Baran (& Sweezy)

Monopoly Capital at the Half-Century Mark

by John Bellamy Foster

Topics: Economic Theory , Marxism , Monopoly , Political Economy

 Places: Americas , United States

[Monopoly Capital] represents the first serious attempt to extend Marx’s model of competitive capitalism to the new conditions of monopoly capitalism.

Howard J. Sherman, American Economic Review, 19661

A list of Marxist writers on political economy [since the Second World War] whose works are known to a relatively large number of activists would be very short, at least until the beginning of the 1960s. Three names would stand out: Sweezy, Dobb, and Baran. It is not by chance that the label of “neo-Marxist’ has been applied to their works, so that they appear to be the only inheritors of the tradition of Marxist political economy. Within the German student movement, for example, Baran and Sweezy seem to be the two theoreticians whose works have been best received and most widely read.

Mario Cogoy, Les Temps Modernes, 19722

A half-century after its publication, Paul Baran and Paul Sweezy’s Monopoly Capital remains the single most influential work in Marxian political economy to emerge in the United States.3 Like any great theoretical work that has retained its influence over a long period of time, Monopoly Capital‘s significance today derives not simply from the book itself, but from the complex debates that it has generated. In recent years, interest in Baran and Sweezy’s magnum opus has revived, primarily for two reasons: (1) the global resurgence of debates over the constellation of issues that their work addressed—including economic stagnation, monopoly, inequality, militarism and imperialism, multinational corporations, economic waste, surplus capital absorption, financial speculation, and plutocracy; and (2) the new, fundamental insights into the book’s origins resulting from the publication of its two missing chapters and the public release of Baran and Sweezy’s correspondence.

I shall divide this introduction on the influence and development of the argument of Monopoly Capital over the last fifty years into three parts: (1) a brief treatment of the book itself and its historical context; (2) a discussion of responses to Monopoly Capital, and of the development of the tradition that it represented, during its first four decades, up to the Great Financial Crisis that began in 2007; and (3) an assessment of the continuing significance of monopoly capital theory in the context of the historical period stretching from the Great Financial Crisis to the present.

The Work

Monopoly Capital was subtitled An Essay on the American Economic and Social Order, referring both to the book’s provisional character and historical limitations on its scope. Baran and Sweezy made it clear that their intention was not to try to replace Marx’s Capital itself, but rather to raise the question of modifications in the system’s laws of motion under monopoly capitalism. For example, Monopoly Capital did not include an analysis of the labor process—instead, it simply assumed the continuing validity of Marx’s own theory of labor exploitation. Their book took its primary significance from the changing character of the individual unit of capital, or the typical capitalist firm, over the course of the twentieth century. As a result of such changes, they argued, monopoly must now be “put…at the very center of the analytical effort” in any attempt to understand the latest stage of capitalist development. In this way they sought to give a sharper meaning to what thinkers like Rudolf Hilferding and V. I. Lenin had referred to as “finance capitalism” and “the monopoly stage of capitalism.”4

The dominance of monopolistic accumulation at the center of the system meant that the whole nature of competition under capitalism had been altered, taking on the form of oligopolistic rivalry. Individual firms or small clusters of firms, protected by barriers to entry and by the sheer scale of their operations, gained extensive control over price, output, investment, and innovation. Such giant firms increasingly operated on a global scale as multinational corporations, and attained significant leverage over the state. These new, mammoth entities were long-lived accumulation mechanisms, constantly mutating into larger, more centralized corporations. The typical firm was not a price taker but a price maker. Genuine price competition or price wars of the kind that would destabilize the co-respective relations between oligopolistic enterprises was effectively banned. Above all, such firms enjoyed widening profit margins and typically grew in size relative to the economy as a whole. It was these features of the firm under monopoly capitalism that led Baran and Sweezy to introduce their thesis of “the tendency of surplus to rise”—monopoly capitalism’s inversion of Marx’s famous theory of the tendency of the rate of profit to fall.5

The economic surplus was conceived in its simplest definition as the difference between the costs of production and the price of the actual (or potential) output generated.6 Under the monopoly stage of capitalism, the primary contradiction at the center of the system shifted from the generation of surplus to its absorption. Capital continually produced more surplus than it could absorb in existing and prospective markets. The result was a tendency to economic stagnation, since surplus (ex ante) that was not absorbed meant economic losses to the system, pulling down growth.

