The other factor to which Krugman has turned in his attempt to explain today’s economic stagnation is the growth of monopoly power. Thus, referring to an account of the growing monopolization tendency by Barry Lyn and Philip Longman of the New American Foundation (Lynn is best known for his book, Cornered: The New Monopoly Capitalism and the Economics of Destruction), Krugman writes in “Robots and Robber Barons”: “Increasing business concentration could be an important factor in stagnating demand for labor, as corporations use thewir growing monopoly power to raise prices without passing the gains on to employees. ” In his December 9, 2012, blog post “Technology or Monopoly Power?” he explains that such monopoly power “could simultaneously raise the average rents to capital and reduce the return on investment as perceived by corporations, which would now take into account the negative effects of capital growth on their markups. So a rising-monopoly-power story would be one way to resolve the sweeping paradox” of stagnation coupled with “rapidly rising profits and low interest rates.” This could have come straight out of Michal Kalecki’s Selected Essays in the Dynamics of the Capitalist Economy (parts of which at least, judging from his latest book, End This Depression Now!, Krugman has been reading)-or even from the 2012 Monthly Review Press book by John Bellamy Foster and Robert W. McChesney, The Endless Crisis: How monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China, which includes statistical evidence on the monopolization tendency.
Krugman is not alone among leading mainstream economists in turning suddenly to growing inequality and monopoly power in order to explain today’s economic stagnation. Joseph Stiglitz’s 2012 book, The Price of Inequality, presents similar arguments. As he makes clear, the problem is that in the crisis “the share of wages” in the economy “has actually fallen,” while “many firms are making good profits”. Stiglitz devotes a whole chapter of his book to the “increased monopoly power in the United States.” He argues that this creates a “negative-sum game” whereby the giant, concentrated firms gain, while the economy as a whole loses. Likewise, Izabella Kaminska, an exceptionally astute reporter for the Financial Times blog, FT Alphaville, observed on December 27 in “In an Economy Not So Far, Far Away,” that “As Paul Krugman, the economist, argued, too much market power can easily end up raising average rent to capital while reducing the return on investment perceived by corporations. This notion resonates well with today’s crisis because it is consistent with the paradox of rapidly rising profits amidst low real interest rates, stagnant real wages and persistent unemployment. It also explains rising inequality.”
Of course mainstream economists are a long way from seeing problems in their full historical dimensions, or from recognizing that both the capital-labor problem and monopoly power are endemic to capitalist development. For Stiglitz, as he explains at the end of his book, the issue is simply one of the revivals of antitrust, government regulation of the economy, and progressive income distribution. There seems to be no real inkling that the conflict between labor and capital extends to the class bias of the capitalist state. Barring this sharpest kind of class struggle, What Atiglitz suggests in the way of reform is unimaginable. And even with it, we cannot be certain much would change within the system. We no longer live in that special period of the post-Second World War US welfare state and European social democracy, in which the existence of the Soviet Union and attempted alternatives in the third world, coupled with an exceptional prosperity, pushed the West toward meaningful reform. Instead we live in an era of neoliberal globalization and financialization, which have pushed the world in a regressive direction. Such structural problems as growing class inequality and rising monopoly power are, moreover, inherent tendencies of capitalism as a system. They will end only with the end of capitalism itself.