monthlyreview.

org
http://monthyrevew.org/2011/04/01/monopoy-and-competton-n-twenty-rst-century-captasm
|ohn Beamy Foster , Robert W. McChesney and R. |am |onna more on Economcs , Goba Economc
Crss , US Potcs/Economy
MonopoIy and Competition in Twenty-First Century
CapitaIism :: MonthIy Review
|ohn Be amy Foster (| foster |at| month yrev ew.org) s ed tor of Monthly Review and
professor of soc o ogy at the Un vers ty of Oregon. Robert W. McChesney
(rwmcches |at| u uc.edu) s Gutgse Endowed Professor of Commun cat on at the
Un vers ty of I no s at Urbana-Champa gn. R. |am |onna s a doctora cand date
n soc o ogy at the Un vers ty of Oregon. Th s s a chapter from Foster and
McChesneys Monopoly-Finance Capital: Politics in an Era of Economic 5tagnation and
5ocial Decline, forthcom ng next year from Month y Rev ew Press.
A str k ng paradox an mates po t ca economy n our t mes. On the one hand,
ma nstream econom cs and much of eft econom cs d scuss our era as one of
ntense and ncreased compet t on among bus nesses, now on a g oba sca e. It s
a matter so se f-ev dent as no onger to requ re emp r ca ver cat on or scho ar y
exam nat on. On the other hand, wherever one ooks, t seems that near y every
ndustry s concentrated nto fewer and fewer hands. Former y compet t ve sectors
ke reta are now the prov nce of enormous monopo st c cha ns, mass ve
econom c fortunes are be ng assemb ed nto the hands of a few mega-b ona res
s tt ng atop vast emp res, and the new rms and ndustr es spawned by the d g ta
revo ut on have qu ck y grav tated to monopo y status. In short, monopo y power s
ascendant as never before.
Th s s anyth ng but an academ c concern. The econom c defense of cap ta sm s
prem sed on the ub qu ty of compet t ve markets, prov d ng for the rat ona
a ocat on of scarce resources and | ust fy ng the ex st ng d str but on of ncomes.
The po t ca defense of cap ta sm s that econom c power s d huse and cannot
be aggregated n such a manner as to have undue nuence over the democrat c
state. Both of these core c a ms for cap ta sm are demo shed f monopo y, rather
than compet t on, s the ru e.
For a econom sts, ma nstream and eft, the assumpt on of compet t ve markets
be ng the order of the day a so has a str k ng mpact on how growth s assessed n
cap ta st econom es. Under compet t ve cond t ons, nvestment w , as a ru e, be
greater than under cond t ons of monopo y, where the dom nant rms genera y
seek to s ow down and carefu y regu ate the expans on of output and nvestment
so as to ma nta n h gh pr ces and prot marg ns-and have cons derab e power to
do so. Hence, monopo y can be a strong force contr but ng to econom c stagnat on,
everyth ng e se be ng equa . W th the Un ted States and most of the wor d
economy (notw thstand ng the econom c r se of As a) stuck n an era of secu ar
stagnat on and cr s s un ke anyth ng seen s nce the 1930s-wh e U.S.
corporat ons are s tt ng on around $2 tr on n cash-the ssue of monopo y power
natura y returns to the surface.1
In th s rev ew, we assess the state of compet t on and monopo y n the
contemporary cap ta st economy-emp r ca y, theoret ca y, and h stor ca y. We
exp a n why understand ng compet t on and monopo y has been such a bedev ng
process, by exam n ng the "amb gu ty of compet t on." In part cu ar, we rev ew
how the now dom nant neo bera strand of econom cs reconc ed tse f to
monopo y and became ts m ght est champ on, desp te ts wor dv ew- n theory-
be ng based on a re g ous devot on to the gen us of econom ca y compet t ve
markets.
When we use the term "monopo y," we do not use t n the very restr ct ve sense
to refer to a market w th a s ng e se er. Monopo y n th s sense s pract ca y
nonex stent. Instead, we emp oy t as t has often been used n econom cs to refer
to rms w th sumc ent market power to nuence the pr ce, output, and nvestment
of an ndustry-thus exerc s ng "monopo y power"-and to m t new compet tors
enter ng the ndustry, even f there are h gh prots.2 These rms genera y
operate n "o gopo st c" markets, where a handfu of rms dom nate product on
and can determ ne the pr ce for the product. Moreover, even that s nsumc ent to
descr be the power of the modern rm. As Pau Sweezy put t, "the typ ca
product on un t n modern deve oped cap ta sm s a g ant corporat on," wh ch, n
add t on to dom nat ng part cu ar ndustr es, s "a cong omerate (operat ng n
many ndustr es) and mu t -nat ona (operat ng n many countr es)."3
In the ear y 1980s, an unquest on ng be ef n the ub qu tous nuence of
compet t ve markets took ho d n econom cs and n cap ta st cu ture wr t arge, to
an extent that wou d have been nconce vab e on y ten years ear er. Concern w th
monopo y was never dom nant n ma nstream econom cs, but t had a d st ngu shed
and respected p ace at the tab e we nto the century. For some authors, nc ud ng
Monthly Review ed tors Sweezy and Harry Magdoh, as we as Pau Baran, the
preva ence and mportance of monopo y | ust ed ca ng the system monopo y
cap ta sm. But by the Reagan era, the g ant corporat on at the apex of the
econom c system w e d ng cons derab e monopo y power over pr ce, output,
nvestment, and emp oyment had s mp y fa en out of the econom c p cture, a most
as f by at. As |ohn Kenneth Ga bra th noted n 2004 n The Economics of lnnocent
Fraud: "The phrase monopo y cap ta sm, once n common use, has been dropped
from the academ c and po t ca ex con."4 For the neo bera deo ogues of today,
there s on y one ssue: state versus market. Econom c power (a ong w th
nequa ty) s no onger deemed re evant. Monopo y power, not to ment on
monopo y cap ta , s nonex stent or un mportant. Some on the eft wou d n arge
part agree.
In contrast, we sha demonstrate n what fo ows that noth ng cou d be further
removed from a rea ty-based soc a sc ence or econom cs than the den a of the
tendency to monopo zat on n the cap ta st economy: which is demonstrably
stronger in the opening decades of the twenty-hrst century than ever before. More
concrete y, we argue that what we have been w tness ng n the ast quarter
century s the evo ut on of monopo y cap ta nto a more genera zed and
g oba zed system of monopo y-nance cap ta that es at the core of the current
econom c system n the advanced cap ta st econom es-a key source of econom c
nstab ty, and the bas s of the current new mper a sm.
The Rea Wor d Trend: Growth of Monopo y Power
The des rab ty of monopo y, from the perspect ve of a cap ta st, s se f-ev dent:
t owers r sk and ncreases prots. No sane owner or bus ness w shes more
compet t on; the rat ona move s a ways to seek as much monopo y power as
poss b e and carefu y avo d the n ghtmare wor d of the power ess compet t ve rm
of econom cs textbooks. Once a rm ach eves econom c concentrat on and
monopo y power, t s ma nta ned through barr ers to entry that make t
proh b t ve y cost y and r sky for wou d-be compet tors successfu y to nvade an
o gopo st c or monopo st c ndustry-though such barr ers to entry rema n
re at ve rather than abso ute. Creat ng and ma nta n ng barr ers to entry s
essent a work for any corporat on. In h s author tat ve study, The Economics of
lndustrial Organization, W am Shepherd prov des a st of twenty-two d herent
barr ers to entry common y used by rms to exc ude compet tors and ma nta n
monopo y power.5
Monopo y, n th s sense, s the og ca resu t of compet t on, and shou d be
expected. It s n the DNA of cap ta sm. For Kar Marx, cap ta tended to grow
ever arger n a s ng e hand, part y as a resu t of a stra ghtforward process of
concentration of capital (accumu at on proper), and even more as a resu t of the
centralization of capital, or the absorpt on of one cap ta by another. In th s
strugg e, he wrote, "the arger cap ta s," as a ru e, "beat the sma er..
Compet t on rages n d rect proport on to the number, and n nverse proport on to
the magn tude of the r va cap ta s. It a ways ends n the ru n of many sma
cap ta sts, whose cap ta s part y pass nto the hands of the r compet tors, and
part y van sh comp ete y. Apart from th s, an a together new force comes nto
ex stence w th the deve opment of cap ta st product on: the cred t system." Cred t
or nance, ava ab e more read y to arge rms, becomes one of the two ma n
evers, a ong w th compet t on tse f, n the centra zat on process. By means of
mergers and acqu s t ons, the cred t system can create huge, centra zed
agg omerat ons of cap ta n the "tw nk ng of an eye." The resu ts of both
concentrat on and centra zat on are common y referred to as econom c
concentrat on.6
So what do the data te us about the state of monopo y and compet t on n the
economy today, and the trends s nce the m d-twent eth century? Chart 1 be ow
shows that both the number and percentage of U.S. manufactur ng ndustr es (for
examp e, automob e product on) that have a four-rm concentrat on rat o of 50
percent or more have r sen dramat ca y s nce the 1980s. More and more
ndustr es n the manufactur ng sector of the economy are t ght o gopo st c or
quas -monopo st c markets character zed by a substant a degree of monopo y.
And, f anyth ng, the trend s acce erat ng.
Chart 1. Number and Percentage of U.S. Manufactur ng Industr es n wh ch Largest
Four Compan es Accounted for at Least 50 Percent of Sh pment Va ue n The r
Industr es, 1947-2007
Notes: The Census Bureau added new ndustr es ( .e., Standard Industr a
C ass cat on |SIC| codes) each year s nce 1947; n that year there were 134; n
1967, 281; and by 1992, 458. Beg nn ng n 1997, the SIC system was rep aced by
the North Amer can Industr a C ass cat on System (NAICS) and s nce th s t me
the number of ndustr es eve ed oh at approx mate y 472 ( n 1997 and 2002, 473;
and 2007, 471).
Source: "Sh pments Share of 4, 8, 20, & 50 Largest Compan es n each SIC: 1992-
1947," Census of Manufactures; and "Econom c Census," 1997, 2002, and 2007,
Amer can FactF nder (U.S. Census Bureau, 2011),
http://census.gov/epcd/www/concentrat on.htm .
Concentrat on s a so proceed ng apace n most other sectors of the economy,
as de from manufactur ng, such as reta trade, transportat on, nformat on, and
nance. In 1995 the s x argest bank ho d ng compan es (|PMorgan Chase, Bank of
Amer ca, C t group, We s Fargo, Go dman Sachs, and Morgan Stan ey-some of
wh ch had somewhat d herent names at that t me) had assets equa to 17 percent
of U.S. GDP. By the end of 2006, th s had r sen to 55 percent, and by 2010 (O3) to
64 percent.7
In reta , the top fty rms went from 22.4 percent of sa es n 1992 to 33.3 percent
n 2007. The str k ng exemp ar of reta conso dat on has been Wa -Mart, wh ch
represents what |oe Magnuson n h s Mindful Economics (2008) has ca ed
"Monopsony Cap ta sm." Wa -Mart uses ts power as a "s ng e buyer" (thereby
monopsony, as opposed to monopo y or "s ng e se er") to contro product on and
pr ces.8 The trends, w th respect to concentrat on n reta , can be seen n Tab e 1,
wh ch shows the r se n four-rm concentrat on rat os n s x key reta sectors and
ndustr es, over the fteen-year per od, 1992-2007. Most remarkab e was the r se
n concentrat on n genera merchand se stores (symbo zed by Wa -Mart), wh ch
rose from a four-rm concentrat on rat o of 47.3 n 1992 to 73.2 percent n 2007;
and n nformat on goods-w th book stores go ng from a four-rm concentrat on
and n nformat on goods-w th book stores go ng from a four-rm concentrat on
rat o of 41.3 percent n 1992 to 71 percent n 2007, and computer and software
stores from a four-rm concentrat on rat o of 26.2 percent n 1992 to 73.1 percent
n 2007.
Tab e 1. Percentage of Sa es for Four Largest F rms n Se ected U.S. Reta
Industr es
Industry (NAICS code) 1992 1997 2002 2007
Food & beverage stores (445)
15.4 18.3 28.2 27.7
Hea th & persona care stores (446)
24.7 39.1 45.7 54.4
Genera merchand se stores (452)
47.3 55.9 65.6 73.2
Supermarkets (44511)
18.0 20.8 32.5 32.0
Book stores (451211)
41.3 54.1 65.6 71.0
Computer & software stores (443120)
26.2 34.9 52.5 73.1
Notes: The trans t on to the NAICS system means that 1992 cannot be str ct y
compared to ater years (see Chart 1). However, the above ndustr es were
matched us ng "NAICS Concordances" prov ded by the U.S. Census Bureau.
Source: "Econom c Census," 1992, 1997, 2002, and 2007, Amer can FactF nder
(U.S. Census Bureau, 2011).
Concentrat on rat os for nd v dua ndustr es are mportant, but are of more
m ted va ue today than n the past n gett ng at the fu range of monopo y power
of the g ant corporat on. Th s s because the typ ca g ant rm operates not n | ust
one ndustry, but s a cong omerate, operat ng n numerous ndustr es. The best
way to get an overa p cture of the trend toward econom c concentrat on that
takes nto account the mu t - ndustry nature of the typ ca g ant rm s to ook at
some measure of aggregate concentrat on, e.g., the econom c status of the two
hundred argest rms compared to a rms n the economy.9
To put the top two hundred rms n perspect ve, n 2000 there were 5.5 m on
corporat ons, 2.0 m on partnersh ps, 17.7 m on nonfarm so e propr etorsh ps,
and 1.8 m on farm so e propr etorsh ps n the U.S. economy.10 Chart 2 shows the
revenue of the top two hundred U.S. corporat ons as a percentage of the tota
bus ness revenue n the economy s nce 1950. What we nd s that the revenue of
the top two hundred corporat ons has r sen substant a y from around 21 percent
of tota bus ness revenue n 1950 to about 30 percent n 2008.11
Chart 2. Revenue of Top 200 U.S. Corporat ons as Percentage of Tota Bus ness
Revenue, U.S. Economy, 1950-2008
Notes: "Tota revenues" (COMPUSTAT) and "tota rece pts" (SOI) are equ va ent.
S nce the COMPUSTAT dataset conta ns on y cong omerate- eve data a fore gn
compan es-dened as those not ncorporated n the Un ted States-were dropped.
In th s F gure, as we as for F gures 3, 4, and 5, a robust near smoother was
used so the ne approx mates a ve-year mov ng average.COMPUSTAT data was
extracted from Wharton Research Data Serv ces (WRDS). WRDS was used n
prepar ng th s art c e. Th s serv ce and the data ava ab e thereon const tute
va uab e nte ectua property and trade secrets of WRDS and/or ts th rd-party
supp ers.
Source: Data for the top 200 corporat ons (see notes) were extracted from
COMPUSTAT, "Fundamenta s Annua : North Amer ca" (accessed February 15, 2011).
Tota revenue was taken from "Corporate Income Tax Returns" ( ne tem "tota
rece pts") Stat st cs of Income (Wash ngton, DC: Interna Revenue Serv ce, 1950-
2008).
