Competition and Monopoly

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(1904 - 1981)
Paul Mattick Sr. (March 13, 1904 – February 7, 1981) was a Marxist political writer and social revolutionary, whose thought can be placed within the council communist and left communist traditions. Throughout his life, Mattick continually criticized Bolshevism, Vladimir Lenin and Leninist organizational methods, describing their political legacy as "serving as a mere ideology to justify the rise of modified capitalist (state-capitalist) systems, which were [...] controlled by way of an authoritarian state". (From : Wikipedia.org.)

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Competition and Monopoly

Published: New Essays, vol. 6, no. 3. Spring 1943.
Transcription/Markup: Micah Muer, 2020.


Almost three years ago, during a Hearing before the Temporary National Economic Committee, representatives of the Federal Trade Commission declared that "the capitalist system of free initiative is quite capable of dying and of dragging down with it the system of democratic government." Monopoly, they said, "constitutes the death of capitalism and the genesis of authoritarian government."[1] Since then, and because of America's official entry into the war, the discussion around the monopoly question has calmed down considerably. As far as public interest is concerned the TNEC has seemingly labored in vain. This is not at all surprising. Contrary to the propaganda of despair that had been released by the liberal business world which asserted among other charges that the monopolistic restriction of output would "impair democracy's ability to defend itself in times of war,"[2] production has been expanded to a remarkable degree. And this has been made possible not by limiting but by strengthening the power of the monopolies and by the further concentration of economic and political power in the hands of the greatest of all monopolies – the government.

The government which, according to traditional ideology, stands above social factions and separate interests, was to destroy the monopolies,[3] bust the trusts, and help the "little man" restore fair competition in order to foster economic mobility and thus social stability. And it did break the economic stagnation but not its alleged cause, the monopolies. It did restore a sort of international competition by way of war which, however, led to the further restriction of competition at home. "By the aid of war contracts and other assistance from the Federal Government, the larger companies in virtually every industry are assuming greater importance, while the small units are being forced gradually out of business or assuming a lesser role."[4] Thus even the professional trust-buster, Thurman W. Arnold,[5] who claims to believe that the monopoly issue may be solved because of the "full production compelled by war" and the "potential increase to national wealth by a new release of productive energy," finds himself forced to make the amendment – "provided production does not fall into a few hands with power to shut it off." His optimistic expectation is based on the assertion that "no monopoly can maintain its control over prices in the face of a surplus which it does not control." But in reality, there are no obstacles to controls of all kinds, including that of price, and in the face of all kinds of surpluses. At any rate, if there should be an "uncontrolled surplus" it will be uncontrolled by existing monopolies only because it will be controlled by the stronger state-monopoly.

However, there will be no surplus. There will be, instead, deteriorated productive apparatus and dilapidated manpower for which the newly developed techniques and organizations of production, as well as the new capacities of the additional workers drawn into production, will be only small compensation. The present imperialistic expansion of production is extension for destructive purposes. Not at once, but in the long run, this kind of expansion results in the same situation which is presumably created by the output restriction of monopolies. The population can be impoverished and its labor wasted by the expansion as well as by the restriction of production. All the inventions, all the increases in productivity and new productive processes of the first World War, for instance, did not affect the permanency of the capitalist crisis and did not improve the living conditions of the mass of the world population.

Although improbable, it may be possible to produce objectives and implements of war faster than they can be destroyed so that a favorable balance is gained at the end of the hostilities. Yet this balance would make possible the resumption of war, it could not be a basis for improving social conditions. The latter depend not only on production but also on the kind of goods produced. The arguments that stress the possibility of a quick reversal from war to peace production overlook the fact that under modern conditions all peace production is necessarily production for war. Among Roosevelt's "Conditions of Peace" that of the "Disarmament of All Enemy Nations," for instance, implies the "Policing of the World" by the armed victors and thus the impossibility of reverting to that limited war production usually called production for peace. Maintenance of the peace can only mean that the victors gain and secure their monopoly of arms. Inescapably, a progressively increasing part of their total production will have to be devoted to destructive ends.

Aside from this, the very nature of capital production itself precludes the possibility of producing at will or "according to plan." Neither the individual entrepreneur, the monopolist, nor the government can decide what and what not to produce. Whether they know it or not, all their decisions are determined not by their will to serve themselves and society, but are forced upon them by the development of capital and the social frictions connected therewith. All positive expectations connected with the increase of production and productivity by way of war are based on the illusion that the capitalist system may be regulated consciously, on the false notion that those people who declare war may also assure peace; that those who preside over the chaos of destruction may also bring about abundance for all. To us, however, who proceed from the peculiar laws which determine capitalist development, the present restriction of the social forces of production by way of the progressive destruction of men and materials seems rather like the action of a suicide who, instead of simply starving to death, laborously constructs himself a deathly contraption for his final plunge into the night unending.

II

The discussions around the monopoly problem are unrealistic because the present war is a war between more or less monopolistically developed nations. The transformation from a state of "imperfect competition" to the dominance of monopolies has long since been accomplished. The current ideas and theories in this respect deal awkwardly with the past. The war makes the world conscious of this fact; it also removes the last remnants of the old laissez faire structure. And yet, though it appears as if something new has evolved, what is really new concerns only the form not the substance of capitalism.

Capitalism is not particular as to what form it assumes. Its genesis and previous development, however, exclude the possibility of a victory of the forces of "competition" over those of "monopoly." The past cannot be resurrected. The struggle between laissez faire and monopoly, furthermore, was not a fight between adherents of opposing economic principles, but simply the actual unfolding of capitalism, differently described by differently affected interests. The victors were always temporary monopolists no matter how competitively they behaved; the losers merely lamented this fact. The present struggle between monopoly capitalism and totalitarianism is a continuation of the previous struggles by which the form of capitalism is altered.

From its very beginning capitalism was always both monopolistic and competitive. One group in society had the monopoly of the means of production. It did not "compete" with those who had none, but exploited them. It was competitive against other monopolists. Class relations, implying monopolism, exclude noncompetitive conditions. Ideologies formed by class relations exclude the spreading of noncompetitive conceptions. Thus it seems to almost everybody that competition is derived from "human nature." The "natural competitive aptitude" supposedly transcends and overpowers all social and economic changes. It is to be utilized for the welfare of society just like any other natural force. The more widely spread competition in the early stages of industrial capitalism, due to the greater number of capitalists sharing in a smaller mass of capital, was thought to benefit society. In asserting itself the competitive ego supposedly brought about the most economical arrangement of the practical social life. This ideology, seen as a universal truth, corresponded to the interests of a small part of the world that ruled almost all of it – to a limited group in society that monopolistically dominated the whole.

"Competitive society" in the sense in which it is today defended by would-be trust-busters and anti-fascists never existed in reality. Its place was in the methodology of economic theory which itself was merely a phase of traditional ideology. The theory of competition had been directed against interferences by undefeated powers of the past. Originally it refused to serve other functions than that of glorifying the absence of theory in the practical social life. With the final defeat of feudalism, economy could only serve descriptive functions because of competition which, supposedly, automatically regulated supply and demand, harmonized value and price, and would be the more "economical" the less one tried to deal with it.

Not to deny the usefulness of theoretical models, it is nevertheless true that those of the professional economists who concerned themselves with competition analysis in static terms and closed systems were entirely useless for understanding and influencing the real world. However ingeniously constructed, there never was the slightest resemblance between the different economic models and the developing reality. The equations of the competitive models which established economic equilibriums could not serve as the "ideal" to which laissez faire economy could or should aspire, nor as the "ideal" which monopolistic competition left so far behind. Nor yet as theoretical yardsticks with which to measure the extent of the diversions that the automatic competitive regulation might suffer, thus throwing light upon the necessary counter measures in order to reach a better approximation of the "ideal."

There was only the historical fact that some became capitalists sooner than others, that some amassed more capital than others, and that some were more favorably affected by social and economic changes than others. There was only the fact of the relentless general scramble for the largest profits possible, repeated in all the subdivisions of the socially created surplus value, and the feeble attempts on the part of the workers to get the highest possible wages. Actual occurences made immaterial the assurances of economists that the competitive system must only become really competitive to be the perfect system. The inconsistency of the Neo-Classicists' attempt to "learn the secrets of the market" in order to improve social conditions was merely an indication that they recognized the constant widening of the always existing gap between reality and economic theory. For despite all competition, laissez faire economy was progressively "disrupted" by monopolistic and state interferences which, in view of the traditional convictions as to the wonder-workings of the market, were in great need of rationalization.

Of course the process of capitalist production and distribution might be described as a competitive process. Wage differentiations, too, allow for competitive procedures within the working class. With the particular means at his disposal, each one tries to get as much as possible of the results of social labor. By force of circumstances, the struggle of individuals is, at the same time, a struggle of groups, organizations, classes. This competition, however, does not result in the equations of Adam Smith nor in those of the modern economists. On the contrary, the fiercer this competitive struggle, the greater the inequalities and disproportionalities that form the base of the whole capitalist structure.

