Malcolm Sawyer and Zhao Qingjie: Monopoly Capitalism over the Past 40 Years
I. Introduction The publication of Keith Cowling’s Monopoly Capitalism coincided with a period of epochal shift in industrialized economies away from the perspectives of Fordism, Keynesianism, social democracy, and the welfare state. This period, centered around 1980, is typically viewed through the lenses of neoliberalism, financialization, and globalization. This shift in direction was marked by the election of Margaret Thatcher in the UK in 1979 and Ronald Reagan in the US in 1981, with deregulation, privatization, and anti-union agendas marking the beginning of this New Era. This article examines the relationship between the evolution of neoliberalism, globalization, and financialization since approximately 1980 and the analysis of monopoly capitalism. Monopoly capital theory is often linked to the concept of secular stagnation, which the author also explores herein.
II. Neoliberalism and Monopoly Capitalism Monopoly capital theory regards industrialized capitalist economies characterized by oligopoly and monopoly as the dominant industrial structure, followed by the exercise of monopoly and oligopolistic power. Driven by mergers and acquisitions, there is a clear upward trend in industrial concentration. The analysis of the exercise of monopoly and oligopolistic power draws on the theories of industrial economics (both theoretical and empirical literature, particularly the Structure-Conduct-Performance [1] literature) and Kaleckian economics (the degree of monopoly). Michal Kalecki hypothesized that price-cost margins (at the industrial level) would be based on the "degree of monopoly" and broader market forces. According to the research of Abba P. Lerner, price-cost margins are related to the elasticity of demand; the degree of monopoly is explained according to demand elasticity. However, Kalecki’s concept of the "degree of monopoly," and the analytical methods of monopoly capital researchers derived from it, are quite broad. In the Structure-Conduct-Performance (SCP) literature, price-cost margins are related to industrial concentration, the degree of effective (if implicit) collusion, and barriers to entry including economies of scale and advertising.
Along these lines, Cowling and Ian Waterson proposed a formal oligopoly model, which Cowling drew upon heavily. Through informal summation, we can derive the aggregate price-cost margin from industry-level price-cost margins. More importantly, the price-cost margin can be easily transformed, on the one hand, into the surplus share of output, and on the other, into real product wages. Thus, the "degree of monopoly" provides a theory of income distribution characterized by the exercise of power. Kalecki and others extended this power beyond the product market to include the power of capital over labor. The surplus includes profits and management remuneration, which integrates to some extent with certain managerialist literature, particularly in cases where managers are considered to have a degree of power to capture a portion of the surplus for themselves.
Clearly, monopoly capital analysis depicts the capitalist economy in a manner entirely different from neoliberal doctrine. Neoliberal doctrine depicts a world where competition and free markets bring economic and social benefits, arguing that these beneficial effects of markets are driven by incentives and the pursuit of profit. Neoliberalism emphasizes the expansion of market mechanisms, extending market transactions into areas from which they were previously excluded, and emphasizes the deregulation of markets. As a doctrine, neoliberalism emphasizes the beneficial roles of markets and competition, drawing heavily on Austrian School economics and neoclassical economics. The neoclassical tradition leads to the view that perfectly competitive markets are considered efficient and result in (Pareto) optimal outcomes. The required assumptions (e.g., the absence of externalities or economies of scale) may be considered strong, yet they are used to support arguments for the removal of restrictions and regulations perceived to hinder the realization of competitive outcomes. The Austrian School approach emphasizes competition as a process of entrepreneurial discovery.
The pursuit of neoliberal economic policies has not been consistent across different periods or countries, nor does it fully conform to so-called neoliberalism. These neoliberal policies include tax cuts, particularly on corporate profits, shifting from direct to indirect taxation on the basis of providing incentives and promoting investment. The privatization and liberalization of product and financial markets are other major factors. Privatization often involves former public monopolies becoming private monopolies, albeit subject to certain regulations (with issues of regulatory capture). Another major factor involves the weakening of the role and influence of trade unions. Developments in work, employment, and wages—the growth of precarious work and zero-hour contracts—are consistent with the neoliberal view of creating so-called competitive labor markets.
