Sweezy on

by Abedian Hossep



   Marx was the first economist to recognize and theorize the monopolistic behavior of a firm as an industry. This process became to be very essential in the succeeding century. He determined clearly its roots in the greater profitability of a large structured productive unite compared to many small fringes. Marx, thus, made an excellent beginning in the analysis of monopolistic capitalism, illustrating how and why it was the inevitable out growth of capitalism in its competitive stage. The first generation of his followers, particularly Hilferding and Lenin, built their ideologies over this foundation (Sweezy 20).

In order to understand Marx's exposition of the theory as presented in his first volume of The Capital, for centralized economy, first we should focus upon the fundamental difference in between the Capitalist and Soviet planing economies. Marx accounted as following: In a simple, centralized, commodity production system, the producer goes to market with a commodity (C), exchanges it for money (M), and in return buys other commodities (C) that are required for the satisfaction of producers' families' needs. Therefor, this process can be represented by the formula (C-M-C), where the first (C) stands for a specific commodity produced by one firm, and being marketed by the centralized body, then (M) is the money which the producer gets in exchange, and the second (C) is for the bundle of useful commodities that he buys with the money. It is significant to mention that, this system is only a method of production for use. Though, the link is indirect: producers do not use their own products or at least by no means all of them, but all the same their purpose in producing is to satisfy their needs, not to add to their wealth (Sweezy 28).


   Matters are radically different, when we come to capitalism as Marx noted. In a society which those who do the actual producing own no means of production, and hence must sell their labor power to the capitalists, who do own means of production and therefor control the processes of the output. Here, the defined formula (C-M-C) must be replaced by its opposite (M-C-M). This symbolizes that the capitalist, who initiates the process of production starts with money (M), then with this "capital" purchases commodities (C), consisting of means of production and labor power, which are transformed through a process of production in to the finished commodities ready for sale. Hence, when the sale has been completed, the capitalists left once again with money (M-C-M) (Sweezy29).

However, the capitalist who had a capital of (M) at the beginning of the first cycle, now gains a "surplus" of (M')and this turnover becomes, (M''), (M'''), (M''''), as he "invests" more and more in the production. Thereby, in successive years it will become "profitability" of the capitalist. This is what Marx meant when he characterized capital as " self-expanding value" (Sweezy 31). But this is not all. When there is only one producer, the larger the monopolies become the more profitable they are. Therefore they are able to accumulate capital rapidly, while at the same time they are afraid of spoiling their own market by over-investing. An addition, they set up whatever barriers they can to protect their monopolistic positions against outsiders invading their market. For example, by maintaining a considerable margin of used productive capacity that can be quickly activated in relation against unwanted new comers, which will rise the unnecessary output and cost of the production, for the single manufacturing firm, but will cause a barrier for the competitors. Thus, monopolies in the capitalist competitive market, act in two ways to intensify the contradiction of the accumulation process that, as we have already seen, are achieved by the formula (M-C-M'). On the one hand, it rises the potential rate of invested capital accumulation, and on the other hand it restricts the profitable outlets into which the accumulated "surplus value" can be over flooded, caused by competition. Hence, the result will be over accumulation of "Capital" by the monopolistic competition for its profitability and its matter of existence (Sweezy 43).


  According to the Soviet Type economy school, which was based upon the Marxist central planning model, the monopolist is not obliged to gain a potential rate of over accumulation, since there is no competition or market anarchy. There by, additional production cost will be eliminated as the government intervention increases over the market, and this will result to a lower average cost, the value of the production declines, and as output increases price falls towards a new equilibrium between the labor value and market price (Sweezy 50).

However, the actual consideration the monopolistic competition largely exceeds the centralized Soviet Type economy, which Marxist analogues fail to recognize, is the significance of maximization of the consumer's utilities, given as demand. This would also open new territories, such as technological advancements and innovations. Marx, indeed rationalized: "The tendency to over accumulation of the capital that is inherent in the very nature of the capitalists". He truly manifested the monopolistic inefficiency a hundred years ago when such claims were doubtful and considered premature, but his error became apparent as he wrote: "The real barrier of capitalist production is capital itself." Further more, Marxists believed and argued that: "Monopoly capital makes that barrier even bigger and more formidable as individual capitalists struggle for existence." (Sweezy 73) However, the monopolistic capitalist's "barrier" for growth diminishes as capitalist investment in innovation or better allocation of resources increases (Sweezy 82).











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