On April 4 in New York City, former President Donald Trump was arraigned in court on 34 felony charges brought by the State of New York — not the Federal Government. He became the first president to be charged with crimes — felonies — after leaving office. In the United States, arraignment is when the charges are read, detailing the laws allegedly violated. Then, the defendant enters a plea, guilty or not guilty (Trump pleaded not guilty). He was released without bail and promptly flew on his private jet to his luxurious home — one of many — at the Mar-a-Lago resort in Palm Beach, Florida, near Miami.
Even if Trump is found guilty by a jury — which wouldn’t be until 2024 at the earliest — he would not be barred under law from again running for or serving as president. Eugene Debs, the Socialist Party presidential candidate, ran from his prison cell in 1920. Trump is the opposite of Debs in terms of the class he represents, in morality, and in almost every other way. It’s hard to imagine the 2024 Republican nominee running from prison! Nobody expects Trump to serve a minute in prison even if convicted of every count and all appeals fail. The point of the charges isn’t to put him in prison but to keep him out of the White House.
Many liberal and progressive observers delighted to see Trump charged are dubious that these charges will stick. The charges of falsifying business records are misdemeanors under New York State law, not felonies. In the Clinton impeachment of 1998, the underlying crime involved an affair with someone, not his wife. Bill Clinton had an affair with young aide Monica Lewinsky. From a purely moral standpoint, Clinton’s affair with the young aide was worse than Trump’s affair with porn star Stormy Daniels who is well-versed in the ways of the world.
Clinton was impeached — not indicted — by the Republican House of Representatives on a charge of lying to government investigators — a crime under federal law — who were investigating Clinton’s affair. (1) The impeachment was seen as an attempt by the Republicans to embarrass the Democratic president. It backfired politically when Clinton’s approval rating rose sharply in the polls during the partisan impeachment. The only victim of Trump’s affair with Daniels was his wife, Melania. However morally challenged an affair with a porn star might be, it is not against the law and is of no concern to the criminal justice system.
As Trump ran for president in 2016, he feared Daniels might go to the media and expose the affair, costing him votes. He’s charged with using campaign donations to pay Daniels to keep quiet. Trump’s business records didn’t say he debited money to meet these hush expenses. The State of New York charges that Trump falsified his records which, under state law, is a misdemeanor. The state’s legal theory decided it became a felony when Trump used supporters’ money donated to be used in his presidential campaign to pay the hush money. The state’s legal theory is that Trump violated federal election laws and that tax fraud was also involved. That way, the charges are raised from misdemeanors — punishable by a year or less in jail — to the level of felonies, punished by more than a year in prison.
The media says the charges could be only the beginning. The State of Georgia is investigating Trump on his attempt to find enough votes to overturn Joseph Biden’s slim victory in the popular vote in the state. At the federal level, there’s potentially a more serious criminal case on the charge: he stole classified government documents he had no right to and kept them at his Mar-a-Largo home. These charges have been undermined because classified documents have also been found at Biden’s home, dating from the time he was vice president under Barack Obama. Similar documents have also been found at the home of Trump’s vice president, Mike Pence.
Separately, there remains the possibility that federal charges will be filed for his role in the attempted coup of January 6, 2021, though Biden’s Justice Department has shown no movement on this.
Trump’s real crimes
Like other U.S. presidents, Trump is responsible for crimes against workers, peasant farmers, and oppressed nations and nationalities worldwide that I have neither the space nor the time to list. These are far more serious than paying off Ms. Daniels or falsifying business records for political purposes or to dodge taxes. The ruling capitalist class and its Party of Order do not consider these crimes. The Party of Order — consisting of leading members of the Democratic and the Republican parties — claims Trump has committed crimes against it and the capitalist ruling class it represents. What are these crimes?
First, Trump had ideas about foreign policy and attempted to implement them in opposition to the Party of Order. These crimes included improving relations with Russia, which encouraged Germany and other Western European satellite imperialist countries to increase trade with Russia, which reduced their dependency on the United States. It makes economic sense for industrial Germany to exchange high-quality manufactured goods for Russian energy, agricultural products, and raw materials.
But the U.S. did not fight two world wars against Germany in the 20th century so that Germany and Russia could establish such a mutually beneficial economic relationship. To the Party of Order foreign policy professionals, Trump was a dangerous amateur, interfering in an area where he had no qualifications. The fact that the president makes foreign policy under the constitution is just a technical detail of no concern to the Party of Order. In addition, Trump repeatedly showed no understanding of the importance of the NATO alliance under which the Western European imperialist countries, especially Germany, are subordinated militarily and thus politically to the United States. To the Party of Order, Trump was undermining U.S. control of Western Europe, a vital pillar of the U.S. world empire.
When Nixon moved to normalize relations with the People’s Republic of China, he did it to put pressure on Vietnam to yield to U.S. demands — which failed. He was also trying to establish an entente with China against the Soviet Union in what turned out to be the final stage of the Cold War — which succeeded. Trump attempted to normalize relationships with the Democratic People’s Republic of Korea — North Korea. This was seen as encouraging the North Korean government. But the Party of Order believes North Korea will crack as long as they are prevented from trading with other countries. They want North Korea to be absorbed into the U.S.-dominated neocolonial regime of the Republic of Korea — South Korea. The Party of Order also opposed and reversed Trump’s attempt to pull U.S. troops from northeastern Syria containing Syria’s oil fields. The U.S. occupation is against the Syrian government’s and people’s will.
Biden personifies the Party of Order perhaps more than any other politician of the last fifty years. Trump’s policies of increasing protective tariffs, the hostile policy toward China, his tearing up the nuclear deal with Iran, and the tightened blockade against socialist Cuba have all continued and have even been intensified. Biden decided to carry out Trump’s attempt to end the military war against Afghanistan — replacing it with a no less criminal economic war — even though it meant a Taliban victory. Biden wouldn’t have done this if the Party of Order didn’t support the change in imperialist tactics in Afghanistan.
Trump’s biggest crime was his refusal to accept his 2020 defeat in the popular vote and the electoral college to Party of Order favorite Joseph Biden. The modern U.S. state rests on the uncontested centralized chain of command exercised by the White House over the forces of the U.S. Army, Navy, Marines, Coast Guard, Air Force, and Space Force, as well as the multiple intelligence agencies. The president personifies the state and the centralized chain of command on which it rests. There can be no ambiguity about who the president is at any time. As it is said, we have only one president at a time.
As the U.S. capitalist republic developed into imperialism, elaborate rules were developed regarding the selection of and succession to the presidency. Some are in the Constitution, and some are in written and unwritten laws. All have been respected by all U.S. presidents — though Nixon stretched them at times — except for Donald Trump.
