Competition between capitalists is constantly negated by monopolies. But monopolies compete and constantly face challenger capitalists

Leopard and its spots

With or without monopolies, the basis of capitalist exploitation remains the same, argues Michael Roberts

“Let me be clear: capitalism without competition isn’t capitalism. It’s exploitation.” That was what Joe Biden tweeted when signing an executive order to expand competition across the economy and crack down on monopolistic practices. “The heart of American capitalism is a simple idea: open and fair competition,” Biden said in a speech before signing the measure. He called himself a “proud capitalist”, but said that he wants to “ensure our economy isn’t about people working for capitalism: it’s about capitalism working for people”.

Biden’s remarks supported the idea that (1) capitalism is not a mode of production that is exploitive, as long as there is ‘free competition’ in trade, credit and the production of commodities (and presumably in wage labour too); and (2) it is monopoly and monopoly practices that are the cause of what could be called ‘exploitation’, because only then is there ‘unfair competition’ and blockages to the equitable process of production and distribution through ‘competitive’ markets: ie, proper capitalism.

Here Biden echoes not only the view of modern mainstream neoclassical economics, but also those of the early classical economists, like Adam Smith and David Ricardo. Smith reckoned that what was wrong with the society and the economy of the late 18th century was monopoly and the lack of free competition and trade. He railed against monopoly control (including feudal state monopolies) in trade and agriculture. Ricardo also saw the problem in monopoly control of land ownership and agricultural production. If that was broken, then industrial enterprise in competitive markets would lead to rising productivity and prosperity for all. As Biden said, then “capitalism would work for the people”.

But it is not just the apologists for capitalism that accept this analysis. Many modern-day Marxists and post-Keynesians focus on what they call ‘monopoly capitalism’, ‘monopoly finance capital’, or ‘state monopoly capitalism’ as the enemy of the people’s prosperity, not capitalism as such.

Take the view of Michael Hudson. He considers himself a ‘classical’ economist like Smith and Ricardo (and Marx is also a classical economist, he says). Hudson argues that capitalism started as a progressive force in developing the productive forces, because it was industrial capitalism. But, since the 1980s, ‘financial capitalism’ had superseded industrial capitalism. This was really a return to ‘feudalism’, where the surplus in an economy was extracted by ‘monopoly’ landlords (rent) and financiers (interest and capital gains), not created by the exploitation of labour-power (profits).1

Grace Blakeley, British leftist economist and author, in her recent presentations reckons that modern capitalism has morphed into ‘state monopoly capitalism’. She highlights similar points made by Biden in his case for ‘competition’:

... by May 2020, the combined market capitalisation of the four largest US tech companies reached one fifth of the entire S&P 500 [stock market index]. Four companies - Microsoft, Apple, Amazon and Facebook - now account for 20% of the combined value of the 500 largest US corporations - an unparalleled level of market concentration. Forty years ago, these corporate entities were either just beyond being plucky start-ups or did not even exist.

Monopolistic tendencies are not limited to the tech sector. In 1975, the largest 100 US companies accounted for nearly half of the earnings of all publicly listed companies; by 2015, their share reached 84%.2

Similarly, a Brookings Institution study found that the top 50 companies globally by value added $4.5 trillion of stock market capitalisation in 2020, taking their combined worth to about 28% of global gross domestic product. Three decades ago, the equivalent figure was less than 5%.

Monopoly school

But is this state monopoly ‘feudal’ financial capitalism now the enemy of labour, while freely competitive industrial capitalism is an ally? Is there no exploitation of labour under competitive capitalism, as Biden argues? The whole point of Marx’s and Engels’ critique of capitalism was that it was a system of exploitation of labour-power to extract surplus value in production, whether there were monopolies or not.

Indeed, Marx’s Capital has a subtitle - ‘A critique of political economy’ - precisely to attack the idea that, once monopolies are curbed or removed, ‘competitive capitalism’ does not exploit labour and instead workers get a fair day’s pay for a fair day’s work, and capitalists are thus rewarded for their competitive ‘animal spirits’ with profits.

It is certainly true that the concentration and centralisation of capital in the major economies has intensified. The rise of the mega social media and tech companies in the last two decades confirms Marx’s view over 150 years ago that capitalist accumulation leads to the concentration and centralisation of capital, as corporate operations increase in scale and large firms eat up the small. And it is clear that this process has been encouraged and helped by state injections of easy credit and the deregulation of corporate activities and governance.

The Brookings Institution has found that multinationals are major contributors to the US economy.3 Such companies headquartered in the US accounted for 20.1% of all US private-sector employment in 2017 and foreign-headquartered firms accounted for another 6.4%. Multinationals play a particularly large role in manufacturing: more than 70% of all US manufacturing employment is in such companies. Multinational firms accounted for more than half of all non-residential capital expenditures in 2017 and more than 80% of all US industrial research and development - not to mention more than half of exports and imports of goods and services.