The capac ty of the g ant rms n the economy to obta n h gher prots than the r
sma er compet tors s the ma n nd cator of the degree of monopo y exerc sed by
these megacorporat ons. Chart 3, above, shows the tota gross prots of the top
two hundred U.S. corporat ons as a percentage of tota bus ness prots n the U.S.
economy, from 1950-2008, dur ng wh ch the r share rose from 13 percent n 1950
to over 30 percent n 2007.
Chart 3. Gross Prots of Top 200 U.S. Corporat ons as Percentage of Tota Gross
Prots n U.S. Economy, 1950-2008
Notes: Tota gross prots were ca cu ated by subtract ng "cost of goods so d" (or
"cost of sa es and operat ons" for ear er years) from "bus ness rece pts." Th s
fo ows the den t on used n the COMPUSTAT database. Bus ness rece pts are
dened as gross operat ng rece pts of a rm reduced by the cost of returned goods
and serv ces. Genera y, they nc ude a corporate rece pts except nvestment and
nc denta ncome. A so see notes to F gure 2.
Source: See F gure 2. Tota gross prots (see notes for ca cu at ons) were taken
from "Corporate Income Tax Returns," Stat st cs of Income (Wash ngton, DC:
Interna Revenue Serv ce, var ous years).
The share of prots of the top two hundred corporat ons turned down br ey n
2008, reect ng the Great F nanc a Cr s s, wh ch h t the argest corporat ons rst
and then rad ated out to the rest of the economy. A though ava ab e data ends n
2008, t s c ear nonethe ess that the argest corporat ons rebounded n 2009 and
2010, ga n ng back what they had ost and probab y a ot more. Referr ng to the
top ve hundred rms, Fortune magaz ne (Apr 15, 2010) nd cated that the r
earn ngs rose 335 percent n 2009, the second argest ncrease n the fty-s x
years of the Fortune 500 data. Returns on sa es more than quadrup ed n 2009. As
Fortune wr tes: "Hence, the 500s prots v rtua y returned to norma after years of
extremes-bubb es n 2006 and 2007, co apse n 2008-desp te a feeb e overa
recovery thats far from norma ." There s tt e doubt that th s recovery of the
g ant rms was re ated to the r monopo y power, wh ch a owed them to sh ft the
costs of the cr s s onto the unemp oyed, workers, and sma er rms.12
A New Wave of Compet t on?
The ev dence we have prov ded w th respect to the U.S. economy suggests that
econom c concentrat on s greater today than t has ever been, and t has
ncreased sharp y over the past two decades. Why then s th s not common y
acknow edged-and even frequent y den ed? Why ndeed have so many across the
po t ca spectrum dent ed the past th rd of a century as an era of renewed
econom c compet t on? There are severa poss b e exp anat ons for th s that
deserve attent on. For starters, the past three decades have seen dramat c
changes n the wor d economy and much upheava . Four ma| or trends have
occurred that, nd v dua y and n comb nat on, have appeared to foster new
econom c compet t on, wh e at the same t me ead ng nexorab y to greater
concentrat on: (1) econom c stagnat on; (2) the growth of the g oba compet t on of
mu t nat ona corporat ons; (3) nanc a zat on; and (4) new techno og ca
deve opments.
The s owdown of the rea growth rates of the cap ta st econom es, beg nn ng n
the 1970s, undoubted y had a cons derab e ehect n a ter ng percept ons of
monopo y and compet t on. A though monopo st c tendenc es of corporat ons were
not genera y seen n the econom c ma nstream as a cause of the cr s s, the post-
Second Wor d War accommodat on between b g cap ta and b g un ons, n
manufactur ng n part cu ar, was often presented as a key part of the d agnos s of
the stagat on cr s s of the 1970s. Dom nant nterests assoc ated w th cap ta
ns sted that the arge rms break oose from the ndustr a re at ons moor ngs
they had estab shed. The restructur ng of rms to emphas ze eaner and meaner
forms of compet t on n ne w th market pressures was v ewed by the powers-that-
be as cruc a to the rev ta zat on of the economy. The resu t of a of th s, t was
w de y contended, was the aunch ng of a more compet t ve g oba cap ta sm.
The g ant corporat ons that had ar sen n the monopo y stage of cap ta sm
operated ncreas ng y as mu t nat ona corporat ons on the p ane of the g oba
economy as a who e-to the po nt that they confronted each other w th greater or
esser success n the r own domest c markets as we n the g oba economy. The
resu t was that the d rect compet t ve pressures exper enced by corporate g ants
went up. Nowhere were the negat ve ehects of th s change more ev dent than n
re at on to U.S. corporat ons, wh ch n the ear y post-Second Wor d War years had
benetted from the unr va ed U.S. hegemony n the wor d economy. Mu t nat ona
corporat ons encouraged wor dw de outsourc ng and sa es as ways of ncreas ng
the r prot marg ns, re y ng ess on nat ona markets for the r product on and
prots. V ewed from any g ven nat ona perspect ve, th s ooked ke a vast
ncrease n compet t on-even though, on the nternat ona p ane as a who e, t
encouraged a more genera zed concentrat on and centra zat on of cap ta .
The U.S. automob e ndustry was the most v s b e man festat on of th s process.
The Detro t B g Three, the very symbo of concentrated econom c power, were
v s b y weakened n the 1970s w th renewed nternat ona compet t on from
|apanese and German automakers, wh ch were ab e to se ze a share of the U.S.
market tse f. As Dav d Harvey has noted: "Even Detro t automakers, who n the
1960s were cons dered an exemp ar of the sort of o gopo y cond t on
character st c of what Baran and Sweezy dened as monopo y cap ta sm, found
themse ves ser ous y cha enged by fore gn, part cu ar y |apanese, mports.
Cap ta sts have therefore had to nd other ways to construct and preserve the r
much coveted monopo y powers. The two ma| or moves they have made" nvo ve
"mass ve centra zat on of cap ta , wh ch seeks dom nance through nanc a
power, econom es of sca e, and market pos t on, and av d protect on of
techno og ca advantages.through patent r ghts, cens ng aws, and nte ectua
property r ghts."13
One of the most mportant h stor ca changes ahect ng the compet t ve cond t ons
of arge ndustr a corporat ons was the reemergence of nance as a dr ver of the
system, w th power ncreas ng y sh ft ng n th s per od from corporate boardrooms
to nanc a markets.14 F nanc a cap ta , w th ts movement of money cap ta at
the speed of ght, ncreas ng y ca ed the shots, n sharp contrast to the 1950s
and 60s dur ng wh ch ndustr a cap ta was arge y se f-nanc ng and ndependent
of nanc a cap ta . In the new age of specu at ve nance, t was often contended
that an advanced and purer form of g oba zed compet t on had emerged, governed
by what | ourna st Thomas Fr edman dubbed "the e ectron c herd," over wh ch no
one had any contro .15 The o d reg me of stab e corporat ons was pass ng and, to
the untra ned eye, that ooked ke unend ng compet t ve turbu ence-a ver tab e
terra incognita.
Techno og ca changes a so ahected percept ons of the ro e of the g ant
corporat ons. W th new techno og es assoc ated n part cu ar w th the d g ta
revo ut on and the Internet g v ng r se to who e new ndustr es and g ant rms,
many of the o d corporate powers, such as IBM, were shaken, though se dom
exper enced a knockout punch. |ohn Kenneth Ga bra ths wor d of The New
lndustrial 5tate, where a re at ve y sma group of corporat ons ru ed mper ous y
over the market based on the r own "p ann ng system," was c ear y mpa red.16
A of these deve opments are common y seen as engender ng greater compet t on
n the economy, and cou d therefore appear to con ct w th a not on of a genera
trend toward monopo zat on. However, the rea ty of the case s more nuanced.
Most of these sk rm shes were be ng fought out by ncreas ng y centra zed g oba
corporat ons, each a m ng to ma nta n or advance ts re at ve monopo y power.
Such g oba zed o gopo st c r va ry has more to do, as Harvey says, w th
construct ng and conserv ng "much-coveted monopo y powers" than promot ng
compet t on n the narrow sense n wh ch that term s emp oyed n rece ved
econom cs. Twent eth-century monopo y cap ta sm was not return ng to ts ear er
n neteenth-century compet t ve stage, but evo v ng nto a twenty-rst-century
phase of g oba zed, nanc a zed monopo y cap ta . The boom ng nanc a sector
created turmo and nstab ty, but t a so exped ted a sorts of mergers and
acqu s t ons. In the end, nance has been-as t nvar ab y s-a force for
monopo y. Announced wor dw de merger and acqu s t on dea s n 1999 reached
$3.4 tr on, an amount equ va ent at that t me to 34 percent of the va ue of a
ndustr a cap ta (bu d ngs, p ants, mach nery, and equ pment) n the Un ted
States.17 In 2007, | ust pr or to the Great F nanc a Cr s s, wor dw de mergers and
acqu s t ons reached a record $4.38 tr on, up 21 percent from 2006.18 The ong-
term resu t of th s process s a ratchet ng up of the concentrat on and
centra zat on of cap ta on a wor d sca e.
Chart 4 shows net va ue of acqu s t ons of the top ve hundred g oba corporat ons
(w th operat ons n the Un ted States and Canada) as a percentage of wor d
ncome. The upward trend n the graph, most marked s nce the 1990s, nd cates
that acqu s t ons of these g ant mu t nat ona corporat ons are centra z ng cap ta
at rates n excess of the growth of wor d ncome. Indeed, as the chart nd cates,
there was a tenfo d ncrease n the net va ue of annua g oba acqu s t ons by the
top ve hundred rms (operat ng n the Un ted States and Canada) as a percentage
of wor d ncome from the ear y 1970s through 2008.
Chart 4. Net Va ue of Acqu s t ons of Top 500 G oba Corporat ons (w th Operat ons
n Un ted States and Canada) as Percentage of Wor d Income (GDP), 1971-2008
Notes: The COMPUSTAT North Amer ca dataset does not techn ca y cover a
g oba corporat ons, on y those requ red to e n the Un ted States or Canada.
Therefore, the va ue of acqu s t ons, as we as tota revenues (Chart 5), are
understated to some degree. In 2009, revenues for the top 500 g oba corporat ons
operat ng n the Un ted States tota ed $18 tr on; n compar son, Fortunes
"G oba 500," wh ch nc udes the top corporat ons operat ng ns de and outs de
North Amer ca, g ves a tota of $23 tr on (Chart 5 compares the two ser es on
revenues). The COMPUSTAT ser es s ncomparab e n terms of ts ength and
cons stency of measurement, however, wh ch s why we report t here.
Source: See Chart 2. "Wor d Deve opment Ind cators," Wor d Bank,
http://databank.wor dbank.org.
To assess a the new compet t on that the aforement oned four factors ostens b y
encouraged and the resu t to wh ch th s eads, et us return to the automob e
ndustry. As the dust c eared after the upheava of the 1970s and 1980s, there was
no onger a ser es of nat ona automob e ndustr es but rather a g oba o gopo y
for automob e product on, where ve mu t nat ona rms-a of wh ch were
nat ona powerhouses at the beg nn ng of the process-produced near y ha f the
wor ds motor veh c es, and the ten argest rms produced 70 percent of the
wor ds motor veh c es. There s a power aw d str but on thereafter; the twenty-
fth argest motor veh c e producer now accounts for around one-ha f of 1 percent
of the g oba market, and the ft eth argest g oba producer accounts for ess
than one-tenth of 1 percent of product on.19 The og c of the s tuat on po nts to
another wave of mergers and acqu s t ons and conso dat on among the rema n ng
p ayers. There are no banks n ng up to cut $50 b on checks to the ft eth
ranked rm so t can make a p ay to | o n the ranks of the b g ve. There s tt e to
no chance that newcomers w ar se out of the b ue or from another p anet to
cha enge the dom nance of the handfu of rms that ru e g oba automob e
product on.
As Chart 5 shows, the tota annua revenues of the argest ve hundred
corporat ons n the wor d (w th operat ons n the Un ted States and Canada) have
been trend ng upward s nce the 1950s. In 2006, | ust pr or to the Great F nanc a
Cr s s, the wor d revenues of these rms equa ed about 35 percent of wor d
ncome, and then d pped when the cr s s h t. Over the ast s x years, Fortune has
been comp ng ts own st of the top ve hundred corporat ons n the wor d
known as the "G oba 500" (th s cons sts not | ust of those g oba corporat ons
operat ng n the Un ted States and Canada, as n the COMPUSTAT data used n the
onger t me ser es, but a so the top ve hundred operat ng n the wor d at arge).
Th s shows G oba 500 revenues on the order of 40 percent of wor d GDP (fa ng to
around 39 percent n 2008). The percentages shown by these two ser es are h gh y
s gn cant. Were the ve hundred argest shareho ders n a company to own 35-40
percent of the shares of a rm, they wou d be cons dered to have the power to
contro ts operat ons. A though the ana ogy s not perfect, there can be no doubt
that such g ant corporate enterpr ses ncreas ng y represent a contro ng nterest
n the wor d economy, w th enormous consequences for the future of cap ta sm,
the popu at on of the wor d, and the p anet.
Chart 5. Tota Revenues of Top 500 G oba Corporat ons as Percentage of Wor d
Income (GDP), 1960-2009
Source: See sources and notes to Chart 4. "Fortune G oba 500," Fortune, 2005-
2010 (data are for prev ous sca year).
In 2009 the top twenty-ve g oba pr vate megacorporat ons by revenue rank were:
Wa -Mart Stores, Roya Dutch She , Exxon Mob , BP, Toyota Motor, AXA, Chevron,
ING Group, Genera E ectr c, Tota , Bank of Amer ca, Vo kswagen, ConocoPh ps,
BNP Par bus, Ass curaz on Genera , A anz, AT&T, Carrefour, Ford Motor, ENI,
|PMorgan Chase, Hew ett-Packard, E.ON, Berksh re Hathaway, and GDF Suez.20
Such rms stradd e the g obe. Sam r Am n apt y ca s th s "the ate cap ta sm of
genera zed, nanc a zed, and g oba zed o gopo es." There s no doubt that
g ant g oba corporat ons are ab e to use the r d sproport onate power to everage
monopo y rents, mposed on popu at ons, states, and sma er corporat ons.21 So
much for that new wave of compet t on.
The Amb gu ty of Compet t on
In our v ew, the best exp anat on for the cont nu ng confus on about the degree of
monopo y n the economy s due to what we ca the "amb gu ty of compet t on."