Among the most important of these rules is the concession speech made by the defeated presidential candidate as soon as the election is called by the top media monopolies, led by The New York Times. Under this crucial rule, the defeated candidate is expected to concede the election, congratulate the declared winner, and pledge support to the one and only president. This is what Richard Nixon did in the arguably stolen election of 1960 and what Albert Gore did in what’s been proven to be the stolen election of 2000. (2) Nixon never challenged the right of John F. Kennedy to be president, nor did Albert Gore challenge the legitimacy of the George W. Bush presidency. Both Nixon and Gore discouraged their disappointed supporters from challenging the legitimacy of the elections, though both had legal grounds to do so.
What would happen if two people claimed to be president and armed forces commander-in-chief simultaneously? It would be up to individual military units to determine on their own which to support. Military units could declare for different candidates and start shooting at each other.
This has occurred in the past: During the Roman Empire, different generals claimed to be emperor. A civil war among the military units loyal to the rival claimants determined who finally ended up in control. During the Middle Ages in Europe (the period in European history from the collapse of the Western Roman Empire in the 5th century CE to the period of the Renaissance in the 15th century), there were at times popes and anti-popes as different men claimed the office and set up rival papal courts. This is only the history of the European society that is ancestral to the British colonies that became the United States. In the age of weapons with destructiveness beyond anything that could be imagined in the past, the dangers that would flow from the emergence of rival U.S. presidents fighting with one another for control of the world empire can scarcely be imagined. That is not to mention the opportunity that such a situation could give the working class and its allies to get rid of the system of capitalist class rule altogether.
This is why Trump’s refusal to acknowledge defeat after The New York Times declared Biden the winner, followed by his attempts to overturn that result, ending with the January 6 attempted coup, convinced most responsible political leaders of the ruling class that Donald Trump is unfit for the office. But he has not gotten the message. He’s instead declared that he is running again. And polls show he’ll likely win the Republican primaries and has a chance of defeating Biden in the 2024 election.
There’s another factor. Indicators such as the relationship between the short-term and long-term interest rates, the contraction of the money supply, and the weakness of the U.S. dollar against gold (compared to its strength in 2022) point to a major recession beginning this year or in 2024. If the Federal Reserve System attempts to stave off the recession by expanding the money supply until after the election, the current weakness of the dollar indicates the result would likely be a new stagflation crisis.
The likelihood of recession or stagflation points to a Republican victory in 2024. Even before the economic crisis has hit, polls have shown Biden consistently below 50% approval. He or some other Democrat is far from a shoo-in, even if recession/stagflation is staved off through 2024. This is in itself no problem for the ruling class. It’s how the two-party system is supposed to work, and the Republican Party is generally preferred by the capitalists. But what happens if the Republican candidate is Donald Trump, who refuses to play by the rules? This is why, if he continues to refuse to drop his candidacy, he’ll likely face more serious felony criminal charges than those he faces now. The ruling class and its Party of Order are telling Trump: Get out of the race and get out now, or we’ll do whatever it takes to get you out of presidential politics.
The monopoly stage of capitalism
Now I have to return to the question of whether there is a monopoly stage of capitalism, a view denied by Anwar Shaikh. Last month I explained there are two theories of monopoly capitalism. One is associated with “Finance Capital” by Austrian-German Marxist Rudolf Hilferding, published in 1910, and Lenin’s “Imperialism, the Highest Stage of Capitalism,” published in 1916, and “The State and Revolution,” written in the teeth of the 1917 Russian Revolution. The other is associated with Paul Sweezy and Paul A. Baran’s “Monopoly Capital,” published in 1966.
Shaikh represents a third position. He claims there’s no such thing as a monopoly phase of capitalism. He sees capitalism as characterized by what he calls real competition. He contrasts it with the perfect competition of the orthodox neoclassical theory taught in universities. Shaikh claims all theorists of monopoly capitalism, including Hilferding, Lenin, and Sweezy and Baran, believed the neoclassical perfect competition characterizing capitalism in the 18th and 19th centuries had given way to imperfect competition since the turn of the 20th century. He says the theories of monopoly capitalism assume perfect competition existed in the past but became distorted due to the growth of the power of monopoly corporations over time. He concludes that theories of monopoly capitalism rest on neoclassical foundations.
Shaikh believes the nature of capitalist competition has stayed the same since the days of Adam Smith. This competition is not the perfect competition of neoclassical theory but what he calls real competition. He attempts to analyze it in “Capitalism.” But is he correct that capitalist real competition remained unchanged throughout the system’s lifetime, and all theory variants rest on neoclassical foundations?
In contrast, Baran and Sweezy did not see their theory of monopoly capitalism as identical to that of Hilferding and Lenin, with some updates or popularizations like other works by 20th-century Marxists. They saw their book, “Monopoly Capital,” as a qualitative advance over both Hilferding and Lenin. They write, “As we have already noted, Lenin, who was strongly influenced by Hilferding’s analysis of the origins and diffusion of monopoly, based his theory of imperialism squarely on the predominance of monopoly in the developed capitalist countries. But as also noted, neither he nor his followers pursued the matter to the fundamentals of Marxian economic theory.” (“Monopoly Capital,” Baran and Sweezy, p. 5)
Karl Marx as a theorist of monopoly capitalism
The common view is that Marx said nothing about monopoly capitalism and that he’s outdated because he wrote about competitive capitalism. This is clear from the claim of Baran and Sweezy that Marx assumed each firm produces a “negligible fraction of an anonymous output.” (Baran and Sweezy, p. 6) This view indeed forms the foundation of the neoclassical model of perfect competition, but it isn’t Marx’s analysis of capitalism. We can only conclude that Baran and Sweezy read “Capital” through neoclassical glasses and believed Marx was saying the same thing as their university professors regarding competition and price theory. As to their book, “Monopoly Capital,” Shaikh’s claim is correct: The theory presented by Baran and Sweezy is built on neoclassical foundations.
Marx wrote about monopoly capital in “Capital,” Vol. I, Chapter 32, entitled “Historical Tendency of Capitalist Production”:
“As soon as the laborers are turned into proletarians, their means of labor into capital, as soon as the capitalist mode of production stands on its own feet, then the further socialization of labor and further transformation of the land and other means of production into socially exploited and, therefore, common means of production, as well as the further expropriation of private proprietors, takes a new form.”
