By Bill Dunn,

The theories of monopoly capitalism and unequal exchange make important contributions to economic theory. They emphasize, respectively, how big companies can use their power over consumers and smaller-firm suppliers, and how rich countries can exploit poorer ones.

Capitalist exchange is not a realm of freedom and equality. However, both theories continue to be invoked in ways that are deeply problematic.

The problems come with the theories’ more grandiose claims, when Paul Baran and Paul Sweezy insist their ideas of Monopoly Capital identify “the crucial problem” and when Arghiri Emmanuel insists Unequal Exchange is “the elementary transfer mechanism … that sets in motions all the other mechanisms of exploitation.”

The problem with both is their reliance on exchange as the foundational concept. At best, emphasizing exchange can parallel the mainstream neglect of exploitation and resistance in production. At worst it becomes pure apologetics. As sophisticated a thinker as Immanuel Wallerstein in his book, The Modern World-System, at one point equates socialism with the universal establishment of free wage labour as it exists in the capitalist core. This isn’t rethinking and updating Marxism but running headlong in the opposite direction.

If claiming too much is a problem, so too is the way the ideas can be invoked in a loose sense to be rude about corporate power and trade relations. Again, it’s tempting to nod agreement with a refusal to accept liberal mantras about the benefits of capitalism and trade. But as the Trump experience suggests, an anti-trade rhetoric is not intrinsically better.

What I am therefore suggesting is that for the ideas to be useful they need to be downgraded conceptually, so their claims can be specified and interrogated critically. They would be better posed not as general truths but as interesting hypotheses, brought in as corollaries or qualifications to Marx’s general analysis, as we move to concrete investigations of the real world.

In a recent article, I try to fully explain the theories, which I can’t here. But in two lines, monopoly capital depicts progressive rises in corporate size and increased price mark-ups as the key determinant of modern capitalism, explaining economic stagnation and labour’s declining fortunes in rich countries. Emmanuel’s argument is that wage differences between countries drive unequal exchange, enriching the rich and impoverishing the poor.

There are similarities between the ideas in their focus on exchange. John Bellamy Foster and Robert W. McChesney, leading contemporary advocates of the monopoly capital perspective, insist on the theories’ compatibility, dismissing unbelievers who “still deny” the central claims of unequal exchange. But one of the reasons for looking at the ideas together is that there are revealing tensions between them and important respects in which they cannot both be right.

For Emmanuel, unequal exchange provides the profits for the core of the world-system, on which capitalism thrives. For Baran and Sweezy, too much profit and the difficulties disposing of it all are the problems.

The unequal exchange perspective is predicated on core labour’s wealth and power, which it enhances. While the monopoly capital perspective sees labour’s fortunes declining.

Empirically, when they were first proposed in the 1960s, Emmanuel’s depictions of widening international inequality (if less his claims of inexorably deepening peripheral poverty) looked more plausible than Monopoly Capital’s claims of stagnation, predicated on declining incentives to invest, falling wages, falling demand and increased surpluses.

In recent decades, the tables have turned. Many rich-country economies, and wages within them, have tended to stagnate. Poorer countries, and wages within them, have tended (and of course the averages conceal huge variations) to grow more quickly.

Both ideas can hardly be universal truths. They do, however, raise fascinating questions.

How, for example, does corporate power re-shape markets?

As Marx described, there is a general tendency towards increasing capital concentration and centralization. But there are off-setting processes of fragmentation and repulsion. Lots of guff about the ‘New Economy’ exaggerates the extent of this fragmentation but there have been important counteracting forces.

But these relations are not captured by straightforward indices of firm size and concentration and mark-ups, as useful as the rich empirical literature on this can be. Perhaps most fundamentally, wage-shares of income are irreducible to structural imperatives and the trajectory of capitalism since the 1970s is incomprehensible without also understanding labour’s defeats in that decade.

But corporate power is also complex and multidimensional. It can be used to drive-up prices. At the same time, power over firms’ suppliers and their own workers can provide cheap consumer goods.

There are also complex interactions between the global and the national, as global giants undermine local monopolists. This is something Foster and McChesney acknowledge, yet finding corporate monopoly as everywhere, the explanation can miss much of the nuance.

Again, there seems to be potential for useful investigations in the tension between the monopoly capital and unequal exchange approaches.

Questions of trade inequality are important but dynamic and changing and notoriously hard to measure. Emmanuel and much of the subsequent literature simply posit rival blocs, core countries against peripheral ones, with at most a semi-periphery allowed to join the analytical party. But wealth and wage inequality are also questions of degree, while there are winners and losers from trade between countries but also within them.

Critical political economists have become adept at debunking the myths that free markets and free trade are universally good, paths to individual and national wealth and well being. But there are dangers in travelling the same road in the opposite direction, in seeing trade as a universally bad and in concentrating on trade to the neglect of other sources of social power and economic change.

A detailed mapping of the ebbs and flows of trade and corporate structures and their relation to both inter- and intra-national inequality does indeed need to examine power in exchange. But this requires a more careful estimation and evaluation than is claimed by the grand theories of monopoly capital and unequal exchange.