Lecture
As the totality of relations of the capitalist mode of production takes shape, encompassing all spheres of the economy and all branches of production, capitalism displaces pre-capitalist relations of production and the classes and social groups based on them. The further development of capitalism proceeds on the basis of the reproduction and improvement of the capitalist relations themselves. At the same time, the restructuring of agriculture, the service sector, and the processes ensuring the reproduction of labor power on capitalist foundations occurs relatively more slowly. Once capitalism becomes the dominant system, new tendencies begin to develop within it that were not characteristic of the period when capitalist relations were forming and spreading outward, into all spheres of the economy.
The development of capitalist competition leads to a growing concentration of production (often achieved through the specialization of production) owing to the well-known effect of economies of scale. The concentration of production within the capitalist system inevitably takes the form of a concentration of capital.
Moreover, competition is inevitably accompanied by the absorption of less successful capitals by more successful ones, which, as a rule, means the absorption of relatively small capitals by larger ones, leading to the centralization of capital, i.e., the merging of several previously independent individual capitals under the control of a single owner. Concentration of production is the concentration of production at enterprises that increase their share of the total output of a given type of product, which is usually accompanied by growth in the size of enterprises. Specialization of production is the concentration of production of a particular type of product at enterprises that manufacture only that product. This usually also leads to concentration of production. Concentration of capital is an increase in the size of capital through its accumulation, as well as through the centralization of capitals. It constitutes the economic precondition for the concentration of production.
Centralization of capital is the merging of several independent individual capitals under the control of a single owner. It promotes the process of capital concentration but is not directly connected with the concentration of production (a change of owner by itself does not affect the scale or specialization of production). The concentration and centralization of capital does not mean the disappearance of small capitals, which are constantly being formed anew. But at a certain stage in the development of this tendency, large capitals come to dominate the market, to the point of forming a monopoly. Monopolies as such are not a new historical phenomenon. Trade and industrial monopolies were well known as far back as the late Middle Ages. At that time, however, they rested on non-economic privileges. Now, by contrast, the formation of monopolies is purely economic in character and follows from the development of competition among capitals, accompanied by processes of their concentration and centralization. Monopolies arise as capitalist monopolies. Monopoly capital is capital possessing the properties of a capitalist monopoly.
Capitalist monopoly is the ability of large capital to influence the process of price formation for some commodity by virtue of its high share in the production and/or marketing of that commodity. This ability allows monopoly capital to extract monopoly super-profit — profit that arises because monopoly capital raises the market price of a commodity above the price of supply-and-demand equilibrium, either owing to its high share in the production and/or marketing of the commodity, or owing to its monopolistic control over the conditions for exceptionally low production costs.
The presence or absence of capitalist monopolies is determined by the economic and technological conditions of development in a given branch of industry (setting aside non-economic factors — political, legal, and so on — that also affect the situation). If a high degree of concentration of production is economically disadvantageous in a given branch, then even if a capitalist monopoly should arise there through the centralization of small and medium capitals, it will not be stable, since new small and medium capitals will comparatively easily form in that branch. A rather frequent occurrence is the formation, in one branch or another, not of a single large capital occupying a monopoly position, but of two or three dominant capitals, or of several large capitals that together account for the bulk of production. Such a situation is called an oligopoly.
Oligopoly is a dominant position in the production and/or marketing of some commodity held by several large capitals. The largest capital, occupying a monopoly position in the market, gains the ability to influence the market price of goods not only through its high market share (simply because, in that case, its conditions of production become the determining factor in the formation of the commodity's value). Monopolistic organizations of capital can manipulate the price (and hence the profit obtained) by systematically regulating production and marketing. For example, by deliberately restricting production and sales in particular local or national markets, monopoly capital can influence the balance of supply and demand in those markets, and hence the price level. Within monopolistic associations, output and sales volumes may be redistributed among the various constituent parts of the association for this purpose. To increase the profitability of the association as a whole, so-called transfer prices, rather than market prices, may be used for internal accounting within the association.
Transfer prices are prices used for settlements between the constituent parts of large monopolistic organizations.
Characteristics of the main types of monopolistic associations (pool, cartel, syndicate, trust, concern): The fastest way to gain a monopoly position in a market is to form associations of large capitals which, once they reach a certain scale, acquire the properties of a capitalist monopoly. The simplest forms of association of capitals are the pool or ring. In this form, capitalists enter into a temporary, de facto merger of their commodity capitals in a local, national, or international market in order to gain a monopoly position and dictate the price of their commodity. A similar arrangement can also take an informal character, sometimes not even requiring behind-the-scenes negotiations. In that case it takes the form of price leadership — one of the large capitalists raises the price of his commodity, and the other large capitalists in the branch follow his example, in effect carrying out a monopolistic collusion without any prior agreement (an example of such behavior has repeatedly been demonstrated in Russia by gasoline suppliers).
