Monopoly Capital

[p044] MONOPOLY CAPITAL ism. The capitalist system has in fact only been ‘rescued’ from worse crisis by two other factors which must be taken into account: ‘epoch- making’ innovations which shake up the entire pattern of the economy and as such create vast outlets for the investment of capital far beyond the capital they directly absorb. Only three innovations can be accepted under this head—the steam engine, the railroad and the automobile. The second major factor which must be incorporated into the analysis which has been presented so far is the role of war, which has been a ‘normal’ feature of the present century. Baran and Sweezy then attempt to show that the history of monopoly capitalism in America demonstrates that when both or either of these stimuli are present the problems that would occur with a rising surplus are ‘neutralised’. Only when they are absent or present with insufficient force do the laws of motion of the system assert themselves and dominate, producing ‘creeping stagnation’ and unemployment. The book ends with three closely related chapters on the quality of life under modern American capitalism. Here the authors range widely over the condition of the Negro population, the housing situa- tion, the waste and inefficiency of modern urban life, the dehumanisa- tion of labour in modern industry, the inadequacy of educational pro- visions, the break-up of the basic unit of bourgeois life—the family— etc. In conclusion the authors speculate about the prospect of the overthrow of cavitalism in America. They conclude that the possibility of this happening is slim. The working class now occupies no _ special position in the capitalist system, as it did when Marx wrote. The organised sections of the working class (in any case a declining pro- portion of the population) have to a large degree been integrated into cavitalist society as consumers and ideologically conditioned to accept ” existing social relations. The work- ing class is not a particular victim of capitalism: it suffers from the irrationality of society, but only alongside other classes and strata. The main impulse for socialism must come from outside America: in Vietnam, China, Korea and Cuba and Algeria. Socialism is only in prospect for America after decisive victories have been achieved in the colonial and ex-colonial areas. Obviously there are many points that one would like to take up, most of which have far-reaching implications for Marxism. However, only a few can be selected for any- thing approaching detailed treat- ment. In any case, as the authors plead in their work, the analysis must be considered in general and not in any of its particular details. This is what this review will attempt to do. As we have already suggested, the central part of the work is the claim that a tendency for the pro- duction of a rising surplus under capitalism is now the key law of motion of the system. The manner in which Baran and Sweezy attempt to establish this fact is extremely revealing about their approach to the problems of political economy. Capitalist industry is, in the ‘typical’ case, now dominated by a few giant producers: it displays what is normally called an_ oligopolistic market structure. Baran and Sweezy concern themselves with the pricing and output policies of these few large firms in each industry. The prices they charge can be best understood, they suggest, in terms of the orthodox monopoly price theory (which bourgeois economics always treated as a special case). That is, a monopolist will lower his price to the point where the revenue from selling an extra unit exactly equals the additional expense incurred in producing an extra unit. The producers in each industry are interested in maximum profits for the group as a whole, and this defines their attitude to questions of price policy. ‘Regulated’ prices are now the normal feature of capitalism in its monopoly phase and price com- petition is rejected because of the ruinous effects it can have on all producers. Price changes are effected through ‘price leadership’ 197 which normally tends to push prices ever upwards. The giants still com- pete, but this now takes the form of a massive extension of the sales effort to gain a larger share of the market and at technical changes which are aimed at cost reduction and hence increased profits, which in turn give the company making them increased power against its rivals. This theory of price can only be called subjective and has little in common with the Marxist theory of value. The implication of their position is the total rejection of the labour theory of value as a means of analysing capitalism. If prices are fixed by oligopolists at a level to maximise profits for the group as a whole—prices being limited presumably only by the demand schedule of consumers for the commodity concerned—there would then be no _ objective relationship holding between the value of a commodity and its price. In Capital, in developing his theory of value in Vol III, Marx shows that the deviation of value and price can be explained in terms of the uneven development of the economy which reveals itself in differing organic compositions of capital from industry to industry. That is, it could be explained by means of objective processes which were themselves a necessary feature of the development of capitalism. Of course Marx was aware that in the case of a pure monopoly his theory of value ceased to hold. To justify their implicit rejection of the theory of value Baran and Sweezy would have to prove that this was in fact now the normal feature of the economy. As_ against their position two points can be made. In the first place one suspects that they seriously under- estimate the amount of price com- petition that does persist between the oligopolists on both a national and certainly an international scale. In the second place they seem in grave danger of looking upon a particular phase in the recent evolu- tion of capitalism and on the basis of this limited experience drawing unwarranted and unjustified general- isations. In particular: given a strong tendency for the organic