Marx goes on, “That which is now to be expropriated is no longer the laborer working for himself, but the capitalist exploiting many laborers. This expropriation is accomplished by the action of the immanent laws of capitalistic production itself, by the centralization of capital.” (emphasis added -SW)
For Marx, the number of independent capitalists — individual entrepreneurs or later independent corporations — will diminish as capitalism develops. Or, as Marx puts it, “One capitalist always kills many.”
On the other side of the coin, “Hand in hand with this centralization, or this expropriation of many capitalists by few, develop, on an ever-extending scale, the co-operative form of the labor-process, the conscious technical application of science, the methodical cultivation of the soil, the transformation of the instruments of labor into instruments of labor only usable in common, the economizing of all means of production by their use as means of production of combined, socialized labor, the entanglement of all peoples in the net of the world market, and with this, the international character of the capitalistic regime.”
Here Marx describes the process of globalization in the 1860s! Today many progressives dream of reversing globalization and returning to the past of self-sufficiency and decentralized scattered means of production producing for local communities. But to Marx, capitalism is developing in the opposite direction. He predicted a future communist society, which he declined to describe in detail, that would take all these tendencies developing under capitalism to their natural conclusion. The communist production of the future will be based on centralized, large-scale, globalized production. These globalized productive forces will be owned not by a class of nonworking capitalists but by the associated producers.
Marx continues, “Along with the constantly diminishing number of the magnates of capital, who usurp and monopolize all advantages of this process of transformation, grows the mass of misery, oppression, slavery, degradation, exploitation; but with this too grows the revolt of the working-class, a class always increasing in numbers, and disciplined, united, organized by the very mechanism of the process of capitalist production itself.”
Though written in the 1860s, Marx talks about the magnates of capital who monopolize all advantages of this process of transformation. Unlike Shaikh, Marx isn’t afraid to use the word monopolize, and unlike Baran and Sweezy, Marx writes about the revolt of the working class.
Finally, “The monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with, and under it. Centralization of the means of production and socialization of labor at last reach a point where they become incompatible with their capitalist integument. Thus integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated.”
Marx sees the further development of capitalism as leading to such a degree of centralization of the means of production and socialization of labor that, at some point, it will be incompatible with the continued existence of capitalist private property. Capitalist private property must fall, and as it does, the expropriators are expropriated. You won’t find this kind of language in the works of Baran and Sweezy or Shaikh.
Crises and the centralization of capital
But why does capital tend to become more centralized? Centralizing capital means reducing the number of independent capitals existing in a particular branch of production and the economy as a whole. This trend must eventually give rise to something like the monopoly capitalism described by Hilferding and Lenin. The centralization of capital, carried to its logical conclusion, means the number of independent capitals will be reduced to a single capital. But if this happens, capital will be negated. We wouldn’t have one single capital; we would have no capital at all.
As I’ve stressed throughout this blog, capitalism is the highest form of commodity production, where labor power has become a commodity. If a single corporation gains control of all production, it will have no choice but to carry out all production according to a common plan. That means its products, including everything produced, will lose their character as commodities. The end of commodity production also means the end of commodity money because, without commodity production, there is no commodity money. Just as important, this means labor power will also lose its character as a commodity. Crises of the general overproduction of commodities would also cease since you can’t have commodity overproduction without commodity production. Even if the single corporation still has private stockholders, the economy will have lost its capitalist character.
Marx explained to his readers in “Capital” that the laws governing capitalism tend toward the complete negation of capitalism. Neither Marx nor Engels expected such a universal corporation to emerge without a workers’ revolution. On the contrary, they expected that the economic laws governing capitalism would sharpen class contradictions to such a degree that it would make a workers’ revolution inevitable long before such a universal corporation would emerge. The victory of the workers’ revolution will lead to the ownership and management of the productive forces by the associated producers of the world. Once we reach that stage, there will be no social classes. Beyond this, it would have been pure utopia in 1867 and 2023 to speculate on the details of the organization of the future associated producers of the world.
Marx was aware that even in the 1860s, the ownership of the means of production by individual capitalists was already being replaced by ownership by joint stock corporations. This trend has gone further in our own time. Even in the 1860s ownership of the means of production by joint-stock corporations with shares traded on the stock exchange represented a form of collective ownership of the means of production. It was replacing the ownership of the means of production by individuals or small groups of capitalists called partnerships. Today, corporations or sometimes the capitalist state own the most powerful means of production, not individual capitalists or partnerships. This is an important feature of present-day monopoly capitalism, distinguishing it from early capitalism based on free, not perfect, competition.
The joint-stock corporate form of ownership does not eliminate class antagonisms between the private owners and the workers producing surplus value for the owners of capital. It replaces the ownership of the enterprise by a single individual with the collective ownership of competing groups of non-working capitalists. The contradiction between the workers and the owners is sharpened in the joint-stock corporation ownership phase of capitalism. In the early stages of capitalism, individual owners managed the enterprise. But in the later stage, the owners do nothing but collect dividends.
The rise of joint stock companies is an evolutionary step toward communism. It sharpens the contradiction between the non-working exploiters — stock owners — and workers. Once it became the dominant form of ownership, the continued centralization of capital reduces the number of independent corporations as capitalism continues evolving toward the mathematical limit of the ownership by a single corporation of all means of production, at which point it negates itself.
Marx didn’t expect centralization capital to reach the negation point by a single corporation gaining control of the entire global economy. If a single corporation one day does gain control, it will be an easy task to get rid of the purely parasitic group of non-working stockholders and transform ownership by a single corporation to that of the associated producers. As long as the economy retains its capitalist character, the existence of capitalists remains necessary for the capitalist economy to function. (3) From the moment a single corporation emerges, controlling all the means of production, the capitalist character of the economy disappears.
Well before this, capitalism enters the stage of monopoly capitalism. During this stage of development (which Lenin called imperialism), Marx believed class and national antagonisms would reach a point leading to a political revolution, transferring power to the working class majority. That begins the transitional stage between capitalism and communism, where the state becomes the dictatorship of the proletariat, described in the early years of the Russian Revolution as the massively organized proletariat.
Once the associated producers have gained control of the global means of production and capitalism can no longer be restored, there will no longer be the need for state power to break the resistance of the capitalist class. The existence of capitalists and their class will become an economic impossibility. With no exploiting class to suppress, the state will wither away. The ownership of the means of production by the workers’ state – an organization that forcibly keeps the means of production out of the hands of the capitalist class – as the state withers away will give way to the ownership of the means of production by the globally organized associated producers of the world who will have no need for the state.