A more developed form of monopolistic association is the cartel. This is a stable, long-term agreement among large capitals not only on a unified pricing policy but also on each capital's share of the market for a given commodity. A well-known example of an international cartel is OPEC (the Organization of the Petroleum Exporting Countries). In the form of a syndicate, not only a unified pricing policy and division of the market are carried out, but also the establishment of production quotas, and often a common supply system is formed for the enterprises belonging to the syndicate. The latter is advantageous because of the opportunities afforded by monopsony (a monopoly of the buyer). Having merged, large capitals act as a monopoly buyer and can secure more favorable terms for themselves in purchasing raw materials and supplies. The next step in the development of monopolistic associations is the emergence of forms in which unified ownership and management of the merged capitals is established in one way or another. Historically, various forms of such monopolistic associations arose and predominated at different times — trusts, conglomerates, and multi-branch concerns.
The concentration of capital, and the growth of its economic power and influence over the state of the economy as a whole, lead to an increase in monopoly capital's ability to influence the state apparatus. This influence is secured in various ways — direct bribery of government officials, the financing of elections, the mutual rotation of personnel between monopolies and the state apparatus, lobbying, and so on.
A fusion of the power of the monopolies and the power of the state takes place. Both government officials and representatives of monopoly capital use this fusion in their own interests. These phenomena marked the beginning of the formation of state-monopoly capitalism.
State-monopoly capitalism is a historical stage in the development of capitalism, beginning with which the mutual dependence of capitalist monopolies and the state intensifies: monopoly capital strengthens its influence over the state apparatus, while the capitalist state deepens and broadens its intervention in economic processes in the interests of the reproduction of social capital as a whole, and of the largest monopoly capital in particular.
Alongside the concentration of industrial capital, the concentration of commercial and banking capital also develops. The concentration of commercial capital does not usually lead to the formation of trade monopolies, since the economically efficient levels of concentration of production in trade (as in some industrial branches) prevent this. Only at the end of the twentieth century did large retail chains appear, which, however, do not attain a monopoly position, at most creating a situation of oligopoly. The concentration of banking capital, on the other hand, had already led to the emergence of banking monopolies by the early twentieth century. The formation of banking monopolies created a situation in which banking capital gained the ability to establish control over its borrowers — industrial and commercial capitalists — in order to strengthen guarantees of the effective repayment of loans issued. This control may be direct, for example, through the bank's acquisition of controlling stakes in industrial and commercial enterprises. Control may also be indirect, achieved through a high level of indebtedness of a given enterprise to the bank, through the inclusion of bank representatives on the board of directors of an industrial enterprise, and so on. In turn, large monopolistic capitals in industry, possessing substantial reserves of temporarily free funds and interested in the uninterrupted financing of their operations, establish control over banks or set up their own banks.
This process of mutual penetration of banking and industrial capital and the formation of industrial-financial groups was already developing by the beginning of the twentieth century. Industrial-financial groups became the main players in the market for fictitious capital, securing for themselves the ability to extract substantial income from that market at the expense of smaller players and depositors. Thus, the development of monopolistic tendencies led to the formation of industrial-banking capitalist monopolies based on finance capital. Finance capital: monopoly capital formed through the fusion of industrial and banking monopoly capital, occupying leading positions in the financial [market]. The substantial concentration of capital made it inefficient for capitalist monopolies to conduct operations solely on the scale of the national market. Alongside the concentration of production and capital, the internationalization of production and capital develops vigorously. The growth of foreign trade outpaces the growth of production. International capitalist monopolies form, uniting monopoly capital across various countries.
The formation of super-large capitals, their interest in conducting operations on the scale of the entire world market, and the formation of international monopolies lead to a growth in cross-border capital migration. Capital seeks to overcome national trade barriers by establishing production in various countries, beyond the borders of the country of the capital's original origin. The overaccumulation of capital within the scale of the national economy compels capital to seek profitable application abroad, and the most mobile forms of capital — loan capital and fictitious capital — display particular activity in this regard. As a result, the export of capital begins to predominate over the export of goods. Having established its dominance in the most industrially developed countries, capitalist relations continue to expand their influence into the semi-capitalist and non-capitalist periphery, seeking to transform it into markets for their products and to turn it into a sphere of capitalist exploitation (and not merely of direct plunder of resources, as in the preceding colonial era).
This process of the outward expansion of capitalist relations likewise spurs the growth in the scale of capital export. The export of capital is stimulated by the growing overaccumulation of capital in the metropoles in the course of the cyclical development of capitalist production, aggravated by the increasing concentration of capital by monopolies. The capitals of the metropoles, exported to the colonies, are used to obtain super-profits through the exploitation of rich raw-material resources and of cheap local labor, whose situation is worsened by agrarian overpopulation and by a colonial regime employing methods of non-economic coercion. The completion of the process by which the territory of the Earth is turned into a capitalist world market is accompanied by the division of that market among the largest national monopolistic groupings, backed by their national states. On the non-capitalist periphery this process takes the form not only of an economic but also of a territorial division of the world, turning practically all relatively backward countries into colonies and semi-colonies of the largest capitalist powers, and giving rise to large colonial empires, often through bloody military conquests. This policy came to be known as imperialism.
Such are the main characteristic features of the monopoly stage of capitalism (often called, after one of its characteristic traits, imperialism). This set of features had already fully manifested itself by the early twentieth century. Imperialism leads to a clash of interests among the largest monopolistic groupings and the national states backing them, in the process of the economic and territorial division of the world. Powers that reached a high level of industrial development relatively late find themselves "shortchanged" and push for an economic and territorial redivision of the world.
