‘The Theory of Monopoly Capitalism: An Elaboration of Marxian Political Economy’ reviewed by Hans G Despain

The Theory of Monopoly Capitalism: An Elaboration of Marxian Political Economy

Monthly Review Press, New York, new edition 2014. 320pp., $22 pb
ISBN 9781583674413

Reviewed by Hans G Despain

About the reviewer

Hans G Despain is Professor of Economics and Department Chair at Nichols College, Massachusetts. He …


The Monthly Review tradition has played a unique and invaluable role in understanding and explaining contemporary social being. Philosophically Monthly Review has been eclectic and broadminded. With respect to political economy the tradition of Monthly Review retains its broadmindedness, but can also be described as both steadfast and innovative. The new edition of John Bellamy Foster’s The Theory of Monopoly Capitalism (2014) is an excellent introduction and elaboration to fundamental issues in Marxian political economy in the context of the debates that emerged concerning monopoly capitalism and the Monthly Review tradition.

The Monthly Review tradition was formed around the intellectual genius of Paul Sweezy and Paul Baran. It is deeply rooted in the political economy of Karl Marx, with strong influences from the Institutional and Post-Keynesian political economy traditions. Although fundamental texts go back to the 1930s and 1940s, it is the publication of Baran and Sweezy’s Monopoly Capital in 1966 that marks the emergence of Monthly Review as coherent and unique intellectual tradition.

The theory of monopoly capital never experienced halcyon days; Aeolus never restrained the winds nor calmed the waves of intellectual criticism. Generally ignored by the academic right, hounded by the FBI and Congressional Committees, blacklisted, and threatened with imprisonment, the intellectual output of the Monthly Review “martyrs and convicts” had substantial impact on the Left; much supportive and much in criticism, especially from New Left and other (“fundamental”) Marxists.

Baran and Sweezy were accused of being non-, or even, anti-Marxist for appearing to have abandoned the labor theory of value and theory of surplus value. They upset many Marxists by insisting that the falling rate of profit could be overcome by the ability of monopolistic and oligopolistic firms to control industries and markets. Mistakenly, conventional wisdom held that Baran and Sweezy were vulgar underconsumptionists concerning the causation of crises.

They were accused by the left and right of being historically naïve and theoretically dogmatic by insisting that the normal state of monopoly capitalism is stagnation. Likewise, many critics maintained that their conception of Monopoly Capital and the dominance of big corporations on the manipulation of markets and politics were greatly exaggerated. Debates emerged around the role of the state in monopoly capitalism and about “dependency theory,” which contended that core capitalistic nations exploit and hinder the development of the periphery, or so-called underdeveloped nations. If these criticisms are not damning enough, monopoly capital theorists criticized themselves for undertheorizing class struggle and issues of labor and the role of money and finance within the monopoly capitalistic system.

Foster attempts to explain the theory of monopoly capitalism in the context of these criticisms, misinterpretations and misunderstandings. In this sense Foster’s book is not an introduction to Monopoly Capital (the best introduction remains Baran and Sweezy’s original articulation), but an “elaboration” and development of Marxian political economy.

Foster takes on each of the above issues in The Theory of Monopoly Capitalism. He successfully demonstrates that many of these criticisms are misunderstandings and misinterpretations of monopoly capital theory. He conveys that many of the criticisms and debates are warranted and that Monopoly Capital is a historically evolving and incomplete analysis of contemporary social being. His tone is never defensive or hostile. His intention is cooperative and collaborative, even when these cooperative/collaborative intentions are not necessary shared by critics.

Although never having experienced halcyon days, monopoly capital theory did achieve colossal influence, the zenith of which reigned from the late 1960s and into the mid-1980s. Foster’s The Theory of Monopoly Capitalism, first published in 1986, ironically marks the nadir of the intellectual influence of the Monthly Review tradition. The publication further ironically corresponds to the resurgence of pre-Keynesian or “vulgar” political economy and rise of the New Right politics of Thatcher and Reagan, instituting the Halcion Daze of neo-liberal economic policy. This metaphor may need explanation. Halcion is the brand name of a sedative to treat severe insomnia with common side effects of drowsiness, depression, dizziness, and other bodily “coordination problems.” It is hard to imagine a more apt metaphor for neo-liberal policy.

