Throughout the first phase of its existence, from the Industrial Revolution of the latter half of the 18th century, to the end of the 19th century, the capitalist mode of production was characterised by the existence of a large number of independent firms in every sector of industry. None of these firms was able to dominate any particular branch of production, and consequently the predominant pattern of capitalist relations was what bourgeois theorists called free competition, or laissez faire. Each firm sought to capture a larger fraction of the market by reducing the selling price of its commodities. In this period, the capitalist market was extended over the entire world through the export of industrial consumer goods to areas of the globe where pre-capitalist relations still prevailed (Asia, Africa, Latin America).
From the end of the 19th century, however, the period of free competition gave way to a historically new stage of capitalism, characterised by the monopolisation of separate branches of industry by one or a few large firms.
This transition was facilitated by a technological revolution in which the electric motor and the internal combustion engine supplanted the steam engine as the principal sources of energy for industry and for transportation. Entirely new industries developed (electricity, electrical goods, oil, motor vehicles, chemical industries), and these required greater initial capital outlays than the old industries. This radically reduced the number of potential competitors.
This new historical period was a product of the operation of capitalism's basic laws of motion. The concentration and centralisation of capital led to the formation of powerful monopolistic associations (cartels, syndicates, trusts) and to a new form of giant undertaking combining several enterprises linked together by the banks. The so-called free competition of a multitude of small capitalist firms gave way to the domination of national markets by a handful of financial groups simultaneously controlling banks, other financial institutions, big industrial and transport trusts, big retail store chains, etc.
Capitalist monopolies do not eliminate capitalist competition. In non-monopolised sectors of the capitalist economy, competition continues in the traditional form of price cutting. In the monopolised sectors, however, competition no longer normally takes the form of price cutting, except in international markets in which the various national monopolists continue to struggle against each other. In their traditional domestic markets, however, competition takes the form of struggle between monopolies for reduction of production costs.
By controlling markets and limiting price competition, the big trusts obtain monopolistic superprofits — rates of profit superior to those of companies in the non-monopolised sectors. Monopolies can control markets only by limiting growth of production, and therefore accumulation of capital, within them. On the other hand, these same monopolies are in possession of abundant capital, accumulated due to monopolistic superprofits. Monopoly capitalism is therefore characterised by the accumulation of surplus capital in the hands of the monopolies of the industrialised capitalist countries. This surplus capital must seek new fields for profitable investment. The export of capital from the industrialised countries thus becomes an essential trait of the monopoly capitalist era.
The export of capital to the non-industrialised areas of the world (and the goods bought with this capital — mainly infrastructural facilities to cheapen the export of raw materials from these areas) gave the capitalists of the industrialised countries a major interest in establishing permanent control over these areas. The rise of monopoly capitalism was therefore accompanied by a feverish drive to assert direct political control over the non-industrialised areas of the world by converting them into colonies of the major capitalist powers. Thus the monopoly capitalist era is distinguished not merely by the domination of each of the advanced capitalist countries by a small number of monopolist firms and associations, but by the creation of a world imperialist system based on the division of the globe into oppressor and oppressed nations.
The massive export of capital to the colonial and semi-colonial countries (the so-called Third World) for the organisation of capitalist production of raw materials, created and consolidated a specific mixture of pre-capitalist and capitalist relations of production which prevented the development of large-scale industry within these countries. Foreign capital's domination over the accumulation of capital in the Third World stifled the process of primitive accumulation of capital in the hands of the indigenous capitalists. Thus, while imperialism integrated the colonial and semi-colonial countries into the world capitalist market, it also consolidated a permanent gap in average labour productivity between the industrialised capitalist countries and the Third World.
The essential feature of imperialism is manipulation of the uneven development of labour productivity in different sectors of the world capitalist economy in order to extort monopoly superprofits.
The largest share of these superprofits is derived from the imperialist countries themselves. Here, in the largest and most developed capitalist markets, monopoly power (strict regulation of production, market apportionment, monopoly pricing, favourable access to credit, control of scientific research, export of capital and privileged connections with the state) drastically shifts the distribution of surplus value to the advantage of the largest corporations. But significant superprofits are also appropriated from the colonial and semi-colonial countries through the purchase of labour power at a price much lower than its value in the industrialised countries, and through unequal exchange of goods on the world market: Goods produced in conditions of higher labour productivity (principally industrial goods) are exchanged for goods produced in conditions of lower labour productivity (predominantly mineral and agricultural raw materials). As a result, the capitalists of the imperialist countries are able to appropriate a large part of the value produced in the Third World.
Monopoly capitalism not only intensifies all the classical contradictions of capitalism, but also adds new ones:
- Imperialist exploitation of the colonies and semi-colonies retards and distorts the indigenous development of capitalism in these countries, perpetuating and intensifying their economic backwardness and their dependent and subordinate relationship to the advanced capitalist countries. It creates a permanent division of the world into rich nations and poor nations, consigning the majority of humanity to perpetual destitution.
- Monopoly capitalism intensifies the contradiction involved in private appropriation of the output of an effectively socialised process of production. The functions of ownership and management are increasingly separated as the richest section of the capitalist class becomes transformed into rentiers (appropriating capital via large share holdings, state bonds, foreign securities, interest on capital loans, etc.). The monopoly capitalist thus appears as the purest type of capitalist, with appropriation of surplus value no longer masked in any way by payment for a managerial task in the productive process.
- Monopoly superprofits, the condition for which is the relative limitation of production, create the contradiction of overcapitalisation. This takes the form of a mass of money capital unable to find profitable new fields of productive investment, and chronic underuse of existing productive capacity.
Monopoly capitalism seriously restricts the prodigious development of the productive forces that characterised the age of laissez-faire capitalism. With its artificial restriction of production and sharing of markets between the big corporations, monopoly capitalism becomes a fetter on the development of the productive forces, leading to a general crisis that affects all aspects of capitalist society — economic, political, cultural and moral.
This general crisis is most graphically manifested in the growing inability of capitalism to contain the development of the productive forces within the framework of private property, in a sharpening of social contradictions both within and between nations, and in the growing tendency of the productive forces to be transformed into forces of destruction that threaten the maintenance of human civilisation, and increasingly, even the survival of life on Earth.