Th s refers to the oppos te ways n wh ch the concept of compet t on s emp oyed
n econom cs and n more co oqu a anguage, nc ud ng the anguage of bus ness
tse f. It s best exp a ned by M ton Fr edman, n h s conservat ve c ass c
Capitalism and Freedom, rst pub shed n 1962: "Compet t on," Fr edman wr tes,
has two very d herent mean ngs. In ord nary d scourse, compet t on means
persona r va ry, w th one nd v dua seek ng to outdo h s known compet tor. In the
econom c wor d, compet t on means a most the oppos te. There s no persona
r va ry n the compet t ve market p ace. There s no persona h gg ng. The wheat
farmer n a free market does not fee h mse f n persona r va ry w th, or
threatened by, h s ne ghbor, who s, n fact, h s compet tor. No one part c pant can
determ ne the terms on wh ch other part c pants sha have access to goods or
| obs. A take pr ces as g ven by the market and no nd v dua can by h mse f have
more than a neg g b e nuence on pr ce though a part c pants together
determ ne the pr ce by the comb ned ehect of the r separate act ons.22
Compet t on, n other words, ex sts when, because of the arge number and sma
s ze of rms, the typ ca bus ness un t has no s gn cant contro over pr ce,
output, nvestment, wh ch are a g ven by the market-and when each rm stands
n a non-r va rous re at on to ts compet tors. An nd v dua rm s power ess to
ntervene n ways that change the bas c compet t ve forces t or another rm
faces. The fate of each bus ness s thus arge y determ ned by market forces
beyond ts contro . Such assumpt ons are g ven a very restr ct ve and determ nate
form n neoc ass ca econom c not ons of perfect and pure compet t on, but the
genera v ew of compet t on n th s respect s common to a econom cs. Th s is the
pr nc pa mean ng of compet t on n econom cs.
Yet, as Fr edman emphas zes, the above econom c den t on of compet t on
con cts d rect y w th the way n wh ch the concept of compet t on s used more
genera y and n bus ness ana yses to refer to rivalry, part cu ar y between
o gopo st c rms. Compet t on n the bus ness sense of r va ry, he says, s "the
oppos te" of the mean ng of compet t on n econom cs assoc ated w th the
anonym ty of ones compet tors.
The same prob em ar ses exact y the other way around w th respect to what s
taken to be the nverse of compet t on: monopo y. As Fr edman states: "Monopo y
ex sts when a spec c nd v dua or enterpr se has sumc ent contro over a
part cu ar product or serv ce to determ ne s gn cant y the terms on wh ch other
nd v dua s sha have access to t. ln some ways, monopoly comes closer to the
ordinary concept of competition since it does involve personal rivalry" ( ta cs
added).23 In econom c terms, he s te ng us, monopo y can be sa d to ex st when
rms have "s gn cant" monopo y power, ab e to ahect pr ce, output, nvestment,
and other factors n markets n wh ch they operate, and thus ach eve monopo st c
returns. Such rms are more ke y to be n rivalrous o gopo st c re at ons w th
other rms. Hence, monopo y, ron ca y, "comes c oser," as Fr edman stressed, to
the "ord nary concept of compet t on."
The amb gu ty of compet t on ev dent n Fr edmans den t ons of compet t on and
monopo y um nates the fact that todays g ant corporat ons are c oser to the
monopo y s de of the equat on. Most of the examp es of compet t on and
compet t ve strategy that dom nate econom c news are n fact r va rous strugg es
between quas -monopo es (or o gopo es) for greater monopo y power. Hence, to
the extent to wh ch we speak of compet t on today, t s more ke y to be
o gopo st c r va ry, .e., batt es between monopo y-cap ta st rms. Or to
under ne the rony, the greater the amount of d scuss on of cutthroat compet t on
n med a and bus ness c rc es and among po t c ans and pund ts, the greater the
eve of monopo y power n the economy.
What we are ca ng "the amb gu ty of compet t on" was rst ra sed as an ssue n
the 1920s by |oseph Schumpeter, who was concerned ear y on w th the ehect of
the emergence of the g ant, monopo st c corporat on on h s own theory of an
economy dr ven by nnovat ve entrepreneurs. The r se of b g bus ness n the
deve oped cap ta st econom es n the ear y twent eth century ed to a arge
number of attempts to exp a n the sh ft from compet t ve to what was var ous y
ca ed, trust ed, concentrated, or monopo y cap ta sm. Marx st and rad ca
theor sts p ayed the most prom nent part n th s, bu d ng on Marxs ana ys s of
the concentrat on and centra zat on of cap ta . The two th nkers who were to go
the furthest n attempt ng to construct a d st nct theory of monopo y-based
cap ta sm n the ear y twent eth century were the rad ca Amer can econom st
Thorste n Veb en n The Theory of 8usiness Enterprise (1904) and the Austr an
Marx st Rudo f H ferd ng n h s Finance Capital (1910). In h s lmperialism, The
Highest 5tage of Capitalism Len n dep cted mper a sm n ts "br efest poss b e
den t on," as "the monopo y stage of cap ta sm."24 The Sherman Ant trust Act
was passed n the Un ted States n 1890 n an attempt to contro the r se of
carte s and monopo es. No one at the t me doubted that cap ta sm had entered a
new phase of econom c concentrat on, for better or for worse.
In 1928 Schumpeter addressed these ssues and the threat they represented to the
who e theoret ca framework of neoc ass ca econom cs n an art c e ent t ed "The
Instab ty of Cap ta sm." "The n neteenth century," he argued, cou d be ca ed
"the t me of competitive, and what has so far fo owed, the t me of ncreas ng y
trustihed, or otherw se organ zed, regu ated, or managed, cap ta sm." For
Schumpeter, cond t ons of dua monopo y or "mu t p e monopo y" (the term
"o gopo y" had not yet been ntroduced) were much "more mportant pract ca y"
than e ther perfect compet t on or the assumpt on of a s ng e monopo y, and of
more genera mportance " n a theoret c sense." The not on of pure compet t on
was, n fact, "very much n the nature of a crutch" for orthodox econom cs, and due
to overre ance on t, the underm n ng of econom c orthodoxy was "a rather ser ous
one." Trust ed cap ta sm ra sed the amb gu ty of compet t on d rect y: "Such
th ngs as b umng, the use of non-econom c force, a w to force the other party to
the r knees, have much more scope n the case of two-s ded monopo y-| ust as cut-
throat methods have n the case of m ted compet t on-than n a state of perfect
compet t on."
Schumpeters own so ut on to th s n "The Instab ty of Cap ta sm" (and much
ater n h s 1942 Capitalism, 5ocialism, and Democracy) was to ntroduce the
concept of "corespect ve pr c ng." Th s meant that the g ant rms n a cond t on of
"mu t p e monopo y" (or o gopo y) acted as corespectors, determ n ng the r
act ons n re at on to those of others, de berate y seek ng to restr ct the r r va ry,
part cu ar y n re at on to pr ce, by var ous forms of co us on, n order to
max m ze group advantage.25 Yet there was no h d ng the fact that such a so ut on
const tuted a ser ous "breach" n the wa of econom cs, ntroduc ng a not on of
the bas c econom c un t that was fore gn to the ent re corpus of rece ved
econom cs n both ts c ass ca and neoc ass ca phases.26
Th s breach n the estab shed doctr ne was on y to w den n subsequent decades.
In ma nstream econom cs the theory of mperfect compet t on ntroduced a most
s mu taneous y by |oan Rob nson and Edward Chamber n n the 1930s, dea t not
on y (or even ma n y) w th o gopo y but rather emphas zed the nuence of
monopo st c factors of a k nds n rms at every eve , part cu ar y n the form of
product d herent at on.27 It was found that monopo y e ements were much more
pervas ve n the economy than the orthodox neoc ass ca ana ys s of perfect
compet t on a owed. Sweezy deve oped the most nuent a theory of o gopo st c
pr c ng, known as the "k nked-demand curve" ana ys s n 1939. He argued that
there was a "k nk" n the demand curve at the ex st ng pr ce such that
o gopo st c rms wou d nd themse ves fac ng compet t ve pr ce warfare, and
hence wou d exper ence no ga n n market share f they sought to ower pr ces,
wh ch wou d then on y squeeze prots.28 These contr but ons to mperfect
compet t on theory const tuted an mportant qua cat on to convent ona
econom cs. Yet they were arge y exc uded from the core ana yt ca framework of
orthodox econom cs, wh ch cont nued to rest on the unrea st c and ncreas ng y
preposterous assumpt ons of perfect compet t on, w th ts nn te y arge numbers
of buyers and se ers. Hence, sma rms, ab e to enter and ex t free y from
ndustr es, en| oyed perfect nformat on, and produced homogeneous products.29
The essent a cha enge fac ng neoc ass ca econom cs, n the face of the r se of
the g ant, monopo st c or o gopo st c rm, was e ther to ho d on to ts econom c
mode of perfect compet t on, on wh ch ts overa theory of genera equ br um
rested, and therefore forgo any poss b ty of a rea st c assessment of the
economy-or to abandon these make-be eve mode s n favor of greater rea sm.
The dec s on at wh ch neoc ass ca theor sts genera y arr ved-re nforced over
and over throughout the twent eth century and nto the twenty-rst century-was
to reta n the perfect compet t on mode , desp te ts napp cab ty to rea wor d
cond t ons. The reasons for th s were best stated by |ohn H cks n h s Value and
Capital (1939):
If we assume that the typ ca rm (at east n ndustr es where the econom es of
arge sca e are mportant) has some nuence over the pr ce at wh ch t se s.| t|
s therefore to some extent a monopo st.. Yet t has to be recogn zed that a
genera abandonment of the assumpt on of perfect compet t on, a un versa
adopt on of the assumpt on of monopo y, must have very destruct ve consequences
for econom c theory. Under monopo y the stab ty cond t ons become
ndeterm nate; and the bas s on wh ch econom c aws can be constructed s
therefore shorn away..
It s, I be eve, on y poss b e to save anyth ng from th s wreck-and t must be
remembered that the threatened wreckage s the greater part of |neoc ass ca |
genera equ br um theory- f we can assume that the markets confront ng most of
the rms w th wh ch we sha be dea ng do not d her very great y from perfect y
compet t ve markets.. Then the aws of an econom c system work ng under perfect
compet t on w not be apprec ab y var ed n a system wh ch conta ns w despread
e ements of monopo y. At east, th s get-away seems we worth try ng. We must be
aware, however, that we are tak ng a dangerous step, and probab y m t ng to a
ser ous extent the prob ems w th wh ch our subsequent ana ys s w be tted to
dea . Persona y, however, I doubt f most of the prob ems we sha have to
exc ude for th s reason are capab e of much usefu ana ys s by the methods of
econom c theory.30
The cho ce econom sts faced was thus a stark one: dea ng ser ous y w th the
prob em of monopo y as a grow ng factor n the modern economy and thus
underm n ng neoc ass ca theory, or deny ng the essent a rea ty of monopo y and
thereby preserv ng the theory-even at the r sk of tak ng the "dangerous step" of
" m t ng to a ser ous extent the prob ems" w th wh ch any future econom cs wou d
be "tted to dea ." Estab shment econom c theor sts have genera y chosen the
atter course-but w th devastat ng consequences n terms of the r ab ty to
understand and exp a n the rea wor d.31
In the Un ted States n the 1930s, the ssues of econom c concentrat on and
monopo y took on greater s gn cance n the context of the Great Depress on, w th
frequent c a ms that adm n strat ve pr ces mposed by monopo st c rms and
restra nts on product on and nvestment had contr buted to econom c stagnat on.
The resu t was a arge number of stud es and nvest gat ons n the per od,
nc ud ng Ado f A. Ber e and Gard ner C. Meanss sem na The Modern Corporation
and Private Property (1932) on concentrat on and the manager a revo ut on, and
Arthur Robert Burnss forgotten c ass c, The Decline of Competition (1936),
address ng the ehect ve bann ng of pr ce compet t on n o gopo st c ndustr es.
These stud es were fo owed by hear ngs on econom c concentrat on conducted by
the Rooseve t adm n strat ons Temporary Nat ona Econom c Comm ttee, wh ch,
between 1938 and 1941, produced forty-ve vo umes and some th rty-three
thousand pages focus ng, n part cu ar, on the monopo y prob em.32 After the
Second Wor d War, add t ona nvest gat ons were conducted by the Federa Trade
Comm ss on and the Department of Commerce. In the words of Pres dent Rooseve t
n 1938, the Un ted States was exper enc ng a "concentrat on of pr vate power
w thout equa n h story," wh e the "d sappearance of pr ce compet t on" was "one
of the pr mary causes of our present |econom c| d mcu t es."33
In h s 1942 Capitalism, 5ocialism, and Democracy, Schumpeter famous y responded
to these New Dea cr t c sms of monopo y by try ng to comb ne rea sm w th a
defense of "monopo st c pract ces," v ewed as og ca y cons stent w th
compet t on n ts most mportant form: "the perenn a ga e of creat ve
destruct on," or what Marx had ca ed the "constant revo ut on z ng of product on."
Schumpeter argued that what mattered most were the waves of nnovat on that
revo ut on zed "the econom c structure from within, ncessant y destroy ng the o d
one, ncessant y creat ng a new one. Th s process of Creat ve Destruct on s the
essent a fact about cap ta sm." Yet such creat ve destruct on, he recogn zed,
a so ed to conso dat on of cap ta s.
Po nt ng to o gopo st c ndustr es, such as U.S. automob e product on, he
contended that "from a erce fe and death strugg e three concerns emerged that
by now account for over 80 per cent of tota sa es." In th s "ed ted compet t on,"
rms c ear y en| oyed a degree of monopo y power, behav ng "among themse ves.
n a way wh ch shou d be ca ed corespect ve rather than compet t ve."
Neverthe ess, such o gopo st c rms rema ned under "compet t ve pressure" from
the outs de n the sense that fa ure to cont nue to nnovate cou d ead to a
weaken ng of the barr ers to entry, protect ng them from potent a compet tors. It
was prec se y nnovat on or creat ve destruct on that made the barr ers
surround ng the g ant monopo st c rms vu nerab e to new compet tors. Indeed, f
there were a fau t n the g ant corporat on for Schumpeter, t ay not n "trust ed
cap ta sm" per se, but rather n the weaken ng of the entrepreneur a funct on
that th s often brought about.34
But t was |ohn Kenneth Ga bra th who best vo ced the pub c sent ment w th
respect to monopo y and compet t on n the post-Second Wor d War Un ted States.
Ga bra th ed the heterodox bera assau t on the convent ona v ew n three
nuent a , conoc ast c works: American Capitalism (1952); The Amuent 5ociety
(1958); and The New lndustrial 5tate (1967). S gn cant y, he aunched h s cr t que
n American Capitalism w th the concept of the amb gu ty of compet t on. In
neoc ass ca econom cs, the very r gor of the concept of compet t on was the
Ach es hee of the ent re ana ys s. Th s was best exp a ned, he argued, by
quot ng Fr edr ch Hayek, who had ns sted: "The pr ce system w fu | ts|
funct on on y f compet t on preva s, that s, f the nd v dua producer has to
adapt h mse f to pr ce changes and cannot contro them." It was th s den t on of
compet t on, as used by econom sts, Ga bra th contended, that ed to
an end ess amount of m sunderstand ng between bus nessmen and econom sts.
