Capitalism Essay

What is Capitalism???

 

 

Picture by Tess Martin

 

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1. What is capitalism?

 

1. Free Market?

 

1. There have been various types of free markets throughout history, so a free market for the exchange of goods is not historically unique to capitalism.

 

1. But markets have always been considered a means to social ends, whereas with capitalism we see instead an inversion in which society itself has now become a means to producing for market ends.

 

• What is unique then about capitalism that enabled it to remake society into a means exclusively for market exchange?

 

1. Private ownership of the social means of production for private profit as opposed to the social ownership of the social means of production for the common good.

 

1. Private ownership of the social means of production is then the key, and it means society’s common productive means are now owned by private corporations for the sake of their own private profit: this ownership differs from:

 

1. State “socialism”: State ownership of the means of production – more often this is better referred to as State Monopoly Capitalism rather than socialism proper (which often had more to do with collective democratic ownership rather than centralized state ownership).

 

1. Worker socialism: closer to socialism proper, socialized/democratized ownership of the means of production by the producers themselves, whether through worker’s councils or some type of cooperative. (USSR tried to operate this way before quickly devolving into State Monopoly Capitalism under Stalin, same thing with China and Mao)

 

1. Historical Background: How did society’s means of production become privatized by private commercial corporations and reoriented toward the end of private profit? (or in Aristotle’s language: how did the means and ends of production, which were oriented toward satisfying real human needs and social goods, become inverted into the private pursuit of money making as now the end?)

 

1. For most of human history production was a social project for the sake of the community of producers themselves rather than generating merely exchangeable commodities for the private profit of a few individuals.

 

1. More importantly the social means for producing society were socially owned in some form, since a wealth of tools, technologies, infrastructure, and resources are always collective products made possible only by many hands and minds working together across generations.

 

1. In ancient times large empires did not own all the social means of production. There were of course state-owned lands, wealthy landowners and palaces as well as slavery, but the dominant mode of production for producing subsistence for most of society were still rural village communities (often more than 80% of the population) oriented around social use values rather than mere market exchange.

 

• The rise of Mercantile Capitalism: During the Medieval age in Europe some of the land was owned by various manor lords (feudal landlords) while serfs rented/owned a portion of that land and used their own tools to produce goods both for the landlord and for themselves. Also, various peasant communities still existed outside the manors too.

 

1. Villages were constructed around a “commons” or “greens” as public lands shared by all—often Church and monastery lands contributed to these commons as well.

 

 

2. Through advances in productive technologies as well as the ability of workers to better politically organize against feudal lords, workers gained a certain amount of independence.

 

3. This led to the breakdown of feudalism and the short-lived development of worker-owned guilds and cooperatives prior to the rise of capitalism (13^th to 16^th century).

 

4. Certain craftsmen became middlemen buying and selling goods from other craftsmen for the market and long-distance trade.

 

5. Through exploiting their monopolistic controls on buying cheap and selling high, and therein accumulating money for which there was a growing commercialized demand in terms of loans, these middlemen rose from the upper strata of the laboring classes to that of a new class of wealthy merchants, investors and bankers—the bourgeoisie or middle class of high finance: hence, the banking dynasties like the Fuggers.

 

1. Accumulating capital first took place in exploiting the making of money for its own sake. This was called “usury” which was the exploitative charging of interest on loans.

 

1. A certain drive begins to develop that no longer aims to produce quality goods according to the purposes of meeting real needs for community building, but to privately maximize monetary profit through exploiting demand, driving down the costs of resources and labor as low as possible in order to increase private gain through market exchange.

 

1. In turn, profit was used to buy up or capture more capital (productive means) from social ownership.

 

1. But these early private endeavors were not just the result of cunningly industrious individuals. Instead they relied heavily on a militarized state to colonize foreign lands.

 

1. Colonization exploded at the beginning of capitalism because it was needed to open up new routes for cheaper resources, labor, and capital, and for controlling foreign mines in order to acquire a monopoly on precious metals to back the rise of monetary accumulation.

 

1. But colonization is only possible through the use of military power backing certain state-sanctioned enterprises

 

1. This concentration of wealth also allowed for the private acquisition of more lands at home, also with the help of the state military—the Reformation was not simply about church doctrines, but more so it was about the state commandeering of the “commons” as well as taking lands previously owned by the Catholic church and its monasteries for the market interests of privatization, i.e. “enclosing the commons”, which evicted many workers who were now landless with nothing to sell but their own labor for a wage.

