According to Paul M.Sweezy,every antagonistic socio economic formation pass through several stages in its development.At the atage of its rise,economic relating are conductive to the development of the productive process,and at the stage of its decline relations of production tend to fetter the development of productive forces.Free competition capitalism at that stage of development of capitalism under went important changes at the end of the 19th century and free competition capitalism developed in to monopoly capitalism.

Free monopoly capitalism was now transformed into monopoly capital.This brought about changes in the structure of capital the relation between labour and capital in external economic and international relations as whole as well as politics and ideology.

The capitalist monopoly is a large scale enterprise of or association of enterprises contracting under its control such a large part of the production or marketing of a product that it is in a position of limit competition to fix monopoly high prices by dominating the market and dictating terms for the marketing of its finished products,as a decissive say in implementing inventions and innovations and in the use of skilled labour and above all obtain monopoly high profits

The formation of monopolies is closely connected with the organic composition of capital (c/v)there was a growth in constant relative to variable capital such as building and machines relative to raw processed and auxiliary materials.Both these trends resulted in rise in the average size of the productive units .According to Marx,

“this increase in the size of the productive units put come about in two ways which are concentration of capital”

If individual capitalist accumulate so that the quantity of capital under each one’s control increases this makes possible and enlarged scale of production.This process called contraction of capital by Marx.In this sense concentration can’t take place without accumulation,but accumulation occurs without concentration also.If individual capitals discipline through their subdivision by family layer concentration itself will lead to steady rise in the scale of production and limitation of competition.

Another important process,even more important than concentration is centralization of capital.Centralisation is a process through which these is a reduction of existing capitals in to their growth as in the case of concentration involves the combination of individual capital already in existence through horizontal and vertical rationalization.In order to achieve economies of scale production.They are able to rise labour productivity and the cheapens the commodity and win the feature of completion over the smaller capitalism some of the smaller capitalists disappear and other pass in through the hands of more efficient ones leading to an increase in the size .In this way compelative struggle itself becomes an agent of centralization.

Credit system is the another force leading to centralization ,but in a different way .According to Marx ,centralization in to credit system does not imply expropriation of a smaller capitalists by larger one but to the amalgamation of a number of capitals which already exist or are in the process of formation or joined stock companies .Marx looks concentration from the point of view of the magnitude capital under unified direction.

The best example of concentration was the emergence of the corporation,but the consequent combination movement resulted in the formation of pools ,trust etc.Under the corporate form of organization there is a dissolution of the unified bond between the ownership of the capital and actual direction of production.According to Hillferding this amounts to the freeing of industrial entrepreneur ie the corporate form transformations the industrial capitalist in to the money capitalist .The development of corporation are joint stock company creates a new aristocracy of finance ,a new sort of paracites in the shape of promoters speculator and merly nominal director who engage in cheating and manipulating.Stock speculating and working as brokers.

Not only the corporate of the for or organization ,but also like growth of a capital market for corporate securities helped in the transformation of the industrial capitalists into all among capitalists with the development of securities market, quite different from the old fashioned capitalist operator.The share holders is now no more an industrial capitalist earning profit but only a capitalists receiving dividend, which is higher than the interest rate ,he could earn as money lender by the amount of the variable risk premium.It can also regain possessor of his money on demand .Thus the share holders becomes money capitalist and also function as a lender and risk bearer.

The final stage in the development of monopoly capital comes with the formation combinations.This combinations are formed with the conciousness goal of control this completion.Due to a high degree of centralization the number of enterprise in a given line of production is reduced and this makes competition increasingly severe and dangerous.This cut throat competition set the stage for the formation of combinations inorder to increase profits by means of market control of a monopolistic character.This implies that there is the limitation of the independent action of the entrepreneur involved and their co-ordination under planned and unified policy of or giant management.According to degree of limitation of independent action of entrepreneur ,various forms of combinations have emerged.The market form of the gentelmen’s agreement leading to higher forms such as price regulation association ,cartels,trusts etc.Holding company is a combination for concentrating financial control over several companies which remain formally independent The complete merger is the highest level of combination of the capital of the different corporations by abolishing the independence of the participating companies is possible through the swallowing up of all other firms by a larger firm and the replacement of all old companies by a new one,with a new one ,with a new business identity.

The combination movement swept overall the advanced countries during the last two decades.It brought about a qualitative change in the character of capitalists production and imposed considerable influence on the general laws of motion of capitalist society.

In the later stages of development of monopoly capital,there arise a tendency for integration of basic capital by order to protect their huge investment in various corporations the banks were interested in eliminating competition by influencing the policies of these corporation banks.There fore the bank also tried to transform themselves in to large units.The centralization of capital in the industrial sphere also helped the formation of large banking units.This generated the inter locking of industrial and banking monopolies in all the industrialized capitalist countries.


The transition from the competition to monopoly have a great influence on the functioning of the capitalist system.It may alter some of its lawsand modify others.

1. Monopoly and price:Under conditions of monopoly exchange ratios do not confirm to labour time ratios.The monopoly have the power of setting prices and limiting supply of commodities,It can be notd that the equilibrium output is smaller and equilibrium price is higher under monopoly compared to perfect competition.The les elastic the demand for a commodity the higher the price.

2. Monopoly and the rate of profit: The monopolists are able to sell at high price and after covering the cost of production earn a monopoly profit.

3. Monopoly and accumulation: Monopoly has a two field effect on accumulation .First due to centralization of capital ,the number of capitalist is reduced and it increases the size of the various segments.This will have the effect of raising the rate of accumulation from a given total of surplus value. Secondly ,monopoly transfers surplus value from the smaller capitalists to the larger.The increment of accumulation arising from the addition to the larger segments must be larger than the decrement resulting from the reduction of accumulation from the smaller segments. Due to these two effects the rate of accumulation under monopoly capitalism tends to higher than the rate under competitive capitalism.

4. Monopoly and technical change: Monopoly traet more unemployment and increase the flow of workers ,the Industrial Reserve Army and also reduces the out let for newly accumulated capital provided by technological progress (labour saving)

5. Monopoly and the rising cost of distribution: Monopoly capitalism tries to eliminate the middleman that is the class engaged in the commercial activities of buying and selling for industrial capitalists. Monopoly also under take specialized selling and buying.

6. Monopoly and crisis: Monopoly creates certain forces intensifying crisis and some reducing them.

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