We all know the drill… Monopoly Capitalism is…

 

A comment in a recent post on the demise of America at the hands of State, Corporate, and Financial collusion prompted one user to say: “There will be no solutions. It’s thinking there can be a solution to the real is what lurks behind all our insanity.” If we all thought this way then we’d all sink together in a cesspool of quietude and slow suicide, but some of us will not go silently into that dark night…

We all know the drill, the development of modern corporate states from their beginnings, all the way back to the late medieval period, were invented from the dying feudal structure of the failing European economy built on aristocracy, war, and peasants:  originating from the military conquest of traditional agricultural communities and the imposition of an artificial aristocracy of external state-privileged exploiters, was in the process of breaking down. The free cities of the era began to appear as points of light on the broader feudal map. The market economy was growing, innovative technologies were coming into existence and the common people were obtaining more opportunities to claim their rightful status as free individuals. The ruling class was put on the defensive and sought to reestablish itself by fully expropriating traditional peasant lands and militarily conquering the free cities. The dispossessed peasants, no longer having any means of autonomy or self-sufficiency, were forced to migrate towards industrial centers and into the slave-like factory system. The state intervened to make sure that labor discipline was maintained by such methods as severely restricting the freedom of migration and suppressing efforts at self-organization by the laborers. The old feudal elites reinvented themselves as a new industrial capitalist ruling class by means of mercantilist economic policies which tended to concentrate wealth. In early America, for example, it was the northeastern mercantilists consisting of banking, shipping and land magnates led by Alexander Hamilton who initiated the Federalist coup against the libertarian Articles of Confederation and established the centralist presidential state for the purpose of advancing mercantilist commercial interests.

Thomas Jefferson tried to warn us, but to no avail. The fight between Hamilton and Jefferson was less about personalities than competing visions of government.  Jefferson imagined a government that was strong and centralized on foreign policy, but was as hands-off and restrained as it could be on domestic matters. He was inherently suspicious of anything that compromised individual self-sufficiency and was positively horrified at the thought of Americans depending on their government. A citizenry dependent on the government couldn’t be independent. Such a turn of events would mean that the collectivity had become the basic unit of society. It would mean that the government had compromised individual private life. This was precisely what Hamilton believed should happen, and he hoped to use the United States Treasury to make his vision reality. Hamilton believed the government should play a strong role in individuals’ lives; that the collective, consolidated national identity should be primary. By issuing huge amounts of debt, he hoped to involve the Treasury in the day-to-day operations of the economy, and so give the government a certain purchase over citizen’s private lives.

The two contrasting visions of government of Thomas Jefferson and Alexander Hamilton betrayed two different understandings of American power and the American people. For Hamilton, America’s strength lay in its commerce. Hamilton’s America was an America of businessmen, entrepreneurs, bankers and financiers. The government needed to help these people compete in a global marketplace. And only the national government could do that. Hamilton was suspicious of state governments, beholden as they were to narrow local interests.

While Jefferson shared Hamilton’s admiration for America’s commercial might—he had just come back from a stint in Europe negotiating free-trade treaties—he profoundly disagreed with Hamilton about the basic make-up of the American people. Hamilton’s financiers, Jefferson claimed, were parasitic commercial elites, dependent for their success on the virtuous labor of independent yeoman farmers. The government, Jefferson believed, had no responsibility to help them. If the government was going to help anyone, it should be helping those farmers on whom the commercialists preyed. And the best way to help those farmers, Jefferson argued, was to leave real power close to them, in their state governments, and keep the federal government out of their way. His fight with Hamilton was, at least as Jefferson saw it, a disagreement about who should rule in the name of the people: Hamilton said the few, and Jefferson said the many.

Although Jefferson and Hamilton managed to work together reasonably well at first, their relations became fraught as Washington’s presidency dragged on. By February 1791, the two were locked in an outright struggle, waging a newspaper war by proxy. Jefferson hated conflict, and often thought of resigning, but he hated Hamilton more, and so refused to give him the satisfaction. Sometime in 1793, the conflict just got to be too much for Jefferson. Maybe he decided he would win this fight through other means than debate within Washington’s cabinet. On 5 January 1794, the president accepted Jefferson’s resignation as secretary of state, and Jefferson set off at once for Monticello. Just as he had done when he finished his term as Virginia governor, he claimed to all who would listen that he was truly retiring from public life, that this time he was moving home for good. Just as before, none of his friends believed him. If Jefferson had been more honest with himself, he wouldn’t have believed himself either.