Under monopoly capital, therefore, the economy confronted chronic problems of surplus absorption, excess capacity, unemployment, and underemployment. “The normal state of the monopoly capitalist economy,” Baran and Sweezy contended, “is stagnation.”7 Even technological innovation could not suffice to overcome this tendency, since apart from what they called “epoch-making innovations” on the level of the steam engine, the railroad, or the automobile—which changed the whole spatial and temporal context of production while also expanding demand—innovations tended to be endogenously controlled by monopoly capital itself, and introduced only in accordance with the investment needs of dominant corporations. (None of this meant that Baran and Sweezy underestimated technological change itself. In 1957 Sweezy was the anonymous author of one of the most prescient analyses of technological development of the age, in the form of a pamphlet entitled The Scientific-Industrial Revolution, written for the Wall Street corporate research group Model, Roland and Stone.)8

Yet the monopoly capitalist economy did not simply sink into a deep depression. Instead, the system developed its own internal and external defenses, promoting economic expansion through economic waste and state spending—the latter often in the form of unproductive expenditures, such as military spending. The result was a growing irrationality at every level of the economy—from the sales effort to product obsolescence to socially inefficient and meaningless products to the expenses of empire. Such waste resulted in the squandering of human lives and effort, and the transformation of capitalism’s “creative destruction,” as Joseph Schumpeter famously called it, into a more pervasive, uncreative destruction—toward the products of human labor, the environment, and ultimately humanity itself.

Assessing the scale of waste in the economy, Baran and Sweezy returned to the old concept of unproductive labor, extending it to account not only for what was unproductive from the standpoint of the individual capitalist (i.e., not producing surplus value), but also from the standpoint of capitalism in general (in which the waste of monopolistic competition, e.g. advertising, became visible), as well as from the standpoint of society as a whole (i.e., from the critical view of a more rationally planned, socialist society).9

The impact of Baran and Sweezy’s Monopoly Capital on readers in the late 1960s and early 1970s had much to do with the way it engaged with, but also transcended, the Keynesian Revolution, associated with John Maynard Keynes’s 1936 General Theory of Employment, Interest and Money—a work which had given new life to orthodox economics, enhancing the role of the state in the management of the economy. At the heart of Keynes’s incomplete break with neoclassical economics (which later allowed his analysis to be reincorporated into neoclassical theory in what Joan Robinson aptly called “bastard Keynesianism”) was his critique, along lines first developed by Marx, of Say’s Law of markets, whereby supply was thought to create its own demand.10 Say’s Law had suggested that economic crises could only stem from supply-side pressures—that is, from increased costs, particularly of labor—and never from the demand side, i.e., from a lack of effective demand. Keynes decisively demonstrated the logical fallacy of Say’s Law, and envisioned a new role for governments in the promotion of effective demand through state spending.11

However, the major breakthroughs in the Keynesian Revolution were first developed not by Keynes but by the Polish Marxist economist Michał Kalecki, several years prior to the publication of the General Theory. (Ironically, Kalecki was often seen as a mere follower of Keynes and a developer of his ideas.) In a series of works from the early 1930s through the 1960s, Kalecki developed an analysis of demand-side weaknesses in the capitalist economy, based in the concepts of class and monopoly. He put particular stress on the rise in “the degree of monopoly.”12 Kalecki’s close colleague at the Oxford Institute of Statistics during the Second World War, the Austrian economist Josef Steindl, was to extend this analysis in his 1952 Maturity and Stagnation in American Capitalism, connecting the growth of monopolistic accumulation to the tendency toward economic stagnation.13

It was on the basis of Kalecki and Steindl’s work in particular—as well as their own earlier analyses, in Sweezy’sThe Theory of Capitalist Development (1942) and Baran’s The Political Economy of Growth (1957)—that Baran and Sweezy developed the distinctive critique of the post-Second World War U.S. capitalist system that distinguished Monopoly Capital.14 Going beyond Kalecki and Steindl, they advanced an analysis that was as political as it was economic. The book’s focus on militarism and imperialist interventions transformed them from mere accidental historical developments—as in liberal thought and even in many radical readings—into structurally necessary elements of capitalism’s global expansion. The real causes of the Vietnam War were laid bare. The tactics of Madison Avenue, and the rise of the so-called consumer society were linked with a powerful critique of the sales effort under monopoly capitalism. Institutional racism and its connection to imperialism were exposed. In this sense, Baran and Sweezy offered a fairly complete “essay-sketch” of the dominant issues of the age, in line with the epigraph to their book, Hegel’s famous statement that “the truth is the whole.”15

The most obvious problem facing Marxian theory in the 1960s was the failure of the working class in the industrial capitalist economies to continue their struggle against capitalism, a failure that had become even more apparent after the system rose out of the Great Crisis represented by the First World War, the Great Depression, and the Second World War. Although revolutions had broken out in the periphery and semi-periphery of the system in Russia and the third world, the working classes in the advanced capitalist centers had become increasingly reformist and even conservative. Baran and Sweezy’s analysis, while continuing to sympathize with working-class struggles in the United States, particularly among its most marginalized populations, gave more attention to revolutionary potential of third world peoples struggling against imperialism. Nevertheless, the tendency toward stagnation suggested that continuing economic contradictions at the center of the system could conceivably lead at some point to a more rebellious working class there as well.

In its clarity of thought and style—a quality that even the Economist commended—Monopoly Capital was able to present many of the complex contradictions associated with the rise of the giant corporation in easily accessible terms.16 Still, most readers were mainly influenced by Baran and Sweezy’s more obvious historical observations, and failed to recognize the depth of the theory behind these observations, or their larger implications. Subsequent radical thought was slow to recognize the book’s subtler insights and to incorporate its ideas creatively and constructively. In each successive decade, Monopoly Capital was read differently, reflecting nothing so much as the changing historical conditions of the times. The range of responses to theirmagnum opus by generations of radicals reveals much about the developing political-economic critique of capitalism since the Second World War.