The theoretical models and analysis of neoclassicists and the Austrian School can be contrasted with "actually existing neoliberalism." As monopoly capitalism describes, in capitalist economies, both the absolute and relative scale of large corporations tend to expand further. This does not mean that competition, in the sense of competitive behavior between firms or capital mobility, necessarily declines, although oligopolistic conditions facilitate their implicit collusion and mutual understanding.
The hallmark of neoliberalism should be the promotion of competition and the removal of barriers to competition. Regulations that make entry into an industry difficult are condemned for solidifying the entrenched positions of large firms and reducing competition, especially in the form of "contestable markets." In a neoliberal world, competition and monopoly policy are a paradox—seeking to strengthen competition while the behavior and characteristics of firms weaken it. The Chicago School argument is that it is government action that restricts competition. The neoliberal era has not been an era of strong competition policy—no company has been "broken up" (with the exception of AT&T) in a way comparable to US antitrust measures in the early 20th century. Merger policy has prevented some acquisitions and imposed conditions on others. However, as Mary Meagher argues, mergers and acquisitions are a significant factor in rising concentration. Prevailing evidence suggests that M&As have not improved the overall profitability of the merged firms. Cowling and others argue that while firm profitability tends to improve as market power rises post-merger, productive efficiency is likely to decline.
The neoliberal policy agenda is often advocated on the grounds that "economic prosperity will follow." As outlined above, general economic results do not support any great success from the neoliberal agenda, although many other policies and structural changes affect economic performance. Sam Rosenberg notes: "Overall, over the past 40 years, the neoliberal agenda has had a major impact on the political economy of the United States." The resilience of neoliberalism raises questions about whether the neoliberal agenda itself has been successful and what impact it has had on economic well-being. Rosenberg points out that "the growing importance of firms with monopoly and/or oligopolistic power is inconsistent with the essence of neoliberalism, which emphasizes the coordination of individual decisions through free competitive markets," which is a clear reflection of monopoly capitalism and the non-existence of free competitive markets. Furthermore, "with power so concentrated in product markets and the workplace, income cannot be assumed to be distributed primarily based on the productive contributions of factors of production such as labor and capital, as neoliberalism assumes." Rosenberg also notes that the expansion of profit margins has not led to high private investment; under the neoliberal regime, economic inequality in US society has intensified, and the economy has not become more dynamic or efficient.
According to Kevin Albertson and Paul Stepney, quoting Margaret Thatcher, the failure of the British neoliberal experiment itself is evident because "the evidence does not support the claim" that "she improved the economic prospects of Britain and all its citizens through the application of neoliberal policies... economic growth during Thatcher’s tenure was weaker than under previous governments. If subsequent governments performed poorly, it was not because they fundamentally departed from her policy prescriptions. The cost of the lack of growth was borne disproportionately by the poor."
The neoliberal era of the past 40 years has created increasing inequality rather than the increased growth rates it promised, and has achieved almost no reduction in unemployment. The reality of "actually existing neoliberalism" has been monopoly capitalism.
III. Globalization and Monopoly Capitalism Judging by the growth of international trade, foreign direct investment (FDI), multinational enterprises, and international supply chains, the period since 1980 has undoubtedly been an era of (hyper-)globalization. Judging by indicators such as the scale of international trade and FDI, the pace of globalization has slowed since the Global Financial Crisis.