We all know the rest of the story. Hamilton and the Mercantile East divvied up America and for the benefit of banks and corporate interests with a centralized government to intervene on behalf of those interests.

Most Americans are accustomed to thinking of capitalism and free enterprise as being one and the same. This is certainly the perspective taught in the state’s educational institutions and promoted by the corporate media. But we should lambast this fake populism of the type promulgated by corporate-sponsored afternoon talk radio which ignores the role of corporations, banks and other elite economic interests in fostering statism and instead works to channel the hostility of the working and middle classes away from the elites for whom most state intervention is actually done and towards the lower classes and the urban poor in a type of “divide and conquer” strategy. According to this ideology, the real enemies of free enterprise and proponents of statism are welfare recipients and the residents of homeless shelters and public housing projects. But it is the ruling class that is the primary beneficiary of state intervention. The primary role of such intervention is to redistribute wealth upward and centralize economic power. The tools used to obtain these objectives are as old as modern corporate states themselves. These tools include the state-imposed money monopoly, patents and subsidies.

Under the present system of federal government monopoly on the issuance of legal tender and central banking via the Federal Reserve, interest rates are kept artificially high, an artificial shortage of credit is maintained and access to finance capital is constricted. These arrangements centralize wealth and concentrate economic power in a myriad of ways.

A Short History of Monopoly Capitalism

The main Marxist–Leninist thesis concerning Monopoly Capitalism has always been  that big business, having achieved a monopoly or cartel position in most markets of importance, fuses with the government apparatus. A kind of financial oligarchy or conglomerate therefore results, whereby government officials aim to provide the social and legal framework within which giant corporations can operate most effectively.

The time during which Monopoly was born and grew up spanned one stock market crash (in 1893) to another (in 1929). After the 1893 stock market crashed, unemployment among the working class rose significantly. The U.S. Treasury ran out of gold and was forced to sell high-yield bonds to J. P. Morgan and the other Wall Street monopolists at low rates. Debt-ridden farmers called on the government to initiate an income tax to make taxation more fair to lower-income households (they finally did with the 16th Amendment in 1913), among other reforms.

President McKinley’s 1896 campaign was paid for by big business and he was unpopular with the working class, who favored his opponent, Williams Jennings Bryan. But business had the money and the power in the country and McKinley was elected on a tickey simply promising to do nothing and to make no major changes. During this time, Teddy Roosevelt who was well-tuned to the popular sentiments, was stirring up trouble as an anti-corruption and tax-levying governor from New York. He was added as McKinley’s Vice-President in 1898 simply to put him in a position that officially had no power.

But in 1901, Teddy Roosevelt became president after McKinley’s assassination by Leon Czolgosz. Czolgosz’s last words before his execution by the state were “I killed the President because he was the enemy of the good people – the good working people. I am not sorry for my crime.”

With his new power, Roosevelt proceeded to take a big stick to the major monopolies of the day: Rockefeller’s Standard Oil, J. P. Morgan’s banks, and Cargenie’s steel. He pushed enforcement of the 1890 Sherman Antitrust Act.

Still, the economy was slow to recover and the public became disillusioned with capitalism. Lenin’s 1917 Bolshevik Revolution guaranteed capped working hours and salaries to all of its workers while many struggling American workers began to question whether capitalism was right. After the Great Depression of the 1930s, many people thought that capitalism had failed and that it was only a question of how government would regulate it.

“In 1910,” Lenin wrote, “there appeared in Vienna the work of the Austrian Marxist, Rudolf Hilferding, Finance Capital….This work gives a very valuable theoretical analysis of ‘the 1atest phase of capitalist development,’ the subtitle of the book.”

