistics on the preparation of balance sheets... enable the main party concerned to evade responsibility in the event of a risky failure by selling his shares in time, while the private entrepreneur has to answer with his life for everything he does." For nations, Lenin deeply analyzed the economic conditions of the major imperialist countries and colonies of the time, and through comparative analysis, fully elucidated the polarization of wealth brought to the world by the monopoly of finance capital, accurately pointing out the severe consequences of this polarization—namely, that "what other means than war could there be."
Third, parasitism is the essential characteristic of finance capital in the era of monopoly capitalism. From the perspective of its emergence, Lenin believed that finance capital was formed under the condition where "bank capital and industrial capital have merged"; therefore, finance capital cannot exist independently of the productive industry (实体工业), which makes finance capital carry parasitic characteristics under capitalist monopoly conditions from the moment of its birth. From the perspective of its operation, finance capital relies on parasitic expansion to maintain its own operation. This expansion is reflected in two aspects: first, expansion into various industries, where the financial oligarchy controls various sectors through means such as share participation—generally speaking, "owning 50% of the capital is often enough to control an entire joint-stock company." Second, expansion to the entire world, where the financial oligarchy relies on the export of capital to bring colonies and semi-colonies into its parasitic scope, thereby expanding the range of parasitism. From the perspective of its impact, finance capital under monopoly conditions breeds parasitic groups. According to the data collected by Lenin, these parasitic groups "take no part whatever in any business enterprise and spend their lives in idleness." The essential characteristics of finance capital are continuously exposed through the behavior and activities of such groups, making the parasitic nature of finance capital more manifest.
II. Lenin’s Critical Theory of Finance Capital is the "Scalpel" for Dissecting the Virtual Economy
The academic community generally agrees that the virtual economy (虚拟经济) [3] is closely linked to finance. For example, Cheng Siwei believes that the virtual economy refers to various activities in which virtual capital relies primarily on financial platforms. Zhang Junshan believes that the virtual economy manifests itself first in the activities of the financial sector. Because the price expansion of virtual capital represented by securities causes active transactions in the financial field, correspondingly increasing the profits of the financial sector, people can profit not only from the buying and selling of securities but also from services related to securities trading, such as securities transactions, accounting settlements, and securities business consulting—even related printing and security services will flourish and similarly obtain profit income. Therefore, understanding the virtual economy must closely follow finance. The virtual economy is an economic form with finance at its core, accompanying the productive economy (实体经济), following the logic of virtual capital, and easily integrating with modern technology. Since the essential characteristic of finance capital within the framework of monopoly capitalism is parasitism, understanding the virtual economy with finance capital at its core also requires starting from this essential characteristic of parasitism. This involves deeply analyzing the generative factors of the virtual economy's parasitism, its parasitic expansion, and the harm it causes, so as to achieve a profound understanding of the virtual economy. Lenin’s critical theory of finance capital provides a scientific exposition of the parasitism of finance capital, offering a sharp "scalpel" for dissecting the virtual economy.
(1) The generation of the virtual economy’s parasitism
Financial monopoly created the necessary prerequisites for the generation of the virtual economy's parasitism. On the one hand, under the influence of monopoly, financial giants at the top of the monopoly utilize the "participation system" (参与制) to continuously absorb and control more capital, providing the necessary economic strength for parasitism. Lenin explained this participation system: "The big bank not only directly swallows up the small ones, but 'joins' them to itself, incorporates them into its own capital, buys or exchanges their shares, and 'links' them with a system of debt relationships, etc." In other words, large banks manipulate or swallow other small and medium-sized productive enterprises or small banks through the debt relationship system, thereby expanding financial power so as to turn small and medium-sized enterprises into parasitic sites. Through the participation system, financial giants can use tools such as stocks and bonds to earn profits from the productive economy; the conditions for the generation of parasitism are thus in place. On the other hand, finance capital is not satisfied with controlling a single area of society but is eager to penetrate all aspects of social life, which provides more convenient conditions for the generation of the virtual economy’s parasitism. For example, financial oligarchs engaged in the virtual economy often cooperate with governments, influencing presidential elections or sending their agents into parliament to tighten control over state power. Through the power of the state, they penetrate finance capital into multiple industries such as media and education. In its interaction with multiple social relations, the virtual economy obtains more power to engage in parasitism. But this does not mean that the parasitic activities of the virtual economy stop there, because the self-valorizing and profit-seeking nature of capital drives the virtual economy to expand its parasitic range to obtain more benefits, and so they fix their gaze upon the whole world.
