Capitalism

Capitalism, also known as bourgeois society or capitalist society, is a mode of production in which the wage relation is the most important or most prevalent productive relationship. Karl Marx pioneered the study of capitalist society when he began to materially analyze the social system which had spread from its origin in Europe to become the first world system. Capitalism is a central concept in Marxist economic, philosophical, historiographic, and political thought.

Although wage labor and markets have existed around the world for thousands of years, these forms of social interaction remained dependent on other productive relationships—usually peasant farming, slave labor, or simple hunting and gathering. For example, the Roman Empire was not a capitalist system because its developed network of trade was dependent on slave agriculture and almost disappeared when the slave economy collapsed. In contrast, the American slave system of the 19th century produced goods such as cotton and rice which were destined for industrial wage laborers in Britain and New England to turn them into cheap finished goods. Europe had a unique combination of factors, including the colonization of the New World and a high degree of political fragmentation, which allowed for the rapid growth of capitalist elements and, in turn, a release of unprecedented productive capacity that secured European domination of the globe.

Other factors which define capitalist society include factory production, market exchange by the use of money, private ownership of the means of production, profit as the prevalent form of surplus value, and production for the sake of exchange. Standardizations of Marx's theory of history typically place capitalism in a sequence between feudalism and socialism, but this can be misleading, generalizing Marx's study of European history into global categories rather than focusing on the real history of capitalism's spread into tribal, clan-based, and monarchist societies across the world.

History

The survival of capitalism in the past two centuries was never assured and was only thanks to specific developments.

Bourgeois revolution

Main article: Bourgeois revolution

United States

The Business Plot

This is a supposed plot in which American fascists, with whom major industrialists collaborated, planned to overthrow FDR and make America a dictatorship, in response to the weakness of capitalism and so as to preempt a socialist uprising. The details of this theory are rather murky and evidence is hard to gather, however it does seem that while indeed, a group of people did come together and discuss such a plot, it did not develop into anything much more – it is not as serious as some proponents of the theory may claim. Regardless, such a plot certainly was in the way of capitalists, who were anxious of the socialist revolutions occurring abroad and worried that such movements could reach the United States. In history, far-right wing dictatorships are the clear preference of the bourgeoisie to socialism, as is exemplified in the Nazi rise to power, the 1973 Chilean coup d'état, or any other dictatorship supported or established by the United States (as well as the local bourgeoisie) in response to the "domino theory".

Classes

There were 4 main classes identified by Karl Marx and Frederich Engels.

Bourgeoisie

The Bourgeoisie is the class that owns large quantities of capital, and which hires laborers from the proletarian class to provide labor. By owning capital, they appropriate the value gained by selling commodities on the market, and give as part of their revenue a wage to the workers, which is a small portion of the total revenue. In capitalism, they are the ruling class, and they are the ones who control the state, using it to repress the other classes.

Petit-bourgeoisie

The petit-bourgeoisie consists of those people who own small quantities of capital, such as stores, small farms, or private offices, and who contribute their own labor to their production (although they may also hire a small staff of laborers). Unable to exist as a class in a rapidly advancing capitalist economy, the most lucky among them reach the upper ranks of the bourgeoisie whereas most of them fall backwards into the proletariat.

Proletariat

The proletariat is the working class. They contribute labor, as it is the only thing they have to contribute. They make their living by earning wages, which are as low as they can possibly be, and get lower over time. They represent the most revolutionary and advanced class in capitalism.

Lumpenproletariat

The lumpenproletariat consists of the lowest groups in society, such as beggars, and common criminals.

Features

Wealth creation

Bourgeois economists and ideologues often hold up the rapid growth of certain nations as success stories of capitalist development. However, almost all of these "miracles" occurred thanks to protectionist policies, foreign aid, or even top-down planning rather than through the free market. In the cases of South Korea and Taiwan, the communist example of giving land to those who till it (e.g. when the troops of the DPRK entered the South, the South made concessions by beginning to distribute land to the landless) compelled the Americans to promote land reform in both countries in order to prevent unrest and promote economic growth. Every single impoverished/broken country that became developed under capitalism also has had heavy investments from the US, and in the cases of Japan and South Korea they both had "paternalistic" governments that actively intervened to grow their economies via protectionist measures, consolidation, etc.

To quote Marx in the Manifesto of the Communist Party:

The bourgeoisie, by the rapid improvement of all instruments of production, by the immensely facilitated means of communication, draws all, even the most barbarian, nations into civilisation. The cheap prices of commodities are the heavy artillery with which it batters down all Chinese walls, with which it forces the barbarians’ intensely obstinate hatred of foreigners to capitulate. It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilisation into their midst, i.e., to become bourgeois themselves. In one word, it creates a world after its own image.

There's nothing Marx or Lenin wrote that suggests every poor country would remain that way. But it is imperative to note that alongside Japan, South Korea, Taiwan and Singapore are Myanmar, the Philippines, Papua New Guinea, and Malaysia (among others), i.e. countries that clearly are not considered prosperous by the standards of showpieces like Japan or Singapore. Capitalism cannot make the whole world prosperous, nor can it eliminate unemployment and the inherent tendency toward economic crises. It can make certain countries prosperous, at the cost of growing contradictions between these countries, the development of imperialism, and the consequent imperialist wars for a redivision of the world's markets.

