Cartels and monopolies cannot survive, but they fail in ways which are associated to capitalist crises. Let’s examine this.
Let’s link our ongoing discussion back to Luxemburg’s Chapter 2. Her focus there is that neither a new/expanded credit system nor a set of cartels/monopolies are structurally significant enough to diverge from the basic tendencies of the capitalist economic system. This means that while cartels, monopolies, and expansion of credit may be able to hold back an economic crisis for a while, this can be only temporary.
In a general way, cartels, just like credit, appear therefore as a determined phase of capitalist development, which in the last analysis aggravates the anarchy of the capitalist world and expresses and ripens its internal contradictions.
—Rosa Luxemburg, 1908
‘Reform or Revolution?’
Chapter 2: The Adaptation of Capital
Monopolies do indeed help hold back crises, but only by allowing the capitalist economy to stretch the working class / outlets of disposal a bit thinner. This cannot last, but first let’s look at why it can help hold back a crisis temporarily:
When a market is nearing its capacity for production and realization, monopolization allows the companies to continue increasing their profits without requiring as much market expansion. Instead of a capitalist economy increasing the outlets of disposal for companies to realize profit—for example, through imperialist expansion or Keynesian deficit spending—capitalists coordinate and consolidate.
Cartels and monopolies help capitalists continue to grow their profits in several ways:
(1) they allow for a capitalist-class-coordinated, monopolistic ramping-up of prices and lack of value for the consumer;
(2) they help to extract as much production efficiency from workers through routinization and monopsonistic labor-market coordination;
(3) they allow companies to stagnate and slow-roll the (expensive) implementation of new innovations without worrying as much about competitive pressures.
Luxemburg observes (1) and (2), while (3) is perhaps briefly gestured at.
(1, in the words of Luxemburg) Cartels aggravate the antagonism existing between the mode of production and exchange by sharpening the struggle between the producer and consumer, as is the case especially in the United States.
(2, in the words of Luxemburg) They aggravate furthermore the antagonism existing between the mode of production and the mode of appropriation by opposing, in the most brutal fashion, to the working class the superior force of organised capital, and thus increasing the antagonism between Capital and Labor.
(2 and 3, in the words of Luxemburg) We must add to this the decidedly revolutionary influence exercised by cartels on the concentration of production, technical progress, etc.
—Rosa Luxemburg, 1908
‘Reform or Revolution?’
Chapter 2: The Adaptation of Capital
(I added those section descriptions in italics)
1 and 2 are relatively well-known consequences of monopolies. Monopolies can raise prices on consumers, who are largely the working class because “Where else will they buy their goods from?” Additionally, they can worsen conditions and wages for their laborers because “Where else will they be able to work to make the money they need to survive?” Both of these stretch the working class thin—extracting more labor power from the biological system, while recouping wages by raising prices.
Making the working class more precarious is a short-term solution—this can perhaps work for a few years before capitalist growth again hits limits on the lack of available capital in the system. There’s only so much that monopolies can continue to grow by throwing the working class into further precarity. The working class needs to be able to socially reproduce. Mass working class dissatisfaction can lead to the unprofitable social forms of either left revolution or fascist barbarism.
3 is an interesting consideration. Monopolies seem to slow down developments in technology because they aren’t under as much pressure from competition. Companies want to increase profits—but becoming more efficient at producing value is merely one way to do that. Another profit-increasing strategy is gaining monopoly capture of the market. A company may become a monopoly by initially taking advantage of a relative advantage in productive efficiency. But beyond that, they leverage their efficiency and size to undermine competition—and this ultimately slows down more productive efficiency and innovation.
But this means that there is extra, idle capital being accumulated by monopolies, without as many areas for viable reinvestment in companies that grow on good business fundamentals (because monopolies are increasingly identified as the market for investment, and monopolies are slowing the growth of their fundamentals). Their profit-seeking interferes with other seemingly-stated ideals of capitalism: that capitalists should reinvest capital to produce more value, more efficiently. Even within monopolies, capital is held idle because it’s unnecessary to develop economic efficiency without the pressures of outside competition.
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The aspect of monopolization described in 3 may fetter capitalism’s technological development. Holding capital idle doesn’t increase the speed of technological development, as we would see in how monopolies aggravate the antagonisms of Capital-vs-Consumer and Capital-vs-Labor. While traditional consumer-focused product innovations might stagnate, monopolies continue to innovate production-focused methods of centralized management.