After spend ng the day contemp at ng the sa es force, advert s ng agency,
eng neers, and research men of h s r va s the bus nessman s ke y to go home
fee ng cons derab y harassed by compet t on. Yet f t happens that he has
measurab e contro over h s pr ces he obv ous y fa s short of be ng compet t ve n
the forego ng sense. No one shou d be surpr sed f he fee s some annoyance
toward scho ars who appropr ate words n common Eng sh usage and, for the r
own purposes, g ve them what seems to be an nord nate y restr cted mean ng.35
Ga bra th argued that the typ ca ndustry n the Un ted States was now h gh y
concentrated econom ca y, dom nated by a handfu of "very, very b g
corporat ons." As ong as the rms n the economy cou d be v ewed n "b po ar
c ass cat on" as cons st ng of e ther perfect compet tors (sma and numerous,
w th no pr ce contro ) or monopo sts (s ng e se ers-a phenomenon pract ca y
nonex stent), the dea compet t ve mode worked we enough. But once o gopo y
or "crypto-monopo y" was recogn zed as the typ ca case, a of th s changed. "To
assume that o gopo y was genera n the economy was to assume that power ak n
to that of a monopo st was exerc sed n many, perhaps even a ma| or ty of
markets." Pr ces were no onger an mpersona force, and power and r va ry cou d
no onger be exc uded from econom c ana ys s. "Not on y does o gopo y ead away
from the wor d of compet t on.but t eads toward the wor d of monopo y."36
The rea ty-based v ew of monopo y had cons derab e currency n the postwar
decades, even n econom cs departments, as Keynes ans and bera s en| oyed
prom nence. Harvard econom st Sumner S chter, a free market advocate, amented
that "the be ef that compet t on s dy ng s probab y accepted by a ma| or ty of
econom sts."37 How much nuence t had over government ant trust po c es s
another matter, but t s str k ng that a ead ng scho ar and cr t c of monopo st c
markets, |ohn M. B a r, served as the ch ef econom st for the Senates
Subcomm ttee on Ant -Trust and Monopo y from 1957 to 1970. B a r was somewhat
d sappo nted w th the governments nab ty to arrest monopo y power dur ng
these years, but n retrospect t seems ke a per od of robust pub c nterest
act v sm, compared w th the ab| ect abandonment of ant trust enforcement that
began n the 1980s.38
Monopo y and 1960s U.S. Rad ca Po t ca Economy
Marx an theory, as we noted, p oneered the concept of the monopo y stage of
cap ta sm w th the contr but ons of H ferd ng and Len n, but work n the area had
angu shed n the ear y decades of the twent eth century. The more trad t ona
Marx an theor sts were content to rest on the case estab shed by Marx n Capital
based on n neteenth-century market cond t ons, w th no attempt to extend the
cr t que of cap ta sm to new deve opments assoc ated w th the monopo y stage.
The cruc a step n the deve opment of an essent a y Marx st (or neo-Marx st)
approach, however, arose w th M cha Ka eck s ntroduct on of the concept of
"degree of monopo y" (the power of a rm to mpose a pr ce markup on pr me
product on costs) nto the ana ys s of the cap ta accumu at on process. Ka eck
took the markup on costs as a k nd of ndex of the degree of monopo y, and hence
a reect on of the degree of concentrat on, barr ers-to-entry, etc. H s nnovat on,
wh ch was character st ca y presented n | ust a few paragraphs n h s Theory of
Economic Dynamics (1952), was to show that the ehect of an ncreased degree of
monopo y/o gopo y wou d not on y be to concentrate econom c surp us (surp us
va ue) n monopo st c rms, as opposed to compet t ve rms, but wou d a so
ncrease the rate of surp us va ue at the expense of wages (that s, the rate of
exp o tat on).39
From here t was c ear, as |osef Ste nd was to demonstrate n Maturity and
5tagnation in American Capitalism (1952), that the growth of monopo zat on
created an economy b ased toward overaccumu at on and stagnat on.40
The work of Ka eck and Ste nd , evo v ng out of the concept of the "degree of
monopo y," became the cruc a econom c bas s for Baran and Sweezys 1966
Monopoly Capital: An Essay on the American Economic and 5ocial Order, wh ch
became the theoret ca foundat on on wh ch rad ca po t ca econom cs was to
emerge, w th the r se of the Un on of Rad ca Po t ca Econom cs (URPE), n the
Un ted States n the 1960s. Thus, the rst ma| or econom c cr s s reader pub shed
by URPE n the m d-1970s was ent t ed Radical Perspectives on the Economic Crisis
of Monopoly Capitalism.41
For Baran and Sweezy, a fundamenta change had occurred n the compet t ve
structure of cap ta sm. "We must recogn ze," they wrote at the outset of the r
book,
that compet t on, wh ch was the predom nant form of market re at ons n
n neteenth-century Br ta n, has ceased to occupy that pos t on, not on y n Br ta n
but everywhere e se n the cap ta st wor d. Today the typ ca econom c un t n the
cap ta st wor d s not the sma rm produc ng a neg g b e fract on of a
homogeneous output for an anonymous market but a arge-sca e enterpr se
produc ng a s gn cant share of the output of an ndustry, or even severa
ndustr es, and ab e to contro ts pr ces, the vo ume of ts product on, and the
types and amounts of ts nvestments. The typ ca econom c un ty, n other words,
has the attr butes wh ch were once thought to be possessed on y by monopo es. It
s therefore mperm ss b e to gnore monopo y n construct ng our mode of the
economy and to go on treat ng compet t on as the genera case. In an attempt to
understand cap ta sm n ts monopo y stage, we cannot abstract from monopo y or
ntroduce t as a mere mod fy ng factor; we must put t at the very center of the
ana yt ca ehort.42
Bu d ng on Ka eck s degree of monopo y concept, Baran and Sweezy argued that
Marxs aw of the tendency of the prot rate (as determ ned at the eve of
product on) to fa , spec c to compet t ve cap ta sm, had been rep aced, n
monopo y cap ta sm, by the tendency for the rate of potent a surp us generated
w th n product on to r se. Th s ed to a grav tat ona pu toward overaccumu at on
and stagnat on: for wh ch the ma n compensat ng factors were m tary spend ng,
the expans on of the sa es ehort, and the growth of nanc a specu at on.43 By
exerc s ng a t ghter contro over the abor process, and thus appropr at ng more
abor power from a g ven amount of work, as Harry Braverman demonstrated n
Labor and Monopoly Capital (1974)-and by be ng so much better ab e to search the
g obe for cheaper abor-the system was ab e to generate greater prots. So t
was not | ust that more prots sh fted to the monopo es-more prot was
generated n the system tse f.44
At the core of th s ana ys s was the not on that pr ce compet t on had been
ehect ve y banned by monopo y cap ta -as ear er dep cted by Sweezy n h s
k nked-demand curve ana ys s. At the t me Baran and Sweezy were wr t ng
Monopoly Capital, th s had rece ved strong conrmat on n U.S. government
hear ngs d rected at the stee ndustry. Stee execut ves test ed that they cou d
on y ncrease pr ces n tac t or nd rect co us on w th the r o gopo st c
compet tors, add ng that "we are certa n y not go ng to go down" n pr ce because
that "wou d be met by our compet tors"-resu t ng n cutthroat compet t on and a
drop n prots. As Sweezy stated n the marg ns of h s copy of the 1958 stee
hear ngs: "They a but draw the k nky curve!"45 The resu t n o gopo st c
markets, as Baran and Sweezy wrote, was a "powerfu taboo" on pr ce cutt ng.46
Through tac t co us on corporat ons tended ncreas ng y toward a pr ce system,
wh ch, as famous y summed up by 8usiness Week, "works on y one way-up."47
G ant o gopo st c rms were pr ce makers-not pr ce takers, as postu ated by
orthodox econom cs.
The va ue of th s perspect ve s perfect y ev dent today. As b ona re Warren
Buhett, the vo ce of monopo y-nance cap ta , dec ared n February 2011: "The
s ng e most mportant dec s on n eva uat ng a bus ness s pr c ng power. If youve
got the power to ra se pr ces w thout os ng bus ness to a compet tor, youve got a
very good bus ness. And f you have to have a prayer sess on before ra s ng the
pr ce by 10 percent, then youve got a terr b e bus ness." For Buhett, t s a
about monopo y power, not management. "If you own the on y newspaper n town,
up unt the ast ve years or so, you had pr c ng power and you d dnt have to go
to the omce" and worry about management ssues.48
However, the corespect ve pr c ng strateg es that turned o gopo st c markets nto
shared monopo es deve oped on y gradua y n the ear y twent eth century. It took
t me, Baran and Sweezy observed n Monopoly Capital, before corporate execut ves
"began to earn the advantages of corespect ve behav or." Th s often on y occurred
after a per od of destruct ve pr ce warfare. Ind rect co us on, such as fo ow ng
the pr ce eader, eventua y so ved th s prob em, generat ng w den ng gross prot
marg ns for the g ant corporat ons.49
In the Monopoly Capital perspect ve, compet t on was not e m nated, but rather ts
forms and methods changed, depart ng s gn cant y from compet t ve cap ta sm.
The powerfu taboo aga nst pr ce compet t on d d not extend to compet t on over
ow-cost pos t on n the ndustry, most mportant y through the reduct on of un t
abor costs-the ma n weapon of wh ch was constant revo ut on zat on of the
means of product on.50 Yet, under monopo y cap ta , cost reduct ons d d not
norma y ead to pr ce reduct ons, but s mp y to w der prot marg ns.
In p ace of the former y predom nant ro e occup ed by pr ce compet t on, other
forms of compet t on, borne of o gopo st c r va ry, preva ed: product
d herent at on, sa es management, advert s ng, etc. (what Baran and Sweezy
ca ed "the sa es ehort") became the ma n means, outs de of techno og ca
deve opments, n wh ch rms sought n the short-run to ncrease the r prots and
market share. A such forms of compet t on, however, fe c oser to the monopo y
s de of the spectrum, cha eng ng both c ass ca econom c not ons of free
compet t on and, even more so, neoc ass ca not ons of perfect compet t on.
At the same t me, the g ant corporat ons often he d back on the deve opment and
re ease of new techno og es f these d d not t w th the r ong-term prot
max m zat on strateg es, an opt on unava ab e under atom st c compet t on. Here
Baran and Sweezy confronted Schumpeters c a m that the "perenn a ga e of
creat ve destruct on"-the new method, the new techno ogy-was the rea y
s gn cant aspect of compet t on, constant y threaten ng the g ant corporat ons,
"the r foundat on and the r very ves." In contrast, they argued that the modern
g ant corporat ons, or "corespectors" as Schumpeter ca ed them, "as he knew
we , were not n the hab t of threaten ng each others foundat ons or ves-or
even prot marg ns. The k nds of non-pr ce compet t on wh ch they do engage n
are n no sense ncompat b e w th the permanence of monopo y prots and the r
ncrease over t me.. Schumpeters perenn a ga e of creat ve destruct on has
subs ded nto an occas ona m d breeze wh ch s no more a threat to the b g
corporat ons than s the r own corespect ve behav or toward each other."51
Centra to the Monopoly Capital thes s was the not on that the tendency toward a
system-w de average rate of prot, as dep cted n c ass ca and neoc ass ca
econom cs, had ost ts former mean ng. The rea ty was one of a "h erarchy of
prot rates," h ghest n those ndustr es where rms were arge and concentrated,
and owest n those ndustr es that were most atom st ca y compet t ve.52 The
growth n the s ze of rms, econom c concentrat on, and barr ers to entry
therefore served to feed ever arger agg omerat ons of corporate power. But th s
d d not mean that there was no movement w th n th s h erarchy, that arge
cap ta s wou d not come and go, some dropp ng out of the p cture and new rms
ar s ng. Ind v dua monopo st c rms were not nvu nerab e; ndustry eve s of
concentrat on cou d sh ft. The r se of new ndustr es cou d ead to ncreased
compet t on for a t me, unt a shakedown process occurred. But overa , the theory
po nted to greater and greater concentrat on and centra zat on of cap ta ,
monopo zat on, and a h erarchy of prots.
Baran and Sweezys Monopoly Capital was based on a Marx an accumulation-based
theory of the growth of the modern rm n wh ch the ncrease n rm s ze and
monopo y power went hand n hand w th the dr ve to greater accumu at on. From
th s perspect ve, t was hard y surpr s ng that the typ ca g ant corporat on grew
to be not on y vert ca y ntegrated (embrac ng subs d ar es a ong ts ent re stream
of product on and d str but on), and hor zonta y ntegrated (comb n ng w th rms
n the same ndustry and at the same stage of product on), but a so evo ved nto a
cong omerate and a mu t nat ona corporat on. Cong omerates such as the DuPont
Corporat on had a ready begun to appear n the ear y part of the twent eth century.
However, there was a qua tat ve d herence n the post-Second Wor d War U.S.
economy n th s respect. As W ard Mue er, a ong-t me ana yst of the
phenomenon, dec ared n 1982, "Now n much of the |U.S.| economy, cong omerate
enterpr se s no onger the except on but the ru e."53
Much more s gn cant than even cong omerat on, however, was the rap d growth of
"mu t nat ona corporat ons," a term co ned by Dav d L entha , prev ous y
d rector of the Tennessee Va ey Author ty, n 1960, and then subsequent y taken
up by 8usiness Week n a spec a report n Apr 1963. Mu t nat ona corporat ons,
part cu ar y emanat ng from the Un ted States, were w de y seen as ncreas ng y
menac ng to states and peop es, not on y n the per phery of wor d cap ta sm but
a so n some states of the deve oped core. For Baran and Sweezy, the r se of th s
phenomenon was not d mcu t to exp a n: mu t nat ona corporat ons represented
monopoly capital abroad, w th the g ant corporat ons mov ng beyond the r home
countr es, n the deve oped core of the system, to contro resources and markets
e sewhere. What mu t nat ona corporat ons wanted was "monopolistic control over
fore gn sources of supp y and fore gn markets, enab ng them to buy and se on
spec a y pr v eged terms, to sh ft orders from one subs d ary to another, to favor
th s country or that depend ng on wh ch has the most advantageous tax, abor, and
other po c es- n a word, they want to do bus ness on the r terms and wherever
they choose."54
In the 1960s orthodox econom sts scramb ed desperate y to address the new
rea ty of a wor d economy ncreas ng y dom nated by mu t nat ona corporat ons,
w th n the framework of a compet t ve mode that eft tt e room for monopo y
power. They nvar ab y sought to emphas ze that such corporat ons were emc ent
nstruments a med at opt ma a ocat on and were cons stent w th compet t ve
markets, ead ng to a genera equ br um. In t a strateg es to exp a n the growth
of mu t nat ona corporat ons n the ma nstream focused on such e ements as: (1)
d herent factor endowments of abor and cap ta between countr es; (2) r sk
prem ums n nternat ona equ ty markets; and (3) the need to expand rms
markets wh e re y ng on nterna y-generated funds. None of th s, however, got at
the rea ty of mu t nat ona corporat ons n terms of accumu at on and power.