The Halcion Daze would continue through the regimes of Major/Clinton and Blair/Bush. After the glory decades of 1966-1986 Marxian political economy fell into the intellectual backwaters. In spite of the so-called economic boom of the 1990s and historically low levels of unemployment during the 1990s and 2000s, the Monthly Review tradition stayed steadfast to its theory of monopoly capital and its tendency toward overaccumulation (83-93) and excess capacity of oligopolistic firms (107-29; and Sweezy 1981, 34-9). They insisted, appearing dogmatically doctrinaire to many, that “the normal state of the monopoly capitalist economy is stagnation” (91-2 and 103-4; and Baran and Sweezy 1966, 108; Baran and Sweezy 2012).

During the nadir of Marxian political economy, various Monthly Review theorists have successfully elaborated analyses and implications of monopoly capital concerning labor, international political economy, the environment, popular media and communication, and financialization (see Despain 2009; Despain 2013 for a reviews of the latter development).

When the financial crisis of 2007-8 occurred there was a renaissance and historical vindication of the basic results of monopoly capital theory. It is especially these developments that make the new edition of The Theory of Monopoly Capital timely and important. Monopoly capital theory holds the greatest potential for providing grounds for a “decentered unity” among heterodox political economy traditions. Foster’s elaborations on the misunderstandings and misinterpretations of monopoly capital theory, and his confessions on the need of further theoretical developments in particular areas are especially important for theorists coming back to, or young theorists being introduce to, the explanatory power of monopoly capital theory.

The basic results of monopoly capital are deceivingly simple. First, as stated above, the normal state of monopoly capitalism is stagnation. Second, monopoly capital organization gives political advantage to capital over labor in the class struggle, increasing the rate of exploitation, and establishing superexploitation for workers in periphery nations. Third, the control over price decisions by large corporations generates a hierarchy of profits rates (rather than any tendency toward an average rate of profit), roughly hierarchically ordered based on size of firm and relative degree of market and political power. Fourth, monopoly capital regulates industries by means of quantity adjustments, rather than price, by manipulating their excess productive capacity depending on the degree of competition. Fifth, the tendency of the rate of profit to fall gives way to the tendency of the rate of surplus value to rise. Sixth, the second through fifth basic results above generate an increase in the potential rate of capital accumulation. In turn this generates a gap (or fundamental contradiction) between potential output (exchange value) and surplus absorption (use value), this fundamental contradiction manifests stagnation. Seventh, the primary mechanism to overcome the fundamental contradiction is economic “waste.”

The basic stagnation problem of monopoly capitalism had never subsided, but in fact worsened (Foster 2006, 1). Stagnation itself was a function of the fact that the surplus generated by monopoly capital became increasing difficult for the system to absorb (12). According to Baran and Sweezy, in general monopoly capital “‘surplus can be absorbed in the following ways: 1) it can be consumed, 2) it can be invested, and 3) it can be wasted’” (89).

However, surplus absorption options 1) and 2) are highly circumvented. Capitalist consumption tends to account for a decreasing share of capitalist demand as income grows. Investment tends to fall short because the new productive capacity is demand dependent. Demand dependence further implies that it is wage and class struggle dependent, thus institutionally contingent. Thus, according to Baran and Sweezy the capitalist system increasingly relies on “waste” (12).

Forms of waste include 1) the sales effort, consisting of advertising, market research, sales outlets, various sales personnel expenses, public relations, lobbying, conspicuous or “showy” business space, product appearance, packaging, planned obsolescence, model changes, etc. 2) military spending and war; and 3) “diversion of potential surplus into the financial sector (listed as ‘finance, insurance, and real estate’ in the national account)” (95). It becomes increasingly clear within a monopoly capitalistic system that real needs of human beings are secondary to the dictates of the logic of capital.

