Monopoly Capitalism

Abstract

Among Marxian economists ‘monopoly capitalism’ is the term widely used to denote the stage of capitalism which dates from approximately the last quarter of the 19th century and reaches full maturity in the period after World War II. Marx’s Capital, like classical political economy from Adam Smith to John Stuart Mill, was based on the assumption that all commodities are produced by industries consisting of many firms, or capitals in Marx’s terminology, each accounting for a negligible fraction of total output and all responding to the price and profit signals generated by impersonal market forces. Unlike the classical economists, however, Marx recognized that such an economy was inherently unstable and impermanent. The way to succeed in a competitive market is to cut costs and expand production, a process which requires incessant accumulation of capital in ever new technological and organizational forms. In Marx’s words: ‘The battle of competition is fought by cheapening of commodities. The cheapness of commodities depends, ceteris paribus, on the productiveness of labour, and this again on the scale of production. Therefore the larger capitals beat the smaller.’ Further, the credit system which ‘begins as a modest helper of accumulation’ soon ‘becomes a new and formidable weapon in the competitive struggle, and finally it transforms itself into an immense social mechanism for the centralization of capitals’ (Marx, 1867, ch. 25, sect. 2). Marx, and even more clearly Engels when preparing the second and third volumes of Capital for the printer two decades later, concluded, in the latter’s words, that ‘the long cherished freedom of competition has reached the end of its tether and is compelled to announce its own palpable bankruptcy’ (Marx, 1894, ch. 27).