(2) The parasitic expansion of the virtual economy
The capital export of imperialist states inevitably leads to the parasitic expansion of the fictitious economy. Since the fictitious economy seeks parasitic expansion across the entire world, it must board the "express train" of capital export. In Imperialism, the Highest Stage of Capitalism, Lenin focused his analysis on the export of capital, arguing that the reasons capital can be exported are: first, that "a large 'surplus of capital' has arisen in the advanced countries"; second, that "monopolist associations of capitalists" exist in all developed capitalist countries; and third, that capital is "exported to backward countries in order to increase profits." Generally speaking, the forms of capital export mainly include the export of loan capital, productive capital, and commodity capital. Among these, the export of loan capital has played a significant role in promoting the parasitic expansion of the fictitious economy on a global scale. This promotional role has continuously strengthened alongside the development of capitalism. In the early 20th century, fictitious economic products such as options, hedging, and asset securitization had not yet emerged. However, developed capitalist countries successively established banks and other institutions in colonies and semi-colonies on a large scale and conducted large-scale investments, marking an important step in the parasitic expansion of the fictitious economy. Regarding this, in the "Export of Capital" section of Imperialism, Lenin provided statistics on the distribution of investments by imperialist states across various continents around 1910. Major imperialist countries such as Britain, France, and Germany conducted large-scale capital exports to relatively backward regions in Asia, Africa, Oceania, and the Americas. Notably, French investment "is for the most part loan capital, regular government loans, and not investment in industrial undertakings." It is thus evident that by the early 20th century, the fictitious economy, with finance capital at its core, was already undergoing parasitic expansion in colonies and semi-colonies. However, due to the presence of a significant natural economy [4] in these regions, the parasitic expansion of the fictitious economy was not entirely smooth. Furthermore, as fictitious economic products were not yet abundant during this period, the application of capital exported by developed countries within the sphere of the fictitious economy was relatively limited.
After World War II, the traditional colonial system collapsed, and newly independent nations in Asia, Africa, and Latin America began their path of national construction. At this point, the natural economy in these countries tended toward disintegration. Major Western capitalist countries gradually initiated a wave of financial liberalization and, relying on the international financial hegemonic order—including the Bretton Woods system—exported massive amounts of finance capital to the world. For example, supported by powerful finance capital and the international financial hegemonic order, the United States continued to export capital globally. Among this, private foreign direct investment increased from $11.788 billion in 1950 to $168.081 billion in 1978, a 13.26-fold increase over 28 years. Additionally, in 1965, US banks had only 31 branches in Europe; by 1978, this number had increased to 170, and the proportion of investment in the financial and insurance industries reached 27% in 1978, showing the continuous expansion of US financial overseas investment. As another example, after World War II, France forcibly implemented the "CFA Franc" [5] in Africa and required the central banks of participating countries to deposit most of their foreign exchange into "operations accounts" set up by the French Treasury, thereby controlling the financial systems of Central and West African nations. Under the influence of the frenzied capital export by imperialist states like the United States, and coupled with the continuous development of financial innovation and fintech—such as the ongoing integration of futures and options contracts with new technologies and the endless emergence of innovative financial derivatives—the parasitic expansion of the fictitious economy has intensified, further strengthening its global influence.
