Capitalism

(EPE, pp. 67-69)

The term used by political economists, mainly those on the left wing, to designate the type of economic system extant in most of the industrialized world today. Mainstream economists, and most right wing political economists, usually prefer the more benign "market system", but the two terms are not at all synonymous.

If a "market economy" is one in which the allocation and distribution of goods and services are organized principally by exchanges in free MARKETS, then "capitalism" is only one of a number of possible varieties of market economy. The slave-based economy of the pre-Civil War American South was a market system, and so too, on the other hand, was the worker self-managed economy of Communist Yugoslavia, and neither of these would be called capitalist. Hypothetical variations of market economy are easily conceived that also differ greatly from what we usually mean by "capitalism", for example, Oscar Lange's MARKET SOCIALISM. "Capitalism" designates a market system in which (a) the physical means of production are <privately owned>, the legal rights to their use, profit and disposal lying in the hands of private individuals; and (b) production is done by <wage labor>, workers contracting with employers to allow the latter discretion and command over their labor for a mutually agreed portion of each day in return for a regularly paid wage until either party declines to continue the contract (Schweikart, 1993).

This definition allows scope for much variation -- for example, "private ownership" may be in the form of individuals' shares of transferable stock, or membership in 'cooperative' ownership arrangements (though in practice the latter have been relatively rare); the wage "contract" may be explicitly detailed (as in UNION contracts), or merely implicit; wages may be paid hourly, as 'piece-rates' or as salaries; and so forth. Yet this definition also helps differentiate related cases. For example, if "owners" of the means of production have rights to their profit, but control lies in the hands of the state, then FASCISM may be a better descriptive term. Similarly, if "employers" have control not only over workers' labor but also over their lives outside the workplace, then SLAVERY, or perhaps FEUDALISM, may be more appropriate.
Aside from its greater accuracy and usefulness, the term "capitalism" is also preferred by critical heterodox economists because it highlights the <systemic> sources of certain contemporaneous social problems that might otherwise be overlooked. Foremost among these are the ALIENATION and the CLASS based EXPLOITATION that most left wing political economists have associated with capitalism since Marx's time.

That the predominant economic system in the industrially advanced world today is merely another in humankind's long history of class systems is suggested immediately in the definition of "capitalism". In principle, people would not willingly sell their daily life-activity into wage employment, any more than they would sell themselves into indentured servitude, unless <compelled> to do so (see ECONOMIC POWER). In capitalism, if one lacks ownership of means of production or the ability to employ others to produce goods for sale in markets, then one <must> 'choose' wage employment in order to subsist. That system therefore straightforwardly rests upon an exploitative class relationship: those who produce do not own the means of production but instead are employed by those who do own them, while the latter need not produce, hence may live off the labor of the rest.
Thus it is difficult to imagine overcoming those social ills fundamentally associated with material INEQUALITY -- social apathy and cynicism about the 'political power of money', competitive and predatory emulation (Veblen, 1979), and so forth -- in a capitalist economic system. And since in any class system people's activities are subject to others' control and discretion instead of their own, symptoms of alienation -- feelings of estrangement, meaninglessness, impotence, indifference and social incompetence -- are fundamentally characteristic of capitalism, not merely the consequence of INDUSTRIALIZATION or the secular society, cultural MODERNISM OR POSTMODERNISM, or whatever.

Critical questions therefore also arise about the connections and interplay between capitalism and other oppressive structures extant in modern capitalist societies, e.g., PATRIARCHY and RACISM. While mainstream economists argue about whether markets tend to erode racial and gender-based domination (Friedman, 1962), the question for critical heterodox economists is whether capitalism tends to replace these with its own form of domination, or instead strengthens them as it accomodates and incorporates them into the whole of capitalist society [see RACE, ETHNICITY, GENDER AND CLASS].

All of this being immediately highlighted in the definition of capitalism, mainstream and right-wing economists' avoidance of the term in preference for the less accurate "market economy" is telling. On the other hand, among critical heterodox economists there has been much disagreement about whether specific historical and hypothetical cases are actually "capitalist". Is SWEDEN's economy, for example, merely a further variation on the same basic form common to such diverse cases as the U.S., France, and JAPAN, or is it something qualitatively different?