As Hadas Thier points out in her book, A people’s guide to capitalism,

The state plays its part, too, in shielding monopolistic companies deemed ‘too big to fail’ from the ravages of a competitive ‘free’ market. After the 2008 economic crisis, megabanks in the United States, each holding billions of dollars worth of assets, were rescued with an enormous taxpayer-funded bailout. As Petrino DiLeo explained, “The treasury department and Federal Reserve Bank have doled out an incredible $16 trillion in assistance to financial institutions and corporations in the US and around the world.”4

But do these long-term developments in capitalist accumulation mean that ‘competitive capitalism’ has now been replaced by ‘state monopoly capitalism’? Does the latter now operate not through the competitive struggle for profits out of the exploitation of labour, as in the law of value, but through the power to mark up prices over costs at will, backed by the state?

This is the basis of the ‘monopoly capital school’, originally developed by Paul Sweezy and Paul Baran in the late 1960s. This monopoly capital theory argued that large companies had abolished price competition and instead given rise to excess productive capacity and stagnation. Crises were no longer caused by falling profitability (if they ever were) as a result of a struggle between capitals for a share of the profit exploited from labour, but now were caused by the expansion of capacity without sufficient ‘effective demand’.

In their book, Monopoly capital, Baran and Sweezy put it this way:

we cannot be content with patching up and amending the competitive model which underlies [Marx’s] economic theory. We must recognise that competition, which was the predominant form of market relations in 19th century Britain, has ceased to occupy that position - not only in Britain but everywhere else in the capitalist world. Today the typical economic unit in the capitalist world is not the small firm producing a negligible fraction of a homogeneous output for an anonymous market, but a large-scale enterprise producing a significant share of the output of an industry, or even several industries, and able to control its prices, the volume of its production, and the types and amounts of investments.

The typical economic unit, in other words, has the attributes which were once thought to be possessed only by monopolies. It is therefore impermissible to ignore monopoly in constructing our model of the economy and to go on treating competition as the general case.5

Baran and Sweezy conclude:

The whole motivation of cost reduction is to increase profits, and the monopolistic structure of markets enables the corporations to appropriate the lion’s share of the fruits of increasing productivity directly in the form of higher profits. This means that under monopoly capitalism declining costs imply continuously widening profit margins. And continuously widening profit margins in turn imply aggregate profits which rise not only absolutely, but as a share of national product. If we provisionally equate aggregate profits with society’s economic surplus, we can formulate as a law of monopoly capitalism that the surplus tends to rise both absolutely and relatively as the system develops.6

But does the increased centralisation and concentration of capital mean that there has been a fundamental change in the nature of capitalism - from a competitive battle for profit share to one of monopoly power; and from value production and distribution of profit to a monopoly mark-up over costs?

Anwar Shaikh thinks not: “If you believe that the system is founded on monopoly - which has become a sacred nostrum of Marxian economics - then it’s all about the power of the state and the power of capital against labour.”7

But, he continues,

From my point of view, nothing - not even the capitalists themselves - has that sort of power, because the rules imposed on labour and capital stem from the creation of profit and the competition of capitals, which Marx specifically links to each other. A state can intervene to redistribute income and oppose both capital and labour. Pushed by the struggles of workers, it can also intervene to construct a welfare system. But these interventions are still fundamentally constrained by their impact on the profitability of firms.

Shaikh argues that the monopoly capital school base their view of ‘fundamental change’ on a false reality that, back in the mid-19th century when Marx wrote Capital, capitalism worked in ‘perfect competitive markets’, which no longer exist and have been replaced by monopolies backed by the state. But this was never the case. As Shaikh puts it,

the capitalist economy should not be viewed as a ‘perfect’ market economy with accompanying ‘imperfections’, but as individual capitals in competition to gain profit and market share. Monopoly should not be counterposed to competition, as neoclassical, orthodox and even some Marxist economists do. Real competition is a struggle to lower costs per unit of output in order to gain more profit and market share ... Real competition is an unending struggle for monopoly power (dominant market share) that never succeeds in total or forever.

He concludes: “... each individual capital operates under this imperative … this is real competition, antagonistic by nature and turbulent in operation. It is as different from so-called perfect competition as war is from ballet”. So capitalism may have changed its spots, but is still the same leopard.


Lenin was supposed to be one of the great supporters of the view that capitalism had become ‘state monopoly capitalism’. This was regularly quoted by the leaders of Stalinist Russia as the 20th century model for capitalism. But Lenin actually had a more accurate view: “At the same time, monopoly, which has grown out of free competition, does not abolish the latter, but exists over it and alongside of it, and thereby gives rise to a number of very acute, intense antagonisms, friction and conflicts.”