The struggle for this redivision leads, from the end of the nineteenth century onward, to a whole series of wars, including both direct aggression by the major powers in their struggle over the redivision of the world (the Anglo-Boer War, the war between the USA and Spain, the war between Japan and Russia, the First World War and, in part, the Second World War), and the participation of the major powers in conflicts "behind the backs" of weaker states (the wars in Latin America from the late nineteenth to the first half of the twentieth century, the Balkan Wars at the beginning of the twentieth century). The formation of colonial empires gives the colonial metropoles access to cheap sources of raw materials and potential markets for their goods. Through the direct exploitation of the natural and human resources of the colonies (sometimes in the form of outright plunder and slavery), the capitalist metropoles gain additional opportunities for the accumulation of capital. Large capital in the metropoles uses these opportunities, among other things, to take the first significant steps toward easing class antagonisms within the most developed capitalist powers.
The first steps are taken toward granting wage workers certain social guarantees (the development of a network of free elementary schools, the emergence of the first pension systems, the emergence of health-insurance systems); among wage workers, a stratum of the most highly skilled workers emerges, for whom more or less decent living conditions are secured (a "labor aristocracy"). It remains an open question to this day whether the "labor aristocracy" can be regarded as complicit with capital in the colonial plunder. Does the super-profit that capital obtains through the exploitation of the colonies, part of which it may direct toward raising wages, not create an interest on the part of the working class in capital's colonial policy? There are grounds not only for raising such questions but also for answering them affirmatively. It is another matter how far the influence of these factors extends to the position of the working class of the developed countries as a whole. At its monopoly stage, capitalism for the first time gives rise to such a phenomenon as transitional economic relations — transitional not from feudalism to capitalism, but from capitalism to a new social order, socialism. Such relations include all those relations that go beyond the framework of the free competitive market.
This includes monopoly prices, the various forms of private monopolistic (and later also state) regulation of production and marketing, and the formation of wage workers' incomes beyond the level of wages determined on the basis of the competitively formed price of labor power. V. I. Lenin called monopoly capitalism a dying capitalism, and also a parasitic and decaying capitalism. From his point of view, the existence of transitional relations (which partially negate, or "undermine," the commodity character of capitalist relations) already made it possible to regard monopoly capitalism as dying.
Evidence of parasitism and decay was supposed to be provided by such features as the growth of a rentier stratum, living solely on income from money capital and engaged in neither labor nor entrepreneurial activity; the plunder of the natural and human resources of the colonies; monopoly capital's drive to monopolize the achievements of technical progress and restrict their dissemination, thereby braking technical progress; and the bribing of a section of the working class by capital and the emergence of a "labor aristocracy."
It should be noted that some of these features are not specific to monopoly capitalism alone (the drive toward a monopoly on scientific and technical achievements); some played only a transient historical role (the colonial system); and some were not of such significance as to be elevated to the rank of a defining characteristic of this stage of capitalism (the formation of a rentier stratum). However, V. I. Lenin's exaggerated critique of the parasitism and decay of monopoly capitalism does not negate the fact that certain features of parasitism and decay did indeed begin to manifest themselves at this stage of capitalism. As for "dying capitalism," the mere emergence of transitional relations is clearly insufficient to warrant such far-reaching conclusions (as was subsequently confirmed by historical practice).
The growth in the power of large private capital, seizing a monopoly position in a whole range of branches, leads to an intensification of intra-capitalist contradictions and to a growth in the instability of the capitalist economy as a whole. The formation of capitalist monopolies infringes on the interests of small and medium capital, and even of large capital if it does not occupy a monopoly position. The dominant position of monopoly capital in competition, its ability to manipulate market prices by influencing the balance of supply and demand, and the opportunities arising from its monopoly position to abuse that position to the detriment of competitors — all of this worsens the economic conditions for the reproduction of non-monopoly capital.
Monopoly capital's ability to manipulate the market situation means a growing distortion in the proportions of reproduction determined by the mechanism of free competition. This weakens the capacities inherent in capitalism for adapting to the contradictions of capital accumulation, which manifest themselves through the mechanism of the capitalist cycle. The market situation that forms under the action of the mechanism of free competition becomes distorted by private monopolistic regulation of the market, which in turn distorts the reaction to that situation. Under such conditions, the periodic crises characteristic of capitalism take on an increasingly destructive character.
Taken together, these tendencies lead capitalist society to seek to limit the arbitrary power of private monopolies. Already at the beginning of the twentieth century a struggle began for legislative restriction of abuses of monopoly market position, and for limiting the direct influence of private monopolies on the state apparatus, above all against direct corruption. Direct state intervention in the production and trade policy of monopolies begins. Initially this intervention is limited only to so-called natural monopolies. A natural monopoly is a capitalist monopoly formed in a branch where a monopolistic organization of production is manifestly more efficient than a competitive one. A typical example of a natural monopoly is the municipal water-supply system. A system of several competing water-supply networks laid into every apartment, so that the consumer could choose which tap to turn on and whose services to use, would be economically absurd. In the twentieth century, natural monopolies could, wholly or in part, include the post, the telephone, the telegraph, the electricity and gas supply systems, railways, water supply, sewage systems, and so on. In a number of countries, some of these branches (for example, the post and the railways) were in state hands even before the twentieth century, for political and military reasons. As for other branches, even in the twentieth century the state did not always proceed to nationalize them. But in any case, the state resorted to measures preventing the abuse of the monopoly position of these branches.