Some fifty years ago there existed in the highly developed nations less capital concentration and therefore less monopolization than is evident today. In the world at large, however, the more competitive economies were highly monopolistic by virtue of the concentration of industry in a few countries. With the spreading of capitalism competition became as fierce on the world market as previously it had been only in the early industrial centers. With the extension of the competitive process, war and direct appropriation were employed in addition to the "peaceful" competitive means of increasing exploitation and profitability through the growth of the productivity of labor made possible by the technical concomitant of capital accumulation. This led, in turn, to the spreading of monopolization as previously competition had been spread by existing monopolies.

The means of competition have quantitatively grown with the growth of production, the extension of capitalism in space, and the growing differentiation of functions within the socio-economic structure. But the end remains the same; the power of some individuals and agencies is broken in favor of others. First, competitive business is monopolistic and becomes increasingly so by way of competition. Monopoly competes against competitive business and against monopolies. The government supersedes both monopoly and competitive business by its greater strength and competes with more and more powerful means, internally and externally, for control over men and resources. Competition in this sense does not cease even if "competitive society" disappears.

Today the conviction grows that not competition but "planning" will insure social welfare. Yet this "planning", too, involves competitive processes. "Within the sphere of collective enterprise," writes the London Economist[6], "the need for competition is even greater" than in the sphere of privately-owned business. The struggle for power, involving economic control, remains a competitive struggle in monopolistic society. Even under conditions of an imagined single world-monopoly based on class relations, competition would continue. It would be a general competitive struggle for positions everywhere within the hierarchical set-up.

III

The previous preoccupation of economists with competition and their present preoccupation with monopoly explains itself by their preoccupation with the distributive side of capitalism. The substance of capitalism – the exploitation of labor for the possessors or controllers of the means of production – can be discovered only in the social production relations. As their eternity is always taken for granted, the substance of capitalism is nowhere challenged. All capitalist changes did not affect the substance of capitalism but referred solely to ways and means by which the surplus value is distributed. To be sure, the fact that the production of surplus value itself could be the reason for all peculiar economic phenomena that arise within the capitalistic development, cannot be made the subject of investigation without challenging the ruling classes. It is for this reason that capitalist economy concerns itself almost exclusively with questions of "demand" and with "market laws." It also explains why the "laws of market" are now resurrected in the so-called "planned economies."

The limitations of the Classicists Marx brought to light with his class struggle theory in both its philosophical and economic form. In the course of its development capitalism itself destroyed its early labor theory of value. It could no longer face that truth it conceived in its theoretical fight against the persistencies of feudalism. Theories were now constructed to prove the value-creating power of capital and its possessors. At the same time subjective value concepts attempted to do away with all class considerations in economic theory. "Supply" and "cost" made room for "demand" and "utility."

In modern economics "value" refers to the rate of exchange between useful and scarce commodities. Expressed in money terms it is equal to price. This, of course, explains neither value nor price. To escape the tautology, the principles of diminishing and marginal utility[7] are called upon. Small increments and decrements in the utility of a commodity are thought to be of prime importance in value determination. Consumers are believed to compare the marginal or final degree of utility of different goods when choosing one or another commodity on the market. In this way they are supposedly determining exchange values and thus the allocation of resources. The mechanism of the theory has been extended from demand to production, productivity, saving, rent, interest, profits and wages. The endeavor was brought to lead to the discovery of the reasons for the changes of actual market values. It incorporated also an attempt to utilize the methods and findings of the natural sciences in economic theory. The latter became mathematical and analogous to mechanics and modern physics.

Because in this theory the utility of a good is derived from the intensity degree of its want-satisfying ability, it offers no concrete scientific standard to measure utilities. It is for this reason that many economists abandoned the utility-value concept altogether and restricted themselves to the mere consideration of price. Others tried to give the concept a more concrete meaning by working with preference scales and price schedules derived from observable market actions. But the fact that "individual desires" seem to express themselves in observable choices on the market does not explain the real reasons for these choices, nor anything else of importance for the understanding of the economy. Though conceived as a theoretical base for actual procedures in the economic sphere, all these endeavors find their most important reasons in the apologetic nature of economic theory. All "progress" made in this field relates only to form – the refinement of competition analysis. When it comes to the real economic problem modern economics has not made one step forward since Adam Smith. It still proceeds from the false assumption that economics is the problem of the equalization of the interests and desires of individuals, realized by the competitive process that brings about an equilibrium between supply and demand, cost and price, and the most economical allocation of resources. Of course, within the abstract framework of theories that concerned themselves with non-existing equilibriums, unverifiable margins, and unexplained prices all and nothing could be proved. All sorts of plays with mathematical quantities could be arranged for and anything desired be established if one stuck lose to the postulated rules of the invented game. The complete alienation of economic theory from its real base had been achieved.

IV

Although economic theory has no relation to reality, changes in the latter nevertheless enforce new formulations of existing economic abstractions so that they may continue to serve apologetic purposes. At present economic theory supposedly finds itself back on the road to reality. This attempt involves an over-lapping and harmonizing of the various doctrines that split up the economic schools. The process, long in evidence, started with the adaptation of marginal principles by the Neo-Classical school. Many modern value theorists are now ready to supplement "pure economics" with he "sociological" approach of the Institutionalists. The "microscopic" techniques of "pure economics" are to be reinforced with "macroscopic" arguments concerning social and political perspectives of today. Yet, as at all times before, so now, too, in regard to class and property questions, modern economists maintain a "neutral" attitude.

By their extensive consideration of actual price-setting practices, it could not escape the economists that the assumption that prices are determined by individuals dealing in a highly competitive market was not justified at all. The "individual competitor", furthermore, was not the small individual proprietor of traditional economic literature, but rather the large quasi-monopolistic corporation. Price, they discovered, was a "highly elusive thing." It had often no connection whatever with the changes in cost and profit conditions. It became more and more obvious that the competitive assumptions had no relation to facts. The market price theorists found themselves forced to consider the imperfection of competition and to consider it differently than had been done previously because of the ruling assumption[8] that the economy was always tending towards an equilibrium between supply and demand, cost and price, marginal cost and average price, average cost and marginal revenue, and so forth. The theory of pure and perfect competition made room for that of monopolistic competition. And as previously in regard to value and price, here, too, economic thought split into two factions: those who believe that the postulates of the old competition theory may still be useful in the investigation of monopolistic reality, and those who simply deal with the latter without bothering to reconcile it with the traditional assumptions.

The Great Depression brought the monopoly issue into the sphere of politics and forced the economists to deal with it in a more serious manner. Yet, the old idea that the prices established under conditions of a free market have the tendency to maximize utility for all concerned was not really rejected. Rather, on the basis of this erroneous assumption it was now argued that this sort of price formation had been made impossible because of monopolization. Consequently, all that would be necessary was to resurrect a kind of competition which insures price flexibility. All economic evils were now blamed on monopoly and the price rigidity supposedly connected with it. From the President down to the left-wing agitator, concentration and monopolization were made responsible for the economic stagnation. Concentration, in the definition of the economists a "situation in which the number of sellers is too few for pure competition but too many for complete monopoly", was thought to result in prices to buyers higher than those necessary to call forth supplies.

Among others it was especially Dr. Gardiner C. Means[9] who advocated that the basic cause for the breakdown of laissez faire and the principal reason for the failure of the American economy to function properly was to be found in the monopolistic, administrative control that replaced the market control of pricing. However, in opposition to this point of view and with new empirical evidence at hand, Dr. Alfred C. Neal[10] demonstrated that price inflexibility, found so significant today, is not at all a new problem connected with, or to be blamed on, the rise of monopolies. Of course price inflexibility is also caused by monopolistic price manipulations. Yet, in regard to the whole price system and by a comparison of the present with the price formation of the past, it must be admitted that there exists no real proof that concentration has resulted in inflexible prices. Though it is true – in regard to stagnation – that there exists in times of depression the tendency for those commodities which suffer the greatest drop in production to show the smallest decline in price, this behavior "is manifested in a similar degree by products produced under both 'high' and 'low' concentration conditions, which is evidence that concentration is not a significant factor for such behavior."[11]

Be this as it may, the whole dispute is possible only by the artificial confrontation of monopoly with competition. It ceases to have meaning as soon as it is realized that – in the words of Marx – "competition implies monopoly, and monopoly implies competition." At all times capitalist development knows both flexible and inflexible prices, stagnation and expansion. The reason why at certain periods the one or the other can and is emphasized will not be found in monopolization as the outward manifestation of capital concentration but in this concentration process as inherent in the accumulation of capital. To approach the problem as one of monopoly vs. competition means to remain in the sphere of capital distribution. But all the important happenings in the sphere of capital distribution are determined by what happens in that of capital production. Only by entering the latter is it possible to comprehend the meaning of monpoly [sic].

