The Protection of Monopoly in the Theories of J. Schumpeter and D.C. Galbraith

At the beginning of the XX century, the Austrian economist I. Schumpeter showed that a monopoly can be a good for society. Under certain conditions, there can be an effective monopoly and effective competition. These ideas are set forth in his works: “Capitalism, Socialism and Democracy”, “Theory of Economic Development”, etc. I. Schumpeter believed that monopoly can arise on the basis of active competition, which indicates the possibility of their positive coexistence. I. Schumpeter considered the economy and competition in dynamics based on changing economic conditions, first of all, on changing conditions of production of goods. Innovations become an important factor of competitiveness that changes these conditions. By innovations (innovations) I. Schumpeter understands a wide range of innovations. These are not only new technologies, changes in traditional methods of production, improvement of product quality, but also less radical transformations, solutions, used by the innovative entrepreneur for profit. Innovations are: the creation of new markets, new forms of selling goods and after-sales customer service, market segmentation, etc. Innovations are becoming an important means of competition, since they change not only technologies or products created, but also the relationships of producers, the structure of demand, the conditions for the formation of costs and prices. The results of such competition are more effective than those of the traditionally accepted price competition. However, only large firms arising from the concentration of production can conduct such competition. They concentrate in their hands significant financial resources, can carry out scientific research, conduct experiments, implement large investment projects. The costly costs associated with innovation can pay off only with large-scale production. This means that large firms are not only able to conduct such competition, but also become monopolies, can extract monopolistically high profits. Schumpeter distinguished this special type of monopoly from monopolies based on privileges given by the state, as well as on ownership of especially rare resources, etc. He called such a monopoly effective, since it involves active competition. The desire for a monopoly of this type is associated with an increase in production efficiency. Monopoly profit here is a reward for innovation. At the same time, monopoly and monopoly profit are transient, cannot exist for a long time. They disappear for the same reason that they appeared, as a result of the following innovations.

Similar views in the second half of the century were defended by the famous American economist and sociologist D.K. Galbraith in the works: “American Capitalism”, “New Industrial Society”, “Economic Theories and Goals of Society”, etc.