The late Professor Baran once remarked to the present writer that he was ‘perfectly satisfied with the current state of orthodox economic theory’ and considered further mathematical explorations of the properties of conventional economic models a waste of time and energy. A little reflection will suggest that this might be considered an unusual opinion for a Marxist to hold. Why, indeed, should Professor Baran have been satisfied with orthodox theory at all? Monopoly Capital, the final product of years of fruitful collaboration between our two leading Marxist economists, supplies an answer which will be helpful to many radical social scientists and offend many traditional Marxists.

Marxist analytic tools were developed to describe the transition from precapitalist to capitalist economies and to unravel the ‘laws of motion’ of competitive capitalism. An analysis of monopoly capitalism requires techniques which are more adaptable to their subject matter. These are nowhere to be found in the classic Marxist literature, although there have been attempts to stretch the labour theory to fit problems of monopoly pricing. The utility of the techniques based on the labour theory nevertheless remains limited to explaining the origins of profits and the distribution of income between economic classes under a régime of competition. Mainly for this reason, the authors of Monopoly Capitalfootnote1 have been compelled to borrow most of their tools from economic orthodoxy.

It should be quickly added that the same thing cannot be said about the method which the authors use to study us monopoly capitalism. In their own words, Marxian social science focuses on ‘the social order as a whole, not on the separate parts’. While American social science has discovered many ‘small truths’ about contemporary capitalism, ‘just as the whole is always more than the sum of the parts, so the amassing of small truths about the various parts and aspects of society can never yield the big truths about the social order itself.’ More concretely, what distinguishes their economic method from that of their orthodox rivals is the division of the total product, or gross national product, into ‘socially necessary costs’ and ‘economic surplus’. For orthodox economists the cost of producing a given total product is equal to the value of that product, even when total product falls below the full capacity level. It will become clear that it is impossible to even identify the surplus unless economic society is viewed ‘as a whole’. Thus the concept of the surplus is integral to the Marxian method and totally foreign to orthodox method.

Immediately there is apparent a striking asymmetry. Baran and Sweezy have welded techniques forged during the past few decades by academic economists to a methodological concept which in one form or another is as old as economic science itself, but which is presently associated chiefly with Marxian thought. As we shall see, the clash between method and technique is the source of some of the more troublesome theoretical difficulties which appear in Monopoly Capital.

In order to convey some idea of the magnitude of Baran and Sweezy’s achievement, as well as to prepare the reader for a critique of Monopoly Capital, we attempt below to summarize the book’s major theses. Expectedly, the authors depart sharply from orthodox practice by placing monopoly at the very centre of their analysis. ‘Today the typical unit in the capitalist world is not the small firm producing a negligible fraction of a homogeneous output for an anonymous market but a large-scale enterprise producing a significant share of the output of an industry, or even several industries, and able to control its prices, the volume of its production, and the types and amounts of its investments.’

Large-scale business is organized along corporate lines and is typical in the sense that a relatively small number of industrial giants own a large share of industrial assets. Controlled by a group of self-perpetuating professional managers, the big corporations retain the lion’s share of their earnings and enjoy a great measure of financial independence. The older interest group theory (which Sweezy himself pioneered) is replaced by a model of an economy dominated by independent corporations selling in oligopolistic industries. The dissolution of the old Rockefeller group into competitive Standard Companies is cited as supporting evidence.

The analysis of big business’ main impulses rests substantially on James Earley’s empirical studies of ‘excellently managed’ corporations. According to Earley’s findings, the corporations systematically ‘focus on cost reductions, expansion of revenue, and the increase of profits’. The corporations are not more profit oriented than the individual entrepreneur of textbook fame, but the giants do strive for the greatest increase in profits possible in any concrete historical situation. Armed with the new managerial techniques, including market analysis and the science of stimulation, the corporations are well-equipped to seek out maximum incremental profits. The managers’ drive for profits is rooted in the specific socio-economic situation in which they operate and in no sense depends on orthodox economic’s fragile individual pyschological explanations of the profit motive.