Monopoly Capital

By Baran and Sweesy

Today, political and financial power is more concentrated than 1966, when the book was published. The book is more relevant today than it was published more than half century ago. The following are some quotes from the book.

The situation in the social sciences in the United States today is paradoxical. The number of research workers and teachers is rapidly rising. Their training and command of their disciplines, including the ability to use precise mathematical reasoning and sophisticated statistical methods, are far above the levels attained by their predecessors of even one generation ago. Universities, foundations, and governments organize re[1]search projects and dispense grants on an unprecedented scale. Books, reports, and articles are turned out in a never-ending stream. And yet all this high-powered intellectual activity has yielded few important new or fresh insights into the way our society works and where it is headed. (P 1)

Comment: This is truer today.

One can even say that social scientists, assuring us for so long that all was for the best in what they took to be the best of all possible worlds, did what they could to keep us from looking reality in the face. How can we account for the paradox of more and better trained social scientists failing ever more glaringly to explain social reality? (P 2)

This environment is above all one of increasing complexity calling for more and more specialization of every kind and at every level. Following this road, social science has become more and more compartmentalized, with its practitioners turning into ever narrower specialists-superbly trained experts in their own "fields" but knowing, and indeed able to understand, less and less about the specialties of others. As for society as a whole, which in the past has been the chief preoccupation of the great social thinkers, since it transcends all the specialties, it simply disappears from the purview of social science. It is taken for granted and ignored. (P 2)

Today the typical economic unit in the capitalist world is not the small firm producing a negligible fraction of a homogeneous output for an anonymous market but a large-scale enterprise producing a significant share of the output of an industry, or even several industries, and able to control its prices, the volume of its production, and the types and amounts of its investments. The typical economic unit, in other words, has the attributes which were once thought to be possessed only by monopolies. It is therefore impermissible to ignore monopoly in construct[1]ing our model of the economy and to go on treating competi[1]tion as the general case. In an attempt to understand capital[1]ism in its monopoly stage, we cannot abstract from monopoly or introduce it as a mere modifying factor; we must put it at the very center of the analytical effort. (P 6)

It is only in recent years that the decisive importance of the dialectical interrelation of development and underdevelopment has begun to be fully appreciated. (P 7)

Comment: For example, China’s production and the rest of the world.

the class struggle in our time has been thoroughly internationalized. The revolutionary initiative against capitalism, which in Marx's day belonged to the proletariat in the advanced countries, has passed into the hands of the impoverished masses in the underdeveloped countries who are struggling to free themselves from imperialist domination and exploitation. (P 9)

As we look back on the history of the last hundred years, we can see that what Marx said to the less developed countries actually applied to only a few of them-those which never fell under, or had escaped from, the domination of more developed countries and therefore could emulate the latter rather than being exploited by them and hence having their development stunted and distorted to suit the needs of the dominant economy. 8 Certainly a similar limitation applies today: only a few countries-most of Western Europe (including Britain), Japan, Canada, Australia, New Zealand, possibly South Africa-can conceivably follow in the footsteps of the United States. In the rest of the capitalist world scores of colonies, neo-colonies, and semi-colonies are doomed to remain in their degraded condition of underdevelopment and misery. (P 12)

The attitude of live-and-let-live which characterizes Big Business likewise derives from the magnitude of the corporation's investment and from the calculating rationality of its management. By and large, this attitude is reserved for other big corporations and does not extend to the smaller business[1]man. For example, the big three automobile companies behave toward one another in a way that Schumpeter appropriately called "corespective,"31 while their behavior to the scores of thousands of dealers who sell their products to the public is notoriously overbearing and dictatorial. The reason, of course, is that each of the big ones recognizes the strength and retaliatory power of the other big ones and as a matter of deliberately calculated policy avoids provoking them. But corespective behavior is by no means limited to competitors. If one big corporation is not a competitor of another, it is quite likely to be either a customer or a supplier; and in this realm of corporate relations the sovereign principle is reciprocity, which enjoins corespective behavior as surely as competition does. In addition, the Big Business community is numerically small, comprising perhaps 10,000 or so people for the entire country, and its members are tied together by a whole network of social as well as economic ties. Conscious of their power and standing in the larger national community, they naturally tend to develop a group ethic which calls for solidarity and mutual help among themselves and for presenting a common front to the outside world. It wasn't always so. In the early days when Big Business was emerging from the jungle of small-scale competition, corespective behavior was rare indeed. Even the railroads had to go through a series of exhausting rate wars before they finally got it into their corporate heads that roadbeds and tracks and locomotives and cars would go on being used to carry passengers and freight whatever might happen to security owners or rival managements. The original tycoons, faced with the consequences of cutthroat competition, sought a way out through a policy of ruthless monopolization. The victims of this drive, however, were numerous and not without influence. By entering into a temporary alliance with dissatisfied farmers and workers, they succeeded in getting the antitrust laws passed, which, though far from achieving their avowed aim of preserving (or restoring) free competition, nevertheless put very real roadblocks in the way of full monopolization. For this reason, as well as others of a technological and economic nature, there were few cases in which one corporation or even one financial interest group succeeded in establishing effective control over an entire market. It was under these circumstances that Big Businessmen began to learn the virtues of corespective behavior. The pro[1]cess of learning was hastened as the highly individualistic tycoon passed from the scene and the company man gradually took his place as the typical representative of corporate business. Today there are probably fewer genuine monopolies than there were at the turn of the century, but there is also infinitely less cutthroat competition. And this brings us straight to the problem of the interaction of the corporate giants. (P 51)

The reasons for this increasingly pronounced divorce be[1]tween micro and macro theories are to be sought in the apologetic character of bourgeois economics. As we shall see, the effects of a thoroughgoing reintegration of the two levels of analysis-the substitution of a monopolistic price system for the traditional competitive system, and the analysis of its implications for the whole economy-are nothing short of devastating to capitalism's claims to be considered a rational social order which serves to promote the welfare and happiness of its members. Since a major concern of bourgeois economics has long been to support these claims, economists have naturally shown no enthusiasm for following a course that ends by demonstrating their falsity. (P 56)

If one seller raises his price, this cannot possibly be interpreted as an aggressive move. The worst that can happen to him is that the others will stand pat and he will have to rescind (or accept a smaller share of the market). In the case of a price cut, on the other hand, there is always the possibility that aggression is intended, that the cutter is trying to increase his share of the market by violating the taboo on price competition. If rivals do interpret the initial move in this way, a price war with losses to all may result. Hence everyone concerned is likely to be more circumspect about lowering than raising prices. Under oligopoly, in other words, prices tend to be stickier on the downward side than on the upward side, and this fact introduces a significant upward bias into the general price level in a monopoly capitalist economy. (P 63)

Comments: This is so true. When oil price rises, retail price rises immediately. When oil price drop, retail gas price reacts sluggishly.