We used to make sense of market concentration in terms of the notion of “monopoly capital,” which for all its theoretical problems was a serious attempt to analyze the consequences of the (absolute and relative) growth of the size of firms stemming from the concentration and centralization of capital.*
The late Paul Sweezy was one of the pioneers (along with other members of the “Monthly Review School”) of the theory of monopoly capitalism. As he explains,
The reasoning here follows a line of thought which recurs in Marx’s writings, especially in the unfinished later volumes of Capital (including Theories of Surplus Value); individual capitalists always strive to increase their accumulation to the maximum extent possible and without regard for the ultimate overall effect on the demand for the increasing output of the economy’s expanding capacity to produce. Marx summed this up in the well-known formula that “the real barrier to capitalist production is capital itself.” The upshot of the new theories is that the widespread introduction of monopoly raises this barrier still higher. It does this in three ways.
(1) Monopolistic organization gives capital an advantage in its struggle with labor, hence tends to raise the rate of surplus value and to make possible a higher rate of accumulation.
(2) With monopoly (or oligopoly) prices replacing competitive prices, a uniform rate of profit gives way to a hierarchy of profit rates—highest in the most concentrated industries, lowest in the most competitive. This means that the distribution of surplus value is skewed in favor of the larger units of capital which characteristically accumulate a greater proportion of their profits than smaller units of capital, once again making possible a higher rate of accumulation.
(3) On the demand side of the accumulation equation, monopolistic industries adopt a policy of slowing down and carefully regulating the expansion of productive capacity in order to maintain their higher rates of profit.
The fact is, monopoly capitalists don’t strive to increase their accumulation to the maximum extent possible. Instead, large portions of the surplus they are able to appropriate from their workers and otherwise capture with their monopoly pricing power is used to acquire other portions of capital (through mergers and acquisitions), to engage in lobbying and funding its desired political candidates, to pay dividends to stockholders, and to pay enormous incomes to corporate executives and other members of the “professional-managerial” class who produce some of the conditions of existence of monopoly capital.
It should be no surprise, then, that increased concentration in a wide variety of industries has been accompanied by slower rates of economic growth, the rise of more fraudulent and speculative economic activities, and to growing inequality in the distribution of income and wealth.
*Bruce Norton has identified some of the key problems in the theory of monopoly capitalism, especially the presumption that “capitalists always strive to increase their accumulation to the maximum extent possible.” See, e.g., his “Epochs and Essences: A Review of Marxist Long-Wave and Stagnation Theories,” published in 1988 in the Cambridge Journal of Economics.