It s n th s context that econom st Stephen Hymer, who was to become one of the
ead ng rad ca econom sts of h s generat on before h s trag c death n 1974, wrote
h s 1960 d ssertat on, The lnternational Operations of National Firms: A 5tudy of
Direct Foreign lnvestment. He used the econom cs of ndustr a organ zat on to
uncover the rea ty of the mu t nat ona corporat on, and d rect y nsp red much of
the cr t ca work on the sub| ect nternat ona y.55 Break ng out of orthodox
nternat ona trade and nvestment theory, Hymer saw the mu t nat ona
corporat on n terms of the search for g oba monopo st c power, n con ct w th
the trad t ona theory of compet t on. A though far ess cr t ca than Hymer, others
such as Char es K nd eberger n h s American 8usiness Abroad, moved toward
greater rea sm, adopt ng n part Hymers "monopo st c theory of d rect
nvestment."56 Hymers work on the monopo st c nuences n mu t nat ona
corporate nvestment became so mportant that the Un ted Nat ons vo ume on The
Theory of Transnational Corporations, ed ted by |ohn Dunn ng n 1993, beg ns w th
Hymers work as the rst ma| or source of a rea st c theory.57
Magdoh and Sweezys "Notes on the Mu t nat ona Corporat on," pub shed n
1969, dep cted mu t nat ona cap ta as exh b t ng the bas c character st cs of
monopo y cap ta , and reect ng the prob em of overaccumu at on n the advanced
cap ta st countr es. The resu t was that "the monopo st c rm. s dr ven by an
nner compu s on to go outs de of and beyond ts h stor ca e d of operat ons..
|Hence,| the great ma| or ty of the 200 argest nonnanc a corporat ons n the
Un ted States today-corporat ons wh ch together account for c ose to ha f the
countrys ndustr a act v ty-have arr ved at the stage of both cong omerates and
mu t nat ona ty."58
F nanc a corporat ons were to fo ow n subsequent decades n adopt ng
mu t nat ona e ds of operat on. Indeed, a key quest on today n understand ng
the evo ut on of the g ant corporat on s ts re at on to nance. Here the c ass ca
Marx an ana ys s was ahead of a others. In Marxs concept of the modern
corporat on or | o nt-stock company, the most mportant ever-other than the
pressure of compet t on tse f (and abstract ng from the ro e of the state)- n
promot ng the centra zat on of cap ta , was the deve opment of the cred t or
nance system. The r se of the modern rm, rst n the form of the ra roads, and
then more genera y n the form of ndustr a cap ta , was made poss b e by the
growth of the market for ndustr a secur t es.59 F nance thus ed to centra zat on.
In 1895, | ust before h s death, Enge s was work ng on a two-part supp ement to
Marxs Capital, the second part of wh ch, ent t ed "The Stock Exchange," rema ned
on y n out ne form. It started w th observat ons on the r se of the ndustr a
secur t es market, t ed th s r se to the fact that " n no ndustr a country, east of
a n Eng and, cou d the expans on of product on keep up w th accumu at on, or
the accumu at on of the nd v dua cap ta st be comp ete y ut sed n the
en argement of h s own bus ness," and saw th s tendency toward overaccumu at on
as the genera econom c bas s of the founding of g ant cap ta and the acce erat on
of an outward movement toward wor d co on zat on/ mper a sm.60 Both
H ferd ngs Finance Capital and Veb ens The Theory of 8usiness Enterprise focused
on nance as a ever of monopo y.
A though ndustr a corporat ons were ater to generate so many nterna funds
that they became, for a t me, arge y free of externa nanc ng for the r
nvestment, the r very ex stence was assoc ated w th a vast expans on of the ro e
of nance genera y w th n the accumu at on process. W th the s ow ng down of
econom c growth beg nn ng n the 1970s, corporat ons, unab e to nd out ets n
product ve nvestment for the enormous surp us they generated, ncreas ng y
turned to mergers and acqu s t ons and the assoc ated specu at on n the nanc a
superstructure of the economy. The nanc a rea m responded w th a host of
nanc a nnovat ons, encourag ng st further specu at on ead ng to an economy
that, wh e ncreas ng y stagnant- .e., prone to s ow growth at ts base-was
be ng cont nua y fted by the growth of cred t/debt. Th s phase n the
deve opment of monopo y cap ta s, we be eve, best descr bed as a sh ft to
monopoly-hnance capital.61
Neo bera Newspeak: Monopo y Is Compet t on
The eft embrace of monopo y at the heart of ts cr t que of cap ta sm was hard y
emu ated by ma nstream econom sts. To the contrary, over the course of the 1970s
and certa n y by the ear y 1980s, the e d went n prec se y the oppos te
d rect on. The neo bera sh ft to a " eaner, meaner" cap ta st system brought the
"free market" econom cs of the Ch cago Schoo nto a pos t on of dom nance. The
deas of Hayek, Fr edman, George St g er, and a host of other conservat ve
econom sts now ru ed the profess on. Trad t ona Keynes ans and nst tut ona sts
-those more sympathet c to rea ty-based assessments of monopo y-not to
ment on eft econom sts, found themse ves marg na zed.
The v ctory of neo bera econom cs was not the resu t of super or debat ng
techn ques or ste ar research. It s best v ewed as the necessary po t ca -
econom c po cy counterpart to the r se of monopo y-nance cap ta .62 More
spec ca y, t can be descr bed as a response to the changes n accumu at on and
compet t on assoc ated w th a new phase of stagnant accumu at on n the
cap ta st core, and to the assoc ated nanc a zat on of the g oba economy. The
genera transformat on n cap ta s g oba mperat ves n the 1970s and 80s was
powerfu y descr bed by |oyce Ko ko n 1988 n Restructuring the World Economy:
Cap ta cont nues to ow n quest of prot, and th s process tse f ob| ect ve y
restructures the economy-through accret on, not as a consequence of a strategy
or a p an. But prot s nce the 1970s s found pr mar y n nanc a specu at on and
commerc a paras t sm, and n other ephemera serv ces, rather than n
product on.. The phenomena growth of nanc a "product nnovat ons" n the
1980s, the nternat ona zat on of equ ty markets, the stampedes of currency
specu at ons by banks and corporat ons gamb ng for a qu ck return.a fo ow the
aws of cap ta sm.. The banks themse ves have been transformed from be ng
end ng un ts to be ng nanc a specu ators.. At the same t me that cap ta s
be ng concentrated n huge cong omerates and trad ng compan es.. Grow ng
compet t on n the cap ta st wor d economy has created overcapac ty n a
sectors-nance, bas c ndustry, and commod t es- nh b t ng nvestment and
encourag ng nonproduct ve nanc a specu at on.63
These changes n t a y came about, as Ko ko sa d, through "accret on"-as a resu t
of cap ta s dr ve to overcome a m ts to operat ons n the context of a g oba
econom c cr s s, beg nn ng n the m d-1970s. But they soon ed to the
deve opment, through the state and nternat ona organ zat ons, of a po t ca -
econom c counterattack aga nst a forms of restra nts on cap ta , nc ud ng the
we fare state, bus ness regu at on, recogn t on of un ons, ant trust, contro s on
fore gn nvestment, etc. Th s then became the neo bera pro| ect of econom c
restructur ng. Increas ng y, corporat ons contracted out abor n order to weaken
un ons and reduce costs, and re ed on greater g oba sourc ng of nputs, tak ng
advantage of ow wages n the per phery.64 G oba compet t on between
corporat ons ncreased, but t d d so n Marxs sense of const tut ng a ever, a ong
w th nance, for the greater centra zat on of cap ta .
Key to th s resurrect on of neo bera deo ogy was the new y art cu ated c a m
that perfect compet t on ex sted ehect ve y n rea ty, and not s mp y on the
b ackboard. Econom c concentrat on and monopo y were no onger to be
cons dered s gn cant, desp te more than a century of grow ng concentrat on. Th s
aspect of neo bera econom cs, wh ch deft y exp o ted the amb gu ty of
compet t on, was cruc a n chang ng the ent re debate about monopo y among
scho ars, po cymakers, act v sts, and the genera pub c.
The most mportant theoret ca deve opment n s de n ng the trad t ona ssue of
monopo y power was a new theory of the emergence of the rm rooted n the
concept of transact on costs. In 1937 Rona d Coase (who was to | o n the Un vers ty
of Ch cago econom cs department n 1964) had wr tten h s now famous art c e "The
Nature of the F rm," wh ch argued that the reasons for corporate ntegrat on
(part cu ar y vert ca ntegrat on) had to do w th reduc ng externa transact on
costs ar s ng from purchas ng nputs w th n the market, as opposed to produc ng
them nterna y w th n a g ven rm. Vert ca ntegrat on, when t took p ace, was
then seen as a way n wh ch rms opt m zed on costs and "emc ency" by reduc ng
transact on costs rather than an attempt to generate monopo y power.
The ntroduct on of transact on costs nto econom cs was an mportant nnovat on.
But Coases purpose was c ear. As he ater reca ed, "my bas c pos t on was (and
s).that our econom c system s n the ma n compet t ve. Any exp anat on
therefore for the emergence of the rm had to be one wh ch app ed n compet t ve
cond t ons, a though monopo y m ght be mportant n part cu ar cases. In the ear y
1930s I was ook ng for an exp anat on of the ex stence of the rms wh ch d d not
depend on |the dr ve to| monopo y. I found t, of course, n transact on costs."65
Coases argument n "The Nature of the F rm" had tt e nuence unt the ate
1970s and 80s, but was ncreas ng y se zed, w th the ascendance of free market
conservat sm, to attack a not ons of monopo y power, and to cha enge
trad t ona ndustr a organ zat on theory and ant trust act ons.66 W th the new
emphas s on transact on costs, a deve opments n rm ntegrat on were
nterpreted as opt m z ng "emc ency," wh e the quest on of monopo y power was
arge y set as de as rre evant.
It shou d be noted that recourse to arguments on "emc ency" n th s sense s
suspect s nce c rcu ar n nature, | ust ed n terms of "market exchange" as the
benchmark, wh ch s seen as emc ent by den t on. In th s perspect ve, greater
prots and accumu at on are presumed to be nd ctors of emc ency and then
| ust ed because they are.emc ent. It s not fewer hours of some standard abor
that are "emc ent" by th s cr ter on, but ower un t abor costs, s nce th s d rect y
enhances prots.67
Coases transact on cost ana ys s was ater carr ed forward n O ver W amsons
nuent a 1975 Markets and Hierarchies, wh ch extended ts putat ve c a ms w th
respect to "emc ency," and was a med spec ca y at moderat ng ant trust attacks
on monopo es, o gopo es, vert ca y ntegrated rms, and cong omerates.68
In the ana ys s of the growth of mu t nat ona corporat ons at the g oba eve ,
transact on cost ana ys s was heav y emphas zed by those sympathet c to
corporat ons. It a so prov ded a bas s for re| ect ng and u t mate y gnor ng the
nterpretat on based on monopo y, p oneered by Hymer, Baran, Sweezy, Magdoh,
and rad ca cr t cs across the g obe. Transact on costs were presented as externa
to the mu t nat ona s. G oba corporat ons were thus sa d s mp y to be operat ng
more "emc ent y" by ncorporat ng e ements of the g oba economy nto the r
nterna processes, and thereby reduc ng the r externa transact on costs.
Monopo y rents were no onger deemed centra . P ac ng a d sproport onate
emphas s on transact on costs, ma nstream econom sts ncreas ng y cr t c zed
Hymers theory of monopo y power as the key to understand ng the growth of
mu t nat ona corporat ons. Power was no onger a centra ssue n the ana ys s of
the g oba corporat on.69
A more concerted attempt to br ng back perfect compet t on to ts former g ory as
part of the new neoc ass ca -neo bera program was promoted and advocated by
George St g er. In h s Memoirs of an Unregulated Economist (1988), St g er
emphas zed that a centra ob| ect ve of Ch cago schoo econom cs was the
destruct on of the concept of monopo y power n a of ts aspects ( nc ud ng ts
connect on to advert s ng). He a so made t c ear that h s own work had been
part cu ar y concerned w th counter ng "the grow ng soc a st cr t que of
cap ta sm |wh ch| emphas zed monopo y; monopo y cap ta sm s a most one
word n that terature."70 A though St g er c a med that Marxs theory of
concentrat on and centra zat on was a dev at on from the ma n ne of Marx st
theory, he nonethe ess thought t a cons derab e threat to neoc ass ca econom cs
and the deo ogy of cap ta sm.71
In an art c e t t ed "Compet t on" for the New Palgrave Dictionary of Economics n
1987, St g er started w th a broad den t on of compet t on as "r va ry" between
nd v dua s, groups, and nat ons n order to paper over the amb gu ty of
compet t on, and then qu ck y s pped nto compet t on n econom c terms, w thout
c ear y d st ngu sh ng the two. Perfect compet t on was then brought n as the rea
content of compet t on and as a "rst approx mat on" to the rea wor d of
compet t on. Wh e "workab e compet t on," as t preva ed n the economy, was
dep cted as essent a y n rea ty what perfect compet t on was n pure theory:
.e., an economy that operated as if numerous sma rms const tuted the
representat ve case. He conc uded: "The popu ar ty of the concept of perfect
compet t on n theoret ca econom cs s as great today as t has ever been."72
At the same t me, operat ng from the oppos te tack, a Ch cago Schoo argument on
the pos t ve aspects of monopo y, bu d ng on St g ers 1968 The Organization of
lndustry, was deve oped. Th s approach nvar ab y saw monopo y power as (1)
reect ng greater "emc ency"; (2) co aps ng qu ck y and revert ng to the
compet t ve case; and (3) nvo v ng short-term monopo y prots that were eaten up
n advance by the costs of obta n ng a monopo y. Monopo y was thus natura y
eet ng and rap d y turned nto compet t on, so t cou d be gnored. Th s was
accompan ed by a cons derab e rewr t ng of h story, w th St g er and h s
co eagues, for examp e, attempt ng to deny the predatory pr c ng po c es that
had ed to the r se to dom nance of Rockefe ers Standard O .73
In genera , neoc ass ca econom cs n the era of neo bera tr umph, beg nn ng n
the ate 1970s, promoted vers ons of econom cs that eschewed rea ty for pure
market concept ons. Rat ona expectat ons theory ( n wh ch the ord nary econom c
actor was cred ted w th abso ute rat ona ty, to the po nt of ut z ng h gher
mathemat cs n mak ng everyday econom c dec s ons) was des gned to deny that
government cou d p ay an amrmat ve ro e n regu at ng the economy. The emc ent
market hypothes s was des gned to deny categor ca y at the theoret ca eve
anyth ng but "emc ent" outcomes n the rea m of nance.74
W th respect to compet t on, the conservat ve vogue became "contestab e markets
theory." B ed as a "new theory of ndustr a organ zat on," the goa of th s theory,
as exp a ned by ts foremost proponent W am Baumo , was to demonstrate that
compet t on and emc ency d d not requ re " arge numbers of act ve y produc ng
rms, each of whom bases ts dec s ons on the be ef that t s so sma as not to
ahect pr ce," as n perfect compet t on theory. Rather, contestab e markets theory
pos ted "cost ess y revers b e entry" or abso ute y free entry and ex t to ndustr es
by potential compet tors.75 The barr ers to entry that const tuted the bas s of
concept ons of monopo y power were abo shed by at at the eve of pure theory.