For example, the state could set tariffs for rail transport and for electricity, while municipal authorities could regulate tariffs for urban transport services, water supply, and so on. The question of state regulation of production going beyond intervention in the affairs of natural monopolies alone arose most acutely during the severe economic crisis of 1929-1933, known in the West as the "Great Depression." The theoretical formulation of the concept of the necessity of state intervention in the mechanism of capitalist reproduction was found in the works of the British economist John Maynard Keynes. He showed that, under a whole range of conditions, the capitalist economic system is unable, within an acceptable time frame, to automatically restore the disturbed equilibrium of reproduction proportions. And for this reason, state intervention aimed at correcting the resulting disproportions and stimulating economic growth becomes entirely necessary. In addition, the concept of market failures gained currency, according to which, in a number of areas of activity (especially in the production of so-called public goods), private capital is unable to ensure the efficient allocation of resources through the mechanism of market competition. Beginning in the 1930s, the capitalist state accumulated a rich arsenal of methods for influencing the capitalist economy.
Firstly, an extensive body of legislation emerged, restricting the full freedom of enterprise in very many areas. Besides laws simply regulating certain general rules of economic activity, a mass of prohibitions and restrictions is imposed on entrepreneurs. Stock-exchange and banking activity is regulated in detail (the formation of reserves, deposit insurance, restrictions on loans issued to a single client, and so on). In the sphere of production, mandatory product-quality standards are set across a range of parameters, along with sanitary norms, permissible pollution limits, procedures for calculating equipment depreciation, and so on. Secondly, the state regulates a whole range of general economic parameters. The state manages the movement of the money supply. Through the central bank's refinancing rate, the mandatory reserve requirement, and also through the purchase and sale of government securities, the level of interest rates is regulated, and, in part, the general parameters of the supply of credit resources as well.
The tax system is used both to regulate the general level of taxation and to grant tax relief of various kinds and directions. Thirdly, the state budget is used to allocate direct investment and to provide grants, subsidies, and subventions. The market for government procurement can reach considerable size. The state issues credits and also provides preferential lending terms through private commercial banks. In the sphere of foreign trade, the state regulates the level of customs tariffs and sets export tariffs and premiums. Fourthly, the state pursues a certain social policy, including an income policy. This includes setting minimum wage rates, applying progressive taxation of income, and applying various kinds of social benefits and guarantees (various social insurance systems, pension programs, unemployment benefits, social benefits for the poor, for obtaining education, and so on).
The significance of the minimum wage as a measure limiting capital's monopsony in the labor market: The establishment of a minimum wage is a non-market measure, but at the same time this measure is aimed at maintaining equilibrium in the labor market.
Without state control over the level of the minimum wage, under conditions of the actual dominance of the buyer (capital) in the labor market, a fall of wages below the value of labor power is quite likely. This is all the more likely because the lowest-paid strata of the working class are, as a rule, also the least organized, the least able to collectively resist the pressure of capital. The size of the minimum wage is a market standard indicating the minimum limits of income that allow a worker to reproduce his labor power. Given differences in family structure across countries, the minimum wage may amount to roughly 1.5 to 3 times the subsistence minimum.¹
¹ Bearing this fact in mind, it is easy to understand the real significance of the policy of the Yeltsin administration, and later of the Putin administration, in setting the minimum wage significantly below the subsistence minimum. Thus, as recently as 2006, the minimum wage was roughly four times lower than the subsistence minimum. In effect, this amounts to state support for capital's monopsony in the labor market, which continued even later, so that in 2017 the minimum wage still remained below the subsistence minimum.
Finally, in a number of cases (especially in the already-mentioned instances of market failure), the state resorts to direct (full or partial) management of capital, for example, by dictating prices and tariffs, production quotas, and, ultimately, by nationalizing particular enterprises and entire branches of the economy. In cases where more efficient ways of employing capital in private hands are found, the state, conversely, may resort to privatization. Often the whole set of state regulatory measures is specifically constructed to achieve certain goals. These goals, together with the means for stimulating their achievement, are combined into state programs and plans. Even apart from the existence of such programs, one of the common goals of state regulation is anti-crisis policy, based on measures that stimulate business activity during a downturn and cool it during an upswing, in order to smooth out the cyclical fluctuations of the economy. Another generally accepted goal of state regulation is the pursuit of antitrust policy. In effect, the capitalist state has taken on the function of manager of social capital as a whole, so as best to ensure the conditions (not only economic but also social and political) for the reproduction of social capital. At the same time, the state may also act as a special kind of private capitalist alongside all the others, and these two capacities of the state may come into conflict with one another. The development of state intervention in the system of relations of private-economy capitalism, resting on freedom of enterprise and a free competitive market, has led to the development of relations and institutions that go beyond the properly capitalist system of production relations, forming various kinds of transitional forms.