[p045] 198 composition of capital to rise under capitalism (a point hardly seriously to be challenged) each firm in an industry must struggle to maintain and improve its profitability largely through the increased exploitation of its labour force. It may, in con- ditions of rising demand, be able to indulge in pricing agreements which allow its rivals to live in relative peace. But matters are entirely otherwise once there is any check to the rate of expansion of the market. Certainly an actual decline in the market will produce an even sharper reversal of policy. In other words, an absence of competition between firms for a period in no way implies a disappearance of the contradictions between them as producers of commodities in a capitalist economy. We shall return to some of these points later. This subjective element in the ‘analysis is evident at an_ earlier point in the discussion on the modern corporation. Baran and Sweezy are concerned with the following question: given that most large firms are now managerially controlled does this alter, in any fundamental sense, their attitude to profitability? In general they con- clude that it does not and in several places they explicitly attack the notion that the managerial strata can stand outside the laws of the system of which their enterprises are integral parts. But despite taking this position—undoubtedly a correct one—they end this section of their work by suggesting that in two important respects the modern corporation does display a different behaviour pattern from that estab- lished by the firm in the earlier, competitive, phase of capitalism. In the first place the modern giant is less prone to take risks than was the early pioneer capitalist. New ventures are only undertaken if the corporation knows that the odds are in its favour, and in any case the big firm has a long time-horizon, not being under the same pressure to realise quick returns on its in- vestments. The second feature which, to a degree, separates out the managerially run firm is its attitude to other firms in the same industry: it has an attitude of ‘live and let FOURTH INTERNATIONAL, NOVEMBER 1966 live’: its behaviour to its rivals is what Schumpeter called ‘cores- pective’. Both these so-called ‘new factors’ stem from the same sub- jective method noted above. The relations existing between firms are determined by the laws of the system as a whole: whether there is a spirit of ‘live and let live’ is not dependent upon the internal structure of the enterprises con- cerned but on the contrary depends upon rate of expansion of the market, the degree of profitability, etc. The other side of the picture which ‘explains’ the rising surplus under monopoly capitalism (apart from the ability of the oligopolists to fix their prices at a level to secure maximum profits in their industry) is the tendency for technical change continually to raise the productivity of labour and therefore reduce costs. To arrive at this conclusion they are forced— even in opposition to such reformists as John Strachey in his Contemporary Capitalism—to deny the importance of the trade unions as instruments for influencing the class distribution of income. That is the working class has no chance of capturing increments in surplus value resulting from rising pro- ductivity. No consideration whatso- ever is given to an examination of the condition of the unions inside or outside the States, the role of their leaderships and their relation- ship to the capitalist state etc. In general, one suspects that in this section of their work Baran and Sweezy have done little more than seize on certain aspects of capitalism which have existed since the end of the second world war and elevated them to the level of features typical of the innermost working of capitalism. For example, the tendency for prices to rise over this period and to have been ‘sticky’ in a downwards direction and along with it the ability, in normal vears, of firms to pass on increased costs in the form of higher prices are surely exolicable in terms of the rate of expansion of the capitalist system in this period. This explains the absence of any general price competition, the growth of price-fixing agreements, cartels etc. Many of these were blown sky high in the depressed 20s and 30s and surely will be once more when the rate of expansion of the capitalist system begins seriously to slow down. Thus the factors which Baran and Sweezy introduce into their analysis to explain the changed functioning of capitalism are rather effects of the phase through which the system has recently passed. The authors invite comparison between their new law and Marx’s law of the falling tendency of the rate of profit. It is interesting that no reference is made to Joseph Gillman’s work in this field: in particular his The Falling Rate of Profit. Despite serious weaknesses in the method of this book it has the virtue of attempting to explain capitalist development in the recent past in terms of Marx’s categories. Baran and Sweezy give no indica- tion why they consider it necessary to cast out what has long been one of the cornerstones