Monopoly profits

Stock market share indexes are still struggling to get back to where they were in January. The exception is the NASDAQ Composite that has gone up by 5% since then. The NASDAQ includes the major internet companies that have continued growing and making profits, but this has often been detrimental to other sectors of the economy. When Google earns more from advertising, other advertisers earn less, and when Amazon sells more, other retailers sell less. The internet expanded the market to some extent, but resulted mainly in a redistribution of market shares. There has been a short list of winners (FAANG), while the list of losers gets ever longer. This is reflected in share indexes, where brick-and-mortar is outstripped by virtuality. It is also a sign of expanding digital mechanisation.

Production is about transmitting value. Buildings, machines, energy, raw materials and labour, all add their share to the price of the produce. Buildings, machines, energy and raw materials can only pass on what they cost, unless they are a monopoly, in which case they add as much value as customers can pay. Labour, however, is able to add more value than it costs. And, except for monopolies, labour’s unpaid added value has been the source of profits ever since they exist. Machines increase labour’s productivity and, if demand does not grow equally, this tends to reduce the amount of labour employed. Production grows and employment shrinks, with the ultimate goal of a fully automated system. When labour is no longer present to be exploited, profits are the surcharge of trademarks, patents and copyrights, and of price agreements between competitors.

The production of goods employed less and less labour, which was diverted to the provision of services, where it was not yet being replaced by machines. But now more and more services are supplied by machines, and this is only a beginning. When machines are doing most of the work, profits can no longer be extracted from labour. They must become the surcharge of monopoly. De facto monopolies are taboo, of course, but patents, trade names and copyrights are rarely contested, and they are the next best thing because they exclude competition by an identical product. And import tariffs or subsidies are old and tested methods for insuring profits. However, the World Wide Web has created world-wide corporations that have an effective monopoly over most of the planet. Machines do all the work and their uniqueness makes them profitable. Machines are replacing humans, who are left with the work machines cannot be bothered with, complex low paid jobs such as window cleaning, emptying dustbins, or cutting hedges. The problem is that, as machines push humans down to the lowest rungs of income, there is necessarily a lack of demand for machine-made monopoly profits.