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 'decapitalizes' 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.