Market power and the rate of profit
In the Great Leveler, Christophers (2016) argues that the grand narrative of capitalism growth, slowdown, crisis and response can in part be understood in the light of the manner in which markets are organised. Although he recognises that other dynamics also underpin this cycle, Christophers nevertheless argues both that slowdowns have historically coincided with imbalances in the degree to which markets are competitive and that the subsequent recoveries were powered by a rebalancing of the degree of competition. The critical legal arrangements for configuring the degree of competition have been those related to concentration and monopoly on the one hand and those related to the protection of intellectual property on the other. The evidence that Christophers assembles concerns the crises of the 1890s, 1930s and 1970s in the USA and the UK and their subsequent periods of growth and expansion. There is a lot to admire in this book, particularly its recognition of the need to understand theoretically and empirically the details of the changing composition of market competition. The historical detail is impressive indeed. And so is the book's extension of the usual period of reckoning beyond the post Second World War era back to the 1890s. In accounts of capitalist dynamics from now on, the form of the market its level of competitiveness will surely continue to figure in the story, and that is much to Christophers' credit. However, the bare outlines of this story of growth and stagnation do need some historical nuance. In particular, some of the details of the story of profitability and growth can be debated, and to illustrate this comment, I will make three observations. My first observation is that historically the rate of profit is relatively constant, as Christophers writes. Whereas Christophers, like others, takes this to be an intriguing feature of capitalist development, the reason for the fact that economy wide rates of profit are bounded was provided nearly 25 years ago (Farjoun and Machover, 1983) Firms' rates of profit are a stochastic variable. Therefore, as the average rate of profit falls below the average, then rapidly increasing numbers of firms make losses; as those firms go out of business, their capital (and their loss) is removed from the surplus/capital calculation and the rate of profit rises, quite independently of any changes in policy. If, on the other hand, the rate of profit rises above the average, then increasing numbers of (less efficient) firms begin production, dragging down average rates of productivity and raising the demand for labour; these tendencies tend to increase the capital stock faster than they increase the surplus, again independent of any countervailing policies. Of course,