Concentration and Centralization of Capital

Increasing Intensity of Competition

The tendency for the rate of profits to decline, the cyclical periods of
overproduction, and the tendency for commodities to become cheaper
as more machinery is used and labor productivity increases combine to
create an intensely competitive situation

The fall in the rate of profit connected with accumulation necessarily

creates a comprehensive struggle. . . . The same thing is seen in the
overproduction of commodities, the overstocking of markets. Since the
aim of capital is not to minister to certain wants, but to produce
profits, and since it accomplishes this purpose by methods which adapt
the mass of production to the scale of production, not vice versa,
conflict must continually ensue between the limited conditions of
consumption on a capitalist basis and a production which forever tends
to exceed its immanent barriers.

The battle of competition is fought by cheapening of commodities

As, capitalist production develops, each individual capitalist employer

finds himself in a life-and-death struggle with his rivals. The
development of credit facilities places an additional competitive
weapon in the hands of capitalists who are able to command them. In
fact, "competition and credit develop in proportion as capitalist
production and accumulation do " 'The smaller capitalist employer
finds his position fatally weak. He drops out of the competitive
struggle, or rather, is swallowed by the larger industrial units. "This is
a new form of expropriation. One capitalist expropriates 'recapitalizes'
another. 'One capitalist kills many.' Under the stress and’ strain of the
contest capitals finally abandon their old positions and amalgamate
into a few powerful hands.

Concentration of Capital

Thus there is generated within the capitalist system of production a

two-sided concentration of capital. The very nature of the productive
process is conducive to this development, since "concentration of large
masses of the means of production in the hands of individual
capitalists is a material condition for the cooperation of wage
laborers." Marx distinguishes between two phases of this concentration
of capital. One he refers to as "concentration" proper. This takes the
form of new accumulations of capital gravitating to the hands of
relatively few capitalists, where they are transformed into large-scale
industrial units

Centralization of Capital

The other aspect Marx calls the "centralization" of capital. This may
take place whether or not capital accumulation is occurring, since it "is
concentration of capitals already formed, destruction of their individual
independence, expropriation of capitalist by capitalist, transformation
of many small into few large capitals. . . . Capital grows in one place to
a huge mass in a single hand, because it has in another place been
lost by many." This centralization is the consequence of competition in
which "the larger capital beat the smaller . . . The smaller capitals,
therefore, crowd into spheres of production which modern industry has
only sporadically or incompletely got hold of. Here competition rages in
proportion to the number, and in inverse proportion to the
magnitudes, of the antagonistic capitals. It always ends in the ruin of
many small capitalists, whose capitals partly pass into the hand of
their conquerors, partly vanish." Meanwhile credit "becomes a new or
formidable weapon in the competitive struggle, and finally transforms
itself into an immense social mechanism for the centralization of
capitals."

Concentration and Centralization Are Self-Perpetuating

Once concentration and centralization of capital begin, they perpetuate

and strengthen themselves, since "the cheapness of commodities
depends on the productiveness of labor, and this again on the scale of
production."40 Also, the use of large-scale methods of production,
involving as they do proportionately more machinery and less hand
labor than small-scale methods, sets in motion further forces tending
to decrease the rate of profits. The cheapening of commodities and the
decreasing rate of profit both further intensify competition, thereby
causing further centralization of capital.