'}'J!
E TENDENCY OF SURPLUS TO RISE 59
58 MONOPOLY CAPITAL
profit, the net rest1lt may be to leave all the firms in a worse
position.
Under these circumstances it is impossible for a single corpo-
ration, even if it has the fullest information about the demand
for the products of the industry as a whole and about its own
costs, to tell what price would maximize its profits. What it can
sell depends not only on its own price but also on the prices
charged by its rivals, and these it cannot know in advance. A
firm may thus make ever so careful an estimate of the profit-
maximizing price, but in the absence of knowledge about rivals'
reactions it will be right only by accident. A wrong guess about
rivals' reactions would throw the whole calculation off and ne-
cessitate readjustments which in turn would provoke further
moves by rivals, and so on, the whole process quite possibly
degenerating into mutually destructive price warfare.
Unstable market situations of this sort were very common in
the earlier phases of monopoly capitalism, and still occur from
time to time, but they are not typical of present-day monopoly
capitalism. And clearly they are anathema to the big corpora-
tions with their penchant for looking ahead, planning carefully,
and betting only on the sure thing. To avoid such situations
therefore becomes the first concern of corporate policy, the
sine qua non of orderly and profitable business operations. .
This objective is achieved by the simple expedient of ban-
ning price cutting as a legitimate weapon of economic war-
fare. 4 Naturally this has not happened all at once or as a con-
4 Smaller businessmen sometimes blurt out what their more public-
~elations-conscious big brothers discreetly keep to themselves. The follow-
ing excerpt from a proceeding of the Federal Trade Commission dealing
with the Chain Institute, a trade association of chain manufacturers,
provides a classic statement of the all-but-universal attitude of business-
men toward price cutting. The witness, after explaining the usual proce-
dure at meetings of the Institute, proceeded as follows: "But, after we got
rid of a lot ~f this stuff, ... then we start talking. Maybe somebody will
say to you, You so-and-so Son of a B, what did you do at Bill Jones'?'
And then som:body calls somebody a liar and so forth, and then maybe
~e ~ould say, Well I have got the evidence that you did, and you are a
liar, and then you would get into a fight with this fellow, and first thing
scious decision. Like other powerful taboos, that against price
cutting has grown up gradually out of long and often bitter
: experience, and it derives its strength from the fact that it
' serves the interests of powerful forces in society. As long as it is
•
' accepted and observed, the dangerous uncertainties are re-
•· moved from the rationalized pursuit of maximum profits.
; With price competition banned, sellers of a given commodity
or of close substitutes have an interest in seeing that the price
: or prices established are such as to maximize the profits of the
: group as a whole. They may fight over the division of these
profits a subject to which we return presently but none can
wish that the total to be fought over should be smaller rather
than larger. This is the decisive fact in determining the price
policies and strategies of the typical large corporation. And it
, means that the appropriate general price theory for an econ-
.· omy dominated by such corporations is the traditional monop-
< oly price theory of classical and neo-classical economics. What
: economists have hitherto treated as a special case turns out to
be, under conditions of monopoly capitalism, the general
case. This is a view which would probably command fairly
you know somebody else would come up and listen to the conversation,
and then there would be six of them there, and they would be picking on
you-I don't mean picking on me, but picking on these price cutters, you
understand .... I have a marvellous vocabulary, I can assure you, when
it comes to calling names, and it has been tested by every member of the
Institute, and when I call a guy a dirty, low kind of so-and-so price
cutter, he knows he has been called a price cutter. I will be frank, and if
' you want to crucify me, I will add this: I would tell him that if he didn't
stop these damned price cuttings, I would show him how to cut prices,
an? many times I did cut them, and when I cut a price, and if it w.as your
price I was cutting, take it from me, brother, you knew your price had
been cut. I could go on and on and on-but I want to say that when any
t~o businessmen get together, whether it is a Chain Institute meeting or a
Bible class meeting, if they happen to belong to the same industry, just as
' ~oon as the prayers have been said, they start talking about the conditions
in .the industry, and it is bound definitely to gravitate, that talk, to the
¥rice structure of the industry. What else is there to talk about?'' Federal
Nrade Commission, In the Matter of Chain Institute, Inc., et al, Docket
o. 4878, pp. 1096-1098.