In part cu ar, econom es of sca e were no onger seen as an advantage for a g ven
rm, const tut ng a substant a barr er to entry. Instead, what was postu ated was
u tra-free entry even n such cases. Ant trust act ons were therefore no onger
necessary. Contestab ty theory was used n the 1980s to promote a r ne
deregu at on; wh ch then proceeded to produce exact y the oppos te of what the
theory had suggested, ead ng to shared monopo y or o gopo y. In the end, "the
theory of pure y contestab e markets," as ndustr a organ zat on theor st Stephen
Mart n observed, " s presented as a genera zat on of the theory of perfect y
compet t ve markets." In ehect, perfect y compet t ve markets ex st, even where
the cond t ons of perfect compet t on do not perta n. Markets are nherent y free,
except n cases of state or abor nterference.76
Ant trust aw enforcement n the new neo bera per od was heav y nuenced by
the arguments of Robert Bork n h s book The Antitrust Paradox. Bork was a student
of W amsons work (though focus ng on "emc ency" and not transact ons costs)
and that of the Ch cago Schoo . He c a med that monopo y was rat ona , eet ng,
and read y d ss pated by new entry. Referr ng to monopo st c and o gopo st c
market structures, Bork wrote: "My conc us on s that the aw shou d never attack
such structures, s nce they embody the proper ba ance of forces for consumer
we fare."77 S nce consumer we fare was the ob| ect of pub c po cy n th s area,
any ant trust act ons threatened to go aga nst the consumer nterest by generat ng
" nemc ency." The ssue of monopo y power was s mp y rre evant.
To g ve some sense of how ma nstreamed the new neo bera mantra became,
near y a of the ma| or conservat ve econom sts mak ng the case that the
corporate status quo was by den t on compet t ve and the best of a poss b e
wor ds-H cks, Hayek, Fr edman, St g er, Coase, and W amson-were a awarded
the Bank of Swedens Nobe Memor a Pr ze n Econom c Sc ences.78
Monopo y and the Left
Above a e se, t was the growth of g oba compet t on that seemed to make the
monopo y quest on ess press ng to econom sts. For St g er, t was the "potent a
compet t on" from mu t nat ona corporat ons n other countr es, symbo zed by the
dec n ng nat ona and nternat ona pos t on of the U.S. stee and automob e
ndustr es n the 1970s, that ed to w despread "skept c sm about the
pervas veness of monopo y."79
Iron ca y, many of neo bera sms foremost cr t cs on the eft came to agree w th
St g er and the Ch cago Schoo on the rre evance of monopo y, part cu ar y n v ew
of ncreased g oba mu t nat ona compet t on. Three prom nent rad ca
econom sts, Thomas We sskopf, Samue Bow es, and Dav d Gordon, argued n 1985
that aggregate concentrat on n the U.S. economy was ncreas ng on y s ow y, and
that nternat ona compet t on had made the ssue of monopo y cap ta , n the
sense presented n Baran and Sweezys ana ys s, no onger as s gn cant n the
Un ted States. U.S. automakers, they po nted out, "sure y have far ess monopo y
power than they d d twenty years ago. And th s s by no means an except ona
ndustry."80 In the r 1990 book Clobal Capitalism, Robert Ross and Kent Trachte
pronounced "the death of monopo y cap ta sm," hypothes z ng (though devo d of
ev dence) that cap ta sm was now character zed by "v gorous pr ce compet t on"
between "g oba rms," and suggest ng that the entry of fore gn compet tors nto
the U.S. market meant that the U.S. auto ndustry no onger had o gopo st c
character st cs.81
We wou d ke to be ab e to character ze th s as the beg nn ng of a ma| or sch sm
among eft econom sts, one v s ted by extens ve research and debate, but we
cannot. The top c rece ved tt e more debate on the eft than t d d n the facu ty
ounge of the Un vers ty of Ch cago Department of Econom cs. The energy and
attent on of most rad ca econom sts-a heterogeneous group on any number of
other ssues-went over to the "monopo y s no onger a b g dea " camp and, w th
that, most eft econom sts no onger concerned themse ves w th the matter.
Some part of th s abandonment of the concept of monopo y can be attr buted not
to the adopt on of a den te theoret ca pos t on, but to cons derab e confus on
across the eft concern ng the contours of a g oba z ng economy. In what was then
w de y regarded as a pathbreak ng treatment of the sub| ect, Dav d Gordon wrote
an art c e for New Left Review n 1988 on "The G oba Economy: New Ed ce or
Crumb ng Foundat ons?" wh ch read ke a comp at on of uncerta nt es: was
g oba zat on about a vast ncrease n nternat ona compet t on, or was t a
process governed by mu t nat ona corporat ons, obta n ng a new eve of
dom nat on? Desp te a very carefu ana ys s of con ct ng trends, Gordon found t
d mcu t to answer the quest ons he ra sed. Nor d d anyone e se have easy
answers. In th s s tuat on, a rather genera and und herent ated not on of
nternat ona compet t on took over n much of eft ana ys s.82
Part of the reason for the decreased nterest n the ssue of monopo y cap ta on
the eft may a so have been the growth of a fundamenta st stra n w th n Marx an
econom cs that ncreas ng y re| ected any reference to monopo y cap ta n ts
ana ys s-s nce that approach attempted to go on h stor ca grounds beyond
Marxs Capital. As |ohn Weeks at y dec ared n Capitalism and Exploitation n 1981:
"The monopo es that sta k the pages of the wr t ngs of Baran and Sweezy have no
ex stence beyond the work of these authors."83
Yet there s tt e doubt that, for the eft as a who e, the dom nant reason for the
sh ft away from the cons derat on of monopo y power was that t fe prey to the
amb gu ty of compet t on, pretty much n the manner neo bera econom cs
scr pted. W th arge corporat ons ncreas ng y mob e and expand ng n g oba
markets, the tendency was to see these, not n Magdoh and Sweezys terms, as
"monopo y mu t nat ona s," but as compet tors pure and s mp e.84 Important
treat ses n Marx an po t ca economy by th nkers as var ous as G ovann Arr gh ,
Dav d Harvey, Robert Brenner, and Grard Dumn and Dom nque Lvy were
wr tten w th no systemat c references to prob ems of econom c concentrat on and
monopo y, whether at the nat ona or nternat ona eve -sharp y d st ngu sh ng
the r work n th s respect from ear y generat ons of Marx an po t ca
econom sts.85
Cons der the work of two mportant contr butors to recent Marx st po t ca
economy: G ovann Arr gh and Robert Brenner. Arr gh s The Long Twentieth
Century showed how far eft po t ca economy had devo ved n th s respect. Not
on y s there no d scuss on of monopo y power or monopo y cap ta n h s account
of the deve opment of twent eth-century cap ta sm, but the growth of the g ant
corporat on and mu t nat ona rm s exp a ned ent re y n terms of transact on
cost ana ys s der ved d rect y from Coase, W amson, and A fred Chand er.86 A
century of eft ana ys s of the growth of monopo y cap ta was consp cuous n ts
absence. Brenner rep cated the sp r t of the t mes by s mp y d sm ss ng concerns
about monopo y n 1999.87
There were, of course, ho douts n th s sh ft away from the cons derat on of
monopo y power. Severa rad ca po t ca econom sts cont nued to deve op aspects
of the monopo y cap ta argument dur ng these years. Magdoh and Sweezy, as we
d scuss above, addressed the prob em of exp a n ng how the stagnat on assoc ated
w th monopo y cap ta had ed to the nanc a zat on of the economy. They
exam ned the sh ft toward monopo y-nance cap ta n great deta n a ser es of
art c es and books n the 1970s, 80s, and ear y 90s.88 The centra prob em, from
th s perspect ve, was to understand how transnat ona product on was a ter ng the
nature of monopo st c r va ry, and the consequences for the wor d economy. As
Magdoh wrote n lmperialism: From the Colonial Age to the Present n 1978: "What
needs to be understood s that the very process of concentrat on and
centra zat on of cap ta s spurred by compet t on and resu ts n ntens fy ng the
strugg e among separate aggregates of cap ta , a be t on a d herent sca e and
w th a tered strateg es."89 Rather than see ng the cr s s of the U.S. stee ndustry
n 1977 as a refutat on of the monopo y cap ta thes s, Magdoh and Sweezy
focused on the growth of nternat ona surp us capac ty n stee , the re at on of
th s to econom c stagnat on, the resu t ng compet t ve strugg e, and the ro e of
th s strugg e n generat ng further concentrat on and centra zat on of cap ta on a
g oba sca e. Instead of the end of monopo y cap ta , th s strugg e represented ts
e evat on to another eve .90
In th s regard, ndustr a organ zat on econom st Er c Schutz has cogent y
observed w th respect to nternat ona compet t on: "|O|nce a market expands to
nc ude producers from across the ent re wor d, no further countertendency |to
concentrat on from compet t on enter ng from abroad| can ex st, and any tendency
toward concentrat on must predom nate, as t obv ous y has, for examp e w th
mergers n the auto ndustry wor dw de."91 As we noted ear er, ve mu t nat ona
corporat ons now account for near y ha f of wor d motor veh c e product on, wh e
ten rms account for 70 percent of g oba auto product on. Concentrat on n th s
area can be expected to go up-not down.
Other eft econom sts pursued the monopo y approach as we . Br t sh theor st
Ke th Cow ng took the argument further n 1982 n h s presc ent work, Monopoly
Capitalism. For Cow ng, o gopo y was mov ng from a pr mar y nat ona p ane to
an nternat ona one. "Changes on the nternat ona scene, such as the creat on of
a sma er, t ghter, nternat ona o gopo y group," he wrote, "w serve to susta n
the degree of nternat ona co us on.. Each member of the nternat ona
o gopo y w ant c pate that any attempt |on the part of a g ven rm| to secure a
b gger market share as a consequence |for examp e| of.tar h reduct on w ead
to an mmed ate response |by the other rms| wh ch w mp y that such a move s
unprotab e, and thus the degree of monopo y n each country s susta ned." It
was taken as a g ven among the g oba corporate g ants, he po nted out, that "free
trade wou d ead to the ncreas ng dom nance of transnat ona corporat ons,
mp y ng a sh ft to prots" at the expense of g oba abor and sma er rms.92
Moreover, "the growth of nternat ona rms means that stagnat on tendenc es
generated n any one country. w be mmed ate y trans ated across many
countr es.. The growth of the dom nance of transnat ona corporat ons may have
accentuated stagnat on tendenc es a ready endem c n monopo y cap ta sm,"
g v ng these a more g oba range.93
In two conoc ast c works, Capitalism and lts Economics (2000) and lnequality and
the Clobal Economic Crisis (2009), Doug Dowd has usefu y exp a ned th s h stor ca
change as a sh ft from Monopo y Cap ta sm I to Monopo y Cap ta sm II. If
Monopo y Cap ta sm I was preem nent y the system of o gopo st c product on n
the Un ted States up to around 1975, Monopo y Cap ta sm II, n contrast, s
dom nated by much arger mu t nat ona corporat ons, nked more nt mate y to
nance (and nformat on techno ogy), and part of an ncreas ng y g oba ,
ntegrated product on at the apex of the wor d economy. What Baran and Sweezy
"ana yzed n 1966," he suggests, "now app es to global cap ta sm and Monopo y
Cap ta sm ll. Why ll? Because the re at onsh ps and processes taken up n the
1960s have a tered great y and sw ft y: from the 1970s to the 1980s and 1990s and
even more s nce 2000, the power and pract ces of g ant bus ness have p cked up
both the r reach and speed, and n do ng so have great y deepened the r
dangerous consequences."94
We be eve that the phase of monopo y cap ta sm that has emerged s nce the m d-
1970s s best character zed as global monopoly-hnance capital. The arger po t ca
mp cat ons of th s were recent y spe ed out by Sam r Am n: "The fo ow ng
phenomena are nextr cab y nked to one another: the cap ta sm of o gopo es;
the po t ca power of o garch es; barbarous g oba zat on; nanc a zat on; U.S.
hegemony; the m tar zat on of the way g oba zat on operates n the serv ce of
o gopo es; the dec ne of democracy; the p under ng of the p anets resources;
and the abandon ng of deve opment for the South."95
Our hope s that there can be a greater recogn t on of the monopo y ssue n
genera , and far greater study and debate about t, by a pr nc p ed scho ars and
econom sts who be eve n rea ty-based soc a sc ence. Th s s part cu ar y
mportant for scho ars on the eft. Rad ca econom sts qu ck y grasped the sharp
growth n econom c nequa ty wrought by neo bera sm, and d d the most to
exam ne ts causes and ehects and pub c ze ts ex stence. Over the past one or
two decades, a number of except ona eft po t ca econom sts gradua y have
come to apprec ate and assess the grow ng mportance of nanc a zat on and debt
for the economy.96 Recons derat on of the quest on of monopo y s the next nk n
the cha n, and nd spensab e for a mean ngfu and comprehens ve understand ng of
both nequa ty and nanc a zat on, not to ment on twenty-rst century
cap ta sm. The research to date has bare y scratched the surface of what s
needed.97
In our v ew, the stakes are h gh. Understand ng monopo y power s not on y
nd spensab e to understand ng how the cap ta st system works and the prob ems
of stagnat on and nanc a zat on; t s a so v ta to understand ng the rea wor d
of po t cs and governance, and to any mean ngfu ana ys s of mper a sm. The
strugg e for democracy requ res that we face up to the rea ty of ever more
concentrated po t ca and econom c power he d by a p utocracy that owns and
contro s the g ant monopo st c corporat ons. We on the eft must earn to speak
nte g b y and ehect ve y to peop e who exper ence the consequences of th s
power n the r ves each and every day-or reconc e ourse ves to rre evance.
Notes
1. + "U.S. F rms Bu d Up Record Cash P es," Wall 5treet journal, |une 10, 2010.
2. + Sam Bow es and R chard Edwards note: "The term monopo y power refers
both to the s tuat on of a s ng e rm (perfect monopo y) and to that of a
sma group of rms (o gopo y or shared monopo y); n e ther case, f some
rm or rms can exc ude others, monopo y power ex sts." Sam Bow es and
R chard Edwards, Understanding Capitalism (New York: Harper and Row,
1985), 141.
3. + Pau M. Sweezy, Modern Capitalism and Other Essays (New York: Month y
Rev ew Press, 1972), 8.
4. + |ohn Kenneth Ga bra th, The Economics of lnnocent Fraud (Boston:
Houghton M m n, 2004), 12.
5. + The twenty-two barr ers are: (1) cap ta requ rements, (2) econom es of
sca e, (3) abso ute cost advantages, (4) product d herent at on, (5) sunk
costs, (6) research and deve opment ntens ty, (7) asset spec c ty, (8)
vert ca ntegrat on, (9) d vers cat on by cong omerates, (10) sw tch ng
costs n comp ex systems, (11) spec a r sks and uncerta nt es, (12)
nformat on asymmetr es, (13) forma barr ers set up by government, (14)
preempt ve act on by ncumbents, (15) excess capac ty, (16) se ng
expenses, nc ud ng advert s ng, (17) segment ng of the market, (18) patents,
(19) exc us ve contro over strateg c resources, (20) tak ng act ons that ra se
r va s costs, (21) h gh product d herent at on, and (22) secrecy about
compet t ve cond t ons. W am G. Shepherd, The Economics of lndustrial
Organization (Prospect He ghts, I no s: Wave and Press, 1997), 210.
