#77 Global Economic Struggle over 50 Years: Monopoly and Oligopoly
Earlier Blogs have outlined the natural growth of monopoly in the world of Capitalist production. Many books on the 19th and early 20th centuries have been critical of the growth of monopoly. Karl Marx was an early commentator. This was followed by Lenin in a key text in the early 20th century. Later, the school of Monthly Review continued to write about the forces of capitalism that lead inexorably to monopoly and oligopoly.
In principle, capitalism has supposedly been a myriad of smallish companies in every field competing against each other. However, in practice, this has rarely been the case. Once the allocating principle of resources and the ‘free market' became established from the early 19th century, capital has always been drawn upwards in a vortex of profit. Small companies became established as legal entities with limited liability through shares from the 1830s. Shareholding of course goes back to monopoly trading companies in the early 1600s, established by parliament. After the 1830s, shares of profitable small companies were bought out by larger companies until only a few companies are left in the marketplace.[i]
The tendency towards monopoly and oligopoly
Examples of monopoly and oligopoly abound in every area of commerce, banking, and industry in the 21st century (for more information on monopoly and oligopoly, see blog 35). To take an example from the publishing industry, which this author knows best, there were hundreds of small publishing names which began life in the 1960s and before. By the 1970s, small successful publishing companies began to be bought by their larger brethren. This process carried through to the 1990s when the industry began to be consolidated into a small number of very large companies. Those publishing companies that had managed to raise capital on the stock exchanges began to buy up familiar named companies like Penguin Books.
The smaller company would usually maintain their original name but became part of a much larger corporate base which included various media: newspapers, film, radio, TV, and so on. By 2017, five or six media companies dominated the market: Pearson Plc, Reed Elsevier, Thompson Reuters, Bertelsmann (owners of Penguin and Random House), Hachette Livre and Holtzbrinck. These companies crossed language lines and national boundaries. Industrial media concentration led to the richest individuals owning and controlling media outlets where independent voices are crowded out. Fox News is Murdoch; in France it is Bernard Arnault, owning mass-market news, radio and TV.
This complex process of the consolidation of companies during the same period, between the 1970s and 2000, can be found in every field of production, services, and banking across the capitalist world. From aeroplane making, pharmaceuticals, agrochemicals, house building, domestic kitchenware to car manufacture, huge global companies dominate globally and set prices determine what is available. In fields like agrochemicals and seeds, these huge companies determine food prices, what is grown, farming policies, biodiversity, food habits and so on. There are many more examples. These companies operate from a multitude of countries and have consequences for nation-states in terms of quality control, taxation and much more.
At a political level, democratic politics is supposed to be about ‘the people's will’. In practice, governments are more concerned to protect these huge edifices. Their economies depend on them. The political parties are financed by them, and the fact that they use tax havens and undermine taxation systems is less important to politicians that they remain on good terms.
The impact of digitalisation
The digital revolution is probably as significant globally as the invention of the steam engine. The revolution originated out of the military in the late 1960s and early 1970s. The navies of the major powers needed to know what equipment they held in a multitude of locations across the world; digitalisation began to give them the tools in the 1970s to answer such questions.
Digitalisation became a major industry from the late 1990s, and very rapidly followed the same pattern of monopoly as the rest of the industry. Government was transfixed on neo-liberalism at this time and did not attempt to control or regulate development. The new well-known digital companies stretch across the globe. This is a complex world of hardware and software, internet service providers, dot.com companies, and information technology. They include many well-known names: Microsoft, Apple, Facebook, Apple, eBay, Amazon, Google, all of whom tend to buy up new start-ups. Each one dominates one or more parts of the complexity of the digital world. Over the last 20 years, every business of every kind has been deeply influenced by digital technology. Digitalisation, like the earlier railways, has affected the lives of the world's populations.
Monopoly and Oligopoly: How to think about these developments
Global Neo-liberalism has dominated the world’s government thinking for nearly 50 years. Market forces over this period have led inexorably to the growth of monopoly and oligopoly. The last time that any government attempted to break up the great monopolies was by the USA in the 1930s. Roosevelt’s New Deal gave employees new rights to organize trade unions, taxes were raised against the rich the top rate was 75%, and a system of capital control made it difficult to move wealth offshore. The New Deal was very successful. Full employment was caused by the war effort in the USA after 1942.
Many of these measures were put in place in the UK after 1945 and again there was a period of increased wealth across the class structure lasting 25 years.
Since 1971, mega-companies have continued to dominate both the economic and political scene. No attempt has been made to break them up into smaller entities. Huge corporations dominate every field of activity across the Western world. One consequence has been the creation of a new class: the super-rich.
The very rich play around with space exploration and spacecraft. A recent slightly amusing article came out in The Long Read in the Guardian newspaper on Wentworth golf.[ii] Wentworth is one of the elite golf clubs in the UK. In 2016, a super-rich Chinese billionaire bought the club and raised the annual fee to $100,000.00. The rich members were in an uproar. Amusing or not, this article illustrates that the government in London welcomes almost any overseas wealthy individual into the British economy. If there were ever any ethics around the rich, there certainly are none now.
Wentworth is clearly the tip of an iceberg of obscene wealth by a very tiny minority of the population.
We should assume that this pattern of economic activity will continue to dominate every aspect of the Western’s world's system of production and services. One of the consequences is that the 'public interest' - however defined - will continue to be deeply in conflict with private interests for the foreseeable future.
[i] I have personal experience of this process myself. The first Limited liability company I set up, Zed Press Ltd, was recently bought up by one of the giants of book publishing - Bloomsbury - and is no longer active. My second limited liability company, Pluto Books Ltd, is now owned by a Trust, the Pluto Educational Trust, to stop it from being sold off to the highest bidder. My assumptions stated in the text have proved to be correct!
[ii] https://www.theguardian.com/news/2021/mar/02/wentworth-golf-club-reignwood-yan-bin
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The peoples of Western Europe had risen from one world of relative poverty and had learnt how to take the wealth from the Americas and transfer it to their own countries. This was slavery and latterly until 1920, indentureship. A whole set up of banks, shipping companies, and insurance companies had arisen to make these transfers possible. From the 1750s the European invaders turned their attention to Asia and systematically began the colonisation process anew. At the same time, as they attempted to colonise and extract the wealth of Asia, the colonising countries began the process we now recognise as industrialisation alongside the rapid growth of cities. The surplus resources extracted through colonisation were used to finance the growth of new industries.