In the course of the development of capitalism on its own basis, a marked evolution of inter-class relations took place. The sharp confrontation between the two principal classes of capitalist society — the proletariat and the bourgeoisie — began to be supplemented by elements of class compromise. This compromise between labor and capital developed first and foremost in the countries of highly developed capitalism. Its basis was the necessity of ensuring, for the reproduction and accumulation of capital, also normal conditions for the reproduction of labor power. Whereas in the early stages of the development of industrial capitalism, when it was taking shape and spreading "outward," capital often extracted profit by pressing down the price of labor power, paying wages below the value of labor power, gradually this approach came to threaten the normal reproduction of capital itself.
The spread of machine technology, and its constantly increasing complexity, required the employment of highly skilled labor power. The effective employment of such labor power proved possible only if the worker were freed from the daily fear of whether he would earn a crust of bread for himself and his family, whether he would be left immediately without means of subsistence in case of illness, and whether falling into the ranks of the unemployed would mean for him an irreversible stroke of fate. At the same time, the organized struggle of the working class for better terms of sale of labor power and for more dignified living conditions developed. Together, these two tendencies — rooted both in the evolution of the conditions of capitalist production itself and in the development of the working-class struggle — led to an improvement in the living conditions of wage workers. This was expressed both in the growth of real wages and in the development of the first systems of social guarantees related to health insurance, pension systems, the introduction of unemployment benefits, the regulation of working conditions, hiring and dismissal, and in the recognition of trade-union rights. The development of monopoly capital gave these compromises an additional impetus — since the extraction of monopoly super-profits created broader opportunities for maneuvering income, it was precisely the large monopolistic associations that more easily found the resources to reach a compromise with their wage workers. The position of the working class was also significantly influenced by the political struggle of the proletariat, expressed especially in anti-capitalist revolutions and in attempts, over the course of the twentieth century, to create a social system alternative to capitalism. It was under the direct influence of the revolutions of the first quarter of the twentieth century (and, above all, the October Revolution of 1917 in Russia) that the developed capitalist countries moved to an 8-hour working day, and began ever more actively to apply various kinds of social guarantees and benefits.
The example of the "world socialist system," which actively developed a system of universal social benefits and guarantees for the population, exerted continuous pressure on the developed capitalist countries. However, these compromises between labor and capital took place, at least in the first half of the twentieth century (and to some extent later as well), against the backdrop of the most acute class struggle between the proletariat and the bourgeoisie, including armed struggle, and indeed could not have been achieved without such struggle. Alongside the change in inter-class relations, changes in intra-class relations also became characteristic of capitalism developing on its own basis. In particular, notable shifts occurred in relations within the capitalist class itself: between owner-capitalists and entrepreneur-capitalists. These changes were reflected in the concept of the "managerial revolution," which, exaggerating the significance of the changes taking place, presented matters as though actual control over the capitalist process of production had passed entirely into the hands of hired managers, while the capitalist owner had essentially been transformed into a rentier, standing entirely outside the process of production.
Undoubtedly, in large capitalist enterprises (and especially in monopolistic associations), the importance of capitalists directly engaged in entrepreneurial activity, appearing chiefly in the form of hired managers, has grown considerably. The sharp increase in the scale of production and the considerable growing complexity of the structure of large capitalist firms sharply strengthened the role of management functions and made direct control by the owner over the whole of entrepreneurial and managerial activity extremely difficult. However, this by no means implies that such control has disappeared or become purely symbolic. "Private production without the control of private property," the emergence of which was noted as far back as Karl Marx, was marked by a transition of private owner-capitalists from control over production to control over the results of production. Naturally, the relative independence of managers from owners under these conditions has grown substantially. Structuring the relations between owners and managers in such a way as to allow owners to secure their interests has become a significant and quite complex problem (known in economic theory as the "principal-agent" problem).
The social position of managers has also changed. Senior managers, especially in large capitalist enterprises, and even more so in monopolistic associations, have been transformed from mere hired overseers of labor power or technical specialists into acting capitalist entrepreneurs. Most of them have also, to one degree or another, come to participate in the ownership of the enterprises they manage. Another shift in the structure of class relations concerned the change in the relative weight of the petty bourgeoisie and the capitalist bourgeoisie. The growth of monopoly capital placed the petty bourgeoisie in even more difficult competitive conditions, leading to its progressive ruin or to its effective subordination to large capital. However, the catastrophic decline in the relative weight of the petty bourgeoisie predicted by Karl Marx, which would have placed it, as a social stratum, on the verge of extinction, did not in fact occur.
It turned out, firstly, that not all branches of the economy undergo a complete restructuring of technology on the basis of large-scale machine production.
Secondly, even the transformation of production on the basis of machine technology can leave a niche for small-scale production (for example, by hiving off some particular operation, or the manufacture of individual parts and components, from a large factory). For this reason, small-scale production (and the petty bourgeoisie) retained opportunities for their own reproduction (especially in the service sector and in agriculture), even though their relative weight has substantially narrowed, and their independence has in many cases become fictitious. Small entrepreneurs are enmeshed in a web of debt and technological dependence on large capital, which frequently acts toward small business simultaneously as both a monopoly and a monopsony.