Marx’s belief that capital will become increasingly centralized as capitalism develops is contrary to the neoclassical model, where the number of independent capitalists increases toward the limit of infinity. If the neoclassical view is correct, communism is a utopia. If the capitalist economy does trend toward fewer and fewer corporations and ultimately to a single corporation — at which point capitalism is negated — it is the resistance to communism that will prove to be the utopia.
But what drives capitalism toward centralization and ultimately toward its negation? Marx and Engels saw two driving forces. One is the tendency of the rate of profit to fall caused by the rise in the organic composition of capital. The lower the profit rate, the greater quantity of capital needed to live off the profit. If the profit rate were 100% per year, a person with $50,000 worth of capital could live off the profits as they would consume $50,000 of products annually. If the profit rate is only 10%, our capitalist will have only $5,000 to consume per year. It’s difficult to live off such an income in any capitalist country at 2023 prices. The lower the profit rate, the larger the individual capital must be to be viable. This implies a tendency toward larger capitals, which Marx called the concentration of capital.
The other factor Marx and Engels stressed was that as capitalism develops, it can increase production at a faster rate than it can increase markets for the commodities it produces. Why is this? I’ve explored this question throughout this blog, but here is a summary:
First, as long as production retains its capitalist character, money must be a commodity.
Second, money is both a means of circulation and a measure of value. This means that the use value of the money commodity must be the measure of prices and profit. During the upward phase of the industrial cycle, the multiplier and accelerator effects, known to Keynesian economists, drive the economy toward the full utilization of the means of production. As this point is approached, demand starts to exceed supply at current prices, causing prices to rise. The combination of a growing quantity of commodities to circulate and the rise in the price of individual commodities create the need for additional means of circulation.
Creating additional means of circulation requires increased production of money material. The need for additional money material is postponed by a large reserve fund of idle money within the banking system backed by gold accumulated since the last crisis. But as the boom progresses, this reserve fund is depleted. As the money market tightens, credit increasingly replaces money as a means of purchase. Or, as Marx put it, the monetary system is replaced by a credit system.
But debts must be paid or at least serviced. Clearing houses reduce the need for money as a means of payment, but as the total quantity of commodities produced continues to grow and their prices rise, even the clearing houses cannot prevent a need for additional means of payment. The velocity of money turnover accelerates, but no matter how high the velocity of circulation gets, it can’t change the fact that a means of payment cannot settle more than one payment at a time.
Eventually, the point is reached where the only way to keep the boom going is to increase the quantity of money material. The rise in prices, temporarily increasing the profit rate in all branches of industry, except the branch of industry producing money material, reduces the profit rate in the industry that produces money material both relatively and absolutely. From the viewpoint of capitalists producing money material, rising commodity prices mean rising cost prices that eat into their profits. If the boom lasts long enough, the production of money material would cease to be profitable altogether, and the production of new money material would cease.
The takeaway is that during the rising phase of the industrial cycle, the more the economy needs additional means of circulation, the fewer additional means of circulation can be created. There’s no escape from this law as long as production retains its capitalist character. In today’s capitalism, this takes the outward form of the Federal Reserve System having to increase its target for the interest rates on federal funds during periods of economic boom. This situation only ends in a crisis, which initially takes the form of an acute shortage of the means of circulation and payment that ends in recession and mass unemployment.
The crisis appears at first as a credit shortage that seems to be caused by tight money policies of the central bank (the Federal Reserve System in the U.S.) that limits the creation of additional means of circulation by the commercial banking system. This causes the money supply to contract, but as credit contracts, so does commodity circulation revealing underlying overproduction. (4)
Bourgeois economists conclude that the cause of the crisis is some technical defect in the banking, credit, or currency system. They propose various solutions based on reforming the currency, credit, and banking systems. Many such reforms have been tried, but they all fail as long as capitalism is retained. This search for a remedy leads to attempting to establish the currency created by the central bank as non-commodity money. If non-commodity money could be established, the creation of additional means of circulation during a boom could be easily solved. The operation of the law of the value of commodities that rules the capitalist economy makes the establishment of non-commodity money impossible as long as the capitalist character of the economy is retained. The system is doomed at periodic intervals to experience a crisis caused by an overproduction of commodities.
As long as capitalism is maintained, the only way to keep overproduction in check is for the economy to operate below its physical potential. This period of stagnation or semi-stagnation allows the reserve fund of idle money — temporarily incapable of acting as capital — to build up in the banks. (5) Eventually, multiplier and accelerator effects break up the stagnation, leading to renewed overproduction, fueled by a new expansion of credit and credit money ending in a new crisis, followed by another prolonged period of depression/stagnation.
The normal condition of capitalism is that capitalists can produce more commodities than they can sell for a profit. If an individual capitalist increases production too fast, they go bankrupt. If capitalists, driven by the multiplier and accelerator effects, collectively do so — as the laws of capitalism periodically force them to do — it ends in a general crisis of overproduction. Under average market conditions — neither crisis nor boom — the number of independent firms taken together can produce more commodities than the market can absorb at a profit. The result is that the number of individual firms will be reduced through bankruptcy or by smaller firms being absorbed by larger ones.
Crises of overproduction and the aftermath become the main force driving capitalism toward an increasing centralization of capital. Thus, the capitalist economy evolves in the direction of a decline in independent capitalists, which can only end in communism. The combination of free — not neoclassical perfect — competition combined with overproduction whenever the economy operates at a level anywhere near its physical ability to produce means it is free competition itself that breeds monopoly.
Counter-tendencies prolong the life of the capitalist mode of production
There are counter-tendencies to the centralization of capital that prolong the life of the capitalist mode of production. If they didn’t exist, communism would have arrived long ago. What are they?
Monopolies, through their super-profits, attract competitors, which break up the monopolies. Here the centralization of capital creates a counter-tendency toward its decentralization. Favorable stages of the industrial cycle that occur periodically during which the capitalists are forced by competition to invest the reserve funds built up since the last crisis, unleashing the multiplier and accelerator effects, lead to sudden expansions of the market. During such rapid market expansions, the market expands faster than production can be expanded.
Commodities fly off the shelves during booms, and capitalist industry can’t keep up with demand, causing prices to rise. Since the existing capitalists cannot fully meet boom-time demand, new ones emerge to fill the gap, creating a tendency toward decentralization. These contradictory tendencies toward centralization and the decentralization of capital don’t operate with equal force. The tendency toward centralization of capital prevails over the tendency to decentralize capital in the long run. Over time, capitalism, driven by its central economic law — the law of the value of commodities — evolves in a direction that eventually ends in communism. In a nutshell, this is Marx’s theory of monopoly capitalism.
