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C. Monopoly Capital and Super-Profits.
We now proceed to the second difference between twentieth century monopoly capitalism and earlier variants of capitalism:
the growth of surplus value extraction through exchange. In the "monopoly capitalism" model of Paul Baran and Paul Sweezy,
the central figures in the Monthly Review group, the corporate system can maintain stable profit levels by passing
its costs on to the consumer. The increased labor costs of unionized heavy manufacturing are paid, ultimately, by the non-cartelized
sectors of the economy (the same is true of the corporate income tax and the rest of the burden of "progressive" taxation,
although the authors do not mention it in this context). Capitalism is no longer predominantly, as Marx had assumed in the
nineteenth century, a system of competition. As a result, the large corporate sector of the economy becomes immune to Marx's
law of the falling tendency of the rate of profit.71
The crucial difference between [competitive capitalism and monopoly capitalism] is well known and can be summed
up in the proposition that under competitive capitalism the individual enterprise is a "price taker," while under monopoly
capitalism the big corporation is a "price maker." 72
Direct collusion between the firms in an oligopoly market, whether open or hidden, is not required. "Price leadership,"
although the most common means by which corporations informally agree on price, is only one of several.
Price leadership... is only the leading species of a much larger genus.... So long as some fairly regular pattern is maintained
such cases may be described as modified forms of price leadership. But there are many other situations in which no such regularity
is discernible: which firm initiates price changes seems to be arbitrary. This does not mean that the essential ingredient
of tacit collusion is absent. The initiating firm may simply be announcing to the rest of the industry, "We think the time
has come to raise (or lower) the price in the interest of all of us." If the others agree, they will follow. If they do not,
they will stand pat, and the firm that made the first move will rescind its initial price change. It is this willingness to
rescind if an initial change is not followed which distinguishes the tacit collusion situation from a price-war situation.
So long as firms accept this convention... it becomes relatively easy for the group as a whole to feel its way toward the
price which maximizes the industry's profit.... If these conditions are satisfied, we can safely assume that the price established
at any time is a reasonable approximation of the theoretical monopoly price." 73
In this way, the firms in an oligopoly market can jointly determine their price very much as would a single monopoly firm.
The resulting price surcharge passed on to the consumer is quite significant. According to an FTC study in the 1960s, "if
highly concentrated industries were deconcentrated to the point where the four largest firms control 40% or less of an industry's
sales, prices would fall by 25% or more."74
This form of tacit collusion is not by any means free from breakdowns. When one firm develops a commanding lead in some
new process or technology, or acquires a large enough market share or a low enough cost of production to be immune from retribution,
it may well initiate a war of conquest on its industry.75 Such suspensions of the rules of the game are identified,
for example, with revolutionary changes like Wal-Mart's blitz of the retail market. But in between such disruptions, oligopoly
markets can often function for years without serious price competition. As mentioned above, the Clayton Act's "unfair competition"
provisions were designed to prevent the kind of catastrophic price wars that could destabilize oligopoly markets.
The "monopoly capital" theorists introduced a major innovation over classical Marxism by treating monopoly profit as a
surplus extracted from the consumer in the exchange process, rather than from the laborer in the production process. This
innovation was anticipated by the Austro-Marxist Hilferding in his description of the super profits resulting from the tariff:
The productive tariff thus provides the cartel with an extra profit over and above that which results from the cartelization
itself, and gives it the power to levy an indirect tax on the domestic population. This extra profit no longer originates
in the surplus value produced by the workers employed in cartels; nor is it a deduction from the profit of the other non-cartelized
industries. It is a tribute exacted from the entire body of domestic consumers.76
Baran and Sweezy were quite explicit in recognizing the central organizing role of the state in monopoly capitalism. They
described the political function of the regulatory state in ways quite similar to Kolko:
Now under monopoly capitalism it is as true as it was in Marx's day that the "executive power of the... state is simply
a committee for managing the common affairs of the entire bourgeois class." And the common affairs of the entire bourgeois
class include a concern that no industries which play an important role in the economy and in which large property interests
are involved should be either too profitable or too unprofitable. Extra large profits are gained not only at the expense of
consumers but also of other capitalists (electric power and telephone service, for example, are basic costs of all industries),
and in addition they may, and at times of political instability do, provoke demands for genuinely effective antimonopoly action
[They go on to point out agriculture and the extractive industries as examples of the opposite case, in which special
state intervention is required to increase the low profits of a centrally important industry].... It therefore becomes
a state responsibility under monopoly capitalism to insure, as far as possible, that prices and profit margins in the deviant
industries are brought within the general run of great corporations.
This is the background and explanation of the innumerable regulatory schemes and mechanisms which characterize the American
economy today.... In each case of course some worthy purpose is supposed to be served--to protect consumers, to conserve natural
resources, to save the family-size farm--but only the naive believe that these fine sounding aims have any more to do with
the case than the flowers that bloom in the spring.... All of this is fully understandable once the basic principle is grasped
that under monopoly capitalism the function of the state is to serve the interests of monopoly capital....
Consequently the effect of government intervention into the market mechanism of the economy, whatever its ostensible purpose,
is to make the system work more, not less, like one made up exclusively of giant corporations acting and interacting [according
to a monopoly price system]....77
It is interesting, in this regard, to compare the effect of antitrust legislation in the U.S. to that of nationalization
in European "social democracies." In most cases, the firms affected by both policies involve centrally important infrastructures
or resources, on which the corporate economy as a whole depends. Nationalization in the Old World is used primarily in the
case of energy, transportation and communication. In the U.S., the most famous antitrust cases have been against Standard
Oil, AT&T, and Microsoft: all cases in which excessive prices in one firm could harm the interests of monopoly capital
as a whole. And recent "deregulation," as it has been applied to the trucking and airline industries, has likewise been in
the service of those general corporate interests harmed by monopoly transportation prices. In all these cases, the state has
on occasion acted as an executive committee on behalf of the entire corporate economy, by thwarting the mendacity of a few
powerful corporations.
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