Monopoly capital analysis often appears as so-called state monopoly capitalism. At the industry level, profit margins and surplus are considered to be driven by the degree of monopoly, which is itself based on factors such as industrial concentration and barriers to entry. The profit margin at the aggregate level (and the distribution of income between wages and profit) is based on the sum of profit margins at the industry level. In the 1960s, the US economy had low participation in international trade (less than 10% of GDP), while the UK had higher trade participation, but was primarily an exporter of manufactured goods and an importer of agricultural products and commodities. Cowling once pointed out that competition might not exist between foreign and domestic firms; in fact, they might be under the same ownership within a multinational corporation (MNC). Roger Sugden, Cowling, and others argue that when assessing the impact of international competition as reflected by imports, proper consideration must be given to the ownership of the firms providing those imports. A large proportion of international trade takes the form of intra-firm trade within multinational enterprises. Cowling and Sugden argue that multinational enterprises are able to weaken workers’ rights, leading to lower wages and increased labor intensity. The rise of multinational corporations is likely to lead to an increase in the degree of monopoly, rather than a decrease as the international competition thesis suggests.
As John Bellamy Foster wrote: "Many critics of monopoly capital theory claim that the internationalization of capital has destroyed the structure of monopolistic accumulation by breaking US hegemony and making the advanced capitalist countries as a whole more vulnerable to foreign trade and capital flows." Scholars such as Cowling, Foster, and Robert McChesney point out: "The reality is the continuous concentration and centralization of capital on a world scale, or the internationalization of monopoly capital. An increasingly concentrated minority of capital controls the lifeblood of national and international economies."
The development of multinational corporations, the growth of FDI, and the growth of international supply chains over the past 40 years are well known. For example, FDI grew rapidly, though the increase slowed after the Global Financial Crisis; the stock of FDI relative to global GDP grew from 9% in 1990 to 42% in 2019. Cowling and Phil Tomlinson noted: "On the world stage, concentration in the communications, information technology, and media sectors is increasing. Recently, significant merger/combination activity has also appeared in the privatized utilities sector," and "there is increasing evidence that a small number of large firms are becoming global-level dominant players in these [utility] industries."
Over the past 40 years, the establishment and consolidation of multinational monopoly capitalism have been evident. With the increase in international competition arising from the growth of international trade and capital flows, monopoly capitalism has been continuously replicated on a global scale.
IV. Financialization and Monopoly Capitalism The period since approximately 1980 is generally considered the era of financialization (there were eras of financialization previously, and the surge of the financial sector emerged gradually in the post-war period). Financialization is a contested concept; this section focuses on the characteristics of financialization and its impact on the analysis of monopoly capitalism.
Epstein [5] explores financialization from the perspective that “financialization means the increasing role of financial motives, financial markets, financial actors, and financial institutions in the operation of the domestic and international economies.” In the literature on financialization, Krippner [6] identifies four broad themes, the first of which is particularly relevant to the discussion in this section: namely, the “dominance of shareholder value.” In her survey, Van der Zwan [7] points out three research approaches to financialization: financialization as a regime of accumulation, the financialization of the modern corporation, and the financialization of everyday life. Among these, the financialization of the corporation includes the pursuit of shareholder value and the extent to which non-financial corporations engage in financial activities.
The analysis of monopoly capitalism appears to relate primarily (or exclusively) to non-financial corporations. According to common assumptions, non-financial corporations only engage in financial transactions to provide funds for production and investment, and only hold financial assets related to production and investment. The research literature on financialization points out that non-financial corporations are playing an increasing role in financial investment (at the expense of non-financial investment) and in the provision of financing (such as consumer loans for shopping).
The relationship between non-financial corporations and the financial sector is usually described as relatively passive, where the financial sector provides funds for non-financial corporations and holds the power over which companies receive funds and at what price. Financialization involves fundamental changes in these relationships. Sweezy [8] referred to the “triumph of financial capital,” arguing that “once it escapes its original role as a modest helper of the real productive economy serving human needs, it inevitably becomes speculative capital, striving only for its own self-expansion.” He also wrote: “The development of a relatively independent financial superstructure sits atop the world economy and most national units. It is composed of central banks, regional banks, local banks, and various dealers in myriad financial assets and services. All of these are interconnected through market networks, some structured and regulated, others informal and unregulated.” Sweezy argued that current financial expansion relies on a stagnant real economy, and that the inverted relationship between the financial sector and the real sector is the key to understanding new trends in the global economy.