V

Competition is not the regulator of production and distribution, but is itself the result of capitalistic disproportionalities. Specifically, it is the necessary consequence of the permanent overproduction of capital, which finds its reason in the fact that capitalists accumulate for the sake of accumulation and workers produce for the sake of the capitalists. Yet "competition had always to shoulder the duty of explaining all inexplicable ideas of the economists, whereas the economist should rather explain competition."[12] They failed to do so and thus they now fail to explain monopolization. But if competition, as is now widely acknowledged, is not the regulator of the capitalist economy, its imperfection or total absence cannot be made responsible for capitalist difficulties. Both the growth and the present impasse of capitalism are independent of competition as well as of monopoly. Of course, both play their parts in economics; but neither is for nor against the regulation of the capitalist economy.

Competition and monopoly have something to do with the distribution of profits. Competition "cannot balance anything but inequalities in the rate of profit."[13] It may bring about "a price of commodities by which every capital yields the same profit in proportion to its magnitude; ... the only thing it tells us is that the rate of profit must have a certain figure."[13] The dominance of monopolies may interfere with the distribution of profits according to the size of capital invested in different branches of production and within each single branch. For shorter or longer periods the monopolists secure for themselves extra-profits which reduce the profitability of non-monopolistic business. By preventing the free movement of capital within a sphere of production and from one sphere to another, by monopolizing a certain product or a number of products, by political means and by all sorts of controls and devices that hinder competition by outsiders the monopolists reduce the profits of non-monopolistic enterprisers below the average that may be obtained under more perfect competitive conditions.

The problem of competition vs. monopoly belongs to the secondary sphere of profit distribution. Empirical observation, in so far as it is possible, has here shown that concentration – to speak in the language of the professional economists – has "a small but significant influence upon the decline in the difference between unit price and unit direct cost – the overhead-plus-profit margin."[14] The margin over direct cost is the source of interest, depreciation, savings, dividends, salaries, bonuses and the like; in short, the Marxian surplus value. "This margin tended to decline least where concentration was high; most where it was low."[14]

To ask for the restoration of competition means to ask for a more "equal" profit distribution, for the elimination of extra-profits to bolster the average rate of profit. In a sense, this quest is a mere repetition of the quarrels of the Classicists in regard to profit and rent and of banking and industrial capital in regard to profit and interest. Now that neither rent nor interest is any longer of great importance because of the growth of industrial-financial capital and because of its dictatorial position in society, the capitalists' quarrels have been reduced to a mere family brawl. The fight concerns the distribution of profits between bigger and smaller capitalists affecting, of course, the interests of all the social layers that are being fed by the surpluses created in production.

To ask for the equalization of profits according to the sizes of capital is, however, to ask for the impossible. In spite of all competition, there has never been such a profit distribution. There have always been extra-profits which, for shorter or longer periods, escaped assimilation with the lower average profit rate. Of course, as long as competition was fierce the equalization of the profit rates existed as a tendency – one which, however, became weaker the faster capital accumulated.

Although competition tends to bring about "a price of commodities, by which every capital yields the same profit in proportion to its magnitude, the magnitude itself is independent of it."[13] But all depends on this magnitude. Capitalism, being production for profit, prospers, stagnates, or declines in accordance with the movements of the profit rate. In addition to others, its most important "economic" difficulty consists in the decreasing profit rate that accompanies the formation of capital. This tendency asserts itself under all the forms that capitalism may assume; it determines to a large extent the changes in form. Competition is one way to escape this difficulty. Monopolism is its result and is also another attempt to escape the declining profitability. As the successful competitor turned monopolist, so the latter now competes to become a supper-monopolist [sic]. What spurred on competition also drives monopolism: the search for extra profits to escape the consequences of the self-contradictory movement of capital accumulation.

According to Marx "the development of capitalist production makes it constantly necessary to keep increasing the amount of capital laid out in a given industrial undertaking, and competition makes the immanent laws of capitalist production to be felt by each individual capitalist as external coercive laws. It compels him to keep constantly extending his capital, in order to preserve it, but extend it he cannot except by means of progressive accumulation."[15] With accumulation, more and more capital is invested in the means of production and relatively less in labor power. The relative decline of the latter, being the sole source of surplus value, leads to a smaller profit rate measured on the total size of capital. But production must be profitable, capital is set in motion to yield a greater capital, thus the surplus value must be raised to neutralize the profit decline. It can be raised by increasing the exploitation of labor and by an absolute increase of the labor force despite its decline relative to the total mass of capital. In order even to maintain a given rate of capital accumulation the production apparatus must be developed in such a manner that more and more of the total social labor serves the needs of accumulation. To make possible that relatively stable rate of accumulation that capitalism knows, the productivity of labor must be raised continuously to yield the additional capital for expansion.

The concentration process is the result of the continuous effort to raise the surplus value. Its social consequences are unavoidable under conditions of capital production. Just as the genesis of capitalism is to be found in the concentration of the means of production in the hands of a particular class, so present-day capitalism necessitates the further concentration of capital in fewer hands. The essence of capitalism is this process of expropriation by which the control of the means of production is centralized and an always greater mass of people are deprived of all but their labor power.

The influence of monopoly upon prices, resulting in monopolistic extra profits that lower the profits of non-monopolistic enterprisers, forced, as they are, to a more severe competitive struggle in a restricted field of economic activity, will lead to the ruin of small business, but it does not explain economic stagnation. Rather, monopolistic profits should make possible an increased economc [sic] activity and monopolistic expansion. The disappearance of small business cannot be given as the reason for the monopolistic stagnation for it is obvious that the monopolies flourished because of it.

The reason for the monopolistic stagnation is the same as that for the growth of monopoly. Monopolies came to rule in order to escape the decreasing profitability of capital. However, just as the greater "perfection" of competition could not yield what the existing competition refused to bring about, namely, the undisturbed accumulation of capital on a competitive basis, so also the greater "perfection" of monopolization did not lead to what monopolization aspired to: profits high enough to enable the further accumulation of capital on a monopolistic basis. The long pre-war stagnation merely indicated that the escape was not successful, that the decreasing profitability had caught up with the monopolies and hindered their further unfolding. The period of crisis and decline was utilized for the preparation of another escape in the old – and only – manner given to capitalism. Being a world system, capitalism now continues the concentration process that started nationally and was slowly extended by international cartelization on a global scale.

Seen from this point of view, the present war emerges as a consequence of the monopolistic difficulty of solving the needs of profit and expansion. There now exists on a global scale what has been experienced everywhere before on a smaller scale: the expropriation of capitalists by capitalists. By trying to win the war, America hopes "to face opportunities of unprecedented scope. ... By the end of the war the United States", it is thought, "will be the only great industrial power with its physical facilities and social fabric intact."[16] Her international monopolistic position will be used "to help rebuild other countries," which, in less polite terms means "a 'peace' more vindictive than the Versailles Treaty, that will seek to stabilize an Anglo-American feudal monopoly over the entire world."[17] Of course, the Axis fights this war for similar ends. Whatever the outcome of the war, however, capitalistic difficulties will not be solved. The war can only reproduce capitalist contradictions on a still larger scale. This reproduction, to be sure, affects the form of capitalism. But the substance remains the same.

VI

The law of the falling rate of profit, due to the disproportional development between the two constituents of capital, variable (wages) and constant (means of production), has often been rejected[18] with the remark that if capital is viewed as a whole, constant capital disappers [sic] and all capital is variable. If – in the final analysis – all capital is variable, the contradiction between constant and variable and its consequence is merely imaginary. The Marxists would be the last, of course, who would deny that all wealth is the product of labor. But it is clear that the workers do not carry constant capital but only wages in their pay envelopes. The means of production belong and remain in the hands of a separate class and because of this class-relation in the productive process, means of production appear as constant and labor power as variable capital.

Because of particular social relations, and for no other reason, the results of previous labor oppose the existing laborers since the former can serve only to exploit them. The growth of wealth in capitalism is the growth of profits which find their way into means of production with which more labor can be exploited and all labor can be exploited more intensively. Without the division of the products of labor into constant and variable capital, capitalism would not be possible. To say that all capital is variable is tantamount to saying that there exists no employing class in soviety [sic] and thus also to negate the statement that all capital is variable.

For the proponents of "classless" economics it is no doubt necessary to ignore the contradictory development between constant and variable capital determined, as it is, by the class structure of society. But its result – a lack of investments for reason of insufficient profitability – is widely acknowledged and investigated. In this field, however, the burden of the professional economists has somewhat been eased because of governmental depression procedures which they merely had to sanction. They shelved "pure theory" for the duration and neglected the "laws of the market" to give more attention to production and the business cycle or, now, to production and the war. The question of monopoly and competition made room for theories of employment and income distribution which largely ignore the old equilibrium assumptions.

Maynard Keynes[19], the most famous contemporary economist, reached his elevated position not by breaking with the customary marginal principles but by temporarily forgetting them and constructing a "theory" that justified the makeshift policies of governments in distress. Of course his theory is dressed in marginal terminology and fitted to traditional assumptions, but its "application" is independent of its subjectivistic formulation. Keynes starts from appearance, that is, from the fact that a capitalist depression is, in Stuart Chase's term characterized by "idle money and idle men." Although quite late, Keynes found out that the assumption of the Classicists that what is not spent on present consumption is spent to provide for future consumption is not true; that there are no automatic forces operating that adjust the "spending habits" of the community; ... "the propensity to consume becomes weaker, ... because it is increasingly difficult to find attractive fields of investment." Keynes even found out that there has been "chronic tendency throughout history for the propensity to save to be stronger than the propensity to invest."[20] But "employment can only increase pari passu with an increase in investment; unless, indeed, there is a change in the propensity to consume."

