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Baran and Sweezy’s Monopoly Capital, Then and Now

An interview with John Bellamy Foster

Benjamin Feldman is a graduate student in history at Georgetown University researching Baran and Sweezy’s Monopoly Capital as part of a larger project engaging with the politics of economic thought in American history.

Benjamin Feldman (BF): To what extent do you feel that Paul Baran and Paul Sweezy’s Monopoly Capital was uniquely situated to appeal to the New Left, and why might this have been the case (Vietnam, Cuba, rejection of Old-Left/Anti-Communist Liberalism)?

John Bellamy Foster (JBF): The whole issue of the Old Left and the New Left is a complicated one. Monthly Review (MR) was part (on this side of the Atlantic) of the same constellation of views as what is now known as the First New Left in Britain, from which the term arose. What gave rise to the New Left was the Soviet invasion of Hungary. The MR editors, Leo Huberman and Paul Sweezy, condemned that absolutely, stating: “An uprising of classic form and proportions took place in Hungary. It was drowned in blood by the Soviet army…. After these events, we do not see how the feelings of any socialist toward the Soviet Union can remain unchanged. Any claim the Soviet Union had to moral leadership of the world socialist movement is now extinguished.” MR was closely aligned with the principal figures of the First New Left, such as E.P. Thompson, Raymond Williams, and Ralph Miliband in Britain and C. Wright Mills in the United States—all of whom published in MR and Monthly Review Press in the 1950s and ’60s. The Socialist Register, which grew out of the first New Left in Britain, was distributed from the start by Monthly Review in the United States.

Monopoly Capital was the principal Marxian, and indeed radical, political-economic work to be published in the 1960s, written by the two most prestigious Marxian economists in the United States and perhaps globally. It grew out of the critique of militarism and imperialism and economic waste as much as out of economic crisis. It was one of the first major works to focus on multinational corporations. Its final chapter emphasized the “irrational system” and was influenced by Baran’s early background with the Institute for Social Research in Frankfurt. All of this made it extremely influential with the New Left in the United States, particularly its more radical, socialist wing. A good indication of this is Assar Lindbeck’s 1971 mainstream attack on what he called The Political Economy of the New Left, which focused almost entirely on Monopoly Capital. (The second edition of Lindbeck’s book contained various replies by Marxists including Sweezy, as well as contributions by various mainstream thinkers.)

BF: Do you recall your immediate impressions upon reading Monopoly Capital (or the pieces that would eventually be combined into Monopoly Capital)? Did you think of it as a paradigm-shifting text, or did you read it as part of a larger movement toward a neo-Marxian critique of the New Deal Order?

JBF: I didn’t read Monopoly Capital in the beginning as a paradigm-shifting text, although I had already read Thomas Kuhn’s Structure of Scientific Revolutions. Still, there was no doubt about its importance to liberation struggles at the time or that it was a key to understanding contemporary capitalism. I first read it in 1973 when I was engaged in an intensive study of economics—including both mainstream neoclassical theory and Marx’s writings (as well as books by others like Ernest Mandel and Howard Sherman). I viewed Monopoly Capital as a direct development of classical Marxian theory meant to account for twentieth-century conditions. This was during the later years of the Vietnam War and a worsening economic climate. Like so many others I had been in the streets protesting against the war machine. The coup in Chile occurred with U.S. involvement in 1973 and fit the same pattern. There was the energy crisis and the 1975 economic crisis. There was simply no question that Monopoly Capital represented reality the way we (that is, radicals—mostly students—with whom I was connected) then saw it. Baran and Sweezy had written their book during the so-called “Golden Age” of the Cold War years, but it pointed to precisely those conditions of stagnation with the waning of the Vietnam War, coupled with continuing U.S. militarism and imperialism around the globe, that we were then experiencing around a decade later. Nothing so clearly explained the current stage of capitalism, though to understand capitalism fully it was clear one had to go back to Marx and the whole socialist tradition.

BF: What was (in your recollection) Monopoly Capital’s impact on the economics profession in general, and the founding of URPE (the Union for Radical Political Economics) in particular?

