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«Evolution, Current State of Art and Prospective of the Monopoly Capital and the Social Structures of Accumulation Schools: Any Points for ...»

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17th Conference of the Research Network

Macroeconomics and Macroeconomic Policies (FMM)

The Jobs Crisis: Causes, Cures, Constraints. 24 – 26 October, 2013, Berlin

Evolution, Current State of Art and Prospective of the Monopoly

Capital and the Social Structures of Accumulation Schools:

Any Points for Convergence?

Jon Las Heras Cuenca, PhD Reseacher

International Political Economy Division, Schools of Social Sciences.

The University of Manchester, UK jon.lasheras@postgrad.manchester.ac.uk INDEX Introduction ………………………………………………………………….… p. 2 Monopoly Capital Monopoly Capital Theory …………………………………………….…….… p. 4 1.

Stagnation and Financial Explosion …………………………………..…. p. 8 2.

Monopoly-Finance Capital ……………………………………………..….. p. 10 3.

Social Structures of Accumulation Social Structures of Accumulation Theory ………………..………… p. 13 1.

Post-War SSA ………………………………………….…………………………. p. 15 2.

A Neoliberal SSA? ………………………………………………………………. p. 18 3.

Reconstructing the SSA Theory ………………………………............. p. 20 4.

A Global Neoliberal SSA ……………………………………………………… p. 22 5.

Nexus with the Regulation Theory……………….…………………….. p. 24 6.

Critique and Comparison of the Theories:

Any Points for Convergence?

Differences …………………………………………………..……………………. p. 27 1.

Similarities …………………………………………………..…………………….. p. 30 2.

Conclusion ……………………………………….……………………………. p. 34 Bibliography ………………………………………….………………………. p. 35 Introduction On the following article we are going to develop a literature review of two radical American schools of economic thought: the Monopoly Capital and the Social Structures of Accumulation approaches.12 Monopoly Capital was the first Marxist school that emerged in the US after both the Monthly Review Magazine and the Monthly Review Press were set up in 1949 and 1951 respectively (see McChesney, 1984). Differently, the Social Structures of Accumulation has its origins on the 60s and 70s antiVietnam war student movements and was developed together with the Union for Radical Political Economics and its peerreviewed journal The Review of Radical Political Economics (see Reich, 1993).

Both schools, which defend clear critical, activist and revolutionary propositions, have made huge efforts in order to denounce and criticise the hegemonic economic theory, while stressing the relevance of social, political andecological struggles.

The Social Structures of Accumulation approach has been a promising stream of Marxian literature due to its capacity to design a theoretical and analytical framework that includes economic, political, institutional and cultural factors. Differently, the Monopoly Capital approach has focused on the inherent tendency of the capital accumulation process to become more concentrated and centralized. This tendency is materialised in both the consolidation of Monopolistic Corporations and in the disproportional rise of financial capital versus productive capital.

Following fundamentally different analytical frameworks, these two schools hold different accounts regarding the Post War ‘treinte gloriouses’ and the subsequent Oil Crisis of the 70’s. Yet, although their theoretical postures appear to be a priori incompatible, both schools share a common ground on the identification of the key factors and developments of the neoliberal era and the 2008 financial crisis. The objective of this article will be twofold: first, to make a diachronic explanation of the Monopoly Capital and Social Structures of Accumulation schools’ and, second, to define the major differences and commonalities that both American schools have. We will argue that there is space for further constructive dialogue between them if both stands acknowledge idiosyncratic weaknesses while keeping their major strengths.

I thank Dr. Thanasis Maniatis, lecturer at the National and Kapodistrian University of Athens for providing the framework of this article, a comparative analysis of the Monopoly Capital and Social Structures of Accumulation schools. I very much appreciate his efforts to teach the dark and forbidenside of Political Economy.

I thank PhD student Stefanos Ioannou at University of Leeds, who is presenting at this very same conference, for his comments and debates, he has definitely been a source of ideas. We both studied our MPhil at the Doctoral Program at the University of Athens with Prof. Yanis Varoufakis, and we both held a course in Marxian Economics where we wrote about this same topic, the Monopoly Capital and SSA schools. Without his efforts to challenge and support my economic knowledge writing this article would have been a more difficult and incomplete task.

The article is organized as follows: in the following section we will provide a general description of the main theoretical propositions of the Monopoly Capital school (MC hereafter) that are gathered in the seminal book written by Paul Baran and Paul Sweezy in 1966. We will later present the explanation they provide of the 70’s crisis and the stagnation tendency of mature capitalism, reverted by a new period of unsustainable growth through the expansion of financial capital. On section two, we will go through the spring of the Social Structures of Accumulation approach (SSA from now on) after the Oil shocks of the 70’s and Reagan’s monetarist policies took place. The theoretical foundations were consolidated during the 80’s and early 90’s. Afterwards, we will present the problems that the SSA scholars faced in order to define whether if a Neoliberal SSA existed or not. Several debates took place regarding whether if it was appropriate to have a more or less materialist approach. The materialist approach, modifying some seminal contributions, superseded post-structuralist perspectives. In so doing, we consider appropriate to present several articles that pull the SSA and the Regulation Theory (RT) together into the same Marxian analysis.





We will argue that the more materialist approach of the SSA is essentially equal to the materialist RT, and that the former has something to learn from the later which is theoretically and methodologically more sophisticated. In section three, we will present the most relevant set of critiques that both schools face, as well as both their theoretical and analytical differences and commonalities. We will end the article with a concluding summary.

–  –  –

1. Monopoly Capital Theory From the very initial pages of the seminal book entitled “Monopoly Capital: An Essay on the American Economic and Social Order”, Paul Baran and Paul Sweezy made clear that the theoretical orthodoxy where Marxist theory was trapped ought to be re-examined and, ultimately, overcome.