The stable reproduction of the capitalist system of production relations on its own basis, under conditions in which industrial production has come to predominate in most branches of the economy, not only does not mean the end of technical revolutions in production but, on the contrary, presupposes such revolutions. Over a long period of time (from the end of the nineteenth century through most of the twentieth century), such technical changes — often referred to even as technical revolutions or as shifts in technological paradigms — for the most part did not go beyond the framework of industrial technologies. Nevertheless, they proved sufficient significantly to increase labor productivity and to noticeably affect the entire appearance of capitalist society. One of the most notable shifts of this kind was the development of mass production. The precondition for this transition was the growth in the concentration and specialization of production, which led to the creation of enterprises capable of producing homogeneous goods on a large scale. One of the best-known technical solutions that facilitated the transition to mass production was the development of the assembly-line principle for putting together finished products.
Mass production inevitably entailed the necessity of mass marketing and mass consumption. The technical capability created to supply consumer goods, including technically complex ones, in quantities sufficient to meet the needs of a significant part of the population, ran up against an economic constraint — the narrow scale of effective demand on the part of society's largest class, the wage workers. Henry Ford was among the first ideologists of the bourgeoisie to recognize this contradiction, proclaiming the principle that his workers should be able to afford to buy his cars. This problem was addressed from two directions. On the one hand, mass production itself made it possible to lower the level of production costs, and hence the prices of various goods. On the other hand, the combination of factors already listed in the preceding section led to a rise in the income level of the working class. On this basis, a mass-consumption society¹ began to take shape. The period of its formation in the USA falls in the mid-1920s to the early 1950s, and in Western Europe, in the mid-1930s to the late 1950s. Its culmination came in the 1960s. Subsequently the phenomenon of mass consumption did not disappear anywhere, but the leading characteristics defining the appearance of society gradually became other ones. Another characteristic feature of the era of state-monopoly capitalism developing on its own basis is the rather notable role of the state sector in the economy. This role is also connected with the nature of industrial mass production under conditions of developing monopoly. The reproduction of the whole of social capital, given the significant role of large monopolies, turns out to be dependent, firstly, on natural monopolies of national scale (rail transport, the system of electricity generation and distribution, the oil and gas supply system). In such a situation the state frequently resorts to nationalizing the relevant branches, in order reliably to maintain the stability of the economy as a whole, placing it beyond dependence on the policy of private capital. Secondly, any large-scale mass production of a monopolistic character, or approaching one — especially if the reproduction of all other branches depends on it — is likewise capable of affecting the stability of the reproduction of social capital as a whole. Thirdly, the concentration of production in the most capital-intensive branches¹
The phenomenon of mass consumption has given rise to the sociological concepts of the "consumer society" and the "mass society." leads to the fact that its scale makes it difficult for private capital to mobilize the investment needed to permanently maintain the competitiveness of a given production, especially on the world market. The coincidence of these last two conditions in a number of industries (metallurgy, the aviation industry, shipbuilding...) also frequently serves as grounds for nationalization. In some cases, nationalization is determined by political considerations (the military industry). In addition, nationalization is resorted to in cases of so-called market failures. These failures are usually connected with the production of goods that fully or partly have the properties of a public good (which is characterized by the impossibility or difficulty of fully privately appropriating both the income and the costs associated with external effects).
Market failures are situations in which market relations fail to provide adequate information about costs and beneficial effects through market prices. One particular case of market failure is the production of goods characterized by the presence of external effects (externalities) — for example, the production of public goods.
A public good is a good to which the exclusion principle is inapplicable, i.e., access to which cannot be restricted by the seller, including for those consumers who did not pay for the good. This is why public goods are characterized by the presence of external effects (externalities).
External effects (externalities) are side effects arising in the production and consumption of a good that affect third parties outside the seller-buyer transaction, and/or that are not accounted for in the price of the good.
Explanations of market failures and externalities by economists of the orthodox-liberal, neo-institutional, and Marxist schools of thought:
Economists of the orthodox-liberal school attribute market failures to the insufficient development of market relations, which prevents all the necessary information from being reflected in prices. These economists explain the existence of externalities by the absence of markets for external effects. Economists of the neo-institutional school (including proponents of the economic theory of property rights) hold the same position, but explain the lack of complete price information and the absence of markets for external effects by the fact that obtaining such information and organizing markets for external effects would require excessively high transaction costs (including for specifying property rights to external effects).
Marxist theory explains market failures by the fact that the market cannot ensure the effective satisfaction of a whole range of social needs, owing to the specific narrowness of the criteria of efficiency inherent to it (the profitability criterion), and its ability to respond only to private interests expressed in monetary form. Most social services have one or another property of a public good, and this is why the fields of education, healthcare, employment services, and social assistance are wholly or partly state-owned, even in those states that resort to nationalizing the production of other enterprises only on an extremely small scale. The presence of a large state sector makes it logical for the state also to have a significant presence in the loan capital market — participation in the ownership of commercial banks, investment and insurance companies, pension funds, and the like. Within the state sector, as within large private monopolistic combines, methods of direct centralized management of production develop further. The combination of the features described above characterizes the stage of capitalist development that took shape in the developed capitalist states in the 1950s-1960s as late industrial society1 (or, more precisely, as late capitalism2).