According to Keynes the marginal efficiency of capital will tend to decrease as investment increases; a sudden shift in the schedule of the marginal efficiency of capital causes entrepreneurs to hesitate to make new commitments. There arises the desire on the part of people to hold their wealth in the form of cash, the so-called "liquidity preference". As there are no automatic forces that bring about a revival of investment activity, that is bring about an increase in the marginal efficiency or profitability of capital the goverment [sic], not subject to the pessimism of the enterpreneur [sic] in regard to the profit outlook, will have to assume "an ever greater responsibility for directly organizing investment."[21] The national debt can be used to balance income and investment; uninvested savings can be made the special target of tax laws and can finance public works that regulate economic activity; inflationary methods can raise the money wage and decrease the real wage of the workers and thus increase profitability. And there are yet a number of other means beside these by which the present system of production may be stabilized.

The fact of insufficient investments[22] can be interpreted in different ways. Against the principle of diminishing utility offered by Keynes, it is argued that the failure of investment cannot be due to a "lack of confidence" that has possessed business men, as there exists no real evidence of a "liquidity preference" on their part. Calculations based on an American study "of the relationship between the volume of new securities issued and aggregate after-tax income received by individuals above the $10,000 level," indicated that the "answer to the mystery of why investments in new securities have shrunk so greatly is not hoarding, but inability of the prosperous classes to invest more. There are two main reasons for this inability. First, the number of persons receiving incomes of $10,000 or more is smaller than in the late 'twenties'. Second, and more important, is the steep rise in income tax rates."[23]

From the point of view of the government as represented by Keynes, taxation leads to a greater volume of investment. From the point of view of the taxed business men, it will shrink private investment still more and thus – in the long run – lower total investment. The mere governmental control of investment certainly cannot increase its volume, which does not depend on attitudes but on abilities. But it does transfer capital from the hands of private capital to those of the government; from one group of individuals to another. It may, via the government, enter the hands of the monopolists in case they control the government; it may strengthen the government against the monopolies in case the government has capitalized itself already sufficiently to operate against the monopolies. It may do both at the same time. The procedure is only a particular form of that continuous expropriation of capitalists by capitalists which accompanies the whole capitalist development.

The war seems, however, to disprove the idea that what is here involved is the mere transfer of capital, by itself unable to increase the volume of investment. The blessings of New Deal measures in all capitalist nations could be questioned, because nobody can really tell whether or not, sooner or later, business would not have picked up of its own accord and driven the revival further than that presumably created by government action. The spurt in economic activity was too insignificant to be able to prove anything. It went far ahead only wherever "public works" and "pyramid building" served, or changed into, war production. And only intensive preparation yr, and the final outbreak of, the war led to the desired situation where there was neither idle men nor idle money.

When Maynard Keynes discovered that throughout history "the propensity to save exceeded that to invest," he noticed only the obvious fact that capital must first be accumulated before it can be invested. Not every amount of capital can be invested; the necessary amount varies with the changes in capital fomation [sic]. With the growth of the organic composition of capital, that is, in other words, when more and more capital is invested in the means of production and relatively less in labor power, the necessary additional capital – despite the cheapening of capital goods – must grow progressively in order to secure a given rate of expansion.

The magnitude of the needed additional capital for expansion is determined by the magnitude of the capital already invested. Since the exploitation of a given number of workers under given conditions has its limitations, additional workers must be exploited and be put to work under more profitable conditions. The existing capital, earmarked for expansion, can fulfill its function only if able to establish a productive apparatus which allows for the exploitation of such a number of additional workers as would be necessary to make its investment profitable. The absolute number of workers must grow despite its further relative decline connected with the growth of the organic composition of capital. And thus, however large the idle capital may be, it may still be too small to satisfy the capitalistic expansion needs. The idle capital, appearing as a surplus, would merely indicate temporary profit shortage hindering the further unfolding of the capitalist economy. To overcome the ensuing stagnation the profitability of capital must be raised, which implies its further concentration and centralization.

Meanwhile, the idle capital, insufficient for a profitable capital expansion, can still be used for unprofitable New Deal measures. Workers are put to work not to create additional capital but to secure the stability of the capitalist system. Stagnation is dangerous. Though it strengthens the forces of monopoly just as well if not better than expansion, it also creates a situation which threatens the whole social structure and therewith the government itself. Out of the necessity of intervening in the economic sphere, the government soon makes a virtue and transforms itself into one monopoly among others to become in due time the strongest of them all, "Before 1933, despite the growth in government control, private business seemed to have the ascendancy. Since then, the pendulum has swung in the opposite direction."[24] It was then realized that "goverment [sic] must be admitted as a partner if it is not to be master."[25] But today it is also realized that the continuance of the policy of governmental interference in the economic life, particularly with regard to investment, "implies the ultimate governmental ownership of all industries."[26]

That this trend finds the acclaim of the majority is itself merely the political expression of the concentration of capital which makes the private owners of capital an always decreasing minority facing an increasing non-owning population, still more augmented by the incorporation of so-called "backward nations" in the interest spheres of imperialism. The trend is all the more welcomed because of the well-fostered and wide-spread illusion that a government-controlled economy will be a welfare economy, capable of bringing about that economic equilibrium often aspired to but never reached, by a proper balancing of investment and employment. Questions of "want" and "choice" become irrevelant [sic]; planning from above is to bring security to all. Suddenly it is assumed that the government knows best what people really desire in kind and quantity of commodities and what kinds of jobs and working conditions they really favor. Thus, at the very moment when all "capitalistic principles" of the freedom of the individual are violated far more than ever before, at that moment the capitalist propagandists feel that "man becomes the master of his fate."

Despite the new phraseology used, the New Deal measures are the old capitalistic procedures employed during periods of crisis. And thus they are limited. They merely foster the more rapid concentration of capital. Short of a complete state-capitalist revolution of the Russian type, it is not possible to oppose the backbone of the economy – the monopolies. All that can be done is to create conditions for their expansion. Internally this means to "recreate" conditions of "equal opportunities" for all capitalists, for precisely under such conditions will those already at a disadvantage be still more disadvantaged. The more laws are passed and executed against monopoly, the stronger the existing monopolies will be, for in this way they are freed from the threat of monopolistic competition. The democratic struggle against monopoly – indicating the existing monopolist stagnation – helps to secure the stronger monopolies. The harder the struggle, the more of the social capital enters their hands.

New Deal measures must be understood as procedures dictated by necessity and ordained with the faith that the capitalist system will sooner or later, as it always has in the past, bring forth a new prosperity. In the course of the process that the New Deal releases, "the idle money" of the weaker capitalist disappears. That of the monopolists becomes still bigger as their profitability increases. But if the Keynes proposals are carried further it will also disappear in due time. It is hoped, however, that before such a time the increased profitability of monopolistic capital will initiate a new boom to compensate for the depression losses.

If the upswing does not come, the Keynesian methods of stabilizing the system lead to the end of the whole capitalist structure; an end that finds its beginning in complete government control unless what is done on a limited national scale is repeated on the larger plane of the world economy. A greater mass of the world's surpluses must be brought into fewer hands, so that the victorious monopolists will be able to change the whole process of capital production and circulation in such a manner that it yields profits which will enable the further expansion of both constant and variable capital, despite the further growth of the organic composition of capital. Of course this necessity need not be recognized. Monopolistic competition and the power politics connected thereto provide enough incentive to embroil the whole world in war. Yet whatever the proposals dealing with the goal of the war, all of them point to the control over more men and resources by fewer competing monopolists. Each side is out to restrict or to eliminate the other. Just as monopolization nationally is fostered in the name of the restoration of democratic competition, so internationally it is fostered by the quest for equality in opportunities on the part of the "have-not" nations, and by the free-trade promises of the Atlantic Charter.

In each capitalistic nation a lack of capital with regard to the capitalistic-social needs of accumulation appears as a surplus in the hands of the Competitive and monopolistic entrepreneurs. In a similar manner a shortage of capital with regard to the expansion needs of the world economy appears in each capitalist nation and each monopolistic power bloc as a surplus without profitable investment possibilities within their narrow structures. Hence their attempts to widen the structure, to gain Lebensraum, to concentrate the wealth and poverty of the world still further. The New Deal becomes the new world war. Centralization by competition and law changes into centralization by direct force. Unprofitable production and "pyramid building" changes into the destruction of capital by military means.

