Magazine article Monthly Review

Monopoly Capital after Twenty-Five Years

Magazine article Monthly Review

Monopoly Capital after Twenty-Five Years

Article excerpt

Monopoly Capital by the late Paul Baran and myself was published twenty-five years ago this year, and on the whole I think it holds up pretty well when judged in the light of all the developments and changes that have taken place in this eventful quarter century. As a basis for what follows, let me sketch in barest outline the argument of the book.

The monopoly capitalist economy is dominated by a relative handful of giant corporations that had their origins in the late nineteenth and early twentieth centuries and by the end of the Second World War had attained a certain form and structure common to most of them. They had achieved financial independence of the financiers and promoters who led them through their early years of growth. In most industries they behaved as rational oligopolists, eschewing price competition and vying with rivals through cost-cutting technologies, product innovation, and advertising. The result was a tendency of profitability to rise, generating what we called a problem of surplus absorption. Following the pioneering work of Kalecki and Steindl, we argued that an economy so structured has a strong and persistent tendency to stagnation which can be counteracted only by forces that are not part of the internal logic of the economy itself and hence fall outside the scope of mainstream economics from which historical, political, and sociological considerations are carefully excluded. In contrast, well over two thirds of Monopoly Capital is devoted to analyzing these forces and their interaction with economic laws and tendencies narrowly interpreted. The titles of the last seven (of a total of eleven) chapters convey a sense of the extent to which the book deviates from the confines of economics as usually conceived and taught in U.S. institutions of higher learning: The Sales Effort, Civilian Government, Militarism and Imperialism, On the History of Monopoly Capitalism, and the Irrational System. These chapter titles can also serve to identify, at least in a general way, the forces Baran and I then considered to be operative in opposing the system's powerful tendency to stagnation.

As I look back on this basic plan of the book and compare it with the situation in which we find ourselves today, I conclude that for the most part there is a reasonably good fit between analysis and reality. But there is one glaring discrepancy which is not even hinted at, let alone explained, in Monopoly Capital. This is the burgeoning in precisely these last twenty-five years of a vastly expanded and increasingly complex financial sector in both the United States and the global capitalist economies. And this development in turn has reacted back in important ways on the structure and functioning of the corporation-dominated "real" economy. (*1)

In our analysis of the giant corporation (Chapter 2), Baran and I posited a community of oligopolies each under the effective control of its management, which in normal circumstances enjoys a secure tenure and is therefore able both to make long-run plans and to insure that like-minded successors will be around to carry them out. In this connection we quoted with approval a remark of Galbraith's in his 1952 book American Capitalism (p. 39): "[T]he present generation of Americans, if it survives, will buy its steel, copper, brass, automobiles, tires, shortening, soap, breakfast food, bacon, cigarettes, whiskey, cash registers, and caskets from one or another of firms that now supply these staples. As a moment's reflection will establish, there hasn't been much change in the firms supplying these products for several generations."

This is a picture of a corporate community with a long planning horizon and a high degree of stability over time. And as of the late 50s and early 60s when Monopoly Capital was written, there seemed to be no reason to expect significant changes any time soon.

It wasn't long, however, before a different scenario began to unfold, culminating in the merger and leveraged buyout mania of the 1980s. …

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