Financialization involves the growth of financial institutions and financial markets (relative to the size of the economy), as well as the development of shadow banking, securitization, and derivatives. It is often believed that so-called financial development is positively correlated with economic growth rates, as financial development improves savings rates and guides and monitors the flow of funds into the investment field. However, a wealth of evidence in recent decades suggests that this positive correlation has ended. We can provide various types of evidence to explain the negative correlation between financial deepening and economic growth. The growth of household debt, including mortgages, would be viewed as a manifestation of increased financial sector activity and the growth of loans and deposits. Household debt may provide short-term stimulus (if unsustainable), but it does not contribute to the long-term growth of the economy. As the financial sector has turned toward the creation and massive trading of derivatives, its role in promoting savings and financing real investment has shifted.
Baran and Sweezy emphasized that control is in the hands of the top management of the company, including the board of directors, the CEO, and representatives of some external interests, but real power lies in the hands of insiders. Management is seen as a self-perpetuating group. The pursuit of profit is the core of corporate operation. “Compared with small businesses, the economy of large corporations is governed more by the logic of profitability.”
As mentioned above, a series of literature on financialization involves the “pursuit of shareholder value.” Monopoly capital is always envisioned as the corporate pursuit of profit and assumes the form of profit maximization. I say “form” because, in an uncertain world, optimization is difficult to design and achieve. In the formulations of Kalecki and Cowling, it is more akin to a surplus, which is maximized and shared between management salaries and reported profits.
At the ideological level, the push for the pursuit of shareholder value came from figures such as Friedman. They argued that the sole responsibility of managers is to maximize profits. Consequently, they condemned any pursuit of corporate or social responsibility, as well as any consideration of the interests of stakeholders other than shareholders. Any corporate executive pursuing goals other than profit was an “unwitting puppet of the intellectual forces that have been undermining the basis of a free society these past few decades.” However, the main impetus for the “pursuit of shareholder value” comes from financial institutions as owners of corporate equity and the so-called “market for corporate control.” Financial markets and financial institutions exert pressure on corporate managers through various channels to implement business practices that enhance shareholder value. The pursuit of shareholder value comes at the expense of the company’s other stakeholders, workers, customers, and the general public. This focus on the “pursuit of shareholder value” stands in stark contrast to the literature on managerial control of corporations. In the latter’s description, companies focus more on pursuing size, sales volume, and sales growth rates, even if this is detrimental to profits and stock market valuations. In the 1980s, it was generally believed that companies relied primarily or exclusively on internal funds for investment, and that adjusting retained earnings/dividend policies and profit margins was generally sufficient for internal funds to meet a company’s expected growth and investment rates.
The literature on financialization includes research on the impact of financialization on investment, innovation, and income distribution and inequality. I believe the main thrust of these studies is consistent with the analysis of monopoly capitalism. In the article "Financialization, Financial Crisis, and Inequality," I reviewed empirical research on financialization and income distribution. These studies involve different dimensions of financialization and use relatively simple indicators for the selected dimensions. The general conclusion drawn from these studies is that a series of factors, including financialization, trade unions, and collective bargaining rights, do affect income distribution, especially the income share between labor and capital. These findings are consistent with the expectations of the financialization literature—namely, that financialization increases the profit share and reduces the labor share of income.
Durand and Gueuder [9] summarized four propositions to explain corporate investment behavior by discussing four competing hypotheses regarding the impact of financialization, globalization, and monopoly on investment, and by examining the actual situation in France, Germany, Japan, the UK, and the USA; each proposition has some empirical support. The first proposition is called “the revenge of the rentier,” where financial payments of non-financial companies increase, thus leaving less funding available for investment. The second proposition relates to a change in management’s preference for financial investment at the expense of domestic productive investment. The third proposition is the substitution of domestic investment by foreign investment, where cheap inputs from low-wage countries increase cost markups. The fourth proposition is the decline in competitive pressure and the intensification of monopoly, which leads companies to reduce their incentive to invest while raising profits.