As far as economic theory in the narrow sense is concerned, Lenin added little to Finance Capital, and in retrospect it is evident that Hilferding himself was not successful in integrating the new phenomena of capitalist development into the core of Marx’s theoretical structure (value, surplus value and above all the process of capital accumulation). In chapter 15 of his book (“Price Determination in the Capitalist Monopoly, Historical Tendency of Finance Capital”) Hilferding, in seeking to deal with some of these problems, came up with a very striking conclusion which has been associated with his name ever since. Prices under conditions of monopoly, he thought, are indeterminate and hence unstable. Whenever concentration enables capitalists to achieve higher than average profits, suppliers and customers are put under pressure to create counter combinations which wiI1 enable them to appropriate part of the extra profits for themselves. Thus monopoly spreads in all directions from every point of origin. The question then arises as to the limits of “cartellization” (the term is used synonymously with monopolization). Hilferding answers:

The answer to this question must be that there is no absolute limit to cartellization. What exists rather is a tendency to the continuous spread of cartellization. Independent industries, as we have seen, fall more and more under the sway of the cartellized ones, ending up finally by being annexed by the cartellized ones. The result of this process is then a general cartel. The entire capitalist production is consciously controlled from one center which determines the amount of production in all its spheres….It is the consciously controlled society in antagonistic form.

A further step in the direction of integrating the two strands of Marx’s thought—concentration and centralization on the one hand and crisis theory on the other—was marked by the publication in 1942 of The Theory of Capitalist Development by Paul M. Sweezy, which contained a fairly comprehensive review of the prewar history of Marxist economics and at the same time made explanatory use of concepts introduced into mainstream monopoly and oligopoly theory during the preceding decade. This book, soon translated into several foreign languages, had a significant effect in systematizing the study and interpretation of Marxian economic theory.

It should not be supposed, however, that these new departures were altogether a matter of theoretical speculation. Of equal if not greater importance were the changes in the structure and functioning of capitalism which had emerged during the 1920s and 1930s. On the one hand the decline in competition which began in the late nineteenth century proceeded at an accelerated pace—as chronicled in the classic study by Arthur R. Burns, The Decline of Competition: A Study of the Evolution of American Industry (1936)—and on the other hand the unprecedented severity of the depression of the 1930s provided dramatic proof of the inadequacy of conventional business cycle theories. The Keynesian revolution was a partial answer to this challenge, but the renewed upsurge of the advanced capitalist economies during and after the war cut short further development of critical analysis among mainstream economists, and it was left to Marxists to carry on along the lines that had been pioneered by Kalecki before the war.

Kalecki spent the war years at the Oxford Institute of Statistics whose director, A. L. Bowley, had brought together a distinguished group of scholars, most of them émigrés from occupied Europe. Among the latter was Josef Steindl, a young Austrian economist who came under the influence of Kalecki and followed in his footsteps. Later on, Steindl (1985) recounted the following:

On one occasion I talked with Kalecki about the crisis of capitalism. We both, as well as most socialists, took it for granted that capitalism was threatened by a crisis of existence, and we regarded the stagnation of the 1930s as a symptom of such a major crisis. But Kalecki found the reasons, given by Marx, why such a crisis should develop, unconvincing; at the same time he did not have an explanation of his own. I still do not know, he said, why there should be a crisis of capitalism, and he added: Could it have anything to do with monopoly? He subsequently suggested to me and to the Institute, before he left England, that I should work on this problem. It was a very Marxian problem, but my methods of dealing with it were Kaleckian.

Steindl’s work on this subject was completed in 1949 and published in 1952 under the title Maturity and Stagnation in American Capitalism. While little noticed by the economics profession at the time of its publication, this book nevertheless provided a crucial link between the experiences, empirical as well as theoretical, of the 1930s, and the development of a relatively rounded theory of monopoly capitalism in the 1950s and 1960s, a process which received renewed impetus from the return of stagnation to American (and global) capitalism during the 1970s and 1980s.