JBF: The 1975 URPE crisis reader was entitled Radical Perspectives on the Economic Crisis of Monopoly Capitalism. The whole prominence of monopoly capitalism at the time was due to Baran and Sweezy’s book. Monopoly Capital was commonly viewed as the fundamental critique of the system in the historical period we were living through. It was thus the original common ground within URPE. In mainstream economics too there was a broad discussion related to Baran and Sweezy’s work. Figures like Paul Samuelson, James Tobin, and Kenneth Arrow would commonly refer to Baran and Sweezy and Monopoly Capital, partly due to the esteem with which Baran and Sweezy were viewed, partly due to Sweezy’s influence within the student movement. Monopoly Capital was reviewed by Sherman in The American Economic Review and by Robert Heilbroner (Sweezy’s former student) in The New York Review of Books. Discussions of it were everywhere.

BF: With what aspects of the book did you disagree, or take issue with?

JBF: I didn’t disagree with any of it initially, or not in any significant way. Many of the finer points of their analysis of course passed me by at first. I did think for years that Baran and Sweezy were wrong when they said that civilian government spending as a share of GDP had reached its outer limits by the late 1930s. But a few years ago Hannah Holleman, Robert McChesney, and I checked the data on this over the last eight decades for an article we were writing for MR (“The U.S. Imperial Triangle and Military Spending,” MR, October 2008, 18) and we discovered Baran and Sweezy were right about this as well—and all the way up to the present day. There was a seeming confusion in their book about the definition of economic surplus to do with the fact that they were gauging it by somewhat different yardsticks at different points (using what is known as comparative statics). Joseph Phillips did a little bit of double counting in his wonderful appendix on the surplus. I later did an analysis with Michael Dawson and we straightened that out, introducing different techniques, and found that despite minor errors, Phillips’s overall numbers were correct and even conservative. Harry Magdoff did a review of Monopoly Capital when it came out that said it could have developed the analysis of debt and finance more and Sweezy himself was later to criticize Monopoly Capital for not doing that properly. But Baran and Sweezy did address this in a few pages at the end of “The Sales Effort” chapter and they were way ahead of the curve on the whole financialization question, which Magdoff and Sweezy, working together as MR editors, were to develop further in the 1970s and ’80s. Indeed, I remember the extraordinary excitement at the URPE conference in Eugene, Oregon in 1975 when their “Banks: Skating on Thin Ice” was published in MR. Today, forty years later, their analysis there seems more powerful than ever.

Sweezy also later criticized Monopoly Capital for not referring directly to Marxian value theory categories, i.e., relying on “economic surplus” rather than “surplus value”—or, more to the point, not making the basis of the surplus category in Marx’s surplus value clear enough. He repeatedly stated, in response to charges leveled by critics, that neither Baran nor he had ever had the slightest intention of abandoning Marx’s value theory. (We now know with the publication of “Some Theoretical Implications“—the missing chapter on the value theory basis of their analysis—just how much they were consciously building on Marx’s value analysis at every point in their theoretical framework.) I never thought for a moment in my own reading that there was the slightest abandonment of the labor theory of value in Monopoly Capital—a close inspection of the text showed that to be false at the outset. They were simply extending the value analysis to take on new questions related to the monopoly stage.

In 1976, I went to graduate school in Toronto. This corresponded to the beginning of the whole “back to Marx” period when the falling rate of profit theory (which had played only a secondary role, if that, in Marxian crisis theory from the 1890s to the 1970s) was being rediscovered in a big way and fundamentalist Marxian political economy was developing. I got caught up in that. I left Monopoly Capital behind and wrote a long class paper defending the falling rate of profit theory. When I finished writing the last page of the paper, I decided that the whole thing was wrong (both empirically and in terms of current historical relevance)—but I was compelled to turn the paper in anyway since it was for a class. The next year, while studying with historian Gabriel Kolko, I returned to the Monopoly Capital analysis via Josef Steindl’s Maturity and Stagnation in American Capitalism. Kolko introduced me to the crucial empirical basis of the theory in excess capacity statistics and I carried out a detailed study of the various measures in this area, which had the effect of convincing me of the concrete basis of the analysis.

BF: How did your thinking on Baran and Sweezy change during the course of the 1970s and ’80s? Why might their influence have declined (if indeed it did) during a period of stagnation that might have vindicated some of their predictions?