 

1. As most of the common public lands in Europe were privatized (enclosed, fenced in, etc) this led to a cycle of more expeditions for the continued colonization of new lands and resources.

 

1. Increasing colonization requires not only a heavy military but also a larger workforce

 

1. And since private profit is generated by running down the cost of resources, land, capital, and most importantly, labor, the colonization process also led to the largest commercialized slave trade in recorded history—the Transatlantic slave trade (12 to 15 million Africans were exported between 16^th–19^th century)

 

1. As private ownership of money, land, and the means of production in the form of slave labor accumulated, the growing pool of landless wage laborers began to lose any negotiating leverage.

 

1. The price of wage labor was driven down even more so with the institutionalization of the Transatlantic slave trade, which provided early capitalists with a fixed source of cheap labor to help rapidly accumulate capital.

 

1. The actual history of mercantile capitalism as that initial stage of capital accumulation is therefore fraught with violence and far more complicated than the myths told by economists about some innocent individual merchants who just happened to be more industrious compared to the rest of the supposedly lazy workers.

 

1. Industrial capitalism:

 

1. As private capital gained more power through privatizing more lands and resources for large scale industry the state role diminished only somewhat in the form of nationalized economies. But there was still a race to colonize new lands for cheaper resources and labor, and to monopolize markets which continued to rely on state involvement

 

1. colonization continued well into the 20^th century and was driven by a ceaseless desire to accumulate capital—WWII was largely driven by Germany’s attempt to play catch-up in the Western game of colonization

 

1. Financial capitalism:

 

1. As a direct result of industrialization which allowed for a mass of enormous corporations to grow, there was a greater drive to expand operations which meant the need for more investors, more financing, more backers to share the risk taking—this also meant more of an intimate interrelation of corporations with banking, stock markets, and shareholders.

 

1. State welfare capitalism:

 

1. But this high-risk financialization of expansion also led to a boom and bust cycle from which the Great Depression came.

 

2. This led to another iteration of capitalism with more government oversight in terms of supplementing the busts, doing the work that businesses should have been doing by taking care of the social welfare of the workforce – social security, workers comp, unemployment insurance, health care, legislation establishing and empowering trade unions, etc. (basically supplementing labor’s wage with a social wage)

 

3. This “state” phase is really a misnomer, since history shows that capitalism is an inherently unstable system that cannot exist on its own without government intervention and state superintending in some form and at some level, as we already saw since its inception at its mercantilist phase (pace libertarian claims about a self-regulating “free” market that needs no government involvement—there has never been a capitalist “free” market without state involvement).

 

• Globalized capitalism (aka: Neoliberalism):

 

1. The rise of multinational corporations also still relies on certain world powers to regulate and police the expansion of the global market. (e.g., think of how much capital benefits from its freedom of movement compared to workers being bound by national borders).

 

2. But in our present neoliberal moment we have shifted from having a market to becoming more fully a market-ruled society, with private capital not simply relying on state help but more directly controlling the very existence of the state. Hence since the 1970s there has a been a vast shift toward greater forms of:

 

1. Privatization of not only the economy, but also of social and health services, public services, and even political goods (hence, the current battle to take back healthcare and childcare as a public service).

 

1. Deregulation of the economy insofar as it serves the interests of private corporations. (e.g. deregulated the commercial use of natural resources; deregulated labor organizing, disempowering unions; deregulated the financial industry leading to bigger banks and more predatory lending).

 

1. Consumerism and the debt economy: citizens come to view themselves as mainly consumers who are empowered through credit which means the increase in debt.

 

 

2. What are the key Features of Capitalism?

 

1. Companies: the privatization of the social means of production turns into its own type of society—a new social entity—but in an abstract way divorced from the actual producers and the public good.

 

1. As Shaw notes, more than “church or state”, within capitalism it is now the company that has possibly become the most important organization in the world. (the new oligarchies?)

 

1. Profit Motive: This is the driving force and end goal for economic activity, the very reason of existence for companies as privatizing the social means of production: from C-M-C to M-C-M’

 

1. Shaw quotes Heilbroner: “the profit motive, as we understand it, is a very recent phenomenon. It was foreign to the lower and middle classes of Egyptian, Greek, Roman, and medieval cultures, only scattered throughout the Renaissance times, and largely absent in most Eastern civilizations.”

