Speculative Promotion

(Russian, griunderstvo; from German Grander, founder), “institutional fever,” the large-scale feverish organization of banks, credit and insurance companies, and industrial, construction, and commercial corporations. Speculative promotion is accompanied by credit expansion, extensive issuing of securities (stocks and bonds), stock market speculations, unhealthy stock-jobbing, and fraudulent manipulations of financial dealers.

Speculative promotion is more or less typical of the periods of production upsurge in all stages of the development of capitalism where there is massive renewal and expansion of fixed capital. Speculative promotion was especially typical of the years 1850–70. The construction of railroads and of heavy industrial enterprises, which was being carried on intensively in many countries but especially in the United States, Russia, and Germany, demanded enormous capital. Stock societies grew rapidly and the issuing of securities expanded. The amount of investments was determined by the size of the issue and the condition of the monetary market. At the start of the 1870’s speculative promotion became international in nature. In 1871–73 the world issue of securities reached 40 billion francs. In Germany speculative promotion especially flourished after receipt of the 5 billion franc indemnity by France after the Franco-Prussian War of 1870–71. As F. Engels pointed out, the large-scale establishment of every possible kind of company became “the pretext became international in nature. In 1871–73 the world issue of and F. Engels, Soch., 2nd ed., vol. 19, p. 178). The speculative fever at the start of the 1870’s and the bacchanalia of promotion determined the scale and severity of the world economic crisis of 1873. During the age of imperialism speculative promotion was linked not only with cyclical industrial upsurges but also with wars, militarization of the capitalist economy, and inflation (the military-inflationary boom).