The next major work in the direct line from Marx through Kalecki and Steindl was Paul Baran’s book, The Political Economy of Growth (1957), which presented a theory of the dynamics of monopoly capitalism and opened up a new perspective on the nature of the interaction between developed and underdeveloped capitalist societies. This was followed by the joint work of Baran and Sweezy, Monopoly Capital: An Essay on the American Economic and Social Order (1966), incorporating ideas from both of their earlier works and attempting to elucidate, in the words of their introduction, the “mechanism linking the foundation of society (under monopoly capitalism) with what Marxists call its political, cultural, and ideological superstructure.” Their effort however, still fell short of a comprehensive theory of monopoly capitalism since it neglected “a subject which occupies a central place in Marx’s study of capitalism,” that is, a systematic inquiry into “the consequences which the particular kinds of technological change characteristic of the monopoly capitalist period have had for the nature of work, the composition (and differentiation) of the working class, the psychology of workers, the forms of working-class organization and struggle, and so on.” A pioneering effort to fill this gap in the theory of monopoly capitalism was taken by Harry Braverman a few years later (Braverman, 1974) which in turn did much to stimulate renewed research into changing trends in work processes and labor relations in the late twentieth century.

Marx wrote in the preface to the first edition of volume I of Capital that “it is the ultimate aim of this work to lay bare the economic law of motion of modern society.” What emerged, running like a red thread through the whole work, could perhaps better be called a theory of the accumulation of capital. In what respect, if at all, can it be said that latter-day theories of monopoly capitalism modify or add to Marx’s analysis of the accumulation process?

As far as form is concerned, the theory remains basically unchanged, and modifications in content are in the direction of putting even greater emphasis on certain tendencies already demonstrated by Marx to be inherent in the accumulation process. This is true of concentration and centralization, and even more spectacularly so of the role of what Marx called the credit system, now grown to monstrous proportions compared to the small beginnings of his day. In addition, and perhaps most important, the new theories seek to demonstrate that monopoly capitalism is more prone than its competitive predecessor to generating unsustainable rates of accumulation, leading to crises, depressions and prolonged periods of stagnation.

The reasoning here follows a line of thought which recurs in Marx’s writings, especially in the unfinished later volumes of Capital (including Theories of Surplus Value); individual capitalists always strive to increase their accumulation to the maximum extent possible and without regard for the ultimate overall effect on the demand for the increasing output of the economy’s expanding capacity to produce. Marx summed this up in the well-known formula that “the real barrier to capitalist production is capital itself.” The upshot of the new theories is that the widespread introduction of monopoly raises this barrier still higher. It does this in three ways.

  1.  Monopolistic organization gives capital an advantage in its struggle with labor, hence tends to raise the rate of surplus value and to make possible a higher rate of accumulation.
  2. With monopoly (or oligopoly) prices replacing competitive prices, a uniform rate of profit gives way to a hierarchy of profit rates—highest in the most concentrated industries, lowest in the most competitive. This means that the distribution of surplus value is skewed in favor of the larger units of capital which characteristically accumulate a greater proportion of their profits than smaller units of capital, once again making possible a higher rate of accumulation.
  3. On the demand side of the accumulation equation, monopolistic industries adopt a policy of slowing down and carefully regulating the expansion of productive capacity in order to maintain their higher rates of profit.

Translated into the language of Keynesian macro theory, these consequences of monopoly mean that the savings potential of the system is increased, while the opportunities for profitable investment are reduced. Other things being equal, therefore the level of income and employment under monopoly capitalism is lower than it would be in a more competitive environment.

To convert this insight into a dynamic theory, it is necessary to see monopolization (the concentration and centralization of capital) as an ongoing historical process. At the beginning of the transition from the competitive to the monopolistic stage, the accumulation process is only minimally affected. But with the passage of time the impact grows and tends sooner or later to become a crucial factor in the functioning of the system. This, according to monopoly capitalist theory, accounts for the prolonged stagnation of the 1930s as well as for the return of stagnation in the 1970s and 1980s following the exhaustion of the long boom caused by the Second World War and its multifaceted aftermath effects.

Neither mainstream economics nor traditional Marxian theory have been able to offer a satisfactory explanation of the stagnation phenomenon which has loomed increasingly large in the history of the capitalist world during the twentieth century. It is thus the distinctive contribution of monopoly capitalist theory to have tackled this problem head on and in the process to have generated a rich body of literature which draws on and adds to the work of the great economic thinkers of the last 150 years. (To Do: I need to add a bibliography of major works concerning monopoly capitalism at some future time, but at age 68 time grows thin and spending the time to do this will come when it comes…)


  1. Sweezy, P. M. The Theory of Capitalist Development. New York: Monthly Review Press, 1942.