JBF: I have answered some of that in part above, but a more complete picture requires an understanding of the changing historical context. My early identification with Baran and Sweezy’s ideas, which was conditioned by the movement in the early 1970s, was later affected by two things: First, I immersed myself more seriously in graduate school in the late 1970s in Marx’s economic theory, and in the then fashionable contributions to fundamentalist Marxian thought, associated particularly with the tendency for the rate of profit to fall due to rising organic composition. This led me eventually (not all at once but as a result of a deep intellectual struggle) to a critique of fundamentalist views and a return to Baran and Sweezy’s analysis at a deeper level, via studies of Steindl and with him Michał Kalecki. Second, I had a negative response to the profit-squeeze theory that had grown up on the left parallel to the demise of Keynesian theory and the rise of bourgeois supply-side economics in its place in the Thatcher and Reagan years. I wrote a piece called “Marxian Economics and the State” for Science and Society in 1982 that explained that the supply-side vs. demand-side division in economics occurred also—albeit in a somewhat different way—in Marxian economics. In 1984, I edited a book with the Polish economist and sociologist Henryk Szlajfer called The Faltering Economy, which was organized principally as a reply to the supply-side theory emerging on the left (and secondarily to fundamentalist Marxian theories that denied the relevance of the monopoly stage of capitalism). Szlajfer’s contributions in that volume were the main inspiration for my 1984 dissertation, later published in expanded form as a book, The Theory of Monopoly Capitalism (1986), which was aimed at demonstrating how Baran and Sweezy’s analysis was based in Marxian value theory and represented an elaboration of Marxian theory applicable to twentieth-century conditions. This, then, was mainly a reply to fundamentalist arguments.

In my view, Baran and Sweezy’s analysis lost influence despite the fact that the crisis developed in the terms that they had described, because of the powerful growth of supply-side views on the left as well as the right. I concluded that the hegemony of economic orthodoxy was such that radical thinkers tended to adopt views that paralleled those of the mainstream. This was hardly surprising given the marginal and dependent position of radical economists in the academy. Baran and Sweezy’s analysis was seen as related to Keynesianism (actually it was based on Kalecki) and when Keynesianism went into a sharp decline and supply-side economics (reintroducing Say’s Law) became prominent in the academy, we got a popular radical version of the same thing. Thus the success of workers in obtaining slightly higher real wages, together with the supposed slowdown in productivity growth at the peak of the 1960s boom (corresponding to the peak of the Vietnam War), were erroneously seen by radical political economists too as constituting the “cause” of the crisis, which was then diagnosed as a “profit squeeze” (short for wage squeeze on profits). Meanwhile, the whole “back to Marx” movement of fundamentalism, which was superior in many ways to the radical profit-squeeze perspective, resulted in a retreat back into nineteenth-century conditions that denied historical development. The whole notion of monopoly capitalism as developed by thinkers such as Lenin, Luxemburg, Hilferding, Veblen, and Baran and Sweezy was thrown out as not consistent with Marx’s Capital, despite the fact that Marx and Engels had placed great emphasis in their time on the concentration and centralization of capital.

What is creating renewed interest in Baran and Sweezy’s Monopoly Capital now is two things: (1) the fact that this analysis was extended by Magdoff and Sweezy into a theory of stagnation and financialization, constituting the main body of research to be found anywhere on financialization over nearly half a century; and (2) the fact that historical conditions following the Great Financial Crisis have forced mainstream theorists, like Larry Summers and Paul Krugman (and a host of others), to recognize that secular stagnation is the underlying problem of the advanced economies (although this is understood in terms of the neoclassical-Keynesian synthesis and not in radical terms). Moreover, orthodox economists now recognize that the stagnation dates back to the 1970s—precisely what Monopoly Capital pointed to and what MR has been insisting for more than forty years.

Finally, there is the growing recognition that the very penetrating critique of waste in Monopoly Capital is related to the whole environmental problem and the critique of actually existing “economic growth.”

BF: What is the continuing relevance of Monopoly Capital? Is it valuable as a critique of contemporary U.S. capitalism, or merely as an historical document? (This is a question that you have addressed in great length in your work, but if anything has changed in your thinking over the past four or five years I’d be greatly interested.)