Developing methods to viably centralize production opens doors for society to take over the monopoly and democratically direct it toward social uses—but since we wouldn’t want to copy how monopolies extractively treat their workers, it wouldn’t be a simple translation. The lack of consumer-focused innovation holds us back because some of those innovations would likely help develop the economy indirectly. Monopolies stagnate and fetter the development of socialized production in some ways; in other ways, they innovate and potentially develop socialized production.
We might imagine a socialist healthcare system to essentially benefit from these developments in internal coordination. It would be a highly coordinated institution aimed at improving people’s health, with the benefits of scaled coordination that a monopoly provides, and newly invented modes of technological development which do not rely on the motivation of potential competition.
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Ultimately, capitalists know that this cartel/monopoly style of growth cannot sustainably fill capitalism’s bottomless hunger. Capitalists realize that the best thing they can do to increase their profits is to expand their market capture to get more resources and find more customers to sell to. As they grow, they increasingly rely on getting every last inch out of the outlets of disposal that they have access to, and fettering the expensive process of developing and deploying technological advancements.
There are material limits to this as well. The capitalist class eventually realizes that they will need to expand their markets, as to increase their viable outlets of disposal. As individual companies, to expand their market share, they will reenter into competition, breaking any informal cartel agreements. I expect Apple, Google, Microsoft, Meta, and Amazon all to become much more aggressively competitive—with each other, with telecom companies, with existing and new sectors of the market. Recall Luxemburg:
“...the forced partial idleness of capital will reach such dimensions that the remedy will become transformed into a malady, and capital, already pretty much ‘socialised’ through regulation, will tend to revert again to the form of individual capital”
—Rosa Luxemburg, 1908
‘Reform or Revolution?
Chapter 2: The Adaptation of Capital
The shortsightedness of focusing on a few companies gives way to competition between individual capitals. Because competition has a tendency back to monopolies, all of this will ultimately lead the economy to a focus on either expanding outlets of disposal in the broader global economy, or socialist revolution. The effort to keep up this back-and-forth between monopoly and non-monopoly forms of capitalism will be too much effort, and some form of imperialist market expansion becomes much more appealing to the capitalist class.
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Capital-holders want to use their capital to make profit. But when there are monopolies which are fettering growth, this means there are fewer places to invest which have good underlying fundamentals and expected growth. In this situation, capital has a tendency to get redirected to shorter-term, riskier, get-rich-quick schemes.
Less regard is given to the overall health of the economy. The economy increasingly becomes a place of speculation and scams; the individualized profit motive is ratcheted up, and eventually becomes too unstable even to be regulated by the coordination of ruling class institutions meant to maintain a viable market (such as the US Federal Reserve).
The increased anarchy in capitalism outwits and overwhelms the internal coordination which once maintained the capitalist markets, and a crisis spreads through the system. Enough schemes, and enough variation among those schemes, and some will inevitably slip past the bourgeois maintenance of capitalist markets: for example, look at how banks crashed the housing market, and how crypto scams have become insidious among many small-scale investors.
Bypassing the institutional supports of the capitalist market economy, especially with so much money tied up in speculation and scams, leads inevitably to a dramatic change. Often, the economy falls into a crisis, with all the investors cashing out of their speculations and scams as the economy’s flows of capital crumble into unviability. Often, this ends with the bourgeois caretakers of the capitalist market stepping in—they expand the markets, increase the credit available to capitalists, attack organized labor to cheapen labor, and bolster competition.
Sometimes, all these investments into get-rich-quick investment opportunities will have some good underlying fundamentals, as was the case with the Dot Com Boom/Bust. However, even with the Internet’s promising, new, potentially market-expanding technology, the amount of initial speculation was so immense that it nevertheless resulted in a mini-recession when the bubble popped.
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I understand an upcoming economic challenge to be signaled by extreme monopolization, ungrounded increases in consumer credit, and increases in scammy business practices and greater-fool speculation. It’s potentially even a sign of a crisis in a few years. These signals come especially in an economy in which major sectors move to new, more collectively dangerous tactics to try to boost individual growth.
How does this relate to technology companies? Don’t they seem to be sustainable, viable monopolies? I believe the lack of competition between big tech companies cannot last under capitalism. However, I think it will take a while for them to reach the limits of the market, given how much they benefit other parts of the economy. As computer technology, computer-aided automation, and computer-aided logistical advancements get adopted; the rest of the economy also expands—the technology from Silicon Valley is able to bolster the productivity of other sectors and companies which have good fundamentals.