Internationally, however, the monopolists do not face the weaker capitalists they face at home. They meet other monopolists. The capital which is insufficient to allow for the progressive accumulation of the world economy is also insufficient to serve the needs of destruction. All available resources must now be used to provide the means for the imperialists' struggle to create conditions under which the monopolistic survivors may add the profits of the losers to their own and thus secure their further existence. Just like capital accumulation, the war situation, too, masters the capitalists instead of being mastered by them. The war of monopolists becomes more than that. The released forces of destruction enforce changes in the form of the economy which go beyond the control and the desires of the ruling class. Yet the war itself testifies that the substance of capitalism is still intact. To satisfy the demands of war, the capitalists must use more and more of the surplus labor and, finally, more than just the surpluses for purposes of war, which leads, on the one hand, to the accelerated centralization and concentration of capital and power in the hands of the monopolistic government and, on the other, to a decreasing productivity because of the impoverishment of the broad masses who, paid below value, are no longer able fully to reproduce their labor power. The more extensive, the more feverish the production for war, the smaller are the chances to reach that profitability needed for a new general upswing of the capitalist world.

VII

Monopolization, government control and the necessities of war have changed the market economy into an administered market economy. It is widely assumed that thereby it becomes possible consciously to direct the economy according to one plan or another. The editors of Fortune[27] for instance, pronounce as "the lesson of war, that economic mechanisms are the servant, not the masters, of man's fate." In their opinion this implies that "poverty is not inevitable any more." They are not disturbed at all by the greatest impoverishment ever experienced in modern times when in large parts of the world millions of people are literally starving to death and the lucky ones in other parts find their consumption progressively reduced. For that is only for the present, the result of the satanic planning of the Axis. The new technology now developed will make postwar life beautiful. Thus, too, the technocratic-minded Stuart Chase[28], to give another example, has no other worries than what to do with our savings when the war is over. Recognizing that the decline of the market cannot be undone, and also recognizing that trusts, monopolies, cartels and trade associations, with their price controls and production restrictions, are not the cause but the result of the decline in the rate of expansion, he finds the solution for the economic problem in the continuation of the policy that rules war production which policy, by considering price a secondary matter, lays bare the physical basis of the economic system. We must keep on thinking in terms of use-values instead of in terms of exchange-values.

The depression-born vogue of technocracy found its adherents among the dispossessed and among aspirants of the expanding bureaucracy. Today the technological trend of thought is taken up by the spokesmen for the capitalists to substantiate the promise of a happy life just around the corner of the war. Existing miseries are always justified by promises of a better future. But there never can be a better future without the direct bettering of the present.

It should be noted that it is no longer capitalism but "science" that now forms the basis for optimism. "Even during the depression," write the editors of Fortune, "the scientist stuck to his task, dreaming up new products and techniques as though there was no such thing as 'overproduction.'"[29] Yet periods of depression or – what is the same – of overproduction of capital, are precisely those in which the scientists "dream up" new products and new techniques to enable their capitalistic masters to continue their expansion. Overproduction of capital is always answered with still more overproduction. "Science" within capitalism can only function capitalistically. It is not only "a mistake to count on science to remold the world in accordance with man's best interests," as the editors of Fortune admit; it is also a mistake to believe, as they do, that "science creates the conditions in which individualism, a healthy family life, and a true American culture can flourish."[30]

The thinking and acting in terms of use-values does not alter the exchange-value motivation in any way. Both remain determined by the self-propelling, contradictory forces of capital accumulation and all the science of Fortune and all the semantics of Stuart Chase can do nothing about it. Besides there is nothing "revolutionary" in this attitude of considering the physical basis of the economy. Capital itself is the result of the difference between the use-value of labor power and its exchange value; of the physical capacity of the laborer to create more than he consumes. In practice this fact is always recognized by the capitalists' activity in widening the gap between productivity and wages. It is hidden only in theory and ideology. To lift the veil a little, to recognize the physical basis of the economy, does not change the economy in any respect. It merely replaces one capitalist ideology with another or, rather, changes the terms of the same ideology.

The fact that people learn to think and act in terms of materials and manpower only facilitates their unchanged economic activity. It merely fosters the removal of some superseded and unessential mediating factors and agencies within the capitalistic circulation process. Others take their place. Initiated by monopolization, the war merely accelerates this trend. With the monopolistic control of diverse products, non-market distribution for purposes of capital formation became more dominant. The new "revolutionary" fiscal policies of today were foreshadowed by the increasing self-financing of the great industrial combines. The war-ration system finds its forerunner in chain-store practices and product standardization connected therewith. In brief, thinking in physical terms merely reflects the monopolistic actuality and cannot serve as a program for the future. To think consistently in this direction leads to a totalitarian ideology – to exactly that which is allegedly combated. The fetishisms that rule society have their basis in the class relations that underlie all economic phenomena. The one cannot be ended without ending the other.

Those who do not recognize classes because they belong to or support the ruling class may imagine that the new changes in the economy will allow for its planned direction. "Thanks to the TNEC," write the editors of Fortune, "the concentration of economic power in the U. S. is no longer a sinister supposition, but a measurable fact. Being measurable, it can be handled."[31] To handle it, they propose "a return to the higher values of individualism. The restoration of the creative, risk-taking, profit-seeking, competitive individual to the legitimate throne of a sovereign free market."[32] Yet they insist that this "counterrevolution is not a return to laissez faire," because, "to accomplish this restoration, the individual must enlist the aid of the very power that has been harrasing him; ... the power of government."[32] As the economic power has already been transfered to Washington, the "only realistic question is: to what use will that power be put."[32] It should not be used against bigness of enterprise for bigness is not the issue; but it should reconcile "the profound but perplexing American desire for both security and freedom. The government should underwrite the whole economy, using fiscal controls, public works, and a broader social security program, so that everyone who wants and is able to work may have a reasonable chance at a job. The government should recognize its responsibility for the health of the economy, by vigilantly policing the free market and actively encouraging the risk-taking individual."[33]

This request has, of course, been granted long since. "Big business," declared H. S. Truman, chairman of the Senate Committee investigating the war program, "has shifted into our bureaucratic agencies, such as the war and navy departments, and the war production board. It has placed thousands of its representatives in key positions in Washington.[34] Here the "risk-taking individual" asserts himself in the interests of a "true American culture," and the government has given everybody without means a "reasonable chance" to "work or fight." All the "planning" that is done is done in the interest of the ruling class and opposes the "planning" of other ruling classes, just as the "planning" in one particular factory or industry opposes that of another. If, in the latter case, the result is the anarchy of competition, in the former it is the anarchy of war. In both cases there is no planning in a socio-economic sense, but only an organized onslaught against the lives and interests of all the ruled all over the world.

If big business wants to utilize the increased governmental powers for its own purposes, the economic journalists of liberalism want to see it utilized in the interest of the population as a whole. But here they face a great dilemma. To diminish the surpluses of the monopolies in favor of "small business" leads to the monopolization of the latter; the destruction of some monopolies leads to the establishment of others. It is, of course, "conceivble" [sic] that all monopolization may be forbidden by law, just as the job trusts of the trade unions have been outlawed in the totalitarian states. But in that case all smaller monopolies would be dissolved in the "perfect" state-monopoly. To escape this conclusion, the anti-monopolists return once more to Adam Smith, whose "political economy was sound in its insistence on free enterprise and on the separation of economic from political power."[35] However, writes Lewis Corey, though he "fought against mercantalist monopoly he did not foresee the capitalist monopoly which now destroys economic freedom," and thus we "need to use government more than Adam Smith envisaged."[35] More, but not too much. The new political economy must "use government to destroy monopoly by transforming it into free public enterprise in the form of public corporations, on whose boards of directors are presented management, labor unions and consumers, that are largely independent of the state. By keeping and strengthening free enterprise in the form of independent business and farming, of independent cooperatives, independent labor unions ... a new system of checks and balances will created preventing centralization of economic power in a new tyranny."[35] Mere verbiage accomplishes here the reconciliation of the irreconcilable. The end of capital concentration and the destruction of monopoly means also the end of free enterprise and competition, the end of capitalism itself. To square the trend towards further concentration with the alleged struggle for democracy, free enterprise and competition by way of the government enforced "democratization of the monopolies" merely elevates the ordinary monopolistic war propaganda into an "economic theory."

No doubt it seems plausible that the elimination of monopolistic extra-profits would benefit not only the small business men but the working class as well. It seems especially plausible because it is always taken for granted that the end of the rule of the monopolies will not effect the trade unions which will be able to enforce wage increases and transfer purchasing power towards consumption goods since they now face a weaker enemy. In the course of time the whole economy would assume more and more the character of production-for-consumption instead of for capital. All depends on the existence of a benevolent government that controls society in the interests of the whole and – not to deviate from its task – is, in turn, controlled by those it controls.

And thus whether in a technological, scientific or economic setting each hopeful attitude towards the future depends on government control of the social life. Only the degree of state interference do the theorists debate, and this only during the transitory stage from monopoly to government control. In Russia and Germany they are all of the same opinion. Previously, government was thought to stand independently above social faction in order to preserve order; now its dominating position leads to the belief that it eliminates the class character of society altogether. In technocracy as well as in modern economics the distinction between capitalism and socialism disappears.

