Something which Luxemburg describes in Chapter 2 of Reform or Revolution is how tariffs and national protectionism of the nation’s capitalists will be exacerbated by monopolies and cartels.
Finally, capitalist combinations aggravate the contradiction existing between the international character of capitalist world economy and the national character of the State – insofar as they are always accompanied by a general tariff war, which sharpens the differences among the capitalist States. We must add to this the decidedly revolutionary influence exercised by cartels on the concentration of production, technical progress, etc.
In other words, when evaluated from the angle of their final effect on capitalist economy, cartels and trusts fail as “means of adaptation.” They fail to attenuate the contradictions of capitalism. On the contrary, they appear to be an instrument of greater anarchy. They encourage the further development of the internal contradictions of capitalism. They accelerate the coming of a general decline of capitalism.
When I initially read this, I wasn’t sure why monopolies/combinations would be “always accompanied by a general tariff war”. However, I recently listened to podcast episode of NPR’s Planet Money, Best by, sell by, use by. The episode gave an example of this sort of tendency. I here describe the relevant part of the podcast, and generalize it.
The episode describes how there is a 12 day ‘Sell by’ rule for milk in Montana, which props up Montana’s dairy industry. With current pasteurization and refrigeration technology, milk is fine to sell much beyond 12 days. But only Montana’s dairy industry can regularly supply milk to Montana’s grocery stores in those 12 days in a way that is marginally profitable given how much market-share they’ll receive. This is a roundabout way of imposing a tariff on dairy companies outside of Montana.
Politicians in Montana are afraid of removing this restriction—for fear of being seen as attacking Montana’s dairy capitalists and dairy industry. But more competition, from allowing the external dairy industry to compete within Montana, could lower milk prices for Montana’s consumers, at least temporarily. It would also mean that Montana’s milk industry would probably be competed out of existence, as has occurred in other dairy categories which lack similar protections. This “tariff” is a protective measure for Montana’s four major dairy companies. These dairy companies thus form a regional cartel, capturing the market without having to worry about competition coming from across a border.
This ‘propping up’ of Montana’s dairy industry is one example of an anticompetitive tactic from a cartel—in this case, a cartel of Montana’s four major milk producers. There are many tactics that monopolies and conglomerates use to protect their market share while not having to engage in expensive competition. Inducing tariffs in their local political economy is one of these tactics. We could imagine that in other sectors, this is a sort of seed that could sprout into a larger tariff war between nations / localities.
There’s no one particular reason that these sorts of tariffs arise. Lots of things within capitalism drive it. Politicians want to be seen as supporting the regional/national team—which in these times means supporting regional/national industries. Politicians are afraid that regional capitalists will lobby against them and withdraw funding unless they support the regional capitalists’ interests. Individual voters, insofar as they identify with their region—and in extension, their region’s capitalists—want to see politicians supporting regional industries. Workers in the affected sectors in these regions might especially feel like their fates are tied to this regional protectionism. All of these tendencies in a capitalist economy, and likely more, are why capitalist combinations seem to be “always accompanied by a general tariff war” which “sharpens the differences among the capitalist States.”
A final note on this tariff analysis. These tariffs tend to come as a way of protecting regional/national cartels. So they should come and go as cartels/monopolies come and go.
Luxemburg’s analysis is that monopolies will give way to market anarchy when they run out of outlets of disposal. Certainly then, the tariffs should go away, as part of this re-introduction of competition?
Probably, yes. For cartels to find new outlets of disposal, they will need to expand to new markets. But to expand to new geographical markets without tariffs being imposed on them, a form of laissez-faire capitalism will likely be necessary. A different region won’t play nice with tariffs if your region has tariffs against them. So there is a mutual lowering of protective tariffs as if to say: “Let the best capitalist win”. Any competition and new monopolistic layouts which were previously being prevented by tariffs may then develop.
Nations with a developed industry might wage imperialist war, or use economic coercion to pry open markets and install a system of laissez-faire. The nation and nation’s capitalists are so confident that their monopoly will dominate the international market that this setup seems like a low risk way of expanding their outlets of disposal.
Going back to a previous point: tariff wars come and go alongside their cartels/monopolies, insofar as these cartels need the anticompetitive protections of the tariffs. This means that the regional and nationalist sharpness of tariffs may be around only insofar as a tariff war might (1) seep into the social/cultural memory, or (2) cause changes to the material structure of the relevant nations economies. We might consider how the Trump-China tariff war has sharpened the difference between the USA and China in the minds of each nation’s residents—even if some of the tariffs have been weakened. We might also look at how the USA has made pushes towards energy independence in the face of seeking political independence from other oil producing countries—I’m thinking of the current USA restrictions on Russian oil.
Finally, (2.a) sharpened differences among capitalist states may continue through imperialist and neocolonial relations. See how the Global North takes in the raw materials and labor of the Global South, only to sell the end products back to the Global South. The Global North no longer requires protectionist tariffs in those sectors, but the materially-rooted antagonisms between nations persists.