Hilferding’s and Lenin’s theories of monopoly capitalism
Hilferding’s and Lenin’s theories of monopoly capitalism are built on Marxist foundations. Since they lived after Marx’s time, the centralization of capital had advanced, and they could be more concrete about the forms centralization was taking. The underlying difference between Hilferding and Lenin was that Hilferding expected that the growing centralization in the form of finance capital would open up a democratic bridge from monopoly capitalism to communism that would be crossed peacefully.
In Germany before World War I, the rapid growth of capitalist industry meant that the number of industrial workers who were members of Social Democratic-led labor unions was rapidly increasing. The number of Social Democratic votes in elections and Social Democratic representatives in the Reichstag — the German parliament — was growing. The monarchy still controlled executive power in Germany, but the crown was gradually retreating before the power of the Reichstag (which had the power of the purse). It seemed only a matter of time before the Reichstag would gain control of the executive power as parliament had already done in Great Britain and France, while the Social Democrats would gain control of the Reichstag.
On the economic side, Hilferding believed top Berlin banks had gained control of the monopoly corporations and organized them into cartels and syndicates. The domination of the Berlin banks over cartelized industry was not the same as control of the entire economy by a single corporation, but Hilferding believed it was close. On the political plane, he believed it would be only a matter of time before Social Democrats would win a majority in the Reichstag, transforming it into an organ of working-class power. Once the working class controlled the Reichstag and wrestled control of the executive power from the monarchy, it would have conquered political power in Germany.
The highly centralized rule of finance capital over cartelized production would make it easy for a Social Democratic workers’ government to take over the economy and organize it into a planned economy of production for use, as opposed to production for profit, with only minimal resistance from the capitalists. A general strike could overcome any resistance that might occur. The following decades made mincemeat of Hilferding’s hopes for a peaceful democratic transition to socialism in Germany. Instead of what he was expecting, there came World War I, hyperinflation, the super-crisis of 1929-1932, and the Third Reich, at whose hands Hilferding was to meet his death in 1941.
Lenin’s views are expressed in “Imperialism, the Highest Stage of Capitalism” and “State and Revolution.” The big difference between Hilferding and Lenin is that Lenin didn’t believe monopoly capitalism was opening the door to a peaceful evolution to communism. On the contrary, Lenin believed monopoly capitalism — a.k.a. imperialism — had instead shut the door to any peaceful transition. He agreed that monopoly capitalism represented the transitional stage based on free competition — which Shaikh confuses with the neoclassical notion of perfect competition — and the future communist society. Monopoly capitalism was anything but peaceful. It led to a world war among a handful of imperialist robber states that held the rest of the world in thrall.
In Lenin’s view, the difference between bourgeois democracy and old-fashioned monarchical despotism, best represented by Russian Czarism, was disappearing as the bureaucratic-military machine of repression grew powerful even in the most democratic capitalist nations. The road from capitalism to communism economically was being opened by monopoly capitalism. That road was soaked with blood as capitalists violently resisted the socialist revolution as they fought wars with each other over access to markets, raw materials, and cheap labor.
Baran and Sweezy’s ‘Monopoly Capital’
“Monopoly Capital,” by Paul Sweezy and Paul Baran, presented a different picture of monopoly capitalism than that found in Hilferding or Lenin. I focus on “Monopoly Capital,” though it should be remembered that Sweezy lived for years beyond the book’s publication in 1966, so it doesn’t represent the end of his evolution as an economic thinker. Baran died in 1964 before their book was published. Baran was born in Czarist Russia and was educated at universities in the Soviet Union, Germany, and the U.S. Baran, of Jewish origin, was forced to flee Germany after the rise of the Nazis and finally found refuge in the United States, where he formed a life-long friendship with Sweezy and lived out the rest of his of life.
Baran was involved with the wartime planning of the U.S. war economy during World War II — and like many left-wing intellectuals, including Sweezy and Herbert Marcuse, worked for the Office of Strategic Services, the forerunner of the CIA during World War II. (See Wikipedia on Paul A. Baran 1909-1964) After the war, he found employment at the Federal Reserve Bank of New York. Finally, he got a tenured job at Stanford University in California.
During the Cold War, Baran was the only Marxist economics professor in the entire U.S. Unlike Sweezy, who came from a wealthy family and didn’t need an academic income to live, Baran needed his Stanford job. As the witch hunt intensified, there were many attempts by the FBI — the U.S. political police — and Stanford University to drive him out of his academic job. Protected by tenure, Baran managed to cling to his job.
After authoring “The Political Economy of Growth” — first published in 1957 — Baran worked with Sweezy on the manuscript that became “Monopoly Capital.” He died of a heart attack in 1964 before the book was published in 1966. During his life, as he was blown by the winds of war, revolution, and fascism from country to country, Baran was exposed to the full range of ideas that influenced 20th-century economic thought, both Marxist and bourgeois.
In the 1930s, the young Paul Sweezy, trained in neoclassical economics at Harvard University, was aware that under modern capitalism, the number of independent firms is nowhere near the limits of infinity, which was the key assumption of the neoclassical model of perfect competition. In the decisive branches of industry, Sweezy realized the decision by individual corporations on how much to produce had a considerable effect on the total quantity of that commodity type that appears on its markets and its price. Only in agriculture, where in the U.S. there were still millions of independent farmers, did market conditions approach the conditions assumed by neoclassical models. (6) By the 1930s, in basic industry, production was dominated by a few giant corporations, each producing a percentage of a particular type of commodity that did not come near the mathematical limit of zero.
One thing that Sweezy, Baran, and Shaikh have in common is their failure to comprehend that modern capitalist crises — such as the one developing at present, April 2023 — are crises of the relative overproduction of commodities. The common problem was that they all accepted the claim that modern money could be made into non-commodity money. Though “Monopoly Capital” is about capitalist stagnation and the difficulties of realization, the term overproduction is not mentioned once. In Marxist works written before, crises are described as overproduction crises even if the authors didn’t fully understand why they occur. But after the book — the term or even the concept of general commodity overproduction as the essence of modern capitalist economic crises — faded away from the academic Marxist tradition outside the socialist block. In countries of the imperialist West — especially since the death of Ernest Mandel in 1995 and Victor Perlo in 1999 — the term is increasingly confined to popular articles appearing in the small circulation socialist press. These writers know the old-time Marxist language but lack university economics degrees and aren’t taken seriously by academics.
