Monthly Review Publishes Missing Chapter from Baran and Sweezy’s ‘Monopoly Capitalism’

The July-August 2012 issue of Monthly Review Magazine featured a missing chapter from the book Monopoly Capital: An Essay on the American Economic and Social Order, published in 1966 by Monthly Review Press. The book was published following the death of Paul Baran in 1964, whom along with co-author Paul Sweezy spent over two years of dedicated work on the book yet not come to a conclusion on the structure and content on the missing chapters, entitled “Some Theoretical Implications” and “On the Quality of Monopoly Capitalist Society II.” Sweezy was left to finish the book which according to Wikipedia argues that,

Big business can maintain selling prices at high levels while still competing to cut costs, advertise and market their products. Competition is generally limited however with a few large capital formations sharing various markets, with the exception of a few actual monopolies… The economic surpluses which result cannot be absorbed through consumers spending more. The concentration of the surplus in the hands of the business elite must therefore be geared towards imperialistic and militaristic government tendencies, which is the easiest and surest way to utilize surplus productive capacity.

Exploitation focuses on low wage workers…, especially minorities. Average earners see the pressures in drive for production destroy their human relationships, leading to wider alienation and hostility. The whole system is largely irrational, since though individuals may make rational decisions, the ultimate systemic goals are not. The system continues to function so long as Keynesian full employment policies are pursued, but there is the continued threat to stability from less-developed countries, throwing off the restraints of neo-colonial domination.

However, Monopoly Capital contains another argument, that wages of a large portion of workers in monopoly capitalist (i.e., imperialist) countries include a portion of surplus derived from the exploitation of labor in non-core countries, and that insofar as the high wage workers are exploited it is through “deductions” by way of raising the real cost of living. The argument presented in regards to the distribution of “economic surplus” is not only compelling and relevant, but similar to many of the arguments put forward by groups like the Revolutionary Anti-Imperialist Movement and media outlets like Anti-Imperialism.com. In short, the recent publishing of this missing chapter is a welcome addition to the ongoing dialogue surrounding a clear historical materialist analysis of class in modern society.

In the short essay A Missing Chapter of Monopoly Capital: An Introduction to Baran and Sweezy’s “Some Theoretical Implications,” Monthly Review editor John Bellamy Foster provides insight into both the history behind the book and its missing chapters and summarizes the its distinct and, as some regard, groundbreaking take on political economy. Here is a relevant excerpt.

If bourgeois thought had abdicated its responsibility to address the reality of capitalism the same could not be said of Marxian political economy. For Baran and Sweezy “it constituted the only basis from which it is possible to visualize the overall function of the ‘corporate system.’” But Marxian economic theory desperately needed to be updated in order to address the changes in accumulation wrought by monopoly capitalism. This involved introducing the concept of economic surplus, or simply surplus (i.e., “the difference between total social output and the socially necessary costs of producing it”), as a category supplementing Marx’s surplus value. In this perspective, the surplus category was a convenient device to raise issues not easily analyzed in terms of the surplus value, which remained nonetheless the base concept.

Having declared their intention to address this problem explicitly, Baran and Sweezy provided an extraordinary “thumbnail sketch” of the most important aspects of Marx’s surplus value concept, including, most crucially, the value of labor power. For Marx, writing in the era of competitive capitalism, the value of labor power, corresponding to the basic basket of commodities socially necessary to reproduce labor power (not just biologically but socially and productively), was at any given time an irreducible minimum, below which labor power and its availability in the quantity and quality needed would be impaired.

Like Marx, Baran and Sweezy contended that the value of labor power was composed of both biological and social-historical elements. The existence of an irreducible minimum did not mean that labor could not be paid, as Marx himself had argued, for considerable periods of time at rates below (or above) the value of labor power. But wage payments below this level had detrimental effects both on labor and on the reproduction of capital, and could not be sustained for long periods of time for most workers without reducing the supply of labor power.

Marx’s argument was developed specifically in relation to the freely competitive capitalism of his time. In contrast, under monopoly capitalism, Baran and Sweezy argued, “the value of labor power ceases to be an irreducible magnitude; it becomes rather a flexible quantity susceptible to significant variations. Monopolistic profits can be earned under such circumstances not merely by the monopolists redistributing the aggregate surplus value in their favor, but by increasing what is appropriated by the capitalist class beyond the surplus value aggregate by means of a price policy that reduces the real wages of labor.” This becomes possible because under monopoly capital, wages for considerable periods of time (and presumably in the monopoly sector) are able to rise above the value of labor power. In essence, workers (or some relatively privileged sectors within countries, or continents) are able for a period of time at least to capture a portion of surplus in their wages. With wages above the value of labor power workers are vulnerable in a new way to deductions from their real wages.[...]