And, when we look at the empirical evidence, the surface appearance of ‘monopoly power’ looks less convincing. Mainstream economists Jan De Loecker and Jan Eeckhout argue that the mark-up of price over marginal cost charged by public US firms has been rising steadily since 1960 and in particular after 1980.8 Their paper suggests that that the decline of both the labour and capital shares, as well as low-skilled wages and other economic trends, have been aided by a significant increase in mark-ups and market power - in other words, the rise of monopoly capital in the form of ‘super-star’ companies like Apple, Amazon, Google, etc.9 These now dominate sales, profits and production and their utilisation of labour is low, compared to other companies and industries. These monopolies will not invest because they do not need to compete, and so productivity growth slows.

However, there are two things against this ‘market power’ argument - at least as the sole or main explanation of the rise in profit share and profit per unit of production. First, as De Loecker and Eeckhout find, economy-wide, it is mainly smaller firms that have the higher mark-ups - hardly an indicator of monopoly power. And, as Shaikh points out, rising mark-ups may not be due to monopoly power, but simply to higher profits from cost savings by large companies. Indeed, when the factor of concentration is isolated in the data, he writes, “in the vast body of literature generated by the investigation of such claims, difference between accounting rates of return are too small to justify claims of monopoly power”.10

Moreover, although US multinationals have gained a greater market share in the last 40 years, that has not meant a reduction in their share of capital spending11 - contrary to the ‘stagnationist’ conclusions of the monopoly school. US multinational parent companies employed 24% of the US private sector workforce in 1982 and 22% in 2017. Their share of investment stayed at about 30%-35% throughout.

Anyway, there are very few real monopolies. What concentration and centralisation of capital has generated are oligopolies, not monopolies, in different sectors of the capitalist economy - and that makes a big difference. Indeed, monopolies have often turned into oligopolies. In 1911, Standard Oil was broken up into 34 companies by the US Congress. In the 1984, AT&T was the main ‘monopoly’ telecoms provider and was broken up into seven regional companies.

By its very nature, capitalism, based on ‘many capitals’ in competition, cannot tolerate any ‘eternal’ monopoly: ie, a ‘permanent’ surplus profit deducted from the sum total of profits divided among the capitalist class as a whole. The endless battle to increase profit and the share of the market means monopolies are continually under threat from new rivals, new technologies and international competitors.12 Profits are not the result of the degree of monopoly or rent-seeking, as neo-classical and Keynesian/Kalecki theories argue, but the result of the exploitation of labour. Marx’s law of profitability is still central to a capitalist economy.

Just before the Covid-19 pandemic hit the world economy, the major capitalist economies were already heading into a new recession, the first since the great recession of the 2008-09.13 The profitability of capital was near all-time lows; up to 20% of US and European companies were making only enough profit to cover the interest on their debt, with none to spare for new investment. Real gross domestic product growth rates had dropped to their lowest rates since 2009 and business investment was stagnating. A global recession was coming; and it had little to do with the ‘market power’ of the big tech companies sucking up all the profits: much more to do with the inability of capital to exploit labour enough to stop profitability across all sectors from falling.

The history of capitalism is one where the concentration and centralisation of capital increases, but competition continues to bring about the movement of surplus value between capitals (both within a national economy and globally). The substitution of new products for old ones will in the long run reduce or eliminate monopoly advantage. The monopolistic world of General Electric and the motor manufacturers in the post-war period did not last, once new technology bred new sectors for capital accumulation. The oil giants are also now under threat from new technology and the world of Apple will not last forever.

Michael Roberts blogs at thenextrecession.wordpress.com

  1. journals.sagepub.com/doi/abs/10.1177/04866134211011770.↩︎

  2. tribunemag.co.uk/2020/06/the-era-of-state-monopoly-capitalism.↩︎

  3. See www.brookings.edu/wp-content/uploads/2021/04/GG_Ch1_Summary.pdf.↩︎

  4. H Thier A people’s guide to capitalism London 2020, p134.↩︎

  5. P Sweezy and P Baran Monopoly capital London 1968, pp5-6.↩︎

  6. Ibid pp71-72.↩︎

  7. A Shaikh Capitalism: competition, conflict, crises Oxford 2016.↩︎

  8. See thenextrecession.wordpress.com/2017/09/05/productivity-profit-and-market-power.↩︎

  9. See thenextrecession.wordpress.com/2017/02/08/apple-and-the-cash-pile-story.↩︎

  10. A Shaikh Capitalism: competition, conflict, crises Oxford 2016.↩︎

  11. See www.researchgate.net/publication/24100342_Industry_Structure_Market_Rivalry_and_Public_Policy.↩︎

  12. See thenextrecession.wordpress.com/2017/03/06/getting-a-level-playing-field.↩︎

  13. See thenextrecession.wordpress.com/2020/05/17/profitability-investment-and-the-pandemic.↩︎