In the previous section the thesis was advanced that the self-expansion process of capital goes through two phases, the competitive and the monopolistic. In the competitive phase the individual firm grows by reducing costs, realizing larger profits, and investing in increased capacity to turn out a product which, being essentially indistinguishable from the products of its competitors, can always be sold at—or, more realistically, slightly under—the going market price. Somewhere along the line, as some firms prosper and grow and others lag behind and drop out, the average firm in an industry becomes so large that it must take account of the effect of its own production on market price. It then begins to function more and more like a monopolist for whom the problem of continued growth is radically transformed. Monopoly profits make possible even more rapid growth than in the past, but the need to maintain monopoly prices dictates a policy of slowing down and carefully regulating the expansion of productive capacity. From this conjunction of factors there results an irresistible drive on the part of the monopolistic firm to move outside of and beyond its historical field of operation, to penetrate new industries and new markets—in a word, to go conglomerate and multinational.
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