Laws of Concentration and Centralization: TODAY'S Review

  • Sourish Dutta

Abstract

Though the basic (late 1860s) Marxian model, under capitalist function of development, assumes (more or less) perfectly competitive market segments with a big variety of small organizations in each industry, Marx was cognizant of the growing size of firms, the consequent weakening of competition, and the progress of monopolistic ability. Hence, capital gets the inclination for concentration and centralization in the hands of richest capitalists. Actually, the focus and centralization of capital are two capital build up techniques. Such attention and centralization of capital can be obviously detected at this modern time-especially in the USA-in the considerable occurrences of the mergers, acquisitions and conglomerates. With this assignment, henceforth, I am wanting to cultivate an analytical debate about these two interlinked ideas and their implications and repercussions in this modern world of capitalism.

Prologue

The modern-day financial catastrophe of 2008 brings back again the Marxian regulations of attention and centralization of capital in the present day form. They are generally confused but must be evidently distinguished. Marx explained it most famously in chapter 25 of level 1 of Capital. Though his vibrant intellectual exploration engrossed in the industrial capital, the same trend holds with respect to financial capital in present situation.

With the increasing mass of riches which functions as capital, deposition increases the attentiveness of that prosperity in the hands of specific capitalists, and therefore widens the foundation of development on a huge range and of the precise methods of capitalist production. . . It is attention of capitals already developed, destruction of their individual independence, expropriation of capitalist by capitalist, change of many small into few large capitals. This process differs from the former in this, that this only presupposes an alteration in the syndication of capital already to hand, and working. . . Capital grows in a single place to a huge mass within a hand, because it has in another place been lost by many. This is centralisation proper, as specific from deposition and awareness.

In simple, by attention we make out the upsurge of capital that is due to the capitalisation of the surplus value originated through build up of surplus value of labour. Indeed, increasing attention of capital occurs as individual capitalists accumulate more and more capital, therefore increasing the definite amount of capital under their control. The size of the organization or economic product of development is increased correspondingly, and the degree of competition in the market is commonly reduced; under centralisation we understand the getting started with together of varied individual capital units which thus form a new larger unit. Actually, more important reason behind the reduction of competition is the centralization of capital. Centralization occurs through a redistribution of already existing capital in a fashion that places its possession and control in fewer and fewer hands. Marx preserved that larger companies would be able to achieve economies of range and therefore produce at lower average costs than would smaller businesses. However, awareness and centralisation, effect one another. An excellent awareness of capital accelerates the absorption of small-scale enterprises by large-scale ones; conversely, centralisation supports the increase of specific capital units therefore accelerates the procedure of concentration[1], [2]. Beside this, recent experience of financial meltdown also conveys a fresh phenomenal sizing in the context of Marxian problems in capitalist method of production. This phenomenon gives climb to the doctrine of Too Big to Fail (TBTF)[3].

Rationale behind these laws

The main logic behind both of these regulations of capitalism is the force of capital accumulation or the self-expansion of capital. Here we must note two specific concepts, namely, individual capital and cultural capital. Marx observes

The proven fact that the cultural capital is add up to the total of the average person capitals (including the joint-stock capital or the talk about capital, so far as governments employ successful wage-labour in mines, railways etc. , perform the function of commercial capitalists), and that the aggregate movements of interpersonal capital is add up to the algebraic total of the actions of the individual capitals, does not at all preclude the probability that this movement as the motion of an individual specific capital, may present other phenomena than the same motion does indeed when considered from the idea of view of an integral part of the aggregate activity of public capital, hence in its interconnection with the movements of its other areas. . . . Every specific capital varieties, however, but an individualised small fraction, a small fraction endowed with specific life, as it were, of the aggregate cultural capital, equally as every specific capitalist is but an individual factor of the capitalist category. The movements of the public capital consists of the totality of the movements of its individualised fractional parts, the turnovers of the average person capitals.

The self-expansion of individual capital is accomplished through the appropriation of surplus value by maximizing the pace of profit, while the movements of the sociable capital causes the equalisation of rates of earnings. Specific capital is a thing and a relation, therefore is the social capital; moreover, the communal capital denotes another aspect of social relation, namely, the relationship between industrial, financial and commercial branches, and also between branches, industries and departments of the effective system. Nevertheless, additionally it is to be observed that in a capitalist economy, state capital is an essential part of cultural capital. In juridical form, condition capital is indeed different from private joint-stock capital, but its moves determine, and are determined by, the actions of communal capital.

Concentration

The other name of self-expansion of individual capital is attention of capital, relating to Marx. It offers nothing to do with the statistical idea of concentration ratio on the routine of Gini, Lorenz or Atkinson. The attention of capital in the Marxian sense is measured in absolute terms with reference to a single individual capital, without regard to all of those other individual capitals; in other words, it isn't a ratio of any two magnitudes. At one place Marx says that "simple focus of the method of production and of the order over labour. . . is equivalent with accumulation, " with another he equates "the pace of self-expansion of the total capital" with "the pace of profit. "

"Every specific capital is a larger or smaller attention of the method of development, with a related command over a larger or smaller labour-army, " says Marx. "Every deposition becomes the method of new accumulation. " Clearly, by awareness Marx will not suggest anything like the Gini coefficient or the Lorenz proportion. Now, build up is the perfect mover of capitalism, and awareness increases with deposition.

Since the pace of income is standard throughout the market, should every capitalist accumulate the entire profits (or equivalent pro- portion of revenue) then every individual capital would grow at the same rate. In that event, there will be a continuous surge in the awareness of capital in the Marxian sense, however, not so in the usual statistical sense. To place it in another way, a constancy in the statistical awareness ratio does not imply a cessation of the Marxian concentration of capital.

Movements of public capital have a tendency to create equalisation of revenue rate throughout the economy, but in simple fact profit rates do change from one branch of development to another at any given period. Besides, as we realize, "one part (of the surplus value) if applied as capital, is accumulated" 13 and the portion of this plough-back might not exactly be the same for every individual capita- list. A bigger capitalist accumulates a larger percentage of the surplus value appropriated by him. Hence, the rates of personal- expansion of varied individual capitals-that is to state, their rates of concentration-differ. If the bigger capital effects a higher rate of self-expansion, then the statistical concentration ratio would rise with the Marxian awareness of capital. Together with the rising concentration of capital a qualitative change takes place-the organic structure of capital rises, and hence the pace of profit declines attracting its trail an emergency which we shall take up for conversation below.

[1] http://www. economictheories. org/2008/07/karl-marx-concentration-and. html

[2]N. I. Bukharin: Imperialism and World Economy

[3] According to some economists, when bankers and finance firms become too big, their inability has systemic implications, inflicting collateral damage on people who may have nothing directly to do with those banks or corporations. Government authorities then feel compelled to save these large entities to be able to minimize the collateral damage, and the expectation of such bailout promotes reckless behavior.

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