(3) Consequences of the Parasitic Expansion of the Fictitious Economy
The root cause of periodic financial crises is the basic contradiction of capitalism [6], which cannot be eradicated within the framework of capitalist private ownership. This makes the occurrence of periodic financial crises inevitable. The parasitic expansion and excessive bloating of the fictitious economy have further aggravated these periodic financial crises. Under the conditions of capitalist private ownership, the fictitious economy, characterized by its parasitic nature, continuously crowds out the development of the real economy, leading to the excessive "virtualization" of the economy. This not only intensifies the destructive power of financial crises but also expands their scope of impact. In this process, the parasitic fictitious economy itself suffers heavy blows, resulting in financial storms, stock market volatility, and the collapse of the financial order. This harm is necessarily global and periodic. For instance, the Wall Street stock market crash of 1929 triggered the Great Depression worldwide. The "Oil Crisis" of the 1970s, the Latin American debt crisis of the 1980s, and the Asian financial crisis of the 1990s all caused severe damage to world economic development and the stability of the international financial order. With the occurrence of each round of financial crisis, the bubble of the fictitious economy bursts and the economy itself is severely hit. However, after the crisis is alleviated, the fictitious economy begins a new round of expansion. As the fictitious economy continues its self-circulation and bloating while detached from the real economy, and as the basic contradiction of capitalism becomes increasingly acute, the crisis eventually intensifies once again, forming a vicious cycle that repeats over and over. Therefore, under the dominance of the basic contradiction of capitalism, periodic financial crises are unavoidable. Furthermore, as the expansion of the fictitious economy intensifies, the destructiveness of these crises will also inevitably increase. This is the inescapable consequence of the parasitic expansion of the fictitious economy.
III. The Fictitious Economy of Contemporary Capitalism Has Not Escaped Lenin’s Theory of Finance Capital Critique
In the 21st century, the fictitious economy of capitalist countries has undergone significant changes compared to the 19th and 20th centuries. These changes are concentrated in three areas: first, the degree of integration between the fictitious economy and digital technology is deepening, and finance capital profits increasingly rely on digital technology; second, the excessive bloating of the fictitious economy has led to its gradual detachment from the real economy, with the divergence between the "virtual" and the "real" constantly intensifying; third, the fusion of the fictitious economy and economic globalization is deepening, with the international liquidity of fictitious capital further enhanced. However, these new changes do not mean that the fictitious economy of contemporary capitalism has escaped the scope of Lenin's theory of finance capital critique; on the contrary, this theory remains the "scalpel" for dissecting the fictitious economy of contemporary capitalism.
(1) The Fictitious Economy under Digital Technology Has Intensified Financial Monopoly
With the development of digital technology, data has increasingly become an indispensable factor of production. In pursuit of more surplus value, capital has launched large-scale data extraction. Tech giants who control digital platforms "compete to construct 'walled gardens' through operating system licensing, application programming interfaces (APIs), and standard development kits (SDKs) to form data streams and data pools exclusively for capital." Consequently, digital monopoly capitalism has formed in developed capitalist countries. The application of digital technology has brought about changes in the capitalist economic form, which has profoundly influenced the fictitious economy. On the one hand, the finance-based fictitious economy has begun to use digital technology to obtain asymmetric information and maintain its informational advantage. Fictitious economy giants themselves control vast wealth, and the tech giants controlling digital platforms will inevitably unite with them to obtain benefits. As a result, monopoly companies integrating finance and technology—such as Amazon, Microsoft, Meta, and Google—have continuously developed. Amazon, for instance, held a market share of over 40% in global retail activity in 2019, while Google owns 90% of the internet search market worldwide. On the other hand, driven by the possession of data, fictitious economy giants further consolidate their monopoly positions through large-scale mergers. In the era of digital monopoly capitalism, possessing capital advantage alone is insufficient to obtain more benefits; only by controlling data and possessing algorithmic power can one truly obtain stable and massive benefits. To this end, fictitious economy giants have launched large-scale acquisitions. For example, Facebook acquired social software giant WhatsApp for $19 billion in 2014, and Microsoft acquired information service giant LinkedIn in 2016, aiming to obtain more data streams, realize large-scale data possession, and strengthen their monopoly status. Furthermore, digital technology has deeply integrated with the fictitious economy