of polical economy. A tendency for profits to rise both absolutely and as a com- ponent part of national income would not of course invalidate Marx’s law, nor call for its reformulation. The rate of profit tended to fall given the tendency under capitalism for the organic composition of capital to rise over time, although unevenly, and assuming that the rate of exploitation remained cons- stant. As Marx was at pains to point out, there were many import- ant counter-acting tendencies which could arise to check and even reverse the operation of this law. In particular, Marx did not see the decline of capitalism as a smooth, mechanistic and purely ‘objective’ process. Capitalism was, by its very nature, a system that had con- tinously to revolutionise methods of production. Because the accumula- tion process has as its raison d’etre the production of surplus value and not the satisfaction of use values, it was a contradictory process which led periodically to crises which presented the working class and its allies with the possibility of over- . throwing the system. These crises were not only inevitable: more

[p046] MONOPOLY CAPITAL than this they were the very means whereby capitalism prepared for a new phase of expansion and accum- ulation. This must lead to some further considerations of the methodology of the book. In the early part of the book Baran and Sweezy make some interesting point: in this respect. Scientific understanding proceeds by way of the construction of ‘models’ which abstract certain features or components of reality for investigation. There are no ‘rules’ for model building: a ‘good’ model will be one which abstracts from all inessential features while a ‘bad’ one will include unimportant elements to the exclusion of elements which are essential to the subject under con- sideration. As they say, the acid test is whether the model ‘makes sense’ of the real world: ‘the proof of the pudding is in the eating.’ Again we must say that this is an inadequate statement of the method of Marxism: it betrays the same weaknesses which are evidenced in Sweezy’s earlier work. (Baran has always displayed some impatience with methodological questions and tended towards ‘practicalism’. This is certainly true of the opening parts of his Political Economy of Growth.) Marxism does not con- sist simply of starting with some initial hypotheses, which are then polished and refined as the analysis proceeds. This smacks very much of the spurious ‘scientific method’ of sociology. It is interesting that Baran and Sweezy in several places pay warm tribute to the writings of C. Wright Mills. Certainly Mills was able to point to the fragmenta- tion of orthodox social science and its degeneration into narrow empiricism. But it is significant that Mills rejects the dialectical theory of knowledge as a piece of Victorian metaphysics. Marx’s categories for Capital and their development by later Marxists were not devised by a positivist method. They were developed on the basis of an analysis of the conquests of the leading bourgeois relation to the experiences produced by the development of the working class as a new force in history. ideologues in’ Because this is not taken as the starting point of their work, Baran and Sweezy misunderstand the nature of political economy in its relationship to Marxism generally. To illustrate this point in relation to their comments on the work of Lenin: they suggest that while Lenin was able to point to the development of monopoly as an important feature of the later phase of capitalist development he did not integrate his insight into the body of ‘economic theory.’ Lenin’s Imperialism was an attempt to evaluate the stage reached by capitalism as a social system: the ‘stage’ in the sense not merely of ‘objective’ factors but in terms of the problems which this stage posed for the development of socialism, the different tendencies inside the labour movement and the tasks of the working class. Lenin demon- strated that capitalism had now reached its highest point, that its continuation would produce deeper and deeper crises on a world scale and that the working class must prepare for its revolutionary over- throw. He also traced the connection between the development of imperialism and the growth of ‘Kautskyism’ inside the labour movement. Lenin’s categories for Imperialism were produced through a concrete grasp of the relationship of the stage reached in the class struggle with the previous conquests of Marxism. This is clearly seen in his work on the nature of the State, a key feature of his analysis of imperialism. Lenin traces in detail the battles of Marx and Engels to establish their conception of the State in struggle with the representa- tives of the capitalist class. Because they fail to understand the true nature of political economy, Baran and Sweezy misunderstand the true significance of Lenin’s work and this mistake is closely related to their positivist method. To turn to one last major point. Much of the later parts of the book are concerned with the irrationality and waste of capitalism. As we have noted, it is here that they deal with the enormous expenditures on arms, the paltry sums which in com- 199 parison are devoted to education, housing, the social services, etc. They try to show—with some degree of success—that this mal- distribution of resources is not accidental but stems from the very nature of the capitalist system with its demand for more and more profit as the final goal of all pro- duction. It must be said however that this part of their work bears a very close resemblance to much of the writing of the New Left in