 

1. Throughout much of history, the selfish pursuit of private monetary gain was either looked down upon as dishonorable or merely tolerated. But now it has become a celebrated goal for life. (precisely the opposite of what Aristotle said is natural to being human)

 

• What does it say about us that we tend to think everyone, for all times and places, has always been driven by a profit motive? (is this to naively and falsely project from our own contingent experience within our Western capitalist societies?)

 

1. Competition: the supposed salve to monopolies forming and that which supposedly regulates the profit motive from getting out of control.

 

1. Competition tends not to be an answer to monopolies so much as a continual reshuffling of them

 

1. Is it a coincidence that British political economists in the 19^th century were celebrating this idea of competition as a kind of natural selection in the marketplace while Darwin and other biologists began describing in nature a violent process of competitive struggle for existence through the survival of the fittest?

 

1. Didn’t Aristotle and Kant say, in their own different ways, that what makes us human is precisely our ability to transcend an animalistic fight for the survival of the fittest by living in solidarity together around higher ideals beyond violent competition?

 

1. Private Property: It is important to note that the right to private property is not simply about an individual’s personal possessions, which other societies prior to capitalism had, and since socialist societies can have personal possessions too.

 

1. Private property here means the private ownership of the social means of production and distribution – the right to take up land as exclusively one’s own to use for private profit.

 

1. The heart of capitalism is about using money to make more money by investing in private accumulation of the productive means and other related assets.

 

3. What are some classical moral justifications?

 

1. As Shaw states: “rarely are we presented with fundamental criticisms of, or possible alternatives to, our socioeconomic order. It is not surprising, then, that most of us blithely assume, without ever bothering to question, that our capitalist economic system is a morally justifiable one.” This is obviously a major question that we need to ask!

 

1. The two dominant responses:

 

1. The right to private property:

 

1. John Locke was one of the original founders of this idea, which he used to justify the private colonial appropriation of Native American “wastelands” as he called them. But he relied on a naïve sense of individual labor:

 

1. Basically, he claimed that if you’re the first one to sink your shovel into something, it is yours (which of course colonizers neglected to consider the fact that indigenous people had worked this land well before their own shovels entered it).

 

1. But this fails to account for the inherently social nature of labor—it assumes that prior to social formations we lived as private asocial individuals who labored alone only for private gain (e.g. the hypothetical idea of the “state of nature” in Hobbes and Locke):

 

1. But can one clear a field alone, build a home or a society alone, or make a complex machine alone, let alone do anything of minimal skill without some form of socialization? Not only is labor social, but it relies on past forms of social labor that have made one’s own labor possible in the first place (nurturing upbringing and education etc).

 

1. Also, it assumes that nature is just a dead mechanism there to be privately possessed rather than a living dynamism to be creatively shared.

 

1. Moreover, as Shaw rightly notes, capitalism as the making of money off money through legalized usury as interest, takes leave of Locke’s paradigm since gaining interest on money is now an acquisition of profit and a certain kind of property that one did not directly produce through their own labors.

 

1. The invisible hand: this has been the more influential attempt throughout the history of capitalism: It is essentially a justification for promoting the selfishness of the profit motive. As the early British political economist, Bernard Mandeville said—the market somehow is responsible for turning private vices into public benefits.

 

1. But how does the market magically/miraculously turn unintended consequences from private self-interest into public benefits for all?

 

1. Supposedly through the laws of supply and demand and competition.

 

1. But as we already discussed above, the history of capitalism has shown that the market is unstable and anarchic, leading to ruin, rather than miracles, without government force. Thus, the hands organizing the market are hardly invisible or law-like.

 

 

4. What are some fundamental criticisms of capitalism?

 

1. It is an inherently unstable economic system that continually generates widespread inequality and poverty the more wealth it produces, since it generates abundance by simultaneously running down the cost of, and thus depleting, labor and land.

 

1. It is not government intervention that causes these things as if the market would self-correct if we took an absolute laissez faire approach.

 

1. The history of capitalism has shown that government intervention is needed to keep the market from collapsing under its own internal crises—hence the history of military and police intervention, expanding colonization to supplement markets, debt bondage, and continual bailouts to failing corporations (not to mention all the needed extra public services and welfare to care for a society in a way that the market cannot).