In short, the process of financialization has pushed companies to focus further on profits and stock market valuations, harming the interests of other stakeholders in the company and leading to a significant rise in executive compensation. Financialization has intensified the tendency toward secular stagnation, which will be discussed further below. The overall current trend is that financialization redistributes income from wages to profits and exacerbates inequality, all of which may reduce the level of demand. The growth of the financial sector is unrelated to the growth rate of output, and the pace of investment and innovation also seems to have slowed down due to financialization.
V. Trends in Industrial Concentration and Market Power
Monopoly capitalism analysis depicts a trend of rising industrial concentration and expanding profit margins. At the industrial level, there is a positive correlation between concentration—and other measures of market power—and profit margins. Industrial economics literature has attempted to undermine the importance of concentration through the development of “reverse” causality arguments: i.e., that high profits imply efficiency, and efficient firms expand and squeeze out inefficient ones, thus concentration rises. The “contestable markets” view also attempts to undermine the importance of concentration.
In past decades, industrial concentration has continuously increased in many countries. Pryor used weighted concentration rates to conduct a study of the entire US economy. He argued that from 1960 to the early 1980s, concentration declined and subsequently rose, and might continue to rise in the future. The subsequent rise was confirmed by Grullon et al. They found that in the previous 20 years, more than three-quarters of US industries experienced rising levels of concentration.
Davis and Orhangazi pointed out: “Between 1997 and 2012, average concentration in US industries increased, most of which occurred in the late 1990s and early 21st century... In fact, a large part of the increase in concentration was driven by the retail trade and information services sectors.” They found no uniform relationship between the level of industrial concentration and profitability, markups, or investment rates. “Highly concentrated industries are not the most profitable (on the contrary, moderately concentrated industries earn the highest profit margins), and, except for a few specific industries (such as information services), the profit margins of those highly concentrated industries are not the highest.”
Meek [10] points out that evidence shows competition throughout the economic sphere is giving way to monopoly, and markets are inevitably tending toward concentration, while we seem unable to implement constraints to prevent the accumulation of money and power. In practice, anti-trust, competition, and monopoly policies have played a minimal role in restraining market power, as exemplified by the weak restrictions on mergers and acquisitions that strengthen market power. The idea that “through free market competition, companies focused on providing maximum returns to shareholders will somehow benefit the general public” is completely outdated. Moreover, “market outcomes are not ‘natural’; they are chosen by those whom the market favors most, through the commission or omission of society.”
A blog post on the International Monetary Fund (IMF) website points out: “Since 1980, global price markups for listed companies in advanced economies have risen by an average of more than 30%. In the past 20 years, the increase in markups in the digital sector has been twice the increase for the economy as a whole.” The authors note increasing signs that in many industries, market power is becoming entrenched, with dominant firms having almost no competitors. The authors further estimate that there is very little mobility among firms in terms of markups; those companies ranked in the top 10% in a given year have an almost 85% probability of maintaining high markups the following year, which is much higher than in the 1990s. Mergers and acquisitions are identified as one of the factors leading to these trends. M&As help increase market power and raise prices; M&As by dominant firms lead to a decline in commercial vitality across the industry—as the growth and R&D spending of all competitors take a hit.
Guttiérrez and Philippon argue that, in the case of the US, concentration and profitability have increased in most industries. Since the beginning of the 21st century, business investment has been weak relative to measures of profitability, financing costs, and market value. It has been widely noted that the link between profits and investment has been broken. Through an analysis of four explanations—reduced domestic competition, increased efficient scale of operation, intangible investment, and globalization—they conclude that by 2016, reduced domestic competition had led to a 5%–10% shortage of non-residential business capital.
Diez et al. found that the growth of markups is widespread across countries and industries, driven by a small number of companies. Markup growth is mainly due to the growth of average markups in incumbent firms and the reallocation effect toward new firms that gain market share from incumbents.
