Monopoly capital theory states that capitalism undergoes phases of evolution and transformation when some of its dominant institutions change significantly over time. It also states that historical changes toward greater concentration of industry need to be incorporated into the edifice of economic theory. It is not sufficient to simply assume high levels of competition, as the degree of monopoly is critical to the performance of capitalism in many ways.
Much of the debate about monopoly capitalism concerns the degree of concentration of industry; what forces control the large corporation; whether a tendency exists for stagnation due to effective demand failure; and whether a large amount of so-called waste is necessary for capitalism to periodically minimize demand problems.
The theoretical origins of monopoly capitalism include certain Marxist writers, and later post-Keynesians and institutionalists joined the debate. Karl Marx in volume one of Capital (1867) discussed the tendency for greater centralization and concentration of capital. Rudolf Hilferding in Finance Capital (1900) scrutinized an era of conglomerates along with the financial domination of industry. Paul Baran and Paul Sweezy in Monopoly Capital (1966) believed that managers of large corporations were often the largest shareholders and held control. Harry Braverman extended the analysis of monopoly capital to the labor process in Labor and Monopoly Capital (1974). Keith Cowling and Roger Sugden analyzed the implications of late-twentieth-century globalization and corporate expansion to monopoly capital theory in Transnational Monopoly Capital (1986).
Up until the late 1800s relatively high levels of competition were characteristic of capitalism. Degrees of competition changed, however, over the business cycle and long waves of growth. With the development of the joint stock company in advanced nations, firms grew in size during the mid- to late 1800s. During the late 1870s to the 1890s overproduction led to periodic deep recessions and depressions. In response to this, around the turn of the twentieth century a major merger movement stimulated greater concentration, along with selling costs such as advertising, while globalization and imperialism expanded the market. This all led to higher profit and accumulation until World War I, as Thorstein Veblen showed in Absentee Ownership (1923).
By the 1930s a serious level of oligopoly and monopolistic competition became institutionalized in the major capitalist economies. Through the postwar boom of the 1950s until the early 1970s the dominant oligopoly sector controlled the major industries, while the weaker competitive sector survived through contracts and agreements with the dominant sector. During this time, monopoly capitalism was seen as based on big business, big unions, and big government.
The term monopoly capitalism did not become popular until the publication of Baran and Sweezy’s Monopoly Capital. The authors drew attention to the tendency for the potential economic surplus over necessary costs to rise as big companies benefit from economies of scale, research and development, and profit mark-ups. Problems exist, though, especially the tendency to periodic stagnation through insufficient effective demand or inadequate markets.
In 1965 Michel Kalecki published his Theory of Economic Dynamics, which explains that when the commanding heights of industry are controlled by oligopolies, the profit mark-up can increase through time. Those who receive income from profit have a higher propensity to save, leading to lower aggregate demand, unless investment rises, which is unlikely as investment depends on consumption. As productivity is greater than demand, capacity output utilization declines, leading to the tendency toward insufficient demand.
The tendency to stagnation creates anomalous solutions such as wasteful advertising and other selling expenses; destructive military spending; and global corporate dominance of the culture. Under monopoly capitalism, billions of dollars are wasted on conspicuous consumption and fashion to reinforce social distinction. Escalating managerial bonuses heighten class distinctions and expand inequality. Monopoly capital enterprises promote the degradation of work through skill fragmentation into tiny compartments of minor skills, according to Braverman. Workers are less master craftspeople and more mere appendages to the technical apparatus.
Credit creation may potentially enhance consumption to lessen aggregate demand problems. But without higher real wages this may stimulate excess debt and escalating speculative bubbles that lead to periodic deep recession, such as during the 2001–2003 recession in the United States. The problem of realizing the surplus continues while the needs of business and privilege outweigh the potential for egalitarian reform.
In Transnational Monopoly Capital, Cowling and Sugden detailed problems associated with transnationals spreading stagnation tendencies to the global economy. Demand problems are worse when the power of labor is declining and governments are reducing productive social investments. While greater globalization seemingly raises competition, it can enhance the power of large corporations through lower costs and larger markets. They also emphasize the distributional conflict between managers and shareholders, and how managerial salaries are part of the economic surplus (rather than being a necessary cost).
Three critical questions can be raised about monopoly capital. The first is historical. The origins of monopoly capital were from 1900 to the 1940s, while the 1950s to early 1970s represent the Fordist long boom. Globalization from the 1980s to the 2000s has seen the emergence of many East Asian nations (especially China) as serious players in the world economy. New competitors in the global system also engage in cooperation through strategic alliances, joint ventures, and mergers and acquisitions. Although monopoly capital tendencies remain, a competitive-innovation dynamic has been actively at work. How this affects monopoly capital tendencies needs to be further researched.
Second, is stagnation linked purely to effective demand problems? Have changes in capitalism created new anomalous tendencies? For instance, outside of East Asia and a few other nations, long-term profitability, productivity, and gross domestic product (GDP) growth per capita have all been below par from the mid-1970s to the early 2000s (despite business cycle upswings). Perhaps excess competition, neoliberal governments, and financial dominance of industry have been the major players in this anomalous performance, along with inadequate demand, as Phillip O’Hara suggested in his Growth and Development in the Global Political Economy (2005).
Third, a central concept to emerge from monopoly capital theory is the economic surplus. The production, distribution, and reproduction of economic surplus are critical to the long-term performance of capitalism. And, as James Stanfield has suggested, it provides a potential (surplus) fund for democratic social change out of which a more progressive system may emerge.
SEE ALSO Competition, Marxist; Economics, Post Keynesian; Institutionalism; Marxism; Primitive Accumulation
Braverman, Harry. 1974. Labor and Monopoly Capital. New York: Monthly Review.
Cowling, Keith, and Roger Sugden. 1987. Transnational Monopoly Capital. Sussex, U.K.: Wheatsheaf.
Foster, John Bellamy. 1986. The Theory of Monopoly Capital: An Elaboration of Marxian Political Economy. New York: Monthly Review Press.
Kalecki, Michal. 1969. Theory of Economic Dynamics: An Essay on Cyclical and Long-Run Changes in Capitalist Economy. Rev. ed. New York: Kelley.
O’Hara, Phillip Anthony. 2005. Growth and Development in the Global Political Economy. London and New York: Routledge.
Stanfield, James Ronald. 1992. The Fund for Social Change. In The Economic Surplus in Advanced Economies, ed. John Davis, 130–148. Aldershot, U.K.: Edward Elgar.
Steindl, Josef. 1976. Maturity and Stagnation in American Capitalism. Rev. ed. New York: Monthly Review Press.
Phillip Anthony O’Hara
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