The term overproduction does appear in Shaikh’s “Capitalism” but primarily within quotations from Marx. As we’ve seen, Shaikh believes pure fiat money, non-commodity money, combined with the fractional reserve banking system, enables almost unlimited growth in demand. In his analysis, capitalists can’t glut the market. He sees current economic crises not as overproduction crises but as crises of insufficient production of surplus value. The closest he gets is his belief that the crisis of the 1970s was a crisis of the absolute overproduction of capital. Marx describes such a hypothetical crisis in Volume III of “Capital” as an illustration to explain how capitalism regulates the population of workers and potential workers — the industrial reserve army — to meet the needs of capital.
A crisis of absolute overproduction, where the accumulation of capital goes so far that the capitalists run out of additional workers, is not the same as relative commodity overproduction, where capitalism runs into the barrier of a lack of markets sufficient to absorb the commodities produced at profitable prices. I don’t believe that when Marx talked about overproduction crises, he meant crises of the absolute overproduction of capital — though such crises are conceivable — but rather crises of the relative overproduction of commodities. At best, the modern Marxist uses the term overaccumulation. In the mid-19th century, Marx criticized economists who acknowledged a surplus of capital but denied the overproduction of commodities.
In his earlier work (1942) based on Marx’s work, “The Theory of Capitalist Development,” Sweezy attempted to explain modern capitalist crises. He did not attempt to describe the Marxist theory of money. There was no problem with that in a work popularizing Marxist ideas, but Sweezy should have refrained from discussing the cause of capitalist crises since they can’t be understood without understanding money. Sweezy described crises as an overproduction of the means of consumption (Department II) relative to the means of production (Department I). Sweezy was aware of the ever-increasing mechanization of production but arbitrarily assumed that Department I could not grow faster than Department II.
While such a disproportion between the departments is possible, we would have a partial overproduction of some commodities — the means of consumption — relative to underproduction of other commodities — the means of production. This theory of crises caused by this disproportion was popular in the days of the Second International (1889-1914). But it doesn’t go beyond Say’s Law which allows an overproduction of some commodities — the means of personal consumption backed by shortages of other types of commodities — the means of production. Sweezy was later dissatisfied with this explanation which led him to the dead end of “Monopoly Capital,” a book he was also dissatisfied with. (See “Baran and Sweezy’s Monopoly Capital, Then and Now,” an interview with John Bellamy Foster)
In “Theory of Capitalist Development,” Sweezy rejected Marx’s law of the tendency of the profit rate to fall. In that book, he held that the tendency of the profit rate is indeterminate because it’s an open question whether the rise in the rate of surplus value will be sufficient to cancel out the tendency of the rate of profit to fall due to a rise in the organic composition of capital. In “Monopoly Capital,” he and Baran go further in rejecting the law of the tendency of the rate of profit to fall for the monopoly phase of capitalism. They claimed the law of the falling rate of profit only applies to competitive capitalism. Under monopoly capitalism, the monopoly pricing power of corporations gives birth to the opposite, a tendency for the profit rate to rise, called the tendency of the surplus to rise.
By the time of “Monopoly Capital,” Sweezy had rejected Marx’s law of the tendency of the profit rate to fall at least in the monopoly phase of capitalism and continued to have no idea what a crisis of relative overproduction of commodities was. As a child of the Depression, he knew capitalism could produce horrible economic depressions. He believed this tendency toward depression applied only to the monopoly phase of capitalism. The earlier pre-1870s phase of capitalism tended toward full employment of capital, if not of workers. This shows that both authors, as they wrote the manuscript that became the book, remained under the influence of neoclassical ideas. However, they believed their theory aligned with Marx’s work and his labor-based theory of value.
In neoclassical economics, capitalism operates close to full employment of workers and machines but only to the extent that perfect competition prevails. If competition is not perfect (individual firms control a large enough market share that their production decisions affect prices), unemployment of machines and involuntary unemployment becomes possible even under neoclassical assumptions. This is the reasoning in “Monopoly Capital.”
Baran and Sweezy rejected the law of the tendency of the profit rate to fall in the monopoly stage of capitalism. They didn’t understand that capitalist overproduction prevented full employment of the means of production or workers, even under free competition.
In my opinion, “Monopoly Capital” failed as an analysis of capitalism, monopoly or otherwise, because the authors ignored Marx’s theory of value. The law of value of commodities was discovered by the classical economists and Marx, whose analysis of the form of value — the foundation of Marx’s theory of money — goes beyond the analysis of Ricardo and other classical economists. The law of value would still exist as an objective law ruling capitalist production even if the classical economists or Marx had never lived. Under capitalism, you’re free to ignore the law of value, as did Baran and Sweezy, but the law of value will not ignore you.
A critique of Baran and Sweezy’s ‘Monopoly Capital’
In “Monopoly Capital,” the monopolistic giant corporations cut costs but never prices. Baran and Sweezy wrote, “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 …” In this passage, we see that they believe that during the competitive phase of capitalism, firms were so small they produced “a negligible fraction of a homogeneous output for an anonymous market,” the foundation of the neoclassical system. They continue: “… 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.” (Baran and Sweezy, p. 6)
In neoclassical price theory, perfect competition prices will equal marginal costs. These were equivalent, Baran and Sweezy believed, to Marx’s prices of production. If monopoly prevails, competition will be imperfect. Then marginal cost will, according to the theory of monopoly competition, equal marginal revenue. The fewer the number of capitalists in a branch of production, the higher prices will be relative those that would prevail under competitive conditions. In Marxist terms, they assumed that under monopoly capitalism, monopoly capitalists sell their commodities above their value. (7) In 2016, Monthly Review published two chapters Sweezy had decided not to include in “Monopoly Capital” because he and Baran were unable to reconcile their differences on it before Baran died. One of these chapters — I don’t know if the author was Baran or Sweezy though criticism included in the chapter published by Monthly Review implies the author was Baran — is entitled “Some Theoretical Implications.” It deals with the relationship between Marx’s value theory and the views they were expounding in what became “Monopoly Capital.”
The author writes, “But as the price of labor power (the level of wages) rise in the course of capitalist development to a level significantly higher than the socially necessary minimum, matters become much more complicated. The value of labor power ceases to be a definite irreducible magnitude, it becomes rather a flexible quantity susceptible to significant variations. Monopolistic profits can be earned under such circumstances not merely by the monopolists’ redistributing the aggregate surplus value in their favor, but by increasing what is appropriated by the capitalist class beyond the surplus value aggregate by means of a price policy that reduces the real wages of labor.” (See “Some Theoretical Implications” at Monthly Review)
This means monopolist capitalists can realize extra profits by selling commodities above their value to working-class consumers. The workers, Baran and Sweezy believed, sell their labor power, as under competitive capitalism, to the capitalists at their value in money terms. But capitalists sell commodities at money prices above the value of the commodities to the workers. These profits are called profits upon alienation. In terms of money, the workers are paid the value of their labor power, but in terms of the commodities they buy with their wages, they are paid less than the value of their labor power. These profits upon alienation are added to the surplus value, which transforms surplus value into “the surplus” of “Monopoly Capital” and of the Monthly Review school.