Foster elaborates that monopoly capital is a historical stage of development (64-5), with a hierarchy of firms in terms of size and market power (70-1). Large firms pursue a policy of “rent-seeking” activity that in many instances becomes more important than profit maximization (62). It is fully rooted in Marx’s labor theory value, but with amendments occurring in the realm of distribution (50) depending on the success or failure of rent-seeking activities of giant firms (62). The concept of “surplus” is intended to demonstrate a significant proportion of a nation’s output does not necessarily have any economic grounds for how it is distributed. Surplus value can always be argued to have been economically “earned” by labor management, entrepreneurial skills, etc. The notion of national surplus establishes and underscores that fact that distribution is a political and ethical process, not justified in economics (24-5). Thus, the notion of surplus is certainly differentiated from, but fully rooted in, Marx’s theory of surplus value (18).

Foster fully accepts the measurements of surplus (34-45) and excess capacity (107-27) of firms are highly contentious and even inexact. However, they are also both theoretically indispensible for understanding and explaining the dynamic tendencies of contemporary monopoly capitalism.

Foster argues that explanations of crisis in monopoly capital theory are far more complex and sophisticated than vulgar underconsumptionism (75-83). Foster demonstrates effectively that the fundamental problem in monopoly capitalism is excess capacity and the lack of profitable investment outlets (124) for full absorption of a nation’s surplus (93-101). Excess capacity is essentially a reaction to avoid overproduction (83-93), to control market activity and to amend the anarchy of production (62-4), resolve problems of disproportionalities between Marxian Department I (capital goods) and Department II (consumption goods) (101-6) and evade the tendency of the rate of profit to fall (127, 14-5). This means that the law of value and the falling rate of profit are fully in effect, but can be manipulated by the large firms so the consequences are not imposed on themselves, but exported to rivals, workers, and other social agents. This is by definition rent-seeking activity (also called “unequal exchange” in monopoly capital theory), which may very well prove to be far more lucrative than maximizing revenue and minimizing costs.

According to monopoly capital theory, the relationship between the state and the capitalist class is “an extremely dynamic” process (154). The state’s primary role is to facilitate “the imperatives of accumulation” and assure “conditions of private appropriation” (148). In the twentieth century the state achieved these aims by increasing “wasteful” public expenditures on armaments and war, constituting the era of “armament-imperialist complex” (136). However, under circumstances of deepening stagnation this increase in wasteful public spending is analogous to “pumping up pressure in a leaky tire” (145): as the leak gets bigger so too must the spending on waste. Additionally, giant corporations employ their power to manipulate the state as an “extra-economic” mechanism to protect and increase profits and market power (154).

Regarding the international dimension, monopoly capital theory contends that analysis must begin with the fact that much of the world implementing capitalistic structures and pro-market policy fail to develop (160-92). Instead, the monopolistic position of giant corporations (167) allows them to impose superexploitation on workers (179), unequal exchange (181), destroy native industries, and usurp the nation’s surplus (165). The monopoly capital activities create massive social disharmony and disorder (165), to which Monthly Review theorist Samir Amin (2013, 31-41) dubs corporate globalization leaders social-political “corruptionists.” All of which tends to arrest development (169-78), by reversing the surplus flow process from the ‘underdeveloped’ host country to developed countries, and deepening financial dependency from the “peripheral” underdeveloped countries to the “core” developed countries, for further (non)development.

Monopoly capital theory understands that there is a more or less seamless coherence, based on the imperatives of accumulation, between the capitalist class, the state, and the international dimension as long as all is going well. Stagnation as the normal condition necessarily means that social being in contemporary monopoly-finance imperialist capitalism rarely, if ever, goes well. Hence the relationships between (institutional) agents are not seamless but highly contradictory as the normal state. Thus, in addition to the fundamental stagnation tendency of monopoly capitalism, there are further contradictions concerning the role of the state and between international trade relations of the core/core and core/periphery nations and the reproduction macrodynamic of the international political economy.

