Capitalism – an introduction

At its root, capitalism is an economic system based on three things: wage labour (working for a wage), private ownership or control of the means of production (things like factories, media, communication, machinery, farms, and offices), and production for exchange and profit.

Capitalism is based on a simple process – money is invested to generate more money (money making more money). When money functions like this, it functions as capital. For instance, when a company uses its profits to hire more staff or open new premises, and so make more profit, the money here is functioning as capital. As capital increases (or the economy expands), this is called ‘capital accumulation’, and it is the driving force of the economy. This process – generating profit – is the basis of capitalist society and the value system that underpins it.

Those accumulating capital do so better when they can shift costs onto others. For example, if companies can cut costs by not protecting the environment, or by paying sweatshop wages, or by offsetting production to countries where more overt exploitation won’t encounter as much resistance (eg: in 2014 Holden threatened to move to China in order to get workers to accept lower wages) – they will. Furthermore, for money to make more money, more and more things have to be exchangeable for money. Thus the tendency is for everything from everyday items to DNA sequences to carbon dioxide emissions – and, crucially, our ability to work – to become commodified (entered into the market – to be subjected to market forces).  This is the reason why new markets need to be constantly found and opened up (or invented – think all the insecurities fostered through advertisement to sell us things we don’t need). Capitalism has to constantly expand for it to continue functioning, and this process is never a peaceful one.

The Zapatistas, a predominantly Indigenous resistance movement centred in Mexico, don’t consider this process neutral – they describe it as a war. The main objectives of this war are: first, the capture of territory and labour for the expansion and construction of new markets; second, the extortion of profit, and third, the globalisation of exploitation. This is a war that is not fought between nations or even between a nation and an externally identifiable enemy. It is instead a war for the imposition of a logic and a practice, the logic and practice of capital, and therefore everything that is human and opposes capital is the enemy. Any coherent logic and practice that allows for the organisation of life outside of capital, anything that allows us to identify ourselves as existing independent of capital, must be destroyed – or what may be the same thing – reduced to the quantifiable exchangeability of the world market. Cultures, languages, histories, memories, ideas and dreams must all undergo this process or disappear. All the colours of the people of the earth face off with the insipid colour of money. For the capitalist market, the ultimate goal is to make the entire world a desert of indifference, populated only by equally indifferent and exchangeable consumers and producers. This imposition is so expansive that literally everything becomes a business opportunity, a site for speculation, or a marketable moment. What was previously a site for community strength (eg: a mural) is today simply a wall for corporate advertisement; what was previously knowledge passed down to be shared socially is today the site for the latest patent; what yesterday was free and abundant today is bottled and sold.

In a world where everything is for sale, we all need something to sell in order to buy the things we need. Those of us with nothing to sell except our ability to work have to sell this ability to those who own the factories, offices, etc. And of course, the things we produce at work aren’t ours, they belong to our bosses.

The commodification of our creative and productive capacities, our ability to work, holds the secret to capital accumulation. Money does not turn into more money by magic, but by the work we do every day. Long hours, productivity improvements etc mean we produce much more than necessary to keep us going as workers. The wages we get roughly match the cost of the products necessary to keep us alive and able to work each day (which is why, at the end of each month, our bank balance rarely looks that different to the month before). The difference between the wages we are paid and the value we create is how capital is accumulated, or profit is made.

This difference between the wages we are paid and the value we create is called “surplus value“. The extraction of surplus value by employers is the reason we view capitalism as a system based on exploitation – the exploitation of the working class – that broad class of people that are pulled into work.

This process is essentially the same for all wage labour, not just in private companies. Public sector workers also face constant attacks on their wages and conditions in order to reduce costs and maximise profits across the economy as a whole.

Competition

In order to accumulate capital, our boss must compete in the market with bosses of other companies. They cannot afford to ignore market forces, or they will lose ground to their rivals, lose money, go bust, get taken over, and ultimately cease to be our boss. Therefore even the bosses aren’t really in control of capitalism, capital itself is. It’s because of this that we can talk about capital as if it has agency or interests of its own, and so often talking about ‘capital’ is more precise than talking about bosses.

Both bosses and workers, therefore, are alienated by this process, but in different ways. While from the workers’ perspective, our alienation is experienced through being controlled by our boss, the boss experiences it through impersonal market forces and competition with other bosses.