One important issue in such disagreements has been whether an economy's development is mainly determined by processes of ACCUMULATION of CAPITAL. Capital, as the private ownership of physical means of production in the form financial instruments such as stock and MONEY, is subject to powerful compulsions of accumulation, or growth in its value or quantity, due to personal income-maximizing behavior and competition in capitalist markets. This compulsion acts as the 'engine' of economic development in capitalism, directing investment in an insatiable pursuit of profit rather than other social or private concerns. Even if the specific social decisions that appear to determine the broad directions of an economy's development are purely political -- reflecting concerns other than private profit, for example, in public legislative bodies -- in a capitalist economy these decision-making processes must nonetheless tend to be in accord with the pursuit of profit, since capital owners are the ruling classes in such societies [see STATE, POLITICAL ECONOMIC THEORIES OF]. On these grounds Sweden and other similar cases are arguably capitalist.

In fact, on the basis of the primacy of the accumulation of capital, even economies as apparently different from capitalism as those of Communist Yugoslavia and the former USSR have been called "capitalist". In Yugoslavia, even though the country's physical means of production were constitutionally 'publicly owned', they were subject to <private> control (by worker-managed firms) in the context of competitive markets within which the acccumlation dynamic was quite strong. And while the accumulation dynamic in the centrally planned USSR was not impelled by market competition, a powerful dynamic of some sort clearly existed in that country, judging from its growth record. If top-level state planners and Party leaders were seen as self-interest seeking maximizers of personal 'income' (or 'power' or 'control'), and if they were decisively in control of the economy's major investments, then the latter may be understood to have been their capital, and the USSR was arguably subject to a capital accumulation process. Since, moreover, major similarities existed between Soviet administrative structures and the CENTRALIZED PRIVATE SECTOR PLANNING appearing in modern capitalism, the case that the USSR was ('state' or 'bureaucratic') "capitalist" is perhaps not farfetched (Munkirs, 1985).

Yet the accumulation dynamic of both PRECAPITALIST and capitalist market competition has been uniquely prodigious. The restless spread of trade throughout Europe in the Middle Ages, and its continuation into the New World that was critical for the historic PRIMARY ACCUMULATION of capital, were direct manifestations of market competition. And it was the competitive cost-cutting behavior arising with the spreading web of markets that underlay the 'putting-out' system, the enclosure movement, and the decline of the guilds which were so crucial for feeding the RESERVE ARMY OF UNEMPLOYED that was destined to be bound up with the growing accumulations of capital (Braudel, 1981; Polanyi, 1944). Once all of this had gone far enough, the 'take-off' of capitalism into economic and political dominance, and then into cultural dominance as well, appears to have been inevitable, as older, non-capitalist modes and regions of production, along with the societies constructed upon them, succumbed before the 'heavy artillery' of an incessantly vigorous and technologically innovative market competition -- a process that has continued relentlessly down to the present (Marx & Engels, 1988) [see CAPITALISM, PHASES OF EVOLUTION AND FORMS].

Ironically, from this viewpoint the mainstream and right-wing economists' term "market economy" may be accurate enough after all, for it may be that <whatever particular form> of market economy is in place at a point in time, it will soon enough evolve into or be supplanted by capitalism. Whether it be 'petty commodity producers', worker self-managed firms, or 'relatively autonomous' state-owned enterprises, if they are subject to market competition then both a 'concentration of capital' and a 'proletarianization of labor' may be expected gradually to occur. Since the final outcome is roughly the same, one may as well call it a "market economy" as some other, momentarily more accurate designation -- although, of course, such a bland and neutral term can convey but little of the momentousness of the issues at hand.

REFERENCES & ADDITIONAL READINGS

Braudel, Fernand (1981). Capitalism & Civilization, 15th - 18th Century (Vols. I - III). Harper & Row, N.Y.

Edwards, Richard C.;Reich, Michael and Weisskopf, Thomas E. (1986). The Capitalist System (3rd Ed). Prentice-Hall, N.J.

Friedman, Milton (1962). Capitalism and Freedom. Univ. of Chicago Press.

Marx, Karl and Engels, Frederick (1988). The Communist Manifesto (Editor: Frederic L. Bender). W.W. Norton, N.Y.

Munkirs, John R. (1985). The Transformation of American Capitalism: From Competitive Market Structures to Centralized Private Sector Planning. M.E. Sharpe, N.Y.

Peterson, Janice & Doug Brown (1994). The Economic Status of Women under Capitalism. Edward Elgar, Vermont.

Polanyi, Karl (1944). The Great Transformation. Beacon Press, Boston.

Schweickart, David (1993). Against Capitalism. Cambridge Univ. Press, N.Y.

Sweezy, Paul (1942). The Theory of Capitalist Development. Monthly Review Press, N.Y.

Veblen, Thorstein (1979). The Theory of the Leisure Class. Penguin Books, N.Y.

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