these fields. Like Baran and Sweezy, the New Left, in analysing modern capitalism, suggested that the work- ing class was no longer a revolu- tionary class; that the system did not suffer from the ‘old’ problems and that new ones had taken their place, problems which were not con- cerned with economics so much as with more general questions such as the debasement of culture under Capitalism, the contrast between ‘private affluence’ and ‘public squalor’, etc. The weakness of this method of analysis is that it does not concern itself with the contradictions of capitalism so much as with its irrationality. It is interesting that the final chapter of the book is entitled ‘The Irrational System’ Such a method is closely concerned with an abstract criticism of capital- ism and not with an exploration of the inner contradictions of the system as part of the struggle to overthrow it. This largely explains the pessimism of Baran and Sweezy about the possibilities of socialism in America. Marx was not con- cerned merely to criticise capitalism; this had long been a pre-occupation of socialists and radicals of various hues. He attempted to show that capitalism was not merely irrational, but locked in contradictions which assumed larger and larger pro- portions. At the base of these con- tradictions was of course. the struggle between the working class and the capitalist class. The weakness of their method can be illustrated by reference to the way in which they examine the role of the state, expenditures on war and the nature of imperialism as means of absorbing the growing surplus generated by the capitalist

[p047] 200 system. Perhaps the most obvious case is their treatment of the role of arms expenditures. They rightly point out that this represents a convenient way of disposing of ‘unwanted’ capital and avoiding the traditional ‘realisation’ problem of the system (although it is not dis- cussed in quite these terms) and further show that the large export of ‘aid’ abroad together with a large military commitment throughout the world is part of the defence of US imperialism and the preservation of its profits. These points are undoubtedly correct, but they do nothing to highlight the contra- dictions involved in these develop- ments. The problem cannot be examined at this point in any detail. But it is clear that the present US balance of payments difficulties and the serious disequilibria that this produces in the world economy— especially in the form of the present ‘liquidity crisis-—are the product, in the main, of the massive outpourings of capital from America in the post- war period. None of these problems receives any attention. In fact the relationships of US imperialism to the rest of the world economy are totally neglected as a central part of the analysis. There is no treatment of the tendency to uneven develop- ment under imperialism, surely one of the key features of modern capitalism. It is precisely the tremendous imbalance between the FOURTH INTERNATIONAL, NOVEMBER 1966 speed of development of the American economy in relation to the rest of the world which pro- duces the present crisis. In a similar way, arms expenditures have played a role in the stabilisation of capital- ism in the recent past. But they also produce their own set of problems and contradictions for the system. The impact of the war in Vietnam is a classic illustration of this point. Not only does this war produce increasing political tensions inside America, for both the ruling class and the working class, but it generates inflationary and monetary disturbances which are of major concern to the Johnson administra- tion, producing an attempt at wage limitation which sharpens the con- flicts with organised labour. Finally the role of the State: once more this has not simply been a one- sided way of stabilising capitalism. The intervention of the state, and with it the great increase in the volume of taxation, has been a con- tributory factor to the inflationary pressures now at work in the States and, by undertaking increasing ex- penditures in the field of research and development (especially those connected with the war machine) it has tended to speed up technical progress which capitalism finds it increasingly difficult to contain and utilise. That Baran and Sweezy can say little about the state of the class struggle in America today and are doubtful whether socialism will be achieved during this century stems from their failure to analyse the relationship of developments in America to world economics and politics and the impact of these developments on the consciousness and fighting capacity of the US working class. Not all the questions raised by this book can be dealt with. But from the points already made it is clear that the present work cannot be considered adequate in any way. Although claiming to follow in the Marxist method and although em- ploying the terminology of Marx in many places Baran and Sweezy have in practice capitulated to revisionist conceptions. Certainly Sweezy’s earlier work has many weaknesses which have been discussed in the pages of this journal. But this book represents a serious degeneration from even his earlier work. No Marxist should be afraid to analyse capitalism afresh and seek out new developments. Without a constant struggle to do this Marxism would become ossified and lose all connec- tion with the struggles of the work- ing class. This we believe is the historical duty and responsibility of the Fourth International. It cannot be achieved by isolated commenta- tors, such as Baran and Sweezy, no matter how gifted or sophisticated they might be. G.P.