JBF: Baran and Sweezy called Monopoly Capital an “essay-sketch,” though they worked on it for ten years. The book was written in a popular style with an attempt to get at a large audience. But it had in fact an enormous theoretical depth, proceeded as it was by Sweezy’s The Theory of Capitalist Development and Baran’s The Political Economy of Growth, and rooted in the theoretical contributions of Marx, Veblen, Lenin, Kalecki, and Steindl, among others. Just how deep the analysis was is apparent with the publication of the two missing chapters of the book—”Some Theoretical Implications” (MR, July–August 2012) and “The Quality of Monopoly Capitalist Society: Culture and Communications” (MR, July–August 2013). The theoretical framework was derived most immediately, with respect to the monopoly argument, from Kalecki and Steindl, but its roots went down much more deeply to Marx. Baran, in particular, was convinced that the Kalecki and Steindl framework, focusing on gross profit margins (the degree of monopoly in Kalecki’s terms) had to be broadened into a conception of economic surplus able to grasp the full dimension of economic waste, which the Kalecki-Steindl analysis was not able to comprehend beyond idle capacity. In order to carry out this wider critique, Baran and Sweezy had to develop an argument that went beyond a consideration of the economic order to take into account what they called “the economic and social order” as a whole, embracing the state (superstructure), imperialism, communications, the sales effort, finance, imperialism, etc.

What they were aiming at was a full theory of the monopoly stage of capitalism, but the task was so great and the problems of communication to a broad public so formidable (they were writing for a primarily Western liberal audience at the time—the early 1960s—which had no real knowledge of Marxian theory) that all they were able to do was an essay sketch. Even then, they were forced to leave out any direct consideration of the labor process and exploitation. Baran’s death in 1964, before the book was completed, meant that the most important chapter on the theoretical underpinnings of their analysis—which they had not worked out completely—was (reluctantly, I believe) left out of the book by Sweezy.

Still, the power of their analysis lies in the synthesis that they were able to present. They provided a theory of stagnation and economic waste (necessary for the absorption of surplus), pointing also to the growth of FIRE (finance, insurance, and real estate), which led to Magdoff and Sweezy’s later theory of financialization. They critically analyzed civilian and military government spending in ways that have enduring significance in our time. They laid the basis for viewing the entire electoral system as democratic in form, plutocratic in content. They provided the first coherent explanation of multinational corporations (outside of Stephen Hymer’s unpublished dissertation—Hymer was later to identify with MR). They provided a nascent political economy of environmentalism via their searching critique of waste in the system. They integrated the most critical element of the Frankfurt School discourse in their analysis of “the irrational system.” Most importantly, they extended Marxian political economy into a consideration of twentieth-century conditions. When a figure like David Harvey speaks today of the economic crisis of our time as a problem of “overaccumulation” based on problems of “surplus absorption” he is speaking in the language of Baran and Sweezy—and for good reason, since their approach captures the main political-economic contradictions of our time.

Monopoly Capital cannot be seen in isolation, however. Its wider influence was associated with the great works that it inspired and that belonged to the same constellation of Marxian theory, filling out the overall analysis. Here such works as Harry Magdoff’s Age of Imperialism, Harry Braverman’s Labor and Monopoly Capital, Magdoff and Sweezy’s Stagnation and the Financial Explosion, Michael Yates’s Naming the System, and Samir Amin’s The Law of Worldwide Value, should be mentioned. István Mészáros’s great critique of capital and analysis of the conditions of socialist transition in Beyond Capital, relied heavily for its political-economic understanding on Baran and Sweezy’s (and Magdoff and Sweezy’s) analysis.

Beginning with the fortieth anniversary of Monopoly Capital, I attempted to extend the analysis, building on Magdoff and Sweezy’s work from the 1970s to the ’90s, in order to develop a theory of the “monopoly-finance capital” phase. This led to the book The Great Financial Crisis that I wrote with Fred Magdoff, released a couple months after the Lehman Brothers collapse. Robert W. McChesney and I drove home the fact that the underlying problem is one of stagnation, in our book, The Endless Crisis, published several years later. In that book we also provided a theoretical analysis of global labor exploitation (the “global labor arbitrage”) rooted in the monopoly-capital framework.

Monopoly Capital‘s importance thus lies in its contribution to a larger constellation of Marxian thought, tied to the radical struggles of our day.

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