Capitalism

What IS Capitalism?

We start out by qouting Wikipedia’s definition

Capitalism is an economic system and an ideology based on private ownership of the means of production and their operation for profit. Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system, and competitive markets. In a capitalist market economy, decision-making and investment are determined by the owners of the factors of production in financial and capital markets, and prices and the distribution of goods are mainly determined by competition in the market

Capitalism as an economic system slowly grew out of the previous feudal economic system -feudalism - during the late middle ages.

An economic system is defined i Wikipedia this way:

An economic system is a system of production, resource allocation, and distribution of goods and services within a society or a given geographic area. It includes the combination of the various institutions, agencies, entities, decision-making processes, and patterns of consumption that comprise the economic structure of a given community. As such, an economic system is a type of social system. The mode of production is a related concept which includes:

• productive forces: these include human labour power and means of production (e.g. tools, equipment, buildings, technologies, knowledge, materials, and improved land).

• social and technical relations of production: these include the property, power, and control relations governing society’s productive assets (often codified in law), cooperative work relations and forms of association, relations between people and the objects of their work, and the relations between social classes.

All economic systems have three basic questions to ask: what to produce, how to produce and in what quantities, and who receives the output of production.

*The analysis of economic systems traditionally focused on the dichotomies and comparisons between market economies and planned economies, and on the distinctions between capitalism and socialism,

• an alterntive economic system characterised by social ownership and democratic control of the means of production.*

Capitalism has flourished since around 1850 as industrial capitalism, gradually dominated by international monopolies and particularily since around 1980 in the neoliberal era as financial capitalism characterized by rapid globalisation.

Capitalism is an economic system dependent on endless expansion - capital accumulation. Capital accumulation is the dynamic that motivates the pursuit of profit, involving the investment of money or any financial asset with the goal of increasing the initial monetary value of said asset as a financial return whether in the form of profit, rent, interest, royalties or capital gains. The process of capital accumulation forms the basis of capitalism, and is one of the defining characteristics of a capitalist economic system.

This have now gone on for some 200 years. The question concerning us here is whether this ‘endless’ system finally is up against it’s limits - and if so - how it will end - and into what it might transform.

During the first hundred years of capitalism the major focal point was the contradiction between the social and economic classes - workers and capitalists. After the Bolshevik revolution and the second world war the main struggle became the one between the Capitalist Western bloc and the challenging Communist Bloc. After the collapse of the Soviet Union Western Capitalism complacently seemed to have ‘won forever’ - Fukuyama’s End of History: …the advent of Western liberal democracy may signal the endpoint of humanity’s sociocultural evolution and the final form of human government.

The financial and economic crises since 2008 have brought capitalism’s weaknesses and vulnurablities back into focus. Some of the current issues are:

• majority of population left behind - profits ‘take all’ - ‘social contract’ broken
• extreme concentration of economic power (0.1% controll x% of wealth) - democracy threatened
• aggresive resource exploitation and pollution drives climate change and ruins environment
• alienation and heaping up people in inhuman urban megacities - rural areas emptied

We will visit these in more detail here:

No more Social and Economic Progress

Closing down Democracy

Destroying Climate and Ruining Environment

Alienation and Megascale Urbanisation

Jayati Ghosh wondered how relevant karl Marx’s Opus Magnum Das Kapital still is after more than 150 years, and answered this way:

*First is the central point about capital: for Marx, it is not just a resource in itself, a simple factor of production analogous to land and labour, but an expression of very specific social relations of production. The social relation between employer and worker is what enables capitalist production to take place at all. It requires workers to be “free” in a double sense: “free” to sell their own labour power (not bound by other socioeconomic ties and constraints) and “free” of any ownership of the means of production, so that they have no choice but to sell their labour power for their own material survival. Even when matters appear to be more complex because of the emergence of subcontracting and the “gig economy”, this underlying social relation is still critical.

The concentration of ownership of the means of production in a few hands is effectively what enables capital to play its role in production. But this concentration was necessarily based on expropriation from those who previously possessed it, such as peasants and small artisans who could have produced on their own. This “primitive accumulation” has often been a violent process, but it can also occur – and still continues to occur – in other more complex ways, because of the uneven development of capitalism in different regions and in different sectors.

A central, and still very powerful, concept is that of “commodity fetishism”: the situation in which relations between people become mediated by relations between things: commodities and money. Commodities (goods and services produced for exchange) are not simply things or objects, because they possess both use value (meeting human needs or wants) and exchange value (as a thing that can be traded in return for something else). But value then gets seen as intrinsic to commodities rather than being the result of labour, and the exchange of commodities and market-based interaction are seen as the “natural” way of dealing with all objects, rather than as a historically specific set of social relations.