According to them, Marxists had not provided any new theory before their book was published in 1966 while the historical material conditions had transformed substantially. The rise of the Giant Corporation and its monopolistic pricing dynamics, the increase of unproductive labour in comparison to productive labour, or the dismaying divergence between core and peripheral countries required a rapid theoretical response. Since the fundamental principle of Historical Materialism is the “continous, systematic and comprehensive confrontation of reality with reason” (Baran, 1969: 33), it was paramount for Baran and Sweezy to update Marxist theory according to new historical events.

There were two other major theoretical contributors to such theory, Michael Kalecki and Joseph Steindl, who were direct or indirect collaborators and contributors to the Monthly Review (Baran and Sweezy, 1966: 56). To build the Monopoly Capital theory, Baran contributed with his genuine idea of economic surplus instead of surplus value, as well as with some sociological understanding drawn upon the Frankfurt School materialised in the last chapters of the book; Sweezy brought Thorstein Veblen’s understanding of the Monopolistic Corporation and the Marxist underconsumption-overaccumulation crisis theory; Kalecki contributed indirectly with his theory of monopolistic pricing and investment dynamics; and Steindl with the intrinsic tendency of Monopoly Capitalism towards stagnation and lower capital utilization rates instead of continuously falling into catastrophic crisis (Foster, 1986; Howard and King, 2004).

Based in Veblen, Baran and Sweezy (1966, see chapter 2) develop and institutional analysis of the modern corporation. According to them, corporations have become so large, embedding a massive amount of operations and transactions that cannot be explained through the ‘traditional entrepreneur’ paradigm. Managers are important decision makers vis-a-vis stockholders and the huge amount of profits bestows some sort of financial independence to corporations. They define the behaviour of the firm as the “systematic temporal search for the highest practicable profits”, being its major goals to achieve “high managerial incomes, good profits (by reducing systematically production costs), a strong competitive position and growth” (p. 25, italics added by the author).

As the time horizon wherein large corporations take decisions becomes larger, there is a ‘rational calculator’ behaviour opposite to the traditional individual entrepreneur that seeks the maximisation of short term profits. In MC, corporations maximize their average profit throughout the business cycle. From such renewed ‘organic constitution’ two fundamental corporate practices are derived: i) the systematic avoidance of risk taking and, ii) an attitude of ‘co-respective behaviour’ of live-andlet-live towards other corporations that pretends to outweigh Anti-Trust Laws. According to Baran and Sweezy, these two features are crucial because they allow corporations to be ‘price makers’ rather than ‘price takers’ (pp. 54-55).

In an earlier work, Sweezy (1939) puts brightly the dynamic pricing problem that Monopolistic Corporations must face. During the late 19th century, Giant Corporations entered into competitive price wars in order to gain larger shares of the market. Because the response of all companies to competitors’ price reductions was to retaliate in kind, reducing prices themselves, the final outcome was a not a smaller share of the pie, but a smaller pie to share. After learning from their errs, a tacit agreement sprout: companies started to assume that their rivals wouldn’t retaliate in kind and new form of pricing (mark-ups) and competition (mainly cost leadership and product differentiation) was used (Sweezy, 1981).3 The new price formation mechanism under MC is thoroughly derived from Kalecki (Foster, 1986;

Howard and King, 2004). Put simply, the ratio of prices (or proceeds) to (prime) costs varies depending on the level of monopoly.4 Thus, the greater the monopoly power and “price leadership”, the greater the capacity of a company to charge higher prices in comparison to its competitors and, hence, the larger the profits they will accumulate. Nevertheless, the rest of competitors will tacitly accept such move in order to avoid any kind of price warfare.5 And “[s]o long as all 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” (Baran and Sweezy 1966:61), i.e. marginal revenue equates Despite the shift on corporate strategy to avoid price cuts, Sweezy (1939) makes an interesting point by depicting a set of “imaginary demand curves” that model the behaviour of oligopolistic companies. Depending on the level of the actual demand, demand curves (which are non linear) represent more inelastic or elastic tendencies. He’s conclusions are the following: 1) expansion of demand is likely to lead to an increase in oligopoly prices, 2) a contraction in demand sets up strong resistance to any reduction in oligopoly prices, and

3) the list of prices become less trustworthy guides to real prices the longer bad time last (p. 572).

Whereas the degree of monopoly is affected by: a) concentration of industry; b) greater ‘sales effort’; c) the ratio of overhead costs to prime costs which leads to more or less tacit agreement between firms to “protect” profits; d) level of labour unionisation and power; e) degree of monopoly in comparison to other industries (Kalecki 1954: 17-18).

In Baran and Sweezy’s (1966) words: “[t]he leader is normally the largest and most powerful firm in the industry, […] and the others accept its dominant role not only because it profits them to do so but also because they know that if it should come to price warfare the leader would be able to stand the gaff better than they could” (pp. 60-61).

marginal costs. Further, if the previous statement is true, and if it is accompanied by a continuous pressure to cut production costs in order to maximize profits, “then it follows with inescapable logic that surplus must have a strong and persistent tendency to rise” (ibid. p.67).

Before we proceed with an explanation of surplus, it is paramount to clarify that despite the fact that the industry as a whole behaves like a single monopoly, the competition among the set of Giant Corporations forming such monopolistic industry persists. The MC school does not reject the notion of fierce competition between capitals, as we have explained above; it has just changed its methods and form. Quoting Veblen, the endeavour of all enterprises “is to establish as much of a monopoly as may be” (Veblen 1904, in Sweezy, 1981:61). Nevertheless, after the 19th century competition has become more visible and open than ever. May it be the time to change misleading terms?



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