[OPE-L:5480] Re: Counteracting factors

From: Gerald_A_Levy (Gerald_A_Levy@email.msn.com)
Date: Wed May 02 2001 - 04:52:44 EDT

Re Nicky's [5476]:

>   It is impossible for the monopolistic firm to
>  set  *any* old price, at least if we assume
>  they are  profit maximisers.  Am I
>  wrong about this?

Hi Nicky.
I hope your back is feeling better today.

Monopolistic firms are relatively rare today
in advanced capitalist nations and when they
exist they are often created through the
assistance of the state and are controlled by 
state agencies and could therefore
be said to constitute quasi-monopolies.

What is commonplace --indeed, what has
become the predominant form of market
structure in late capitalism -- is oligopolistic
markets where a few large firms dominate a

Price is determined differently in an oligopolistic
market than in a classically competitive
market.  It is to a large degree determined
arbitrarily through such schemes as price
leadership and cost-plus price determination
(and sometimes, but rarely, includes collusion).

It is true, as you suggest, that there _can_ be
limits to the degree to which oligopolies can
increase price as a means of increasing profit
margins. Putting aside the role of the state
(in the U.S., anti-trust policy is rarely directed
at oligopolies), it depends on (as you suggest)
the price and income elasticity of demand for the
commodity (and here I think Steve is wrong
to simply dismiss these concepts) *AND* the
degree and success of product differentiation
strategy by the oligopolies. If, through
advertising and marketing, a firm can create
sufficient brand loyalty that consumers change
the nature of their demand so that it is exclusive
to a particular firm's commodity, then that
oligopoly can with confidence know that a
price change will not lead consumers to
substitute lower-price goods produced by
rival oligopolies. Thus, the success of the
product differentiation strategy allows these
oligopolies to set prices _as if_ they were

Now we get to the issue at hand: is this, as
Jurriaan suggested, a counteracting factor
to the LTGRPD?

Most Marxists (including those on this list, I
think) would say ... No.  The reason offered
is that what oligopolies gain is at the expense
of other capitalist firms, i.e. that the result in
the aggregate is only a redistribution of surplus
value rather than an increase in its mass or rate.

I am not convinced by that argument, especially
when one considers the commodities produced
by oligopolies destined for working-class
consumption.  Suppose that an oligopoly, as
a result of advertising and marketing, is able to
charge working-class consumers a market
price three times greater than the value of those
commodities. Conventional Marxist theory would
assert that other firms pay for the success of
these oligopolies through a loss in the share of
surplus value that they appropriate. Yet, who
pays the higher prices?  It is, in this instance,
working-class consumers, of course. Thus, I
think that a better explanation of what is
happening is that the working-class are the
losers in this process rather than merely other
business firms.

What is changed necessarily , then, is not merely
the distribution of surplus value among capitalists.
What this can represent is, rather, a
*redistribution of income and wealth from the
working-class to one segment of the capitalist
class through exchange*. I.e. by selling workers
commodities which are significantly and
persistently priced greater than value, these
capitalists have effectively "ripped-off" the
working-class in the marketplace. This, of
course, does not deny the exploitation of the
working-class that occurs in the production
process but it suggests that *in addition* to
exploitation, workers can (and are) ripped-off
*again*  in the marketplace. This redistribution 
of income and wealth from the working class 
to the capitalist class could perhaps be seen as 
a counteracting factor (although, it was certainly
not considered so by Marx  ... but then, he lived
in a different epoch of capitalist history, didn't

If anyone doesn't think that this is an empirically
significant trend then we can consider the
bundle of goods that workers purchase today,
who produces them, and what the prices are.

In solidarity, Jerry

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