More broadly, commodity fetishism is the illusion emerging from the centrality of private property in capitalism, which then determines not only how people work and interact, but also how they perceive reality and understand social change. The urge to acquisition, the obsession with material gratification of wants and the ordering of human well-being in terms of their ability to command different commodities, could all be described as forms of commodity fetishism. The obsession with GDP growth per se among policymakers and the general public is an extreme, but widespread, example of commodity fetishism today.

Marx identified three “cardinal facts” of capitalist production:

1- Concentration of means of production in a few hands, whereby they cease to appear as the property of the immediate labourers and turn into social production capacities;

2- The organisation of labour into social labour: through cooperation, division of labour and the uniting of labour with the natural sciences;

3- The creation of the world market.

The third feature is what we now call globalisation, and it is the natural result of the tendency of the system to spread and aggrandise itself – to destroy and incorporate earlier forms of production, and to transfigure and transform technology and institutions constantly.

Capitalism is dynamic, constantly generating new types of production organisation and economic institutions: not just the factory system but more recent arrangements, financial institutions and structures, legal systems. The accumulation of capital generates higher productivity and transforms systems, but it is also associated with uneven development. Marx saw capitalism as being in a situation of continuous disequilibrium, because of this tendency of uneven development, which is not confined to a single arena, but characterises all social and economic relations.

Thus, there is an inherent tension between the expansion of the productive forces and the ability of the economic system to generate sufficient demand for the goods that are produced. There is disproportionality between the expansion of fixed and variable capital, which makes it more difficult to generate profits. There is disproportionality between sectors that emerges in the process of accumulation. There is geographically uneven development that simultaneously creates both “developed” and “underdeveloped” areas. This can be extended to explain imperialism, which can be understood as the struggle for control over economic territories of different kinds. And the imbalance between money as a medium of exchange and money as a measure of value gets amplified by the development of credit and finance, creating a higher tendency for crisis.

The system generates many conflicts and contradictions, only some of which culminate in periodic crises. Since the basic dynamics of capital is simultaneously to aggrandise itself and impoverish other classes such as workers and peasants, within and across nations, it obviously generates class conflicts. But the system also generates intra-class conflict, pitting individual capital against other capitals and the individual worker against other workers. There is a Darwinian struggle for survival constantly at work, so individualism, conflict and competition become the driving forces of the system.

But these also create what Marx called the anarchy of the market and the inevitable tendency towards crises. Overproduction in terms of the market (even when human needs of all the people in the society need not be satisfied) is a characteristic feature simply because of the way individual capitals operate in the drive to generate more profit. As a result, the process of accumulation is never smooth. Rather, it is uneven and punctuated by crises. Partly, this is the result of the very success of capitalism in delivering more economic growth and technological advance.

These periodic crises are a way of resolving the contradictions inherent in the dynamics of capitalism, albeit in a sharp and possibly violent way. Because the underlying imbalance is typically one of overproduction (relative to demand, not need) such crises usually involve the destruction of a significant proportion of existing products and productive forces. For Marx, crises under capitalism are never purely “financial” or “monetary” – rather they reflect the real imbalances, disproportionalities and uneven development that are fundamental features of capitalist accumulation, even when they are expressed in financial terms. Marx did not talk about the rise to dominance of finance, but it can be anticipated from this progression, and financialisation also can be seen as an extension of capitalist processes into more and more areas of life.

A fundamental feature of the capitalist system that Marx described, and one that has complex social and philosophical underpinnings, is alienation. This does not refer to an isolated experience of an individual person’s feeling of estrangement from society or community, but to a generalised state of the broad mass of wage workers. Most simply put, it can be expressed as the loss of control by workers over their own work. This alienation of the workers means that they effectively cease to be autonomous human beings, because they cannot control their workplace, the products they produce, or even the way they relate to each other. Because this fundamentally defines their conditions of existence, this means that workers can never become autonomous and self-realised human and social beings under capitalism.

This alienation, combined with commodity fetishism, creates a peculiar kind of unfreedom – which is often not even widely noticed, because individual emancipation appears to result from “universal saleability”. So every living creature is effectively transformed into property and all social relations become transactionary.

Of course, there is much about capitalism that is not captured in this book: the role of unpaid labour, especially in social reproduction and care work within households; the relationship of the economic system with the natural environment, and so on. Even so, the strong contemporary resonance of many of these concepts means that it is not surprising that people still look to this somewhat forbidding book for insights and understanding.*