70 MONOPOLY CAPITAL
usually under new management and with new capital; or it can
give up the ghost and leave the field to its more successful
rivals. This sort of thing happens very often in the business
world, and every manager knows of numerous cases and lives
in constant fear that a similar fate will overtake him if his
company falls behind in the cost race. The stick of failure thus
complements the carrot of success in an oligopolistic system no
less than in a competitive one.
There is an additional reason, in our judgment as important
as it is neglected, why a tendency for costs of production to fall
is endemic to the entire monopoly capitalist economy, even
including those areas which if left to themselves would stag-
nate technologically. It stems from the exigencies of non-price
competition in the producer goods industries. Here, as in in-
dustries producing consumer goods, sellers must be forever
seeking to put something new on the market. 19 But they are
not dealing with buyers whose primary interest is the latest
fashion or keeping up with the Joneses. They are dealing with
sophisticated buyers whose concern is to increase profits.
Hence the new products offered to the prospective buyers must
be designed to help them increase their profits, which in gen-
eral means to help them reduce their costs. If the manufacturer
can convince his customers that his new instrument or material
or machine will save them money, the sale will follow almost
automatically.
Probably the clearest example of the cost-reducing effects of
the innovating activity of manufacture1·s of producer goods is
to be found in agriculture. As Galbraith has pointed out, ''there
would be little technical development and not much progress
in agriculture were it not for government-supported research
supplemented by the research of the corporations which devise
and sell products to the farmer." 20 No doubt, as this statement
implies, government research has been the main factor behind
the spectacula1· reduction in agricultural costs during the last
19
We discuss the implications of this in the consumer goods field in
the next chapter.
20
J. K. Galbraith, American Capitalism, Boston, 1952, pp. 95-96.
THE TENDENCY OF SURPLUS TO RISE 71
two decades, but the sales-hungry manufacturers of farm ma-
chinery, fertilizers, pesticides, etc., have also played an impor-
tant part in the process. Similarly, producers of machine tools,
computers and computer systems, business machines, automa-
tic control equipment, loading and transfer machinery, new
plastics and metal alloys, and a thousand and one other kinds
of producer goods are busy developing new products which
will enable their customers comprising literally the entire
business world to produce more cheaply and hence to make
mo1·e profits. In a word: producers of producer goods make
more profits by helping others to make more profits. The pro-
cess is self-reinforcing and cumulative, and goes far toward
explaining the extraordinarily rapid advance of technology and
labor productivity which characterizes the developed monop-
oly capitalist economy.
We conclude, then, that with regard to the cost discipline
which it imposes on its members the monopoly capitalist econ-
omy is no less severe than its competitive predecessor, and that
in addition it generates new and powerful impulses to innova-
tion. There can therefore be no doubt about the downward
trend of production costs under monopoly capitalism.
On the face of it this would seem to be an argument for
monopoly capitalism's being considered a rational and progres-
sive system. And if its cost-reducing proclivities could some-
how be disentangled from monopoly p1·icing and a way could
be found to utilize the fruits of increasing productivity for the
benefit of society as a whole, the argument would indeed be a
powerful one. But of course this is just what cannot be done.
The whole motivation of cost reduction is to increase profits,
and the mon6polistic structure of markets enables the corpora-
tions to appropriate the lion's share of the fruits of increasing
productivity directly in the form of higher profits. This means
that under monopoly capitalism, declining costs imply contin-
uously widening profit margins. 21 And continuously widening
21
'Yhat is reported to be true of the country's largest corporation, the
A_rner1can Telephone and Telegraph Company, is really typical of the
giant corporations which dominate the economy: ''Striking testimony to