[p048] LIMITED PUBLICATIONS PARK NEW S.W.4 London, Street, High Clapham 186A 7029 MACaulay List Book Free Write for The New Course By Leon Trotsky A collection of articles written in 1923 during the lull before the great storm of persecution which was later to overwhelm Russian Bolshevism. Here Trotsky, analyses the incipient stages of the degeneration of the Communist Party, uncovers its causes and proposes measures for combating its further decline. He here analyses the party in a historical, that is dialectical way, the relationships between generations, social strata, groups, factional forma- tions, tradition and the multitude of factors that go to make a revolutionary party. 111 pages, 3/ This document is a landmark in the development of 20th century Marxism. It sums up the experience of an entire period of struggle against the Soviet bureaucracy. This Platform also represents the highest point in the fortunes of the Joint Opposition (Trotskyist-Zinovievite) to Stalin. It is the programme of the last of the Bolshevik-Leninists who insisted that they remained communists despite all the per- ne mem secution, jailings, violence and slander inflicted on them. : . But this document also represents a watershed—the end of Left Opposition is) one phase and the beginning of another—in the evolution of eS ' Trotskyist politics. 112 pages, 5/- ‘The ) Patorm The Draft Programme of the Communist International by Leon Trotsky This is part of the author’s criticism of the draft programme submitted by the Executive Committee of the Third (Communist) International to the 6th Congress of the Comintern which was held in July 1928. The manuscript of that criticism was written by Trotsky during his exile in Alma-Ata (Central Asia). It was sent to the Congress in Moscow together with an appeal for reinstatement into the party from which he had been expelled a few months before by the Stalinist faction in 1927. Stalin and his supporters had invented the theory of ‘Socialism in one country’, which was made party policy in 1925 and converted into an article of faith to be defended by the world institutions of Stalinism. It is this theory which Trotsky criticises in these pages. 64 pages, 1/- This is a polemic against Radek in 1928. Trotsky examines the arguments against his pre-war theory of the permanent revolution (as expounded in Results and Prospects) and takes up the history of his differences with Lenin before 1917, of which Stalin and his henchmen made so much. Trotsky shows that it was Lenin’s criticisms of his attitude to the centralised Marxist party, which he afterwards understood and accepted, that kept them apart, and not their differences on the permanent revolution. 254 pages, 15/- soft cover, 25/- hard cover m This is the basic programmatic document of the world The death agony ‘movement founded by Leon Trotsky and his comrades. By — eae 1938 the revolutionary Marxists had found it necessary to capitalism Heures lay the foundations of the Fourth International in order to restore working-class leadership after the defeats prepared by and the the Stalinist bureaucracy in control of the Third (Communist) International. The defeat of the German Revolution in 1923, of the British General Strike in 1926, and of the Ath Intervational Chinese Revolution in 1927, followed by Hitler’s victory over the German working class in 1933, finally ruled out the ees perspective of transforming the Communist International ™ by internal opposition. 60 pages, 1/- tasks of the Printed by Plough Press Ltd. (T.U.). r/o 180 Clapham High Street. London, S.W.4

[p049] Subscribe to Fourth International FourTH INTERNATIONAL is the theoretical journal of the International Committee of the Fourth Inter- national. FourRTH INTERNATIONAL continues the work of Lasour REVIEW which concluded its 12th year of publication with its issue of Summer 1963, the fifth number of volume 7. FourTH INTERNATIONAL continues the work and traditions of Revolutionary Communism since the death of Lenin. FourTH INTERNATIONAL represents the unbroken chain of theoretical journals in the Bolshevik tradition, whose continuators were the Left Opposition led and inspired by Leon Trotsky. FourtH INTERNATIONAL follows in the traditions of that Opposition and in the traditions of the Fourth International of Leon Trotsky. FourTH INTERNATIONAL is the product of decades of continuous struggle of Marxists in the Inter- national Labour movement against Stalinism, Reformism and Revisionism. FourTH INTERNATIONAL represents the successful fusion of Marxist trends in this International Labour movement, from Trotskyist to Com- munist, Social-Democratic and Trade Union movements. FourTH INTERNATIONAL, With this issue, commences a new period of activity in the International Labour movement and simultaneously prepares and equips the Marxist movement for its future intervention in the battles of the working class which promise to eclipse and transcend all pre- vious struggles both in their depth and scope. re To: New Park Publications Ltd., 186a Clapham High Street, London, S.W.4 I enclose cheque/postal order/money order/draft for £ S. d. to pay for issues of FourTH INTERNATIONAL. Volume.... No..... Price 4/- (postage 6d. per issue) Some writings by Leon Trotsky The First Five Years of the Communist International Vol. 2 (soft cover) 12s. 6d. (hard cover) 18s. Od. The New Course 3s. 6d. The Permanent Revolution (soft cover) 15s. Od. (hard cover) 25s. Od. Draft Programme of the Communist International A Criticism of Fundamentals, 1928 Is. Od. Where is Britain Going? 7s. 6d. Whither France? Ss. Od. Stalinism and Trotskyism in the USA Is. 6d. Stalinism and Bolshevism 6d. Radio, Science, Technique and Society Is. Od. I Stake My Life! (Dewey report of the Moscow Trials) 6c. Trade Unions in the Epoch of Imperialist Decay 2d. The Russian Revolution (The Copenhagen Speech) 4d. Culture and Socialism and Art and Revolution 2s. 6d. Death Agony of Capitalism (Transitional Programme) 1/- To: New Park Publications Ltd., 186A Clapham High St., London, S.W.4. I enclose cheque/postal order/money order/ draft for £ s. d. to pay for SOOO CEES OSO OES ERESESES ESOS CEE OSERESOS SCORSESE ESESEVEDS TA Se ace eee SSS SOOEHH EHEC ESSE ESOS HSH OSESEESE SOS EHOSS