6. + Kar Marx, Capital, vo . 1 (London: Pengu n, 1976), 777-80.
7. + S mon |ohnson, "The B Da ey Prob em," The Humngton Post, |anuary 11,
2011.
8. + |oe Magnuson, Mindful Economics (New York: Seven Stor es Press, 2008),
283-87; Barry C. Lynn, Cornered: The New Monopoly Capitalism and the
Economics of Destruction (Hoboken, New |ersey: |ohn W ey and Sons, 2010),
42-52. On monopo st c pr c ng under the spec c cond t ons of monopsony,
see |osef Ste nd , Economic Papers, J94J-88 (New York: St. Mart ns Press,
1990), 309-10.
9. + Er c A. Schutz, Markets and Power (Armonk, New York: M.E. Sharpe, 2001),
80-81.
10. + Lawrence |. Wh te, "Aggregate Concentrat on n the G oba Economy:
Issues and Ev dence," Stern Schoo of Bus ness, New York Un vers ty,
Economic Working Papers, EC-03-13 (2003), 3-4, http://arch ve.nyu.edu.
11. + Todays g ant corporat ons can be seen as pursu ng a twofo d, nterre ated
strategy of the pursu t of max mum sa es revenue and max mum protab ty,
wh ch converge over the ong-run, s nce arger market share prov des the
bas s for h gher monopo y prots, and h gher prots are used to expand
market share. See Peter Kenyon, "Pr c ng," n A fred S. E chner, ed., A Cuide
to Post-leynesian Economics (Wh te P a ns, New York: M.E. Sharpe, 1979), 37-
38.
12. + "Fortune 500: Prots Bounce Back," Fortune, Apr 15, 2010,
CNNMoney.com.
13. + Dav d Harvey, The New lmperialism (Oxford: Oxford Un vers ty Press,
2003), 97-98.
14. + Pau M. Sweezy, "The Tr umph of F nanc a Cap ta ," Monthly Review 46, no.
2 (|une 1994): 1-11.
15. + Thomas Fr edman, The Lexus and the Olive Tree (New York: Random House,
2000), 13.
16. + |ohn Kenneth Ga bra th, The New lndustrial 5tate (New York: New Amer can
L brary, 1967); |ames K. Ga bra th, The Predator 5tate (New York: Free Press,
2008), 115-25.
17. + R chard B. Du Boh and Edward S. Herman, "Mergers, Concentrat on, and
the Eros on of Democracy," Monthly Review 53, no. 1 (May 2001): 14-29.
18. + "M&A Dea s H t Record $1.57 Tr on n 2007," New York Times, December
21, 2007.
19. + Wor d Motor Veh c e Product on, 2009, OICA Correspondents Survey
w thout doub e counts. http://o ca.net/wp-content/up oads/rank ng-2009.pdf.
20. + "G oba 500 2010," money.cnn.com (accessed February 20, 2011). Data s
for sca year 2009. |apan Post Ho d ngs, S nopec, State Gr d, and Ch na
Petro eum were not nc uded n the top twenty-ve here, s nce state-owned,
rather than pr vate, compan es.
21. + Sam r Am n, The Law of Worldwide Value (New York: Month y Rev ew Press,
2010), 110-11, 118.
22. + M ton Fr edman, Capitalism and Freedom (Ch cago: Un vers ty of Ch cago
Press, 2002), 119-20.
23. + Fr edman, Capitalism and Freedom, 120. Den t ons of monopo y and
compet t on s m ar to Fr edmans can be found n the Nat ona Resources
Comm ttee, The 5tructure of the American Economy (1939), d rected by
Gard ner Means, wh ch observed that the term "monopo y" cou d be "used on
the who e to refer to s tuat ons n wh ch sumc ent contro wou d be
exerc sed over pr ce by an nd v dua producer or by a co ud ng group of
producers to make poss b e monopo y prots, .e., prots above the rate
necessary to nduce new nvestment n other ndustr es not sub| ect to
monopo y contro ." Converse y, "a s tuat on was n genera c ass ed as
compet t ve f there was nsumc ent contro over pr ce to make monopo y
prots poss b e." For Means, th s suggested that monopo y was pervas ve n
the key sectors of the U.S. economy. Gard ner C. Means, ed., The 5tructure of
the American Economy, Part 1 (Wash ngton, D.C.: U.S. Government Pr nt ng
Omce, 1939), 139.
24. + Marx, Capital, 776-81; Rudo f H ferd ng, Finance Capital (London; Rout edge
and Kegan Pau , 1981); Thorste n Veb en, The Theory of 8usiness Enterprise
(New York: Char es Scr bners Sons, 1932); V.I. Len n, lmperialism, the Highest
5tage of Capital (New York: Internat ona Pub shers, 1939), 88.
25. + The natura resu t wou d be someth ng c oser to the pr ce structure of a
s ng e monopo st, wh ch, rather than produc ng up to the po nt that
marg na cost equa s pr ce, nstead produces to where marg na cost equa s
marg na revenue, ead ng to h gher pr ces and ower output.
26. + |oseph A Schumpeter, Essays (Cambr dge: Add son-Wes ey, 1951), 47-72;
and Capitalism, 5ocialism, and Democracy (New York: Harper and Brothers,
1942), 90-91.
27. + |oan Rob nson, The Economics of lmperfect Competition (London: Macm an
1933); Edward Chamber n, The Theory of Monopolistic Competition
(Cambr dge: Harvard Un vers ty Press, 1933). "Monopo st c compet t on" s
often used n neoc ass ca econom cs to refer to a rea m of sma and
med um rms, exc ud ng a most by den t on the typ ca rm structure of
o gopo y. Chamber n, who h mse f ntroduced the term "o gopo y" to
econom cs, s c ear that such a separat on was not h s ntent on. Edward
Hast ngs Chamber n, Towards a More Ceneral Theory of Value (New York:
Oxford Un vers ty Press, 1957), 31-42. See a so Mark B aug, Economic Theory
in Retrospect (Cambr dge: Cambr dge Un vers ty Press, 1978), 415.
28. + Pau M. Sweezy, "Demand Under Cond t ons of O gopo y," The journal of
Political Economy 47, no. 4 (August 1939): 568-73; Gav n C. Re d, The linked
Demand Curve Analysis of Oligopoly (Ed nburgh: Ed nburgh Un vers ty Press,
1981); |ohn M. B a r, Economic Concentration: 5tructure, 8ehavior and Public
Policy (New York: Harcourt Brace |ovanov ch, 1972), 468.
29. + |ohn E. E ott, Comparative Economic 5ystems (Eng ewood C hs, New
|ersey: Prent ce Ha , 1973), 62-63; Er c A. Schutz, Markets and Power
(Armonk, New York: M.E. Sharpe, 2001), 7.
30. + |.R. H cks, Value and Capital (Oxford: Oxford Un vers ty Press, 1946), 83-84.
31. + See |ohn Be amy Foster, The Theory of Monopoly Capitalism (New York:
Month y Rev ew Press, 1986), 53-55.
32. + George |. St g er, Memoirs of an Unregulated Economist (New York: Bas c
Books, 1988), 95. For a scho ar y treatment of the TNEC monopo y stud es,
see Inger Sto e, Advertising at War: 8usiness, Consumers, and Covernment
Policies during the 5econd World War (Urbana: Un vers ty of I no s Press,
forthcom ng, 2012).
33. + Ado ph A. Ber e, and Gard ner C. Means, The Modern Corporation and
Private Property (New York: Macm an, 1932); Arthur Robert Burns, The
Decline of Competition (New York: McGraw-H , 1936); Rooseve t quoted n
E s W. Haw ey, The New Deal and the Problem of Monopoly (Pr nceton:
Pr nceton Un vers ty Press, 1966), 412.
34. + Schumpeter, Capitalism, 5ocialism and Democracy, 83, 87-106; Kar Marx
and Freder ck Enge s, The Communist Manifesto (New York: Month y Rev ew
Press, 1964), 7. On Schumpeters arger system of thought see |ohn Be amy
Foster, "The Po t ca Economy of |oseph Schumpeter: A Theory of Cap ta st
Deve opment and Dec ne," 5tudies in Political Economy 15 (Fa 1984): 5-42,
and "Theor es of Cap ta st Transformat on: Cr t ca Notes on the Compar son
of Marx and Schumpeter," Ouarterly journal of Economics 98, no. 2 (May
1983): 327-31.
35. + Fr edr ch Hayek, The Road to 5erfdom (Ch cago: Un vers ty of Ch cago
Press, 1944), 49; |ohn Kenneth Ga bra th, American Capitalism (Boston:
Houghton M m n, 1952), 14-15.
36. + Ga bra th, American Capitalism 32-44, The Amuent 5ociety (New York: New
Amer can L brary, 1984), 32-34, and The New lndustrial 5tate, 85-108; Sweezy,
Modern Capitalism, 33-37. In The New lndustrial 5tate, Ga bra th weakened h s
argument by attempt ng to subst tute a not on of a p anned corporate sphere
governed by a technostructure for the cap ta st economy tse f (a v ew from
wh ch he ater backed away). The resu t of th s was to r g d fy the U.S.
econom c cond t ons of the mmed ate post-Second Wor d War per od,
exaggerat ng the ndependence of management n the b g ndustr a rms
from cap ta st ownersh p and externa nanc a nuences, thereby
underm n ng the rea sm that was the ha mark of Ga bra th an cr t que.
37. + Sumner H. S chter, "The Growth of Compet t on," The Atlantic Monthly
(November 1953): 66-70.
38. + See B a rs c ass c treat se: Economic Concentration.
39. + M cha Ka eck , Theory of Economic Dynamics (New York: Month y Rev ew
Press, 1965), 17-18: Sweezy, Modern Capitalism, 39-41. Ka eck s bas c
ana ys s of the degree of monopo y had been set out ear er n h s Essays in
the Theory of Economic Fluctuations (New York: Farrar and R nehart, 1939). It
was deve oped further n h s 5elected Essays on the Dynamics of the Capitalist
Economy (Cambr dge: Cambr dge Un vers ty Press, 1971), 156-64. See a so
Ste nd , Economic Papers, J94J-88, 303-16; Robert A. B ecker, "Internat ona
Compet t on, Econom c Growth, and the Po t ca Economy of the U.S. Trade
Dec t," n Robert Cherry, et a ., ed., The lmperiled Economy, vo . 1 (New
York: Un on for Rad ca Po t ca Econom cs, 1987), 227.
40. + |osef Ste nd , Maturity and 5tagnation in American Capitalism (New York:
Month y Rev ew Press, 1976).
41. + Radical Perspectives on the Economic Crisis of Monopoly Capitalism (New
York: Un on for Rad ca Po t ca Econom cs, 1975). On the nuence of
Monopoly Capital on rad ca po t ca econom cs n the Un ted States see Pau
Attewe , Radical Political Economy 5ince the 5ixties (New Brunsw ck, New
|ersey: Rutgers Un vers ty Press, 1984).
42. + Pau A. Baran and Pau M. Sweezy, Monopoly Capital (New York: Month y
Rev ew Press, 1966), 6.
43. + For a stat st ca account ng of the tendency of actua surp us n the U.S.
economy to r se n the two decades fo ow ng the pub cat on of Monopoly
Capital see M chae Dawson and |ohn Be amy Foster, "The Tendency of the
Surp us to R se, 1963-1988," n |ohn B. Dav s, ed., The Economic 5urplus in
Advanced Economies (Brooke d, Vermont: Edward E gar, 1992), 42-70. These
resu ts, however, are m ted by the fact that they measure actua surp us,
not potent a surp us (w th the d herence between the two hav ng ts
stat st ca trace n unemp oyment/underemp oyment/unused capac ty).
44. + Sweezy, Modern Capitalism, 41; Harry Braverman, Labor and Monopoly
Capital (New York: Month y Rev ew Press, 1974). For a genera d scuss on of
nequa ty and the pos t on of abor n the contemporary po t ca economy
see M chae D. Yates, Naming the 5ystem (New York: Month y Rev ew Press,
2003).
45. + U.S. Senate, Subcomm ttee on Ant trust and Monopo y, Administered Prices:
5teel, Comm ttee on the |ud c ary, 85th Congress Second Sess on, March
1958, 85-89, 97.
46. + Baran and Sweezy, Monopoly Capital, 57-64.
47. + "A Pr c ng System that Works On y One Way-Up" 8usiness Week, |une 15,
1957, 188-98.
48. + "Buhet Says Pr c ng Power Beats Good Management," B oomberg.com,
February 17, 2011.
49. + Baran and Sweezy, Monopoly Capital, 51.
50. + Pau M. Sweezy, Four Lectures on Marxism (New York: Month y Rev ew
Press, 1981), 63-65.
51. + Baran and Sweezy, Monopoly Capital, 73-74; Schumpeter, Capitalism,
5ocialism, and Democracy, 84-85.
52. + Sweezy, Four Lectures on Marxism, 65-66, and Modern Capitalism, 45-47.
The h erarchy of prots assoc ated w th econom c concentrat on and rm
s ze has been emp r ca y demonstrated numerous t mes both w th respect to
the Un ted States and other advanced cap ta st countr es. See, for examp e:
Bag cha S ngh M nhas, An lnternational Comparison of Factor Costs and Factor
Use (Amsterdam: North Ho and Pub sh ng Co., 1963), 54-73; |osef Ste nd ,
5mall and 8ig 8usiness (Oxford: Bas B ackwe , 1947); Howard Sherman,
Prohts in the United 5tates (Ithaca, New York: Corne Un vers ty Press, 1968),
and The 8usiness Cycle (Pr nceton: Pr nceton Un vers ty Press, 1991), 307-10;
Norman R. Co ns and Lee S. Preston, "Pr ce-Cost Marg ns and Industry
Structure," Review of Economics and 5tatistics 51, no. 3 (August 1969): 271-
86; R chard Edwards, Contested Terrain (New York: Bas c Books, 1979), 82-83,
219-31; Kath een Pu ng, "Cyc ca Behav or of Prot Marg ns," journal of
Economic lssues 12 (|une 1978): 287-306; |oseph Bowr ng, Competition in a
Dual Economy (Pr nceton: Pr nceton Un vers ty Press, 1986), 151-80.
53. + W ard F. Mue er, "Cong omerates: A Non ndustry," n Wa ter Adams, ed.,
The 5tructure of American lndustry (New York: Macm an, 1982), 427; W am
M. Dugger, Corporate Hegemony (New York: Greenwood Press, 1989), 17-21.
54. + Baran and Sweezy, Monopoly Capital, 193-201.
55. + Stephen Herbert Hymer, The lnternational Operations of National Firms: A
5tudy of Direct Foreign lnvestment (Cambr dge, Massachusetts: MIT Press,
1976), 25, 92-93, 117-22; (Hymers 1960 doctora d ssertat on); Robert B.
Cohen, et. a ., "Genera Introduct on," n Stephen Hymer, The Multinational
Corporation (Cambr dge: Cambr dge Un vers ty Press, 1979), 2-3; |ohn H.