Baran and Sweezy assumed that a permanent rise in prices above the value of commodities contrary to the law of value is possible. This is the root of their mistakes. (8) As with Malthus, who Marx criticized, in “Monopoly Capital,” capitalists realize a surplus by selling their commodities at prices above their value. (9)
The problem then becomes how to realize the surplus. This is done as it is with Malthus by the sale of commodities to third persons who are neither workers nor capitalists. For Malthus, the third persons were landowners who, unlike capitalists, spent their incomes on consumer goods rather than accumulating them like the capitalists do, as well as the state and its dependents. For Baran and Sweezy, the third person is the army of salespeople employed by monopoly corporations, the state, and its dependents.
“Theory of Capitalist Development” and “Monopoly Capital” avoided the question of the nature of money. (10) Prices, which play an important role in “Monopoly Capital,” are measured in terms of money. You can only analyze prices by properly analyzing money. Like most Keynes-influenced economists, they accept the view that money is or should be created by the monetary authority, not by for-profit capitalist gold miners and refiners. The nature of money is ignored in “Monopoly Capital.”
In “Capitalism,” in contrast, Shaikh deals with the history of money. He acknowledges it begins as a special commodity produced by private individuals but, at a certain point, gives way to state money that eventually becomes pure fiat money — non-commodity money. While he doesn’t come to the correct conclusions as to the nature of modern money, he’s aware of the problem — more than you can say for Baran and Sweezy.
Keeping this in mind, we should examine why the theory of profits upon alienation — the surplus — where profits arise in the sphere of circulation by selling commodities above their value doesn’t work. Baran and Sweezy ignored the question of the money commodity that, in its use value, measures values and profits. We can’t do this if we are to analyze prices. Assume that gold is the money commodity. If the gold-producing industry is in the hands of monopoly capitalists, their monopoly power cancels out the monopoly power of the other monopoly capitalists who sell commodities priced in gold terms.
But suppose gold is in the competitive sector where competition reigns supreme, and commodities are sold at their values or below. In that case, monopoly capitalists can sell their commodities above their values, or in Shaikh’s terminology, above their direct prices. But there will be a limit on the monopoly capitalist’s ability to do so. If prices are raised too high, the profitability of gold mining and refining capitalists is wiped out, and gold production will cease. The capitalist economy will be unable to create additional means of circulation. This can only be overcome by lowering, in gold terms, the prices charged. This price lowering must be sufficient to restore a rate of profit that would attract competitive capitalists into gold mining and refining.
In theory, the monopolies — contrary to the claims of “Monopoly Capital” — will not be able to permanently push up prices, so as time goes on, they generate a rising surplus. That’s the theory, but what’s the actual history of prices? As with any other science, we must check our theories against empirical data. If our theory is in contradiction, we’ll have to replace it, as we can’t replace empirical data.
Next month I’ll examine the concrete history of prices.
To be continued
(1) Under the U.S. legal system, grand juries have the power of indictment, while the House of Representatives can impeach federal officials. When a federal official is impeached, they’re tried by the Senate. Penalties on conviction of an impeachment include removal from office and loss of pension and, if the Senate so decides, can include being barred from holding another federal office. To be convicted, two-thirds of the Senate must vote for impeachment. Conviction isn’t the equivalent of a criminal conviction and involves no fines or imprisonment. Donald Trump was impeached twice by the House of Representatives. The first time, he was charged with holding back military supplies destined for the Zelensky government in Ukraine to force the Ukrainian government to investigate Biden’s son Hunter on criminal charges. Trump allegedly hoped the resulting scandal would lead to Biden’s defeat in the presidential election.
The second impeachment was made right after the events of January 6, 2021, when Trump encouraged a mob to disperse Congress in hopes of preventing it from certifying a Biden victory in the 2020 election.
The first impeachment was a largely partisan attempt by the Democrats to embarrass Trump. But the second was more serious as it involved an attempted coup to remain in power by forceful and illegal methods, unprecedented in U.S. history. The second impeachment would have shortened Trump’s time in the White House by a few days. It enjoyed more bipartisan support. If convicted, he probably would have been barred from holding a federal office again, permanently removing him from presidential politics. Some Republican senators voted for this, but most did not, fearing the wrath of Trump’s base in their future election campaigns. As a result, Trump is now a declared candidate for the office of president for the January 20, 2025, to January 20, 2029, term. (back)
(2) In the 1960 election, the actions of the Chicago Democratic Party machine closely allied to the Chicago Outfit — the Chicago mob once headed by Al Capone — delivered the State of Illinois electoral votes to Democrat John F. Kennedy. If Illinois votes had gone instead to Republican Richard Nixon, it would have been Nixon, not Kennedy, who would have been put into the White House. In the 2000 presidential election, the vote in Florida was given to George W. Bush, giving him an electoral college victory. Still, he did not win the popular vote, losing by about half a million votes. The Florida election was flawed because under then-governor Jeb Bush — George W. Bush’s brother — police activity on election day prevented tens of thousands of African-American voters from reaching the polls. Though racist and thoroughly anti-democratic, even according to the rules of bourgeois democracy, this sort of thing is not without precedent in the history of U.S. elections, including presidential ones.
This didn’t prevent Bush from declaring victory and Vice President Albert Gore, the Democratic candidate, from conceding and offering his congratulations and support. But as the tally of the Florida votes continued, Bush’s electoral victory melted away to a dozen or so votes. A recount was ordered. In Dade County, a mob of young Republicans — led by Roger Stone, who later emerged as a close adviser to Donald Trump, the Wall Street Journal called it the “Brooks Brothers Riot” because they were a gang of corporate-dressed Republican lawyers as well as House and Senate staffers — attacked the office where the votes were being recounted forcing it to be suspended. This event turned out to be the forerunner of a much larger attack on the Capitol on January 6. In both cases, Republican supporters attacked a government office conducting lawful business concerning who was to serve as president of the United States.
The difference was that, in one case, a county office was attacked. In the other, it was the chambers in the Capitol building where the Congress, which under the constitution is a coequal branch of government with the executive (presidency) and judiciary, was meeting to certify the results of the 2020 presidential election.