1 The term is not a very fortunate one, since it does not express the specific nature of this society precisely as a particular stage in the development of capitalism. However, it does point to one of the genuinely characteristic features of this stage, and can be accepted as an already established term, provided one does not forget the real content concealed behind it. Late capitalism is characterized by the emergence of a phenomenon such as the "welfare state." This term is placed in quotation marks not by accident: in fact there can be no talk of universal welfare there, and more honest researchers speak of the "two-thirds society" or the "dual society." The two-thirds society arose both from the internal tendencies of the development of capitalism and from the pressure of external circumstances. The growing complexity of the technologies employed and of the labor force's qualifications caused not only a rise in the incomes of hired workers but also created the need for higher guarantees of social well-being. A qualified worker's working time should not be lost to illness; a qualified worker should not have to overexert himself trying to provide his family with a crust of bread; a qualified worker should not be in a state of psychological discomfort, worrying about how he will be able to give his children an education or provide for himself in old age — otherwise all of this will affect...
1 The term belongs to the Belgian Marxist Ernest Mandel. (See: Mandel E. Der Spätkapitalismus. Suhrkamp Verlag, 1972. English edition: Late Capitalism. L: Verso Publishers, 1978)
the quality of his labor, leading to defects, accidents, downtime, and so forth. Pressure on capitalists from the organized labor movement — trade unions and political parties — developed in this same direction. At the same time, the example of the development of broad social guarantees in the countries of the "world socialist system" forced capitalists to enter into a social compromise with their workers, so as not to endanger the very existence of the capitalist system itself. The result was a society in which roughly two-thirds of the population was provided with a fairly decent level of income and social guarantees. As for the remaining third, which turned out to be insufficiently provided for, social peace on that side was secured by various social assistance programs (the "war on poverty") together with repressive measures (up to and including direct state terror) and technologies of political manipulation. The search for the most effective methods of using the labor potential of hired workers, as well as the striving for a stable social compromise, led to the creation — on a very limited scale — of social and economic mechanisms that allowed a small part of the working class to move somewhat beyond the status of hired workers. A number of capitalist firms switched to applying various experimental methods of "humanization of labor,"1 worker participation in the firm's capital and income, and the involvement of ordinary workers in production management. However, one should not exaggerate the extent to which such new features of relations between capitalists and hired workers have spread. And even the presence of such new features does not change the fact of the fundamental confrontation between the owners of capital and the 1
Methods that reduce the degree of monotony of labor, soften its fragmentation into partial operations, and expand its creative functions (for example, the transition from assembly-line production to modular production). sellers of their own labor power. Alongside this, on a small scale, enterprises of a non-capitalist type (chiefly cooperatives) began to form in the developed capitalist countries, belonging to and managed by the workers employed in them. In these enterprises the basic capitalist relation is indeed eliminated, but only within the enterprise. And even the relations within the enterprise are significantly influenced by the capitalist relations dominant in society. The diffusion of ownership, the significance of which was greatly exaggerated by the ideologists of "people's capitalism," is nevertheless a fact of the postwar development of capitalism in the most developed countries. Over the postwar period, the number of people (including hired workers) who possess even a small amount of capital property — in the form of shares, bonds, units in investment funds, savings in pension and insurance funds, etc. — grew significantly. The proportion of the population with small and very small holdings of capital assets reached quite noticeable figures.
However, small holders of shares, units, etc. (among hired workers) own an utterly negligible share of the total social capital, and their role in managing this capital is practically nil. As a result of the development of the "two-thirds society," in the most developed countries some categories of hired workers even began to receive income above the price of labor power. This applies chiefly to those workers who directly service the process of capital's self-expansion — managers and specialists. First and foremost, the highest pay is given to those managers and specialists employed in the financial market (the sphere of direct "money-making"), though this also applies to those employed in trade, production, research and development, the mass media, and mass culture. To some the quality of his labor, leading to defects, accidents, downtime, and so forth. Pressure on capitalists from the organized labor movement — trade unions and political parties — developed in this same direction.
At the same time, the example of the development of broad social guarantees in the countries of the "world socialist system" forced capitalists to enter into a social compromise with their workers, so as not to endanger the very existence of the capitalist system itself. The result was a society in which roughly two-thirds of the population was provided with a fairly decent level of income and social guarantees. As for the remaining third, which turned out to be insufficiently provided for, social peace on that side was secured by various social assistance programs (the "war on poverty") together with repressive measures (up to and including direct state terror) and technologies of political manipulation. The search for the most effective methods of using the labor potential of hired workers, as well as the striving for a stable social compromise, led to the creation — on a very limited scale — of social and economic mechanisms that allowed a small part of the working class to move somewhat beyond the status of hired workers. A number of capitalist firms switched to applying various experimental methods of "humanization of labor,"1 worker participation in the firm's capital and income, and the involvement of ordinary workers in production management. However, one should not exaggerate the extent to which such new features of relations between capitalists and hired workers have spread.
And even the presence of such new features does not change the fact of the fundamental confrontation between the owners of capital and 1 Methods that reduce the degree of monotony of labor, soften its fragmentation into partial operations, and expand its creative functions (for example, the transition from assembly-line production to modular production). sellers of their own labor power. Alongside this, on a small scale, enterprises of a non-capitalist type (chiefly cooperatives) began to form in the developed capitalist countries, belonging to and managed by the workers employed in them. In these enterprises the basic capitalist relation is indeed eliminated, but only within the enterprise. And even the relations within the enterprise are significantly influenced by the capitalist relations dominant in society. The diffusion of ownership, the significance of which was greatly exaggerated by the ideologists of "people's capitalism," is nevertheless a fact of the postwar development of capitalism in the most developed countries. Over the postwar period, the number of people (including hired workers) who possess even a small amount of capital property — in the form of shares, bonds, units in investment funds, savings in pension and insurance funds, etc. — grew significantly. The proportion of the population with small and very small holdings of capital assets reached quite noticeable figures.