Because of this, bosses and politicians are powerless in the face of ‘market forces,’ each needing to act in a way conducive to continued accumulation (and in any case they do quite well out of it). They cannot act in our interests, since any concessions they grant us will help their competitors on a national or international level.

So, for example, if a manufacturer develops new technology for making cars which doubles productivity it can lay off half its workers, increase its profits and reduce the price of its cars in order to undercut its competition. Throughout capitalism’s history there has not been a time where this boom and bust cycle has not resulted in masses of people being periodically thrown on the scrap heap.

If another company wants to be nice to its employees and not sack people, eventually it will be driven out of business or taken over by its more ruthless competitor – so it will also have to bring in the new machinery and make the layoffs or peel back conditions to stay competitive. This is the same whether we’re talking about a corporation or a co-op.

Of course, if businesses were given a completely free hand to do as they please, monopolies would soon develop and stifle competition which would lead to the system grinding to a halt. The State intervenes, therefore to act on behalf of the long-term interests of capital as a whole.

The State

The primary function of the State in capitalist society is to maintain the capitalist system and aid the accumulation of capital.

As such, the state uses repressive laws and violence against the working class when we try to further our interests against capital. For example, bringing in anti-strike laws, sending in police or soldiers to break up strikes and demonstrations, displacing Indigenous people from their land etc.

The “ideal” type of state under capitalism at present is liberal democratic, however in order to continue capital accumulation at times different political systems are used by capital (when it is threatened) to do this. State capitalism in the USSR, and fascism in Italy, Spain and Germany are two such models, which were necessary for the authorities at the time in order to co-opt and crush powerful working-class movements. Movements which threatened the very continuation of capitalism.

When the excesses of bosses cause workers to fight back, the State occasionally intervenes to make sure business as usual resumes without disruption. For this reason national and international laws protecting workers’ rights and the environment exist. Generally the strength and enforcement of these laws ebbs and flows in relation to the balance of power between employers and employees in any given time and place. For example, in France where workers are more well-organised and militant, there is a maximum working week of 35 hours. In the UK, where workers are less militant the maximum is 48 hours, and in the US where workers are even less likely to strike there is no maximum at all. Thus rights and conditions don’t exist merely because they are written down – their existence depends on the struggle between the interests of capital and the interests of the working class (a broad term which doesn’t necessarily imply any cohesion or unity). For example – when struggle from the working class escalates, concessions are often won (eg: increases in wages, welfare, civil liberties, healthcare, conditions, rights etc) – when it is low these are often taken away or attacked by the ruling class.

History

Capitalism is presented as a ‘natural’ system, formed a bit like mountains or land masses by forces beyond human control, that it is an economic system ultimately resulting from human nature. However it was not established by ‘natural forces’ but by intense and massive violence across the globe. First enclosures drove self-sufficient peoples from communal land into the cities to work in factories. Any resistance was crushed with the utmost violence. People who resisted the imposition of wage labour were subjected to vagabond laws and imprisonment, torture, deportation or execution. In England under the reign of Henry VIII alone 72,000 people were executed for vagabondage. For an excellent concise history of the development of class society, money, the historical myth of the concept of barter as the origin of trade, capitalism and the state see: Debt: The First 5000 Years by David Graeber.

Later capitalism was spread by colonial invasion and conquest by Western imperialist powers around the globe – precisely to open up new markets. Whole civilisations were brutally destroyed with communities driven from their land into waged work. The only countries that avoided conquest were those – like Japan – which adopted capitalism on their own in order to compete with the other imperial powers. Everywhere capitalism developed, peasants and early workers resisted, but were eventually overcome by terror and violence from ruling elites.

Capitalism did not arise by a set of natural laws which stem from human nature: it was spread by the organised violence of the elite. The concept of private property of land and means of production might seem now like the natural state of things, however we should remember it is a concept that has been enforced by conquest. Similarly, the existence of a class of people with nothing to sell but their labour power is not something which has always been the case – common land shared by all was seized by force, and the dispossessed forced to work for a wage under the threat of starvation and execution.

As capital expanded, it created a global working class consisting of the majority of the world’s population whom it exploits but also depends on. Capitalism has only existed as the dominant economic system on the planet for a little over 200 years. Compared to the half a million years of human existence it is a momentary blip, and therefore it would be naive to assume that it will last for ever. It is entirely reliant on us, the working class, and our labour which it must exploit, and so it will only survive as long as we let it.

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Capitalism: An Introduction

  • April 6th, 2014
  • Posted in General

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