The old nonsense that economics has to do with human behavior as a relationship between ends and scarce means which have alternative uses is now accepted almost generally with this difference, however, that the government must now do what the market no longer fulfills satisfactorily. Economics is reduced to a mere technique to be employed by the government to satisfy demand and the proper allocation of resources by a pricing system based on marginal principles. Even the difference between "the traditional Marxist and the modern position" in regard to these questions is described as "but a difference as to the technique applied."[36] With mathematical precision it is demonstrated – on paper – that government pricing and fiscal policies which balance supply and demand could guarantee full employment and the optimum use of resources. If this would be accomplished, the "philosophically inclined could speculate for a long time whether the society was capitalistic or socialistic."[37]

Situations which were hitherto merely the unrealistic assumptions of static equilibrium theories are found today to be realizable by virtue of governmental control. Even pure competition theorists do not hesitate to advocate controlled institutional monopolies to enforce "perfection" of competition, just as state-capitalist theorists, by defining competition in "functional terms", that is, as the correct allocation of resources, attempt to incorporate the competitive principles in their authoritarian set-up, so competition theorists believe that competitive results may be achieved by way of monopolistic institutions. For in such a definition "the extent to which any process, practice, law or institution constitutes to the optimum allocation of resources determines whether it is to be classed as economically competitive or not."[38] From this position it is not inconsistent for political authoritarianism to act in the name of democracy, or for democracies to apply authoritarian principles. Everybody's inconsistencies are removed by a simple redefinition of terms.

The great concern of the economists with the "economic optimum", implying the most economical allocation of resources, springs from the old illusion that capitalistic principles are economic principles. On the basis of this illusion, they apply their economic principles to all forms of society regardless of the particularity of the social relations. But behind their apparent timelessness is revealed their specific, historical, capitalistic character. For capitalism is not a social production but society production for capital. Precisely in its disregard for social relations and in its emphasis on ends and means there comes to light that particular social relationship that constitutes capitalism – the division of society into exploiters and exploited. In order to ignore this division, economics has to concern itself with the bettering of the existing state of affairs without altering it. For the economist a "better state of affairs" means a more "economical" one; the better allocation of resources and their fuller use for the given "social ends" – whatever they might be. Right now they happen to be war and victory, yesterday they were competition and accumulation without extensive warfare.

The ruling economic theories are so constructed that they can always serve capitalistic needs regardless how often or to what extent the form of capitalism might change. Their great adaptability to actual capitalistic changes brings to light once more that their quarrels about competition, monopoly and state control do not touch the real problem of capitalism but deal with the problems of capitalists which arise in their struggles over e division of surplus value. If this great adaptability has led to a redefining of terms equating monopoly and competition it also contains, of course, the reluctant confession that Marx was right after all in his insistence that monopoly implies competition and competition, monopoly.

With few exceptions, then, economic theory echoes both the actual economic policy and the propaganda accompanying it. By itself it has nothing to offer but the theory of the equation of sacrifice and desire by way of demand and price formation which, already ridiculous in view of depressions, is made utterly nonsensical by war. The present-day optimism of the economists over assumed planning possibilities and the assumed trend towards a welfare economy by virtue, or with the help of government control is without any justification. Though it is true that for quite a while economy tended towards a production for consumption goods[39], this was merely an indication of the great dilemma in which capitalism found itself. And though it is true, as many economists (Hicks, Hansen, Keynes, Wallace and others) have realized – in contrast to traditional ideas – that the greatest flexibility of prices by way of competition could not guarantee economic stability and social welfare, their own suggestions in this direction in favor of price stabilization and government interferences are also no antidote for depressions. The contradictions of capitalism do not turn overnight into blessings merely because the government finds it convenient to speak in terms of social welfare in order to keep up national morale and to keep down its own bad conscience in this, capitalism's "war of survival."

VIII

If it seems "plausible" to writers like Lewis Corey that conditions of the past can be restored by destroying the monopolies with the help of a government otherwise restricted in its power and yet achieve a sort of "socialism" – that is, production for consumption which, of course, could net mean the conspicuous consumption of the capitalists but that of the masses – this "plausibility" has no other basis than the wish to serve the powers that rule today. The innocent are nevertheless capable of being taken in by such propaganda. They desire a better future and in their powerlessnes [sic] are only too willing to believe in it in order to make their present lot more bearable. Such people must be reminded that the early period of capitalist development with its wide-spread competition and its division of powers knew an even greater misery of the workers than the period of monopolization and the contraction of political power. Monopoly is neither a greater nor a lesser enemy of the working class than is competitive business.

The betterment of the laborers living conditions within the capitalistic development was not due to a growing humanitarianism of the capitalist class, and not even due to the wage struggles on the part of the worker: Back of this betterment was the fact that the productivity of the workers was raised to an extent which allowed them to consume more although they received increasingly less from society's total production. Greater exploitation improved living conditions. But greater exploitation implied capital concentration and monopolization. It is thus impossible to advocate a special opposition to monopoly on the part of the working class. The workers' opposition must begin and end with capitalism.

Those who are not opposed to capitalism have no choice but to favor monopoly. "The trade unions, seeking improved labor conditions and better educational opportunities, find it much easier to come to terms with the big monopolies than with the general run of smaller firms, and are consequently apt to favor the big business interests when they clash with those of the smaller firms."[40] Of course, in the last resort, "such an attitude cannot possibly benefit more than a fraction of the working class; for even if the monopolists are ready to share profits with their employes, monopoly profits must come from somewhere, and that in practice means that a large part of it must be extracted from the workers who are not in privileged employment. Yet the workers cannot possibly find allies in the smaller capitalists, who are induced by their inferior bargaining position in the market to be less liberal in their treatment of labor."[40]

At any rate, monopoly that splits the capitalist class also splits the working class.[41] If the existing wage differentiations in each capitalist country weld parts of the working class to the monopolists, in the world at larger workers support their government against others in order to secure or to gain a privileged position in the shade of their nation's privileges. Because some of the workers ally themselves with their rulers in order to safeguard their immediate interests, others have no choice but to follow their lead. There is no greater hypocrisy than that of labor leaders and their followers who speak of the liberation of the working class as a whole and the liberation of suppressed peoples from imperialistic rule when at the same time their activity at home and their participation in war helps to secure capitalist exploitation and to extend it over still more people and to include even the colonization of the defeated colonizers.

In this situation lies the hope for capitalism. "As was evident from the last war and the ensuing long depression, capitalism was headed for destruction. Yet it did not collapse but regained strength for another attempt to solve the crisis capitalistically. Social relations do not collapse like a house on rotten foundations; they must be changed by independent action on the part of the working class. But there are no signs in this direction. And there is no telling how long a particular social relationship may exist under the most intolerable conditions, especially if this relationship concentrates all power in the hands of an unremovable minority and if the society, though not at all changing substantially, changes continuously in non-essentials.

The war, for instance, changes many things: from the greater comradeship between private and officer when faced by the enemy to the control of war profits by the leaders or representatives of the people. Not only the Russians and Germans but all the participants in this war speak now in terms of socialism. Although in the democratic countries it is argued that the war must first be won before the rule of the common man may begin, even the most reactionary statesmen seem to favor social legislation designed to end insecurity. Nevertheless, every proposal in this direction incorporates the continuation of capitalist class relations.

It must also not be overlooked who the people are who speak today for a welfare economy tomorrow. "Any one who analyzes the composition of the Conservative party in the House of Commons," writes H. J. Laski, "cannot avoid the conclusion that its essential purpose is the protection of the interests of private property in the means of production. Forty-four per cent of them are directors of public companies; between them hold nearly 1,800 directorships. All important economic interests are represented here – banks, insurance, railways, shipping, iron, steel, engineering, textiles, electricity supply, coal, oil, tobacco, foodstuffs, newspapers and so forth."[42] As yet, ending the power and influence of private capital is no more than a possibility of the future. "The very rich," writes Nicholas Davenport, "remain just as rich and powerful as before, for the simple reason that they retain their capital and their hold of the national wealth. True, the Government has requisitioned securities and stock of materials, but it has given the former owners cash or Government stock in exchange. The former owners of capital have merely received claims on our future wealth. Through out all the war industries private ownership and control of plant remain the rule of our wartime economy. When the Government has to excercise [sic] some sort of authoritarian regime it usually does so by asking 'big business' to administer the controls of their own capital."[43]

Thus far the war is a war between monopolism and totalitarianism. Totalitarianism is the attempt of weaker monopolistic groups to beat the stronger ones in a super-monopolistic way by the more thorough concentration of all possible powers in the hands of a more centralized directing force. The monopolistic governments counter this attempt by transforming themselves into similar government-controlled super-monopolies. For them there is no answer to totalitarianism but totalitarianism.