Dunn ng and A an M. Rugman, "The Inuence of Hymers D ssertat on on the
Theory of Fore gn D rect Investment," American Economic Review 75, no. 2
(May 1985): 228-32. Hymer was c ose y assoc ated n h s ast years w th
Sweezy and Magdoh at Monthly Review and wrote for the magaz ne. At h s
death n an automob e acc dent n 1974 at age 39, he was schedu ed to be
part of a debate at the Un ted Nat ons Stah C ub n New York, to cons st of
h mse f, Magdoh, and Sweezy n oppos t on to K nd eberger and other
defenders of the mu t nat ona s. See Char es P. K nd eberger, "Introduct on,"
n Hymer, lnternational Operations of National Firms, xx .
56. + Char es P. K nd eberger, American 8usiness Abroad (New Haven: Ya e
Un vers ty Press, 1969), 27.
57. + |ohn H. Dunn ng, ed., The United Nations Library on Transnational
Corporations, vo . 1, The Theory of Transnational Corporations (New York:
Rout edge, 1993), 17-43.
58. + Pau M. Sweezy and Harry Magdoh, The Dynamics of U.5. Capitalism (New
York: Month y Rev ew Press, 1972), 93-100. For a rea st c, post-Keynes an
theory of the modern o gopo y see A fred S. E chner, The Megacorp and
Oligopoly (Cambr dge: Cambr dge Un vers ty Press, 1976).
59. + See Thomas R. Nav n and Mar an V. Sears, "The R se of a Market for
Industr a Secur t es, 1887-1902," The 8usiness History Review 29, no. 2 (|une
1955): 105-38. For a h stor ca treatment of the r se of monopo y cap ta n
the Un ted States, nc ud ng the ro e of nance n the process, see R chard
B. Du Boh, Accumulation and Power (Armonk, New York: M.E. Sharpe, 1989).
60. + Freder ck Enge s, On Capital (New York: Internat ona Pub shers, 1974),
118-20.
61. + Sweezy, "The Tr umph of F nanc a Cap ta ," 1-11; |ohn Be amy Foster and
Fred Magdoh, The Creat Financial Crisis (New York: Month y Rev ew Press,
2009), 63-88.
62. + S m ar v ews on the structura re at on of neo bera sm to nanc a zat on
can be found n a number of d herent eft ana yses. See Grard Dumn and
Dom n que Lvy, Capital Resurgent (Cambr dge, Massachusetts: Harvard
Un vers ty Press, 2004), 110-18; Harvey, The Enigma of Capital (Oxford:
Oxford Un vers ty Press, 2010), 11.
63. + |oyce Ko ko, Restructuring the World Economy (New York: Pantheon, 1988),
178-81.
64. + See Ko ko, Restructuring the World Economy, 297-301; Dav d Harvey, A 8rief
History of Neoliberalism (Oxford: Oxford Un vers ty Press, 2005).
65. + R. H. Coase, "The Nature of the F rm: Mean ng," n W amson and W nter,
ed., The Nature of the Firm, 54. See a so n the same vo ume: Coase, "The
Nature of the F rm," 18-33, "The Nature of the F rm: Inuence," 61-74, and
O ver E. W amson, "Introduct on," 6.
66. + Coase, "The Nature of the F rm: Inuence," 61-63. For a cr t que of the
Coas an theory of the rm see Ke th Cow ng and Roger Sugden, 8eyond
Capitalism (New York: St. Mart ns Press, 1994), 38-42.
67. + |ust cat ons for both hor zonta and vert ca ntegrat on of rms are often
made n terms of the emc enc es assoc ated w th var ous econom es of sca e.
Yet, as Schutz po nts out, "g ven the pervas veness of s gn cant barr ers to
entry n rea -wor d markets, t wou d be a m stake to suppose that wherever
monopo y power ex sts n free markets ( .e., as de from cases of state
ntervent on) t must be due to econom es of sca e." Log ca y, barr ers to
entry, wh ch are ass duous y cu t vated by rms, wou d be unnecessary f
the r super or market power were s mp y the resu t of greater emc ency.
Schutz, Markets and Power, 58.
68. + O ver E. W amson, Markets and Hierarchies (New York: The Free Press,
1975), 258-61; Herbert |. Hovenkamp, "Harvard, Ch cago and Transact on
Cost Econom cs n Ant trust Ana ys s," Un vers ty of Iowa Co ege of Law,
Lega Research Paper, no. 10-35 (December 2010): 1-35,
http://ssrn.com/abstract=1592476.
69. + Dunn ng and Rugman, "The Inuence of Hymers D ssertat on on the Theory
of Fore gn D rect Investment," 228-32. Hymer, n some of h s ater work,
before mov ng more dec s ve y nto a Marx an perspect ve, had h mse f
ncorporated Coases work and transact ons costs. But he made t secondary
w th n a perspect ve that emphas zed monopo y cap ta abroad. See Hymer,
"The Large Mu t nat ona Corporat on," n Dunn ng, The Theory of
Transnational Corporations, 34-43; Pau Marg nson, "F rms and Corporat ons,"
n Ph p Arest s and Ma co m Sawyer, The Elgar Companion to Radical Political
Economy (Brooke d, Vermont: Edward E gar, 1994), 158-61.
70. + St g er, Memoirs of an Unregulated Economist, 92, 162-63.
71. + George |oseph St g er, Kurt R. Leube, and Thomas Ga e Moore, ed., The
Essence of 5tigler (Stanford: Hoover Inst tut on Press, 1986), 269, 284.
72. + George |. St g er, "Compet t on," The New Palgrave Dictionary of Economics,
vo . 1 (London: Macm an, 1987): 531-35, St g er, The Organization of
lndustry (Homewood, I no s: R.D. Irw n, 1968); Shepherd, The Economics of
lndustrial Organization, 30.
73. + St g er, Memoirs of an Unregulated Economist, 102, 161-63. For systemat c
refutat ons of St g ers po nt on Standard O see M chae Pere man,
Railroading Economics (New York: Month y Rev ew Press, 2006) and R chard
B. Du Boh and Edward S. Herman, "A fred Chand ers New Bus ness H story:
A Rev ew," Politics and 5ociety 10, no. 1 (|anuary 1980): 100-01.
74. + For a usefu assert on of rea ty-based econom cs n the face of such
rrea sm, wh ch he abe s "utop an econom cs," see |ohn Cass dy, How
Markets Fail (New York: Farrar, Strauss, and G roux, 2009).
75. + W am |. Baumo , |ohn Panzar, and Robert D. W g, Contestable Markets
and the Theory of lndustry 5tructure (New York: Harcourt Brace |ovanov ch,
1982), x x.
76. + Stephen Mart n, Advanced lndustrial Economics (Oxford: B ackwe , 1993),
324; Shepherd, The Economics of lndustrial Organization, 30-31; Edw n G.
West, "Monopo y," The New Palgrave Dictionary of Economics, vo . 3 (London:
Macm an, 1987), 540; Schutz, Markets and Power, 54-58.
77. + Robert H. Bork, The Antitrust Paradox (New York: Bas c Books, 1978), 164;
Hovenkamp, "Harvard, Ch cago and Transact on Cost Econom cs n Ant trust
Ana ys s," 7.
78. + Another area of theoret ca nnovat on n econom cs that has tended to
muddy the waters on the ssue of monopo y was a pro ferat on of forma
game-theory mode s (of wh ch Sweezys k nked-demand curve ana ys s was
recogn zed as a forerunner) des gned to ana yze mperfect compet t on. The
ma| or ty of these stud es concentrated on abstruse mode s and anecdotes
that were far removed from rea -wor d cond t ons or emp r ca test ng. See
Mart n, Advanced lndustrial Economics, 560-64. In a etter to one of the
authors on February 14, 2011, noted ndustr a organ zat on econom st Er c
A. Schutz conrmed our conc us ons that the most mportant deve opments n
the theoret ca sh ft away from the trad t ona ndustr a organ zat on
terature and ant trust, w th the conservat ve sh ft n econom cs n the
1980s, were transact on cost econom cs, contestab e markets, game theory,
and Borks "ant trust paradox" argument: the four p npo nted n our
argument. Schutz wou d a so add a fth: pub c cho ce theory.
79. + St g er, Memoirs of an Unregulated Economist, 104.
80. + Thomas E. We sskopf, Samue Bow es, and Dav d M. Gordon, "Two V ews of
Cap ta st Stagnat on," 5cience & 5ociety 69, no. 3 (Fa 1985): 268-70.
81. + Robert |.S. Ross and Kent C. Trachte, Clobal Capitalism (A bany: State
Un vers ty of New York Press, 1990), 38, 49, 145.
82. + Dav d Gordon, "The G oba Economy: New Ed ce or Crumb ng
Foundat on," New Left Review 168 (March/Apr 1988):24-64.
83. + |ohn Weeks, Capitalism and Exploitation (Pr nceton: Pr nceton Un vers ty
Press, 1981), 165. For other examp es of such fundamenta st v ews see W
Semm er, "Compet t on, Monopo y, and D herent a s of Prot Rates," Review
of Radical Political Economics 13 (W nter 1981): 39-52; Ben F ne and Andy
Murn, Macroeconomics and Monopoly Capitalism (Br ghton, Sussex:
Harvester, 1984). For responses from the perspect ve of monopo y cap ta
theory see Howard |. Sherman, "Monopo y Cap ta vs. the Fundamenta sts,"
n Stephen Resn ck and R chard Wo h, Rethinking Marxism (Brook yn, New
York: Autonomed a, 1985), 359-77; M chae A. Lebow tz, Following Marx
(Boston: Br , 2009), 225-46; Foster, The Theory of Monopoly Capitalism.
84. + Magdoh and Sweezy, The Deepening Crisis of U.5. Capitalism, 28. Argu ng
from a eft standpo nt (and fa ng prey to the amb gu ty of compet t on),
|ames C fton ns sted, n contrad st nct on to Baran and Sweezy, that: "The
fact that t s typ ca y the modern corporat on rather than the nd v dua
cap ta st that pursues th s search |for prots| today does not at a mp y a
essen ng of compet t on n the cap ta st economy.. It seems c ear that the
arge rms wh ch dom nate the econom c process as a who e cannot be so
character zed |as monopo es| for that process |the strugg e between arge
rms| s a h gh y compet t ve one." |ames A. C fton, "Compet t on n the
Evo ut on of the Cap ta st Mode of Product on," Cambridge journal of
Economics 1, no. 2 (1977): 143, 150.
85. + Dav d Harvey, The Limits to Capital (Ch cago: Un vers ty of Ch cago Press,
1982); G ovann Arr gh , The Long Twentieth Century (New York: Verso, 1994);
Robert Brenner, The 8oom and the 8ubble (New York: Verso, 2002); and
Dumn and Lvy, Capital Resurgent. Harvey d d nc ude a m ted d scuss on
of the ssue of monopo y cap ta sm n The Limits of Capital but underscored
h s own hes tat on on the ssue. Thus he responded to Baran and Sweezys
content on that monopo y shou d be put at "the very center of the ana yt ca
ehort" by wr t ng: "The abandonment of the compet t ve mode certa n y
does enta abandon ng the aw of va ue-wh ch, to the r cred t, Baran and
Sweezy are fu y prepared to do. The troub e s that we cannot w thdraw th s,
the ynch-p n of Marxs ana ys s, w thout ser ous y quest on ng or
comprom s ng a of the other Marx an categor es." Harvey, Limits to Capital,
141.
86. + Arr gh , The Long Twentieth Century, 218-19, 239-43. For a cr t que of
Chand ers work for ts re| ect on of monopo y power as a centra factor n the
growth of the rm and ts c ose re at on to transact on cost ana ys s see Du
Boh and Herman, "A fred Chand ers New Bus ness H story," 87-110.
87. + F nanc a zat on, Brenner argued, far from encourag ng monopo y, was
actua y a dec ded agent of dramat ca y ncreased market compet t on.
"Banks most obv ous y, but other nanc a bod es as we , tend to have
mmed ate y at hand, or to be ab e to br ng together, whatever amount of
cap ta s necessary to enter any e d that s d sp ay ng an unusua y h gh
prot rate." Moreover, "rms can resort to bank nance w th part cu ar
ease." Brenner added: "The upshot s that more than temporary monopo es
are d mcu t to ma nta n, w thout d rect po t ca act on by governmenta
author t es to susta n them by contro ng entry (and, of course, the tendency
over the ast coup e of decades has been n the oppos te d rect on, toward
deregu at on)." St g er cou d not have put t better! Robert Brenner,
"Compet t on and C ass," Monthly Review 51, no. 7 (December 1999): 35.
88. + See espec a y Harry Magdoh and Pau M. Sweezy, The End of Prosperity
(New York: Month y Rev ew Press, 1977), The Deepening Crisis of U.5.
Capitalism (New York: Month y Rev ew Press, 1981), 5tagnation and the
Financial Explosion (New York: Month y Rev ew Press, 1987), and The
lrreversible Crisis (New York: Month y Rev ew Press, 1988).
89. + Harry Magdoh, lmperialism: From the Colonial Age to the Present (New York:
Month y Rev ew Press, 1978), 177.
90. + Magdoh and Sweezy, The Deepening Crisis of U.5. Capitalism, 23-30.
91. + Schutz, Markets and Power, 66-67.
92. + Ke th Cow ng, Monopoly Capitalism (New York: |ohn W ey and Sons, 1982),
130-34.
93. + Ke th Cow ng, "Monopo y Cap ta sm and Stagnat on," n Tracy Mott, N na
Shap ro, eds., Rethinking Capitalist Development: Essays on the Economics of
josef 5teindl (New York: Rout edge, 2005), 155-66.
94. + Doug Dowd, lnequality and the Clobal Economic Crisis (London: P uto Press,
2009), 31-32, 67-72, and Capitalism and lts Economics: A Critical History
(London: P uto Press, 2000), 89-90, 168-99.
95. + Sam r Am n, 5eize the Crisis| Monthly Review 61, no. 7 (December 2009): 3.
96. + We have n m nd here such works as Dumn and Lvy, Capital Resurgent;
Anwar Sha kh, "The F rst Great Depress on of the 21st Century," n Leo
Pan tch, Greg A bo, and V vek Ch bber, eds., The Crisis This Time (London:
The Mer n Press, 2010), 44-63; and Robert Brenner, "What s Good for
Go dman Sachs s Good for Amer ca: The Or g ns of the Current Cr s s,"
Center for Soc a Theory and Comparat ve H story, Inst tute for Soc a
Sc ence Research, UC Los Ange es, October 2, 2009. (Th s s the Pro ogue to
the Span sh trans at on of the authors Economics of Clobal Turbulence
|Verso, 2006|, pub shed by AK Press, 2009.)
97. + We are now see ng n | ust the ast few years works br ng ng a of these
e ements together, mak ng for compe ng resu ts. See Harvey, The Enigma of
Capital; Am n, The Law of Worldwide Value; M chae Pere man, Railroading
Economics (New York: Month y Rev ew Press, 2006); and |ohn Be amy Foster
and Fred Magdoh, The Creat Financial Crisis.