through its technical advantages, giving rise to internet finance companies that typically rely on online lending to earn high profits. For instance, interest rates for "payday loans" from US internet finance companies are generally high and opaque. These platforms usually charge borrowers various management fees, service fees, and handling fees. If these fees are converted into loan interest, the rates rise significantly, even exceeding the highest legal red lines for private lending rates. In the digital age, a large number of young people have become the most proficient users of digital technology. This not only brings huge profits to internet finance companies and strengthens platform monopolies but also easily entices young people to become addicted to "economic opium" [7]. Thus, it is evident that the fictitious economy under digital technology has not weakened monopoly but has intensified it in various ways, which is consistent with Lenin's discourse of over 100 years ago. Lenin lived in the era of the Second Industrial Revolution, when the technological level of capitalist countries was rising, and monopoly capitalists used their technological advantages to intensify monopoly and oppression. Today, Western developed capitalist countries use their digital technology advantages to intensify the monopoly of the fictitious economy, still for the purpose of earning monopoly profits. This means that the fictitious economy of capitalist countries in the 21st century has not escaped the scope of Lenin’s theory of finance capital critique.
(2) The Fictitious Economy under the Divergence of "Virtual" and "Real" Has Never Shed Its Parasitic Nature
Lenin emphasized the parasitic nature of monopoly capitalism in Imperialism. So, today, under the divergence of the "virtual" and the "real," has the parasitic nature of the fictitious economy changed? This divergence refers to the phenomenon where the fictitious economy, which was originally based on the real economy, increasingly detaches from it, making the boundary between the two more distinct. Under this influence, many sectors of the real economy have begun to "shift from the real to the virtual" (脱实向虚), with large amounts of real economic assets turning toward the fictitious economy. As the fictitious economy bloomed and the number of real economic entities decreased, it seemed as though the fictitious economy could exist independently of the real economy or even dictate its fate. In reality, however, the fictitious capital contained within the fictitious economy must interact with functional capital; otherwise, fictitious capital would struggle to exist. In other words, the fictitious economy cannot be completely detached from the real economy. The decrease in the number of real economic entities does not mean their ability to support the fictitious economy has weakened; rather, it means that a real economy of this scale can already satisfy the parasitic needs of the fictitious economy. If this portion of the real economy did not exist, the "shift from the real to the virtual" could not continue. Therefore, the fictitious economy under this shift has not shed its parasitic characteristics. Moreover, the parasitic nature of the fictitious economy has never weakened. Under the influence of this divergence, the fictitious economy continuously swallows the real economy, manifested by the prevalence of financial investment and the generation of large financial bubbles. Between 1960 and 2020, the share of the financial industry in the US grew from 14% to 21%, while manufacturing fell from 27% to 11%. Profits in the financial industry grew from 17% to over 30%, while manufacturing profits dropped from 49% to 10.6%—a reduction of more than two-thirds. During its bubble economy era, Japan's financial sector expanded even more frenetically. These examples illustrate that the parasitic nature of the fictitious economy in developed capitalist countries is constantly strengthening, because the fictitious economy can only sustain the needs of its expansion by increasing the intensity of its parasitism on the real economy. At the same time, under the influence of this divergence, inequality in capitalist society has further intensified. For example, the rapid expansion of the fictitious economy accelerated the decline of profit rates in the real economy, forcing it to continuously suppress workers' wages, resulting in a situation where profits squeeze wages. According to statistics, "by 2006, the real hourly wage of non-agricultural workers in the United States had decreased to 1967 levels," and "millions of low- and middle-income families in the United States had to rely on credit to support their household expenses," while financial giants amassed vast wealth. Furthermore, the inequality between developed capitalist countries and developing countries has continuously expanded with the development of the fictitious economy. Traditional "rentier states" [8] obtain more benefits, while developing countries are in a position of being exploited by finance capital. This inequality between people and between nations demonstrates that under capitalist conditions, the fictitious economy has not escaped its parasitic nature. Lenin's discourse on the parasitic nature of finance capital is still applicable to the fictitious economy today, because under capitalist private ownership, the fictitious economy can never shed the parasitic traits it has carried since its inception.