The character of the war as a struggle between totalitarianism and monopoly is not altered by alliences [sic] of monopolistic democracies with totalitarian states such as Russia and China. Imperialistic needs and defense necessities at times transcend internal differences between allied nations. This also demonstrates the mixing and overlapping of many struggles of various groups during a particular historical period. Russia's totalitarianism is the product of the last war. It was designed to lead to a quick industrialization and to prevent exploitation and control by foreign imperialisms. German totalitarianism, the product of the Great Depression, is an attempt to solve imperialistically what could not be solved by traditional economic means. The growing totalitarianism in England and America is the result of the hew war and springs from the desire to safeguard the capitalistic forces which are threatened by German imperialism. Coming to life at different times and under different conditions, each totalitarian state has characteristics of its own. From a long-range point of view this individualism disappears, however. In the matter of capitalism, there is no difference between democratic, monopolistic or state capitalism. In the matter of capitalists, the Russians are different from the Germans and the Germans from the American. Furthermore, a Russian commissar arrives at and defends his position in a manner different from that of an English factory owner. The Goering Works have quite a different history from the United Steel Trust. Yet whatever differences exist between the various owners and controllers of capital, they all act alike.

The expansion and concentration of capitalism occur simultaneously and result in the centralization of economic and political power. This trend – unavoidable so long as capitalism lasts – can of course temporarily be Influenced either positively or negatively. The status quo can be retained or it can be broken. Whether one or the other happens, one or another group of interests, or a particular combination of interests, must rule. Determined by economic class relations, capitalist development is executed, however, by way of struggles between classes, groups, cliques and individuals. The change of rulers occuring in these struggles creates the illusion that history is made by men. Yet in all nations all rulers always act in the same way whatever philosophy they profess to believe in – that is, they all divide society and keep it divided between themselves as rulers and controllers on the one hand and the ruler and exploited on the other. And they all try to defend themselves against other ruling groups, or try to eliminate other ruling groups by way of peace and war.

When English or American capitalists speak of German fascism as the mortal enemy, they mean not only German imperialism but also the subordination of the individual capitalist to the state as practiced there. In fighting German fascism they hope also to remove the threat of their own displacement by fascist bureaucrats. The fact that many German capitalists remained capitalists and even became bigger capitalists under fascism is not enough to quiet their fears, for they cannot be sure that they will belong to those who retain privileged positions – especially not if they belong to a nation controlled or defeated by German imperialism. Even if English and American capitalists think themselves capable of withstanding competition by other capitalists, they know that they cannot withstand the dictates of a totalitarian government.

The totalitarian threat that comes from Russia is quite secondary to that stemming from Germany, for at this time only the latter nation is able to challenge Anglo-American capitalism. The defeat of Germany would bring western Europe into the orbit of Anglo-American imperialism, just as the defeat of France made her – however uneasy – an ally of Germany. The "rulers" of the "new Europe" would be ruled by Anglo-American capital. The threat of Russia – if it arises at all – will concern Asia rather than Europe but it will also have to be met, of course, in Europe, which is an additional reason for the allies to control western Europe. German totalitarianism is the most immediate issue to be dealt with and monopoly capitalism concentrates its power for the battle for Europe.

If the monopolistic nations must copy the organizational forms and military methods of totalitarianism, they must also take over totalitarian propaganda. Thus both the struggle of fascism and the struggle against fascism appears propagandistically as the fight for socialism. The more strictly the governments act in the exclusive interests of state-supported monopolies or the monopolistic state, the more lip-service they pay to socialism. With the progressively increasing concentration and centralization of economic and political power the illusion must be strengthened that all this implies the opposite from what it really is.

Although monopoly implies totalitarianism and vice versa, just as at an earlier stage of development competition implied monopoly and vice versa, it is nevertheless important not to overlook the distinctions between monopoly and totalitarianism. Otherwise many real problems of today would remain incomprehensible. But it is just as important not to forget that these distinctions refer to the struggles for control of the various competing ruling groups in a world that socio-economically remains unchanged.

If the state supported monopolies in the democracies have their way, that is, win the war in a short time, government control – however expanded – will be used chiefly to secure private capital and its profitability. Super-monopolies will assure extra-profits and reduce the profits of the – weakened competitors still further. The state-monopolies of the defeated nations will be dissolved. Mr. Hull speaks the truth when he promises restoration of "free trade" after the war. It will be "free trade" for others who face a stronger Anglo-American monopolism just as at an earlier time England fostered "free trade" because of her monopolistic position in the world market. Free trade merely means preventing other nations from using monopolistic practices and thus to making it easier to exploit them.

The anti-fascist struggle, on the part of the democracies is no fake. Without fascism Germany and Japan would be no match at all for Anglo-American capitalism. A "democratic" Germany was a weak competitor, for her monopolistic strength lies only in her organization and not in the expansiveness of her territory, nor in her possession of vital raw materials, nor, for that matter, in her productive apparatus. Just as monopolistic nations are in favor of free trade to the disadvantage of other nations, so monopolistic nations, however much they themselves may tend towards totalitarianism, are strictly opposed to fascim [sic] in other nations, that is, to fascism with imperialistic ambitions and potentialities. Those without such ambitions and potentialities they are only too willing to accept.

Assuming that the Anglo-American monopolists win this war, that they succeed in breaking all monopolies but their own and assuming further that they will be able somehow to reconcile their monopolistic world position with the needs of the majority of the world population and thus bring about a period of peace and reconstruction of world production and world trade; assuming all this, it is conceivable that the surplus value and the profitability of monopoly capitalism will be sufficiently raised to allow for the further expansion of capital on a more strictly monopolistic base. On the basis of this assumption it is also conceivable that just as at previous periods of increasing exploitation so now again parts of the world population will be able to increase their consumption despite, or rather because of, further monopolization. The masses of the property-less would be greater, the number of capitalists smaller, but capitalist economy would flourish once more.

Accumulation would continue. The hastened monopolization, however, does away with the extra-profits based on the existence of non-monopolistic spheres of production. The monopolistic rate of profit would tend to become the given rate of profit determined solely by accumulation and the rising organic composition of capital. The need for rapid expansion would be greater and stagnation more dangerous than ever before. The need for more surplus value to compensate for the decreasing profitability would be more pressing than ever before and the exploitation of the workers of the world would have to be increased in an as yet unknown measure. In due time, however, capitalism would face another period of stagnation, which would lead to new wars and to the further expansion of government control. All that the present war would have accomplished would be: the postponement of the complete merger of capital and government.

If monopoly capital fights for a cause already lost, it does so because it has no "cause" at all, because its actions are determined not by any social considerations but by momentary competitive needs in the general struggle for favorable positions at the sources of surplus value. That this general competitive struggle and its devastating results still determine the anti-social history of mankind is fully revealed precisely in monopolistic "planning" and in the "new order" of totalitarianism. All the real order that may be detected within the capitalist development only demonstrates that the contradictions between social- and class-production have objective limitations. This order asserts itself inspite [sic] of capitalism and merely shows once more that social planning and order can be established not by, but only against, capitalism.

Just as Adam Smith's fear of monopolistic conspiracies against the well-being of society did not stop his most ardent followers from conspiring against their competitors and from forming monopolies, so the most earnest monopolists in their fight against totalitarianism will eventually become totalitarians while struggling to maintain their monopolistic-competitive position. For what they want and what they are forced to do are two different things. In their search for profits they destroy the profitability of capital. In their attempt to safeguard capitalistic freedoms they establish totalitarian prisons. With their "planning" they lead the world in the barbarism of the present war, all the while demonstrating that, as always before, so today, too, instead of controlling anything they are controlled by developmental laws which they cannot change without giving up their capitalistic existence. Friedrich Engels pointed out some fifty years ago, what is still the truth: "Although production assuredly needs regulation it is certainly not the capitalist class which is fitted for that task ... The trusts of manufacturers of whole spheres of production for the regulation of production, and thus of prices and profits ... have no other mission but to see to it that the little fish are swallowed by the big fish still more rapidly than before."[44]

In the final analysis monopolistic profits mean nothing else than expropriation of capitalists by capitalists. Monopolism does not represent stagnation; the charge that monopolies hinder economic development out of fear of losing their monopolistic position is nonsense, for precisely by attempting to hinder development they push it forward. If capitalism cannot go on expanding by the ordinary capitalistic means of commodity exchange, the monopolists do the "uncapitalistic" thing of favoring the status quo. The status quo for the monopolists is, however, the decline of small competitive business, that is, the status quo does what expansion would do – it fosters the expropriation of capital by capitalists. The more the monopolists try to maintain a certain situation, the more they actually change that situation. The war should be proof enough of that.

If the status quo is only another expression for monopolistic expansion, the struggle between monopolism and totalitarianism must end with the victory of the latter unless, of course, capitalism itself is abolished. To be sure, this does not mean that the present totalitarian powers will be victorious. It means only that no matter who wins or loses on the military front the world will proceed from monopolism to totalitarianism as it moved from competition to monopoly. Both trends – which are really one trend – are only other ways of demonstrating that capital expansion is the concentration and centralization of capital which is brought about in less developed nations by forceful political means and which springs from the economic forces on hand in developed nations. For monopolism, the war is what revolution was for backward Russia, a direct political attempt to hasten process of development that became too slow by the ordinary means of commodity exchange and capital export.