In 2000, the Supreme Court, dominated by Republicans, stepped in. Instead of calling the Florida Republican Party to order as it should have done under the laws governing presidential elections, the Court, on a purely partisan 5-to-4 vote, ordered the recount suspended and handed the election to Bush. An unofficial recount of the vote later revealed that Gore had won the popular vote in Florida, and the votes of Gore’s electors should have been counted in the electoral college. This would have meant Gore would have been president between 2001 and 2005.
African American Democratic politicians wanted to continue the fight against what was now a clear move by the Republican Party to steal the presidential election of 2000. The Party of Order supported Bush. As a disciplined member of the Party of Order, Gore conceded the election to Bush and never challenged his right to the presidency. The Party of Order did not go unpunished for its decision to support Bush. The fact that the Republicans got away with stealing the election in violation of the rules opened the road to January 6. Future historians may see the 2000 presidential election as the turning point where U.S. imperialist democracy began to unravel. (back)
(3) The absolute need for a class of capitalists in a market economy of generalized commodity production is the fatal flaw of the various models of market socialism. Some of the more naive supporters of Gorbachev’s perestroika hoped the reforms would lead to a market economy without capitalists. Instead, they ended up with a market economy with capitalists. This was no accident but was dictated by the basic operation of the law of the value of commodities governing a generalized market economy, also known as a capitalist economy. (back)
(4) This is the basis of Milton Friedman’s discovery that contractions in the money supply cause contractions in economic activity — recessions. In reality, commodity overproduction relative to money material causes the tightening of credit, and that causes the money supply to contract. Friedman took one link in this chain of causation — the contraction in the money supply — and claimed it was the real cause of recessions. For Friedman, since the central bank or monetary authority controls the money supply, once central banks come into existence, recessions are caused by their mistaken policies. Since modern central banks are viewed as governmental or quasi-governmental organizations, modern recessions, including the recession of 1929-1933, are caused not by the operations of the capitalist system but by unwise government intervention in the economy. For that wisdom, he won a Nobel Prize and today is considered one of the greatest economists of the second half of the 20th century. This is not to deny that central banks can worsen recessions or cause a recession that could otherwise be avoided. But once overproduction has developed to a certain point, no central bank policy can avoid recession. (back)
(5) The period between 2009 and the COVID shutdown is an example of such a period. Another example would be that between 1933 and the outbreak of World War II. It’s a norm for the capitalist economy to operate well below its physical ability to produce. Whenever the capitalist economy approaches its physical ability to produce, it’s a sure sign a new overproduction crisis is approaching. (back)
(6) Under the New Deal, the government began to pay farmers not to produce, which cartelized agriculture, with the government acting as an organizer of the cartel to save the family farmer. (back)
(7) Neoclassical economists claim the real-world situation where only a small number of firms produce commodities of a given type and quality approximates the neoclassical model where an almost infinite number of firms produce a commodity of a certain type and quality. Using these assumptions, Baran and Sweezy show that under these monopolistic conditions — anything but perfect competition is defined as monopoly — the economy tends toward less than full utilization of capacity and a degree of (involuntary) unemployment. While their theory is far superior to textbooks that assume unlimited independent capitalists and full employment, it’s still built on neoclassical foundations. (back)
(8) It’s true that the prices produced by capital at an above-average organic composition, are sold at prices above their values. However, this is compensated for by the fact that other commodities are sold below their values. (back)
(9) Thomas Robert Malthus, most famous for his population theory, summed up his claim that the population rises geometrically, but the means of subsistence increase arithmetically. Any attempt to improve the conditions of the working class will fail because, to the extent it’s successful, it will lead to a new geometric rise in the population that will again outstrip any rise in the means of subsistence. Though less well known, Malthus later put forward the idea that the landlords’ rental income and the state’s expenditures on war are necessary to provide a market for the commodities produced by industrial capitalists.
According to Malthus, industrial capitalists must save a portion of their profits to engage in accumulation. As a result, there’s a tendency for them to produce a glut of commodities leading to depression/stagnation. This can be overcome with the help of the landlords, state-supported clergy, and the military, who, unlike the capitalists, consume their entire incomes. Ricardo and his supporters argued that lower rents — achieved by removing the protective tariffs that protected British agriculture — and reducing state expenditures to the minimum would accelerate the rate of capitalist accumulation and, thus, economic growth. The fact that capitalists were engaged in accumulation meant that they were spending money on capital goods instead of personal consumption items. Since both items of personal consumption and capital goods are commodities, Ricardo denied that a rapid accumulation of capital could lead to a general glut. Like Say, Ricardo didn’t believe a general glut of commodities was possible because they are the means of purchase of other commodities.
Baran and Sweezy claimed that the monopoly capitalists are so rich that they are unable to fully spend their monopoly-generated surplus on means of consumption and cannot fully spend the full surplus on accumulation because that would undermine the monopoly-generated surplus. A large portion of the commodities produced must be consumed by third consumers, such as the armies of salespeople assembled by the monopoly corporation and by the state and dependents. They concluded that huge military expenditures are necessary if a 1930s-like depression is to be avoided because special interests, like real estate, prevent the government from spending sufficient money on socially useful projects such as public housing. While Baran and Sweezy deplore this — Malthus embraced it — their argument that third persons are necessary to purchase the commodities produced if depression and mass unemployment are to be avoided is strikingly similar to that of Malthus. However, Malthus applied it to the competitive capitalism of his day, while Baran and Sweezy used neoclassical reasoning to say it’s valid only for monopoly capitalism.
In 1954, International Publishers put out “Marx and Engels on Malthus: selections from the writing of Marx and Engels dealing with the theories of Thomas Robert Malthus.” If you can find a copy of this work, I highly recommend it. Though it’s aimed at Malthus, it reads like a critique of “Monopoly Capital” and the Monthly Review school. (back)
(10) Almost all the left Keynes-influenced economists who came of age during the 1930s ignored money. Neoclassical economists claimed that lowering the central bank discount rate would be sufficient to end a recession. Though the Federal Reserve System and the Bank of England lowered discount rates, this policy failed to end the 1930s Depression. The more progressive young economists of the time ignored monetary policy and concentrated on fiscal policy, which they believed alone could end the Depression. In addition, the younger progressive economists believed the government should spend money on useful projects such as public housing. The failure of Baran and Sweezy to deal with the nature of money was typical of the work of the left-of-center economists of their generation. Right-wing economists led by Milton Friedman revived interest in monetary policy. They claimed that a correct monetary policy alone is sufficient to maintain near-to-full employment as long as the government follows free market policies and “monopolies” like labor unions — but not large corporations — are broken up. According to Friedman and other orthodox neoclassical economists, the government best helps the poor and disadvantaged by doing essentially nothing. (back)
A Critique of Crisis Theory 