The Monopolisation of Industry

Capitalism has overtime evolved from a situation of free-trade and competition to the economic domination of a small handful of firms, who have monopolized nearly every sector of the economy.

Unfortunately, figures on monopolization are extremely hard to come by, given that these figures may generate dissent and are undesirable for powerful firms. However, it was possible for me to find such figures on the US retail market. The following table represents the percentage of sales for the four largest firms in Selected U.S. Retail Industries

*Graph/figures courtesy of the Monthly Review— John Bellamy Foster, Robert W. McChesney and R. Jamil Jonna

[endif]--What this graph represents is just four firms, may make up as much of 73.2% of total sales for general merchandise—out of tens or even hundreds of thousands of total stores, most of which struggling to compete with the economies of scale possessed by larger conglomerate firms— which are able to purchase goods in bulk at lower prices per unit, and therefore benefit from either larger profit margins or the ability to offer goods at lower costs. This has the effect of deterring new entrants into the market. Hence the tendency for such for firms to capture ever increasing market shares (as evident in the graph above).

The concern that arises from this situation is that these oligarchical firms, with their ever-expanding market dominance may totally stamp out competition. It is competition that has historically forced firms to lower costs—whilst a firm with monopoly control can name its price and force others out of the market. The alleged solution to this problem is for the state to break up such cartels, however it is frequently forgotten that these firms often hold close ties to politicians and the state. As in the democratic-republic, wealth wields its power indirectly but all the more surely. In some cases, by direct corruption of officials, or by an alliance between the government and stock exchange.

Perhaps the best example of this being the physical guarantee of profits for the United Fruit Company by the US, with CIA coups orchestrated in South-America when socialist politicians threaten to nationalize their land. Allen Dulles who sat on the company’s board of directors, was the brother of John Foster Dulles— who served as US secretary of state through the 1950s.

The latter paragraph being an anecdotal example at best, it still exposes an alliance between private enterprise and the liberal-democratic state. Thus such an institution cannot be relied on to disassemble monopolies and re-establish free-trade. While the graph and figures displayed previously point towards the retail sector specifically, this tendency exists across almost all industries and is magnified through every financial crisis as smaller firms shut down while larger ones remain to benefit in the long-run.

*Figures taken from V.I Lenin’s ‘Imperialism: The highest stage of Capitalism’

The financial and banking sectors are perhaps the best examples of this. For instance, during the 2008 financial crisis, many smaller investment banks went under— allowing those that remained to accumulate a larger share of the worlds finance capital. As early as 1910, the monopolization of the banks was identified as one of the final stages of capitalism— the following figures showing the skewed distribution of deposits between large and small banks;

We see the small banks being squeezed out by those with more capital at their disposal. With just 9 banks accumulating as much of half the total deposits in an industry that consisted of hundreds of competing banks at the time.

The economic consequences of this are dire—in that a handful of powerful monopiles have at their disposal the finance capital of nearly all the firms in that economy (If 9 banks successfully accumulated more than half the finance capital of German industry in 1910, imagine the accumulation of wealth an entire century later with several recessions along the way which culled the smaller firms).

It is my belief that free-trade has been dead and buried a long time ago.