Jan Eeckhout lists numerous examples of rising concentration in the United States over the past 40 years. He links this to the fact that "average markups [11] have risen from 1.21 in 1980 to 1.54 in 2019. Average markups saw a sharp increase during the 1980s and 1990s, followed by a ten-year stagnation beginning in 2000, and then a new sharp increase in 2010 following the Great Recession." He identifies three main factors giving rise to market power. First is economies of scale on the supply side: "New technologies that are difficult to replicate create permanent technological advantages. They often require large upfront investments, and these investments often lead to economies of scale." Second is the return of scale on the demand side: "Economies of scale are created by use rather than by construction costs." Third is "learning through economies of scale." Eeckhout specifically mentions the creation of dominant firms through mergers and acquisitions (M&A) and "killer acquisitions"—the acquisition of promising startups that could become potential rivals.
The forces behind the contraction of the labor market are the reduction of competition in the markets for goods and services. From technology to textiles, our era is characterized by rapid technological progress. These technological advances grant immense power to a small number of firms. In turn, accompanied by a lack of competition, this generates brutal inequality among workers.
An earlier study by Andrew Henley of over a hundred US industries found that the corporate structure and market behavior within an industry have a significant relationship with the functional distribution of income within that industry. He also observed that both concentration and advertising intensity are negatively correlated with the labor share, particularly with the share of value-added [12] used for production workers' wages.
Based on principal components analysis (PCA), Thomas E. Lambert created a Big Business Index (BBI) using the four-firm concentration ratio, capital-to-labor ratio, number of employees per enterprise, sales per enterprise, asset-to-sales ratio per enterprise, and a union dummy variable. "The Big Business Index is a consistent and statistically significant independent variable used to measure management and supervisory intensity, the average salary of management and supervisory personnel, and the share of CEO average pay in sales," and it is positively correlated with the first three dependent variables and negatively correlated with others.
The shift in production structure has moved from manufacturing to the service sector, particularly the information technology industry. Cecilia Rikap points out: "Leading firms of the 21st century are knowledge monopolies. Eight of the top 10 firms by market capitalization are knowledge monopolies. They grow by relying on a permanent and expanding monopoly over a portion of social knowledge. The private appropriation of knowledge generates intangible assets as well as what is called intellectual-knowledge or techno-scientific rents... the concentration of intangible assets has become the primary driver of capital concentration." She argues that this is a "stage within capitalism. In this stage, knowledge monopoly is continuously strengthened, and the result is the breaking of the link between innovation and growth, caused (at least in part) by the persistence of knowledge rentiership and predation."
Durand and William Milberg found that "within these [global value] chains, the intensive use of intangible assets creates new sources of monopoly power." Their analysis is built on the concept of "knowledge monopoly capitalism," in which government protection of intellectual property rights has the effect of locking in the monopoly power created by intangible assets. We extend this to "information rent," which arises due to the existence of economies of scale and network externalities associated with the production of intangible assets.
Research by David Autor and others focuses on the labor share. As they point out, the labor share has been declining for decades. They seek to explain this decline through the rise of "superstar firms." They analyzed micro-panel data from the US Economic Census since 1982 and documented empirical patterns to evaluate new explanations for the decline in labor share based on the rise of superstar firms. They argue: "If globalization or technological change pushes sales toward the most productive firms in each industry, then product market concentration will rise as industries become increasingly dominated by superstar firms, which will also be characterized by high markups and a low share of labor value-added." "The rise of superstar firms involves a 'winner-take-most' mechanism, which may arise from increased platform competition in many industries or scale advantages associated with the growth of intangible capital and advances in information technology."
Rikap and Bengt-Åke Lundvall argue: "Tech giants are active promoters of a phase of globalization characterized by the growth of trade in digital services combined with a universal shift toward intangible assets." They show that Google, Amazon, and Microsoft "continuously monopolize knowledge while outsourcing innovation steps to other firms and research institutions." They also refer to tech giants as data-driven knowledge monopolists, arguing that they organize and control the global corporate innovation system.