Lenin once analyzed the dominance of financial hegemony over the world in the early 20th century in Imperialism, the Highest Stage of Capitalism. He pointed out that "the supremacy of finance capital over all other forms of capital... means the predominance of the few states which possess financial 'power' over all the rest," and that "finance capital also leads to the direct division of the world." Entering the 21st century, economic globalization has become an irreversible tide, and the interweaving of economic globalization with the virtual economy has grown increasingly strong. For a long time, Western developed capitalist countries, represented by the United States, have dominated the process of globalization, while the vast number of developing countries—due to lack of capital, backward technology, and heavy debt burdens—have remained in a relatively passive position. Developed capitalist countries led by the U.S. utilize the international economic systems and rules they themselves formulated, leveraging transnational financial organizations and military hegemony to vigorously develop the virtual economy, promote industrial hollowing-out [9] within their own borders, and continuously drive the global expansion of finance capital. According to statistics, the ratio of global liquid financial assets to global GDP was 109% in 1980 and 350% in 2013, an increase of nearly 250 percentage points in just 33 years. Simultaneously, the U.S. uses the dollar, bonds, and various financial innovation products to continuously expropriate the real resources (labor resources, natural resources, etc.) of developing countries, relying on powerful military force to pave the way for the expansion of finance capital. It is thus evident that Western countries led by the U.S. have effectively seized the opportunity of the convergence of economic globalization and the virtual economy to continuously consolidate their financial hegemony and construct international financial monopoly capitalism.
Compared to the era in which Lenin lived, international monopoly capitalism in the 21st century has pushed financial hegemony to an extreme, and this hegemony has been reinforced to an unprecedented degree. First, the greed of financial hegemony has reached unprecedented heights. Under the context of the close integration of economic globalization and the virtual economy, financial hegemony not only controls production and sales within the economic sphere but also utilizes the U.S. dollar to exploit the people of the entire world, harvest global wealth, and control the world's political, cultural, and social life, attempting to seize interests in broader fields. Second, the destructive power of financial hegemony has been reinforced to an unprecedented degree. On one hand, imperialist countries represented by the U.S. increasingly bundle military, cultural, and political hegemony with financial hegemony; once certain countries resist their financial hegemony, what follows is political bullying, cultural infiltration, and military intervention. For instance, the wars in Iraq and Libya launched by the U.S. are concentrated expressions of its "financial hegemony + military hegemony + political hegemony." On the other hand, financial hegemony has intensified the destructive power of financial crises. The U.S. subprime mortgage crisis of 2007 triggered a global financial crisis, resulting in a series of catastrophic consequences such as a sustained global economic downturn, widening wealth gaps, and the rise of terrorism. Yet the U.S., the originator of this crisis, took advantage of the deep integration of economic globalization and the virtual economy to shift the crisis onto the rest of the world, directly increasing the scope and intensity of financial hegemony's destruction. Under the background of capitalist globalization, the virtual economy has strengthened the financial hegemony of imperialist countries. Its nature—greedy, destructive, cunning, exploitative, and moribund—has not weakened but has instead intensified. This is consistent with Lenin's discourses of over 100 years ago and signifies that the virtual economy under contemporary capitalist conditions has not escaped the scope of Lenin’s critique of finance capital.