The Debate on Monopoly Capital: The First Four Decades

1966–1975

Paul Sweezy had early on established a strong reputation as an assistant professor of economics at Harvard, publishing pioneering work in the theory of oligopolistic pricing and other areas. In 1942 Sweezy had writtenThe Theory of Capitalist Development, widely considered the finest synthesis of Marxian economics of its time. On being released from military service at the end of the Second World War, he resigned his position at Harvard with more than two years still remaining on his contract, forsaking the possibility of tenure in order to concentrate on his writing and his hope of eventually starting a socialist magazine. (Four years later, in May 1949, the first issue of Monthly Review appeared, edited by Sweezy and Leo Huberman.)17

From 1949 until his death in 1964, Paul Baran was a professor of economics at Stanford University—and the only Marxist economist to hold a tenured position at a major U.S. university. In 1957, he published The Political Economy of Growth, helping to launch dependency theory as a radical response to mainstream development economics in the post-Second World War period.

Considering their respective reputations, Baran and Sweezy’s joint work was eagerly awaited by critics of the system all over the world. It did not appear suddenly: the book had a gestation time of about ten years, and only came out in 1966, two years after Baran’s death. Sweezy prepared the final manuscript based on chapters that they had authored individually and then reworked together, reluctantly leaving out two additional chapters drafted by Baran that had not been sufficiently revised by the two of them. (These two chapters, “Some Theoretical Implications” and “The Quality of Monopoly Capitalist Society: Culture and Communications,” were published in Monthly Review in July-August 2012 and July-August 2013, respectively.)18In 1965, Sweezy explored the possibility of publishing Monopoly Capital with the mainstream British publisher McGibbon and Kee. Although the book received a highly favorable external reviewer’s report which was passed on to Sweezy, for reasons still unclear, no contract was signed, and the book was published by Monthly Review Press on March 26, 1966, the second anniversary of Baran’s death.19

The initial response to Monopoly Capital was startling, especially for a work of Marxian economics during a tense phase of the Cold War. It was reviewed in many of the leading journals of the economic profession, both in the United States and abroad, including the American Economic Review, Journal of Political Economy,Econometrica, Economic Journal, and elsewhere. Beyond the academy, it attracted notice in the New York Review of Books, the New York Herald Tribune, the Economist, the Nation, New Left Review, Science and Society (which published a full symposium on the work), and other outlets. Its sales were large for a book of its kind, and extraordinary for a work in Marxian economics at the time, reaching 50,000 copies in its English-language edition in just the first five years, and in the same period it was translated into eight additional languages.20

Monopoly Capital had an extraordinary effect on the New Left emerging in the United States in the late 1960s and early 1970s, and the book in many ways provided the primary basis on which radical political economy developed in the period—particularly in economics and sociology. This was most apparent with the founding of the Union for Radical Political Economics (URPE) in 1968 and the appearance shortly after of the Review of Radical Political Economics. In April 1971, Sweezy delivered the prestigious Marshall Lecture at Cambridge University, entitled “On the Theory of Monopoly Capitalism.”21

With the advent of economic crisis in 1974–75, URPE brought out its first “economic crisis reader,” a collection of essays called Radical Perspectives on the Economic Crisis of Monopoly Capitalism, in which the influence of Baran and Sweezy’s analysis was evident throughout. Part three of the 1978 edition of another URPE-related reader, The Capitalist System (first published in 1972), edited by Richard C. Edwards, Michael Reich, and Thomas E. Weisskopf, was devoted to “Monopoly Capitalism in the United States.” It contained selections by Baran and Sweezy, Harry Braverman, Douglas Dowd, William Domhoff, Stephen Hymer, David Kotz, James O’Connor, and others.22

Other major works in Marxian political economy in the 1960s and early 1970s inspired in part by Monopoly Capital reinforced and extended the general critique that it had initiated. In 1969, Harry Magdoff, who, following Leo Huberman’s death in 1968, had joined Sweezy as coeditor of Monthly Review, published The Age of Imperialism, providing a detailed economic analysis of U.S. imperialism. James O’Connor’s 1973 The Fiscal Crisis of the State offered a widely influential radical approach to state spending, building on the idea of the division of the economy into competitive and monopoly sectors. Harry Braverman’s 1974 Labor and Monopoly Capital brought Marx’s critique of the labor process into the late twentieth century, integrating it with Baran and Sweezy’s Monopoly Capital—filling the gap left by Baran and Sweezy’s own neglect of the labor process. Samir Amin’s Accumulation on a World Scale, which appeared in an English edition in 1974 (drawing on his doctoral dissertation in the 1950s) linked Monopoly Capital to the global theory of underdevelopment, overlapping in this respect with Baran’s Political Economy of Growth. Stephen Hymer’s definitive work