As Baran and Sweezy clearly recognized, this amounted to saying that under monopoly capital a part of surplus was incorporated in real wages, which were therefore raised above the value of labor power, particularly in the monopolistic sector. Thus as Sweezy put it in his March 2, 1964, letter to Baran, “profits by deduction” under monopoly capitalism means deductions “from a priceof labor power which is well above its value.” That is, workers, partly through the actions of trade unions in the monopolistic sector of the economy, were able to raise wages above the level simply necessary to guarantee the supply of labor under the conditions then and now prevailing, in the centers of capitalism. Yet, this was hardly a straightforward progressive development because it took the form chiefly of the incorporation of unproductive labor and waste (i.e., specifically capitalist use values aimed at absorbing surplus) into the production of wage goods, in ways that diminished whatever qualitative gains workers experienced. If real wages were raised above the value of labor power under monopoly capital, then it was largely on the terms of the corporations rather than the workers.

In the recently released missing chapter, entitled “Some Theoretical Implications,” Baran and Sweezy themselves note:

But as the price of labor power (the level of wage) rises in the course of capitalist development to a level significantly higher than the socially necessary minimum, matters become much more complicated. The value of labor power ceases to be a definite irreducible magnitude, it becomes rather a flexible quantity susceptible to significant variations. Monopolistic profits can be earned under such circumstances not merely by the monopolists’ redistributing the aggregate surplus value in their favor, but by increasing what is appropriated by the capitalist class beyond the surplus value aggregate by means of a price policy that reduces the real wages of labor.

Marx referred to this increase as “profits by deduction”and considered it to be a fleeting and negligible phenomenon. In a phase of capitalist development in which on the one hand wages were irreducible (at or near the subsistence minimum) and on the other hand competition was the prevalent form of the market structure, such “profits by deduction” could have been legitimately disregarded or assigned merely secondary importance. At the present time, however, when wages are markedly above the irreducible minimum and when the bulk of output is sold at monopolistic prices, “profits by deduction” assume a major significance and can no longer be considered to constitute a source of merely minor variations of the surplus value aggregate. This means, however, that the magnitude of the surplus value aggregate is no longer determined (everything else being equal) by the value of the aggregate labor power employed and its productivity. The division of the national product between surplus value and wages is then no longer established in the process of production alone, but also in the process of circulation.

Correspondingly, to the extent to which monopolistic firms are able to shift their vast selling, advertising, and administrative costs as well as a more or less sizable proportion of their tax load onto the wage-earning consumers, the costs of maintaining advertising agents, salesmen, and the like as well as the costs of the government’s civilian and military establishment can no longer be considered as pure and simple drawings on the surplus value aggregate. They too are supported to a greater or lesser degree by a process of “deduction.”

As can be readily seen, this difference between what we call “economic surplus” and aggregate surplus value is the result of the ascendancy of monopolistic enterprise and of the historical rise in the level of wages, leading to the incorporation in wages of a “surplus” element. There is, however, a further difference which stems from what was previously termed the interpenetration of the sales and production endeavors, a phenomenon that is a novum to both bourgeois and Marxian economics.

Also in the same issue, Samir Amin applies a historical materialist analysis to understanding how both profit and real wages could grow in the First World at the expense of the Third World:

In its globalized set-up capitalism is inseparable from imperialist exploitation of its dominated peripheries by its dominant centers. Under monopoly capitalism that exploitation takes the form of monopoly rents (in ordinary language, the superprofits of multinational corporations) that are themselves by and large imperialist rents.[...]

The order of magnitude of the quantifiable fraction of the imperialist rent, the result of the differential in the prices of labor powers of equal productivity, is obviously large… [...]

In addition to the quantifiable advantages linked to differential pricing of labor powers, there are others, nonquantifiable but no less crucial, based on exclusive access to the planet’s material resources, on technological monopolies, and on control over the globalized financial system. [...]

We look forward to discussion on this and further investigations into the construction and particularities of class under imperialism.