IV. Insights from Lenin’s Critique of Finance Capital for China’s Response to Virtual Economy Challenges
Finance is the lifeblood of the national economy and an important component of a nation’s core competitiveness. Precisely for this reason, under the conditions of a socialist market economy, China must attach great importance to and scientifically respond to the various risks and challenges existing in the virtual economy as it promotes national economic development. At the end of October 2023, General Secretary Xi Jinping clearly pointed out at the Central Financial Work Conference: "Hidden risks in the economy and finance remain numerous, the quality and effectiveness of financial services for the real economy are not high, financial chaos and corruption persist despite repeated prohibitions, and financial regulation and governance capabilities are weak." This assessment accurately grasps the urgent challenges facing China’s virtual economy, and we can still draw much beneficial insight and methods for response from Lenin's critique of finance capital.
(1) The Intertwining of Various Risks and Challenges in China's Current Virtual Economy
Risk prevention and control is the eternal theme of financial work. Currently, the risk challenges China faces in the field of virtual economy mainly include the following aspects. First, there is insufficient coordination between the virtual economy and the real economy. At present, due to the accelerating pace of technological updates, rising labor costs, and increasingly diverse consumer demands, the profit margins of the real economy—represented by manufacturing—have declined to some extent. Furthermore, there are deficiencies in innovating development methods and resisting development risks. Coupled with capital's inherent profit-seeking nature, funds more easily aggregate in the virtual economy where profit rates are higher, thereby increasing the difficulty of financing for the real economy. Under these circumstances, signs of "diverging from the real toward the virtual" (tuō shí xiàng xū) [10] have appeared in some sectors of the real economy. Meanwhile, the high-quality services provided by the financial industry are not sufficiently efficient or precise, causing the coordinated development of the virtual and real economies to suffer a certain degree of impact. Second, the external risks and challenges facing economic and financial development are increasing. Since the 2008 international financial crisis, the world economic recovery has been weak. Western developed countries, led by the U.S., have acted as major drivers of global excessive virtualization and financialization. They continuously transfer manufacturing to developing countries, accelerate the domestic "shift from the real to the virtual," and implement multiple rounds of intensified quantitative easing policies, thereby aggravating global financial risks. At the same time, continuous regional wars and conflicts have increased unstable factors in international financial markets. In this context, China's virtual economy will be impacted to a certain extent, and its financial opening-up also faces challenges such as an unjust international financial order and financial hegemony. Third, the regulation of the virtual economy, particularly financial regulation and governance, faces challenges. On one hand, as the degree of integration between new technologies and the virtual economy deepens, some internet financial businesses attempt to evade regulation by virtue of their data technology advantages, further increasing the concealment and harm of financial crimes. On the other hand, some financial institutions suffer from weakened self-regulation awareness, non-compliant transactions, and unscientific risk disposal, while showing deficiencies in areas such as honesty, prioritizing righteousness over profit (yǐ yì qǔ lì) [11], prudence, upholding the fundamentals and breaking new ground, and legal compliance, which further increases the complexity of financial regulation.
(2) Responding to the Risks and Challenges of China’s Virtual Economy Based on Lenin’s Theory of the Critique of Finance Capital
Persisting in the Centralized and Unified Leadership of the Party over Financial Work A survey of Imperialism, the Highest Stage of Capitalism shows that the reason finance capital triggers various crises is, fundamentally, that under the conditions of capitalist private ownership, finance capital is held in the hands of the bourgeoisie. The chaos of the virtual economy, represented by the financial industry, is the result of capitalist manipulation. As far as China's development of the virtual economy at this stage is concerned, strengthening the centralized and unified leadership of the Party over financial work can provide a powerful political guarantee for China’s financial development. Since its founding, the Communist Party of China has established financial institutions during the New Democratic Revolution period, built a financial system during the socialist revolution and construction period, promoted financial reform during the new period of reform, opening-up, and socialist modernization, and driven high-quality development of finance in the New Era of socialism with Chinese characteristics. These historical facts have already proven that only by persisting in the centralized and unified leadership of the Party over financial work can the cause of finance move steadily and reach far. Currently, strengthening this leadership means promoting Party building in the financial field, enhancing financial security capabilities, improving the actual effectiveness of financial reforms, and scientifically responding to external financial risks and challenges under the Party's leadership. It also means permeating all aspects and links of financial work with Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era—the Party's latest theoretical achievement—to ensure that financial work always develops in the correct direction, thereby comprehensively enhancing China's ability to deal with virtual economy challenges.