There are plenty of issues to debate in these views. I will only point out two criticisms specific to Foster’s book. First, throughout the book Foster employs the terms “fundamental” and “traditional” Marxism. It is not at all clear what these terms refer, except for critics of monopoly capital theory. The implication however, is that monopoly capital is not a fundamental or traditional interpretation of Marx. This I believe is a mistake and inconsistent with the letter of Foster’s argument for the monopoly capital position and its relationship to Marx.

Second, Foster writes that Marx’s Capital was written in the context of “competitive” phase of capitalism (51-9) and monopoly capital is a historical development (64-71). To be sure there has been an historical evolution of monopoly capital and how its dynamics manifest at a micro-social and macro-social level. However, there was no “competitive” phase of capitalism. As Maurice Dobb (1946) argued capitalism emerges with, and because of, monopoly power at the level of economics and politics. Monopoly forms change, and as Dobb argues, the monopoly element of society changes from a revolutionary force against feudalism, to a highly conservative force within capitalism. It is highly misleading to characterize Marx’s Capital as a theory of competitive capitalism. It further confuses the relationship between Marx and monopoly capital theory, and weakens the position of monopoly capital theory ontologically and historically.

Epistemologically monopoly capital theorists have been eclectic and open-minded. Ontologically, they have been both innovative and steadfast. They have been innovative in that they have adapted and developed the position as the evidence and evolving conditions have warranted, as evidenced in their contributions in realms of capital/labor relations, the environment, communications, international political economy, and financialization. Their contributions are some of the most penetrating analysis of contemporary monopoly-financial-imperialist capitalism. They deserve gratitude for staying steadfast to their conceptions of monopoly capital, surplus and excess capacity for its explanatory power to reveal the (evolving) ontological constitution of contemporary capitalistic systems and its tendencies toward stagnation.

Foster’s book is brilliantly successful elaborating Marxian political economy and the tendency of monopoly-finance-imperialist capitalism toward stagnation. The book deserves a wide (re-)readership and a new generation of theorists to appreciate the explanatory power of Marxian political economy.

14 July 2014


  • Amin, Samir 2013 The Implosion of Contemporary Capitalism New York: Monthly Review Press.
  • Baran, Paul and Paul Sweezy 2012 Some Theoretical Implications Monthly Review 64, no. 3, July-August, 24-59.
  • Baran, Paul and Paul Sweezy 1966 Monopoly Capital New York: Monthly Review Press.
  • Despain, Hans 2013 The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from USA to China, by John Bellamy Foster and Robert W. McChesney Marx and Philosophy Review of Books by John Bellamy Foster and Robert W. McChesney.” Marx and Philosophy Review of Books, January 30th: http://marxandphilosophy.org.uk/reviewofbooks/reviews/2013/694 http://marxandphilosophy.org.uk/reviewofbooks/reviews/2013/694
  • Despain, Hans 2009 Review: The Great Financial Crisis: Causes and Consquences, by John Bellamy Foster and Fred Magdoff Journal of Economic Issues 42, no. 4, December, 1075–77.
  • Dobb, Maurice 1946 Studies in the Development of Capitalism New York: International Publishers.
  • Foster, John Bellamy 2006 Monopoly-Finance Capital Monthly Review 58, no. 7, December, 1-13.
  • Sweezy, Paul 1981 Four Lectures on Marxism New York: Monthly Review Press.


  1. A very helpful review. I agree with the criticism of Foster, not a major criticism, but nonetheless important. Indeed, Marx was fully aware of the creation of monopolies, as he viewed greater concentration and centralization of capitals as a major tendency of capitalism in general. I’m unsure why Foster would want to differentiate ‘monopoly-capital’ theory from Marx in this way.

  2. Judy: the rise of financialization, monopolies in industries previously fragmented, e.g., family farms/ag vs. corp food

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