Andrea Coveri and others point out: "Market concentration is continuously increasing due to the remarkable rise of platform and data-related business models." They attempt to "analyze the dominant role assumed by giant digital platforms in contemporary capitalism, following the radical perspective proposed by monopoly capitalism scholars," and identify "four drivers for exerting control and accumulating power," namely: growth and diversification; R&D and technological investment; labor fragmentation and surveillance; and government and countervailing power.
Kean Birch and D. T. Cochrane focus on the economic rents obtained by big tech companies. They argue that within the big tech ecosystem, there are four emerging forms of digital rent: (1) "enclave rents" created through control of the ecosystem; (2) "expected monopoly rents" created through the performative realization of future narratives; (3) "engagement rents" constituted by user rankings and metrics based on user participation in digital services and products; and (4) "reflexivity rents" obtained by exploiting ecosystem rules and norms.
Inequality in income and wealth also shows a general upward trend within countries, and the distribution of income between wages and profits is shifting toward profits. What contribution (if any) does the analysis of monopoly capitalism make to understanding these trends? This brief overview of concentration trends (though focused mainly on the US) supports the general monopoly capital view that the tendency for industrial concentration to rise impacts market power, higher profit margins, and a lower labor income share. It should be emphasized that the push for rising concentration and higher profit margins comes from information services, digital technology, or "Big Tech" industries. These "Big Tech" industries possess characteristics favorable to high concentration, and active acquisition policies further strengthen this trend toward high concentration.
VI. Monopoly Capitalism and Secular Stagnation
From the end of World War II until the mid-1970s, Western industrialized nations entered a "Golden Age of Capitalism" characterized by high economic growth rates and low unemployment. During this period, income inequality within countries tended to stabilize or decline, and income distribution tended to tilt toward wages. This period ended with the economic crisis of 1973–1974, which included a financial collapse and a rapid rise in commodity prices, especially oil. The late 1970s was a period of high unemployment and low growth. Since approximately 1980, economic growth in Western industrialized nations has generally slowed compared to the pre-1980 period, especially since approximately 2000. Table 1 and Figure 1 list some summary data on output growth and unemployment.
Li Minqi and I. Mendieta-Muñoz posed and answered the question of whether "long-term output growth rates will decline." Their research results show that "the permanent decline in long-term output and technological progress growth rates is unrelated to the adverse effects of the Great Recession." Since 1960, across countries including the G7 (depending on data availability), "long-term output growth rates began to decline in the late 1960s, and long-term technological progress growth rates began to decline in the early 1960s. These findings suggest that the slowdown in productivity is the main driver of the decline in long-term GDP growth." Unemployment rates have generally remained high (see Figure 1), and these unemployment rates do not reflect the "discouraged worker effect" and underemployment.
The analysis of monopoly capitalism contains substantial elements of the "secular stagnationist" approach. This is clearly reflected in the research of Josef Steindl and Michał Kalecki and was adopted by later authors. It is believed that oligopolistic and monopolistic behaviors are detrimental to investment and innovation, while the shift of income distribution toward profits tends to reduce demand.
In the past decade or so, the idea of "secular stagnation" has been widely discussed. However, most mainstream economic literature views secular stagnation through the concept of the "natural rate of interest." For a long time, monopoly capitalism analysis has focused on "secular stagnation." Alvin H. Hansen's concern about slowing growth stemmed from the decline in population growth rates, changes in the characteristics of technological progress, and the decline in the supply of new US territories, which he believed would reduce demand for investment goods.
Monopoly capitalism analysis focuses on two lines of thought: first, that the conditions of oligopoly and monopoly reduce the propensity to invest and innovate; second, that the shift in income distribution from wages to profits, and then to rentier income, tends to depress the level of aggregate demand.