But this tech-fueled expansion reaches its limits too. Computers are widespread, and the economic expansion from simply introducing computation has begun to stall. The major qualitative changes to production which come with the move from analog to digital have by now been discovered—now, the increases in computation power are mostly minor quantitative benefits in program start-up times, being able to have more programs open, and calculation speed and capacity. While machine learning is an upcoming massive qualitative change in production efficiency, at the moment, computation is no longer developing the economy in a way which drastically increases outlets of disposal.
Thus, we see Silicon Valley companies attempt to expand into new markets beyond the original niche that they’ve captured. Apple, while it has made its success in hardware, has now publicly emphasized that they are focusing on developing their services—fitness, streaming, enterprise, Augmented Reality, et cetera. Google has found massive success in the search advertisement business, and expands into new sectors in ways that give it more information on users: Android requires a Google account and funnels people to Google search and services, but it simultaneously competes in hardware; Chromebooks are similar; YouTube similarly provides more advertisement space and data collection, but it simultaneously competes for the attention of users like any other social media platform. Facebook also has built its success on attention and advertisements, and is desperately looking for a new market to capture, thus, failed forays into hardware, and a huge push on the ‘Metaverse’. Amazon, an online retailer, expands to capture other areas, using its existing online retail and distribution network to support its Amazon Basics line of products, a capture of the ebook market with Kindle, and forays into services like Amazon Prime Video (streaming), Twitch (streaming/social media), and pharmaceuticals. Microsoft, with its capture of the enterprise and much of the consumer software market, seems pretty satisfied with their services model. But this does not prevent them from continually attempting to expand into new markets: the failed Windows phone and the high-end consumer Surface-brand hardware express their hopes of competing with Apple and Android; the Bing search engine and advertisements in the Windows operating system are Microsoft’s attempts to leverage their userbase into an advertisement business like Google’s.
All of this is to say that Silicon Valley companies are looking for new markets: new people to sell to, and new markets to sell in—and they are signaling that they are willing to compete with each other to do so.
While Silicon Valley giants are essentially monopolies/cartels in their own right, they also have had a sort of learned agreement between each other that they will stay in their lanes. Enough failed attempts to encroach on each others’ markets have taught them to focus on what they’re good at. But as companies grow to the limits of the present market’s available outlets of disposal, the pressure to find new markets and to compete with each other ramps up. The learned cartel behaviors of Silicon Valley give way once more to the anarchy of capitalism.
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We have seen how monopolies coincide with two forms of increased individualist anarchy in the capitalist market. First, monopolies and cartels reach a limit to their non-competitive style of growth, and eventually must reenter competition if they wish to continue to grow. Second, they create a market environment which encourages the proliferation of get-rich-individually-fuck-the-larger-economy schemes.
These two forms of capitalist anarchy tend to increase the instability of the market, which opens the door to dangerous capitalist crises. These crises can only be temporarily “solved” with an expansion of the market’s outlets of disposal or a newly invented means of adaptation to capitalist crises.[ftnt3] These two kinds of “solutions” will merely be longer-term bandages than credit and monopolies.
Capitalism’s hunger for accumulation has material limits, and only a socialist system which is able to replace that institutionalized, individualized, profit motive with something more democratic will be able to solve capitalism’s contradiction. Unfortunately, but important to remember, is that fascism too, potentially might be able to carefully run their economy on thin air for a long while, with dehumanizing social forces policing people to fall in line to the totalitarian, centralized economy.
Footnotes:
[ftnt3]
Here, I think of changes to the social form which allow for continued exploitation and a sort of surface-level consent to continue to be exploited. I imagine things like ideologies of thankfulness to capitalists, fascist redirection of working-class rage to scapegoats.
Another potential means of adaptation that has been gaining popularity is the Universal Basic Income—a way of guaranteeing an inflow of money into the economy, even without capitalists needing to pay workers more. But this doesn’t seem like it will be able to quench capitalists’ hunger for accumulation. Even so, it will perhaps address the issue of outlets of disposal—although perhaps not; capitalists, in their desire to capture as much of the UBI as possible might compete with each other, attempt to expand the UBI, and drive the market to inflation.