 

2. Moreover, the current trend toward government deregulation and increasing privatization has now led to the widest inequality gaps within recent history, with more private wealth consolidated into the hands of a smaller few over against the rest (hence the rhetoric around the 1% and the 99%)

 

3. The “all boats are rising” argument tends to set up a diversionary straw man by pointing to some past or alternative society in order to show how better off we are despite the inequality.

 

1. But this fails to see the real problem, which is the fact that the more wealth is produced the more inequality is generated, which should be the opposite trend in a system that is able to create so much social surplus.

 

1. g., recent tax cuts for corporations by the Trump administration were justified by a “trickle down” argument claiming they would allow companies to create more jobs and invest in their employees; yet records show that companies used the tax cuts to buy back more of their own stocks in order to boost stockholder value.

 

1. It has a lowly view of human nature that is also uncritically accepted as unchangeable (which always helps those who want to say this is the best we can do).

 

1. It denies that humans are inherently social, cooperative, creative and rationally purposeful, driven by higher ends beyond mere commerce for private profit.

 

1. Capitalism not just assumes, but habituates, promotes, fosters, ensures, and demands that we see ourselves as inherently selfish individuals. It has no patience for higher ideals about what it means to be human since this would mean challenging its sovereign rule of the profit motive.

 

2. It is no coincidence that early defenders of capitalism who justified its hidden hand as the only way to regulate the chaos of unchangeably selfish individuals were also people who accepted a religious doctrine of the inherent sinfulness of humans as selfish animals who cannot change their own nature but must instead rely on the hidden hand of a god for salvation (market providence).

 

1. This is why the notion that Shaw mentions of “market fundamentalism” is apt here: many thinkers have noted the religious quality of capitalism and its defenders since they rely on a blind acceptance that humans are fated to be selfish and cannot do anything about it except faithfully participate in the dictates of a god-like market (resign yourself to the matrix).

 

3. But its assumption that human nature cannot change itself denies the socially evolving history of humanity in which, through many ups and downs, humans have creatively transformed their nature to a degree beyond mere survival and violent competition.

 

1. It assumes that we only find well-being through ever greater access to material consumption—we are primarily consumers. But then this leads to people working more, in order to gain more purchasing power in order to consume more, rather than working less in order to have more leisure time in pursuing higher ideals and relationships rather than consumption.

 

1. Social psychologists have found that populations of industrialized nations who have more money and consume more are often unhappier than those in other “less developed” societies.

 

1. Its privatizing drive and profit motive tends toward oligarchical consolidations of power both economically and socio-politically. Moreover, competition isn’t the salve to this problem but often fosters the divisive drive even more so.

 

1. Speaking of competition—the evidence is still not very clear as to whether competition is the great driver of innovation. How creative can we be if we’re competing within a cutthroat survival-of-the-fittest.

 

1. Market competition might not be the engine of innovation that capitalists often claim it is: most of the great innovations throughout history have come from either non-market sources (artistic, religious, scientific/educational, or political communities) or from productive communities cooperating together, or from institutions sheltered from market competition:

 

1. Producing for exchange value in order to make money often does not encourage taking the necessary long-term risks to be innovative since the aim is not to socially benefit humankind or solve its major plights, but rather the short term aim of making money through proven commercial means according to whatever the market demands.

 

1. Hence, a recent business magazine asked “is pursuing a cure for cancer really a viable business pursuit?”

 

2. Think more recently about major innovations that led to various advances in medical technologies, cures, vaccines, telecommunications, computers, the internet, etc.

 

1. The possibilities for these innovations were driven not by the profit motive and market cost/benefit analysis, but by being fostered and developed within non-market institutions such as government labs, hospitals, military institutions, NASA, non-profit organizations, universities and research institutions, etc. – they required long hours of cooperative work pursuing real social needs.

 

1. Its privatized mode of production for commodity exchange inherently exploits and alienates the laborer.

 

1. All of the above could be boiled down to this problem:

 

1. If the production process by which a society is able to subsist, and progress, is itself inherently social, then privatizing this social process so that its surplus is now privately consumed by the owners, is inherently backwards, using our social capacities, not as ends in themselves, but as means for benefitting a few.

 

1. This is a deeper criticism than merely pointing out that there is poverty, or there are income inequalities, or that ideologically there is a quasi-religious notion of a depraved humanity dependent on a magical invisible hand:

 

1. rather it gets to the heart of how and why the very structures of the capitalist production process, which produces for exchange value rather than use value, necessarily generates these material inequalities and false self-perceptions in the first place.