However, small holders of shares, units, etc. (among hired workers) own an utterly negligible share of the total social capital, and their role in managing this capital is practically nil. As a result of the development of the "two-thirds society," in the most developed countries some categories of hired workers even began to receive income above the price of labor power. This applies chiefly to those workers who directly service the process of capital's self-expansion — managers and specialists. First and foremost, the highest pay is given to those managers and specialists employed in the financial market (the sphere of direct "money-making"), though this also applies to those employed in trade, production, research and development, the mass media, and mass culture. To some extent, elevated pay affects, in the most developed capitalist countries, the entire stratum of highly qualified workers in general. The question of the source of this elevated pay remains, as yet, insufficiently clear. There are several possible answers to this question. The additional pay above the value of labor power may have as its source a collective deduction from surplus value. Another variant is a deduction from the necessary product of the most poorly paid strata of the population (who are thereby paid below the value of labor power). Yet another variant is the acquisition of funds for the elevated pay of the most qualified part of hired workers through non-equivalent exchange with "third world" countries. It is possible that some combination of all these factors is at work, differing for different strata of highly paid workers. The development of a mass-consumption society, of the "two-thirds society," represents entirely objective tendencies characteristic of late capitalism. Their existence leads to social consequences of a kind that force a reconsideration of some conclusions of classical Marxism. It was mentioned above that the concept of the "absolute impoverishment of the proletariat" was formulated
by K. Marx on the material of a very narrow historical segment of the development of capitalism, and absolutized tendencies characteristic only of that segment. The existence of a tendency toward the absolute impoverishment of the proletariat is a fact of capitalist reality, but this tendency is not universal in character and is not the determining one. The realities of late capitalism confirmed this quite unambiguously, and any attempts to insist on a dogmatic reading of K. Marx lead only to a dead end of self-deception. In just the same way, late capitalism forces us to take a different view of the concept of the "historic mission of the working class." It appears to be historically established fact that the working class of the most developed capitalist states has long since stopped straining to fulfill any "historic mission." And this requires a reconsideration of views on the question of the driving forces of the social revolution that will carry history beyond the bounds of capitalist society (this question will be examined in more detail in the next chapter).
The disintegration of the imperialist colonial system falls within the period of late capitalism. Over the course of the 1950s-1960s, most former colonial countries gained political independence, and by the early 1980s only small remnants of the former colonial empires remained. The causes of the disintegration of the colonial system are rooted in the evolution of the economic and political development of the metropoles and colonies, which affected the character of relations between them, as well as in the rivalry between the two world systems.
On the liberation of the countries of Latin America from colonial dependence: The Spanish colonial empire collapsed for the most part as early as the first third of the 19th century, as a result of the struggle of the peoples of Latin America for independence. At the same time, the largest Portuguese colony, Brazil, gained independence. These colonies belonged to the category of countries in which so-called settler capitalism1 (capitalism based on the mass resettlement of people from the metropoles) played a notable role.
1 Typical countries of settler capitalism include the USA, Canada, Australia, New Zealand, and Israel. Besides Latin America, settler capitalism also played a significant role in South Africa. Countries of settler capitalism won political independence relatively early, or achieved a relaxation of political control on the part of the metropole (Canada's transition to dominion status in 1867, Australia's in 1901, New Zealand's in 1907, and the Union of South Africa's in 1910).
Artificial braking by the metropoles of capitalist development in these countries (similar to what had been observed several decades earlier in North America and had led to the declaration of US independence) led to the growth of a liberation movement, which merged with the anti-feudal and anti-slaveholding movement of the lower classes. Spain and Portugal proved unable to suppress the mass armed uprisings. However, the anti-feudal goals of the liberation movement were not fully realized at that stage, which led to a slowdown in the economic and political development of the countries of Latin America.
During the period of late capitalism, the objective economic interest of metropolitan capital in the colonies declined. The main international flows of capital, whose source is chiefly the developed countries, shifted from the export of capital into colonial, mainly extractive or raw-material, industry, toward the export of capital into the developed countries themselves. The importance of cheap sources of raw materials as a basis for obtaining super-profits declined relatively, compared to investment in advanced high-technology production. The development, in many colonies, of a significant or at least noticeable capitalist mode of production, the formation within them of a national bourgeoisie, and the general rise in the cultural level of the population created additional factors of conflict between the economic and political interests of the metropoles and the colonies.
The intensification of the struggle of colonial peoples for their independence began to raise the economic and political costs of direct colonial exploitation. The relative economic and political weakness of colonial societies was compensated, in the eyes of their national elites, by the opportunity to use methods of accelerated modernization, tested on the formerly backward territories of the Russian Empire, drawing on the political and economic experience and authority of the "world socialist system." In a
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Часть 1 Chapter 12: The Development of Capitalism on Its Own Basis
Часть 2 Thesaurus for Chapter 12 - Chapter 12: The Development of
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