Private capital and private monopoly are everywhere on their way out. They also cannot be developed in backward nations which have to start where capitalism leaves off – with state monopoly. All Mr. Hull's honesty with regard to the restoration of free trade does not make his program realistic, for free trade in the proclaimed sense presupposes a return to the conditions of early capitalism. A way must be found to bring to the monopolistic nations the fruits of free trade without free trade. Faced with the impossibility of undoing the concentration process and its social-material consequences in the defeated enemy nations, the modern free traders will have to employ the fascist methods of direct appropriation and direct annexation in order to realize Mr. Hull's program.

Even victory over the totalitarian Axis powers will not enable the victors to realize their goal – the maintenance and further expansion of present-day monopoly capital. The exploitation of the defeated powers itself will turn against the monopolists of today and transform their society into a totalitarian one. This, as well as the difficulties connected with the attempts of bringing the whole of Europe and Asia under the direct military control of Anglo-American capitalism, not to speak of the future discrepancies and enmities between England and America, explains the vagueness and the unrealistic character of all the Allied peace proposals brought forward. The Allies do not know what to do to make the war and victory the profitable undertaking it has to be in order to give another period of life and success to monopoly capitalism. "The gruesome fact is," said a liberal writer the other day, "that if the slaughter were to end tomorrow it would be a catastrophe the entire world."[45]

The most "realistic" proposals under these conditions are no doubt those that advocate the complete destruction of enemy nations by their deindustrialization, by mass-killings and mass-sterilization. This process would have to be repeated in all the coming wars until finally there would be nothing left but the most powerful exploiting nation without anything to exploit but her own population. Imperialism, however, is designed escape the limits of national exploitation. And so the whole history of imperialistic competition would have yielded a "solution" which consisted simply of a return to the problems that initiated imperialism. The most "realistic" proposals are not realizable and the unrealistic suggestions are merely excuses for the lack of any ideas concerning the coming peace. What has been said in regard to the war of 1914-1918 is doubly true for the present one: "It differed from others because it lost all relation to particular ends. Nations went on fighting because they had begun and did not know to stop."[46]


Notes

[1]. Investigation of Concentration of Economic Power. Monograph No. 21. Washington, D.C., 1940, p. 18.

[2]. Ibid.

[3]. In a round table discussion on Preserving Competition vs. Regulating Monopoly at the Fifty-second Annual Meeting of the American Economic Association, Leon Henderson spoke in favor of preserving competition. "The supposed evils of excessive competition he did not consider to be particularly terrifying. Nor was he worried over the destruction of investment in industry if the country should decided 'whether as a way of life or as an economic policy monopoly should not exist'." (The American Economic Review, Part II, March 1940, p. 212.

[4]. J.H. Carmical in The New York Times, January 24, 1943 ... H.S. Truman, chairman of the senate committee investigating the war program, related that "In two short years the peace time production balance of America has been put in reverse. Today, 100 corporations enjoy 70 per cent of the war and essential contracts, while the 175,000 smaller companies have been reduced from their former 70 per cent position to a mere 30 per cent." The Chicago Tribune, February 12, 1943.

[5]. Democracy and Free Enterprise, University of Oklahoma Press, 1942, p. 24.

[6]. Full Employment: The Cost. October 17, 1942.

[7]. Diminishing utility, in textbook terms, means "that the additional benefit which a person derives from a given increase of his stock of a thing diminishes with every increase of the stock he already has." Marginal utility, in Webster's short definition, means "the minimum degree of utility necessary for continued production or use of goods or services."

[8]. Recently it has become the vogue to declare that "the good old days of competition never really existed," and that "it had always been known that perfect competition was a mere abstraction." (Supplement to Fortune, December, 1942.) However, for more than a hundred years of economic theory and general thinking on economic subjects, the idea of perfect competition ruled not as a mere abstraction, but as expressing the goal towards which the real economic movements were tending. The recent publication dates of almost all treaties [sic] of monopolistic competition also indicate that the present wisdom, expressed by the editors of Fortune, was not the general property of the competition theorists who, for so long, monopolized economic literature.

[9]. The Structure of the American Economy. Part I a. Part II (Toward the Full Use of Resources). See also K. Korsch's reviews of both publications in Living Marxism, Vol. 5, No. 3, p. 36 to 49, and Vol. V, No. 4, p. 60 to 63.

[10]. Industrial Concentration and Price Inflexibility. Washington, D.C., 1942.

[11]. Ibid., p. 36.

[12]. Karl Marx, Capital, Vol. III, p. 1009.

[13]. Ibid., p. 1008.

[14]. A.C. Neal, Industrial Concentration and Price Inflexibility, p. 165.

[15]. Capital, Vol. I, p. 649.

[16]. Gustav Stolper; quoted in the Chicago Tribune, Sept. 22, 1942.

[17]. R.S. Lynd, The Structure of Power, "The New Republic", Nov. 9, 1942.

[18]. Recently again by Henry Bamford Parkes in Marxism: An Autopsy. Boston, 1939.

[19]. The General Theory of Employment, Interest and Money. New York, 1936.

[20]. Ibid., p. 347.

[21]. Ibid., p. 164.

[22]. Flotations of new securities in the U.S., for example, amounted to $9,978,000,000 in 1929, or around one-eight of the realized national income. By 1933, such flotations had dropped to $693,000,000, a decrease of 93 per cent. The market recovery in 1936 did not bring the volume of new flotations higher than $1,950,000,000, a figure representing but 3 per cent of the realized national income. (Willford I. King, What Has Happened to the Investor Class? "Trusts and Estates", January 1943.)

[23]. Ibid.

[24]. E.L. Bogart, The Changing Economic Functions of Government. "The Annals" of the American Academy of Political and Social Science. Philadelphia, Nov. 1939, p. 5.

[25]. Ibid., p. 11 (W.W. Jennings, The Rise of Government Control.)

[26]. W.I. King, What has Happened to the Investor Class?

[27]. Supplement to Fortune, December 1942, (The Domestic Economy).

[28]. The Road We are Traveling. New York, 1942.

[29]. Supplement to Fortune, December 1942, p. 1.

[30]. Ibid., p. 18.

[31]. Ibid., p. 4.

[32]. Ibid., p. 9.

[33]. Ibid., p. 17.

[34]. The Chicago Tribune (2/12/43)

[35]. Lewis Corey, Political Economy and the State. "The Humanist", Winter 1942, p. 149.

[36]. Oscar Lange, On the Economic Theory of Socialism. Minneapolis, 1938, p. 142.

[37]. A.P. Lerner, Democratic Perspective. The University Review, Kansas City, Autumn 1942, p. 70.

[38]. A.C. Neal, Industrial Concentration and Price Inflexibility, p. 12.

[39]. George Terborgh's Estimated Expenditures for Durable Goods shows that durable consumers' goods production averaged 9.3 billions per year for the period 1919-1938; whereas for the same period durable producers' goods production averaged only 6.6 billions. (Federal Reserve Bulletin, Sept. 1939.

The predominance of durable consumers' goods production is an additional reason for the increasing economic stagnation. "Consumers durable goods demand," writes A.C. Neal (Industrial Concentration and Price Inflexibility, p. 160), "is influenced not by considerations of profitability of future demand, but by use-value and income. The use-value effect is likely to make for inelastic demand; particularly in depressions." With durable goods demand being what it is, even the often advocated policy of selective price cuts would not stimulate investments. Dr. Neal relates that during the last depression the Boston Building Trade Council wrote a large number of companies asking whether a cut in wage rates would alter their building programs. None replied in the affirmative.

An increasing use-value production (production for consumption) does not change the character of capitalist production but disrupts it still further. It makes it increasingly more difficult to overcome depression and leads, finally, to war for the restoration of profit production as the only kind of production that insures the expansion of capitalism.

[40]. Big Monopolies and Small Firms. The New Statesman and Nation. December 5, 1942, p. 366.

[41]. The severity of the split may be recognized by the existing wage differences in the United States. The weekly earnings of American factory workers are:

Under $20 2,490,000 poverty
$20 to 30 2,810,000 poverty
$30 to 40 2,240,000 bare subsistence
$40 to 50 1,650,000 minimum decency
$50 to 60 1,410,000 slight comfort

Some 7.5 million wage earners still make less than 40 cents an hour. This represents 19 per cent of the 40 million American workers. Many in lines of work not covered by the wage and hour law are getting less than 30 cents and some as little as 15 cents. About 52 per cent of all factory workers get less than 76 cents per hour and only 8 per cent earn $1.20 and more. (Bulletin of the International Federation of Trade Unions. No. 3. February 1943.)

[42]. Who Are the Real Rulers of Britain. New York Times. 1/24/43.

[43]. Social Revolution–Conservative Style. The New Statesman and Nation, October 10, 1942.

[44]. Capital, Vol. III, pp. 143-143 (Footnote).

[45]. Hiram Motherwell in Common Sense, April 1943, p. 114.

[46]. Linden A. Mander. Foundation of Modern World Society. Stanford University Press, 1941, p. 646.

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Chronology

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