Innovation

Plentiful innovation has been observed under every system, including under socialism such as may be seen in the Soviet space program or in Cuban medical advances. Advances have occurred in feudalism as well, where for instance the windmill was developed. Innovation is in no way exclusive to capitalism, and if anything, its particular brand of innovation compels largely the creation of useless trendy garbage that does not have much social or economic value and meaning. Though it is true that capitalists have the incentive to outcompete their competitors, this is more trouble than it is worth given that this inevitably leads to increased exploitation and lesser-quality products made with lots of shortcuts. The vast majority of innovation comes from people who naturally have innovative tendencies that have the means to construct and develop things. Innovation is something innovative people do as a form of expression of their essential selves, which under socialism will be much better off as there will be increased cooperation among people, for instance through the socialization of "intellectual property", on top of a more reasonable distribution of resources. Characteristic of socialism is also universal education, which would further develop genuine innovation, and the removal of the profit motive means that people could create advancements for the good of society rather than the greed of individuals, who will not be so pressured to think about their own essential needs first as they would have been met.

Innovation occurs despite capitalism, not because of it.

Longevity

There have to be constantly developed new methods and technologies in order to keep capitalism from collapsing for good. However, these tend to eventually get spent up, thus requiring new methods and technologies to either supplant or replace them, and in essence merely delay the collapse of capitalism. Examples of such include:

• Keynesianism
• Credit cards
• Negative interest rates
• Quantitative easing
• Stock repurchases
• Bailouts to financial companies

Contradictions

Social vs. private character

Hitherto, the owner of the instruments of labor had himself appropriated the product, because, as a rule, it was his own product and the assistance of others was the exception. Now, the owner of the instruments of labor always appropriated to himself the product, although it was no longer his product but exclusively the product of the labor of others. Thus, the products now produced socially were not appropriated by those who had actually set in motion the means of production and actually produced the commodities, but by the capitalists. The means of production, and production itself, had become in essence socialized. But they were subjected to a form of appropriation which presupposes the private production of individuals, under which, therefore, every one owns his own product and brings it to market. The mode of production is subjected to this form of appropriation, although it abolishes the conditions upon which the latter rests.

This contradiction, which gives to the new mode of production its capitalistic character, contains the germ of the whole of the social antagonisms of today. The greater the mastery obtained by the new mode of production over all important fields of production and in all manufacturing countries, the more it reduced individual production to an insignificant residuum, the more clearly was brought out the incompatibility of socialized production with capitalistic appropriation.

— Friedrich Engels, Socialism: Utopian and Scientific

In 2012 Barclays, UBS, Citibank, the Royal Bank of Scotland, Deutsche Bank, and JP Morgan, were all found to have fixed interest rates to make bigger profits. Another example is British Airways and Virgin Atlantic in the airline industry a couple years later; also Grolsch, Bavaria, and Heineken in brewing — Sainsbury's, Asda and other supermarkets. All these were found to have colluded on prices in order to secure larger profits. The reason for these scandals is because these companies recognize that planning is a more efficient way to run the economy than leaving it to the anarchy of the free market. Monopolies, trusts, and joint stock companies all exist for capitalists to avoid the results of the very contradiction that allows them to continue to exist.

Superstructure

Role of the state

Capitalism requires a state to give it things like bailouts as well as tax money for various purposes, such as for economic stimulus or funding stock buybacks. Furthermore, the state has a military and police force — coercion in general, which defends the institution of private property, and with this uses coercion otherwise to maintain the capitalist system. Without the state, capitalism will not recover from the crises inherent to it and eventually give way to a different economic system which may not preserve the previous capitalist class, such as socialism. For this reason, anarcho-capitalism is unviable as it seeks to remove an aspect to capitalism which realistically is essential to it, thus being dramatically more unstable than regular capitalism.

Reform

Possibility of reform

See also: Eco-capitalism, Reform versus revolution, and Social democracy

No matter how many social safety nets are created, no matter how many regulations are imposed, there will continue to be class struggle between capitalists and workers in a capitalist society — this quality is practically inherent to such. The capitalist ruling class makes use of the bourgeois state to block, diminish, and eventually discard reforms, as incentivized under capitalism.

Social democratic parties sit at the crux of the capitalism versus socialism spectrum and have strong tendencies to break apart towards either of the two. In Europe, during the mid-late 1940s, the social democratic parties developed distinct left-wings and right-wings, wherein those on the right were more so interested in attempting to reform capitalism and defend the existence of the bourgeoisie, while the left-wing social democrats agreed with the socialists that the means of production are to be socialized and a workers' state be established. Thus the socialist and left-wing social democrats merged into a single party, as had occurred in East Germany, Poland, and Hungary; that, or those kinds of social democrats simply joined the socialist parties, as had been the case in Romania, Bulgaria, and Czechoslovakia. At that time social democratic parties were still Marxist-oriented and explicitly identified themselves with the working class, so merging with or joining the socialists was not a stretch. Of course, the right-wing social democrats triumphed in other areas and dropped any references to Marxism, as the West German SPD had done in 1959, on top of tending to remove any reference in their party line to being a workers' party.

Wealth tax

Wealth taxes, in democracies, are doomed to largely fail, as capitalists are under pressure from shareholders and competitors to continuously increase profits – if the state begins to mandate that a large portion of investments instead go to social programs, many capitalists and businesses will leave the jurisdiction, particularly if they are unaccustomed to wealth taxes like in places such as the United States. Even in social democratic nations like in Europe, their social safety nets are being eroded away as the tendency for the rate of profit to fall digs into welfare benefits. In a planned economy, however, capitalists could largely be convinced/coerced to have their businesses remain in the country through the wide-scale leveraging of synergies available to the state — either that, or the capitalists have their businesses bought out/taken over outright. In any case, a liberal democracy is too decentralized to have a proper grip onto its capitalist class, which rather rules the state if anything.

See also

• Capitalist cringe collection