Persisting in the People-Centered Approach to Financial Work Lenin once pointed out: "As long as capitalism remains what it is, surplus capital will be utilized not for the purpose of raising the standard of living of the masses... (for that would mean a decline in profits for the capitalists)." Recognizing this, Lenin believed that no matter how developed finance becomes under monopoly capitalism, it will only intensify the exploitation of the people because capitalism reverses the relationship between the people and finance capital—that is, the people become subordinates and finance capital becomes the center. In fact, the masses of the people are the creators of social material wealth. Only by persisting in a people-centered approach can economic activities overcome numerous challenges and enhance the stamina and vitality of development. Regarding the challenges currently facing China's virtual economy, only by always adhering to a people-centered approach can we effectively respond to various risks and transform the advantages of the virtual economy into welfare for the public. On one hand, the virtual economy based on finance must meet the multiple needs of the people, such as investment and wealth management, providing them with higher-quality financial services. On the other hand, the virtual economy can give full play to its own advantages to help promote the revitalization of rural industries, coordinated urban-rural regional development, and the development of the digital economy, while providing financial support for the masses engaged in rural revitalization. Guided by the people-centered value concept, the level of coordinated development between the virtual and real economies will continuously improve, and the ability to withstand external financial shocks will be significantly strengthened.
Promoting the Coordinated Development of the Real and Virtual Economies The virtual economy is generated on the basis of the real economy; once detached from the real economy, the virtual economy can hardly survive. China should further develop the real economy, promote the aggregation of resource elements toward the real economy, ensure that policy measures serve the real economy, and rely on intelligent technology to drive real economic development and improve its profit rates. On the basis of consolidating the real economy, China should further promote the integrated development of the real and virtual economies. It is necessary to leverage the virtual economy’s role in vitalizing the real economy—ensuring that finance always serves the real economy—while also leveraging the real economy’s role as a support for the virtual economy, providing a guarantee for the development of the financial industry through a strong manufacturing sector.
Earnestly Strengthening Financial Regulation In Imperialism, the Highest Stage of Capitalism, Lenin mentioned regulatory measures such as "making public the balance sheets, the compulsory use of a single form of balance sheet, and the establishment of supervision." This exactly illustrates that financial regulation is necessary; it is only that under capitalist private ownership, these measures find it difficult to play an effective role. For China, however, earnestly strengthening financial regulation is both practically feasible and highly necessary. On one hand, China implements a basic economic system in which public ownership is the mainstay and diverse forms of ownership develop together. Advancing financial regulation under these conditions can ensure the effectiveness and authenticity of supervision. On the other hand, China needs to earnestly strengthen financial regulation to resist various risks and challenges, including financial crime. Regulation should be strengthened in the following aspects: first, strengthening and improving legislation regarding the virtual economy (including finance) to promote regulatory governance through the rule of law, and striking hard against all types of financial crimes in accordance with the law to ensure the virtual economy remains within legal bounds. Second, promoting the organic integration of new technologies with financial supervision, skillfully using big data for oversight to gradually improve the modern financial regulatory system and expand the scope of supervision. Third, strengthening the internal governance of financial institutions by forming mutual supervision mechanisms among management and creating a cultural atmosphere of risk prevention and voluntary acceptance of supervision within institutions to form a synergy with external regulation. Under the premise of continuously strengthening financial regulation, the security of China's virtual economy development will be significantly enhanced, and its vitality in supporting the real economy will be markedly strengthened.