It is generally believed that the pressure for corporate investment under conditions of monopoly capitalism is less severe than under conditions of competitive capitalism. Steindl argued that the rise of oligopoly tends to reduce the propensity to invest, thereby impacting output and growth. As the degree of monopoly increases, capacity utilization declines, which also has an adverse effect on investment. Kalecki argued that the slowdown in capitalist economic growth "may be at least partly due to a decline in innovation intensity." This was quite serious at the beginning of the "Golden Age of Capitalism" and has become even more relevant over the last 30 years. Steindl attributed one of the causes of this trend to the fact that "the increasing monopolistic nature of capitalism hinders the application of new inventions."
Keith Cowling argued that while companies "invest in R&D and similar work in an attempt to secure their monopoly position, after that, they simply shelve the inventions," which may be the optimal behavior for the firms involved. "All this suggests that protective R&D may be a broad and significant component of planned excess capacity aimed at maintaining and strengthening a monopoly position."
The arguments regarding changes in income distribution and their impact on aggregate demand are based on differing propensities to spend out of wages and profits. In recent years, these arguments have held an important position in wage-led versus profit-led regimes. The general (though not universal) conclusion is that the economy is wage-led, meaning that the shift in income distribution toward profits over the past decades has had a negative impact on economic growth and employment rates.
A recent study concluded: "Reduced competition, increased market concentration, fewer employment opportunities (though work may be more stable for those in large firms), reduced net business investment, and increased worker productivity (which may reduce the demand for more workers while bringing higher profit margins to large firms) may lead to the current and future stagnation of the US economy." Furthermore, R&D work has "failed to produce a large number of transformative innovations... R&D work regarding job creation, the establishment of new firms, and net business investment shows mixed or even negative results... These findings also imply that R&D is used under conditions of monopoly capital to strengthen monopolies."
Lambert explored the relationship between monopoly capital and entrepreneurship. He argues that entrepreneurship in the US is in decline, and that "monopoly capital and its incidental characteristics may be stifling American entrepreneurship," suggesting that "the trend of secular stagnation in the US economy may intensify."
While there are undoubtedly many factors at play, the analysis of monopoly capitalism finds empirical support in the literature on "wage-led" versus "profit-led" [13] regimes—specifically, that the shift from wages to profits, driven by increased concentration and market power, has slowed demand. The impact of monopoly capitalism is currently slowing effective innovation. As mentioned above, financialization has its own relevant contribution, and it is highly likely that demand and investment have been significantly reduced by the effects of the financialization process.
VII. Conclusion
The neoliberal policy agenda of promoting markets, liberalization, and deregulation pursued over the past 40 years (and earlier) has driven the development of monopoly capitalism. The pursuit of this neoliberal policy agenda has resulted in slower economic growth than during the "Golden Age of Capitalism," intensified income and wealth inequality, and a general shift in income from wages to profits. For the United States and the United Kingdom (as well as several other countries), what was once close to state monopoly capitalism has clearly evolved into transnational monopoly capitalism. Industrial concentration has been on an upward trend, a trend exacerbated by mergers and lax anti-monopoly policies. So-called "Big Tech" has largely driven the rise in concentration and profit margins, facilitated by various economies of scale, first-mover advantages, and aggressive acquisitions of competitors.
The analysis of monopoly capital and financialization (particularly the "pursuit of shareholder value") provides a valuable explanation for the slowdown in growth over the past 20 years to near "secular stagnation." Future growth rates may need to remain at low levels for reasons related to the climate crisis and environmental degradation, both of which are linked to the level and rate of change of Gross Domestic Product (GDP). Any future growth must structurally differ greatly from the growth of the past; financialized monopoly capitalism is incapable of undertaking such a structural adjustment of growth.
(Authors: Malcolm Sawyer, Leeds University Business School, UK; Translator: Zhao Qingjie, School of Marxism, China University of Political Science and Law)
(This article is a periodic achievement of the Beijing Collaboration and Innovation Center for the Theory of Socialism with Chinese Characteristics [China University of Political Science and Law])
Online Editor: Tongxin Source: Foreign Theoretical Trends [14], 2023, No. 3; This article originally appeared in the Cambridge Journal of Economics, 2022, Vol. 46, No. 6; the translated version has been abridged.