We’ve been juggling a few things in these last few posts around monopolies, so here’s a bit of a summary.
First, there is a tendency for monopolies and cartels to break their agreements with each other and restart competition when they reach the limits of outlets of disposal (people/companies/governments to sell to).
Second, monopolies and expanded consumer credit are a symptom of a lack of outlets of disposal; while they can hold off a crisis temporarily, monopolies and expanded credit only make the eventual crisis worse by making the working class even more precarious, and the capitalist economy even more interconnected.
Third, when the working class feels more precarious, and there’s a lot of idle capital in the hands of relatively small investors who want to reinvest, and growth is slowing down among the traditional places to invest in—then people are more likely to use their money in riskier, more speculative ways. This increases the risk of breaking capitalist markets—particularly when a large single crisis can ripple out throughout a deeply interconnected economy.
There’s one more observation about monopolies that I want to make. It involves how, when some monopolies lose their influence, newer monopolies arise in their place. This section is meant to be an addition to the Marxist alternative to the bourgeois analysis of the decline of monopolies.
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When monopolies slow down the implementation of new innovations, they open themselves up to being replaced by a competitor. However, they are able to fend off competitors in a variety of ways. Generally, they leverage their scale and idle capital to carefully look out for potential competitors; then they copy or buy out their competitor to prevent their competitor from ever being an imminent threat. Monopolies don’t rely on innovation to maintain their place in the market, they rely on other cheaper (and thus more profitable) tactics which become available to them with their market position and their access to massive amounts of internal capital.
However, this might not be able to last forever. While an economy with a lot of monopolies can manage to slow down innovation, it doesn’t put a full stop to technological advancements. Eventually, several innovations across other sectors are built up, developed, and deployed. These innovations in other sectors can be innovatively combined into a business which is able to be more efficient and effective at doing what the monopoly does.
The small quantitative advancements across a variety of disparate sectors may be combined into a new company. The more developments there are, the more likely that this new company will be significantly more efficient and effective than the old monopoly. Furthermore, these innovations are combined in such a way that the new company’s structure is necessarily, significantly, qualitatively different from that of the old monopoly.
Such a qualitative leap tends to get called a ‘disruption’ in Silicon Valley lingo. It usually refers to a new company which uses their Internet-savvy, computationally-advanced infrastructure to effectively compete with the existing producers of a stagnant sector of the economy.
Often, the normal tactics of monopolies will be able to undermine these new competing companies. But sometimes, the new combination of innovations produces a competing business which is drastically different from the way that the monopoly does things. To compete, the old monopoly would have to invest infeasible amounts of money to change their business model to something similar. The internal politics, massive amounts of capital to be deployed, and new hires to be made might create too large of a hurdle. The monopoly is not able to undermine the competitor, nor make the changes needed in time—that is, “in time” before the disrupter establishes themselves in the market.
The problem for the old monopolies is not that they lack the internal coordination to capture the market—they are good at internal coordination to a high degree. The problem is that the quantitative changes and innovations around the rest of the economy have kept growing, to the point that it becomes ever more likely that a significantly qualitatively different company will be able to replace the monopoly. This tendency for a slow build-up of technological innovations across other sectors, building up to a sudden qualitative shift in the sector-in-question, is the what bourgeois economists often overlook.
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Imagine the massive leap that an oil company would have to make to turn into a renewable energy company. It’s not going to happen! All their institutional knowledge and physical capital—it’s all suited for oil. A change from the oil to renewables would not be an adaptation for the oil company—it would simply be the invention of a whole new company.
Furthermore, the cost of retraining people, or hiring new people and firing oil employees and paying severance packages—which would be necessary for the old company to copy the new paradigm—might be more costly than simply starting up a whole new company. The cost of change may be higher than the cost of the new startup.
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Old monopolies stagnate in their dependence on anticompetitive practices, and are caught off-guard by the novel combination of new innovations. As time goes on, the more new innovations get deployed, and the more drastically a monopoly would have to adapt to a viable upstart competitor built on a novel combination of innovations. I already gave the example of oil companies not being able to adapt to a move to renewables, but we might also imagine taxi drivers being caught off-guard by companies like Uber, or bookstores and retailers being caught off-guard by Internet retail and computer-planned delivery. In the examples of Uber and Amazon, the Internet and computers were able to automate a ton of logistics and deskill a lot of labor. These developments across a wide number of sectors were quantitative developments—faster communication speeds, faster computations—which opened the door to a qualitatively different way of structuring and doing business.
If the new Internet giants are unable to predict and preempt similar qualitative changes to the economy, then they too might get replaced by a new upstart funded by capital from the global financial markets.
At the moment, however, they are still capable of leveraging their size and capital to undermine their competitors. Some companies are able to use their scale to be more effective at discovering potential competitors before they get off the ground. For example, Amazon surveils their AWS infrastructure to track which websites get traffic and seem popular—they use this to copy and undermine potential competitors. The quick and constant R&D built into the culture of many of these companies also makes them faster to adapt their business to new challengers. But the more their business functionally remains stagnant, the more innovations build up over time in different sectors, which increases the likelihood of a competitor popping up which is both qualitatively better and difficult to copy.
With all this being said, Luxemburg’s prediction about cartels falling back into capitalist anarchic competition has me excited. I look forward to seeing what more competition between the big tech companies, and the eventual development of capitalism will look like. I assume it will be bad for the working class, but as with any of these sorts of disruptions, we may see new opportunities and political openings.
Indeed, I hope that the working class is able to combine and leverage these new technological innovations to “disrupt” capitalist social relations in general, replacing them with socialist relations. To quote The Poverty of Philosophy, “A change in [people]’s productive forces necessarily brings about a change in their relations of production.”