The word capitalism is now quite commonly used to describe the social
system in which we now live. It is also often assumed that it has
existed, if not forever, then for most of human history. In fact,
capitalism is a relatively new social system.
[For a brief historical account of how capitalism came into existence a couple of hundred years ago, see Marx and Engels' Communist Manifesto]
But what exactly does 'capitalism' mean?
Class division
Capitalism is the social system which now exists in all countries
of the world. Under this system, the means for producing and
distributing goods (the land, factories, technology, transport system
etc) are owned by a small minority of people. We refer to this group of
people as the capitalist class. The majority of people must sell their
ability to work in return for a wage or salary (who we refer to as the
working class.)
The working class are paid to produce goods and services which are
then sold for a profit. The profit is gained by the capitalist class
because they can make more money selling what we have produced than we
cost to buy on the labour market. In this sense, the working class are
exploited by the capitalist class. The capitalists live off the profits
they obtain from exploiting the working class whilst reinvesting some of
their profits for the further accumulation of wealth.
This is what we mean when we say there are two classes in society. It
is a claim based upon simple facts about the society we live in today.
This class division is the essential feature of capitalism. It may be
popular to talk (usually vaguely) about various other 'classes' existing
such as the 'middle class', but it is the two classes defined here that
are the key to understanding capitalism.
It may not be exactly clear which class some relatively wealthy
people are in. But there is no ambiguity about the status of the vast
majority of the world's population. Members of the capitalist class
certainly know who they are. And most members of the working class know
that they need to work for a wage or salary in order to earn a living
(or are dependent upon somebody who does, or depend on state benefits.)
The profit motive
In capitalism, the motive for producing goods and services is to
sell them for a profit, not to satisfy people's needs. The products of
capitalist production have to find a buyer, of course, but this is only
incidental to the main aim of making a profit, of ending up with more
money than was originally invested. This is not a theory that we have
thought up but a fact you can easily confirm for yourself by reading the
financial press. Production is started not by what consumers are
prepared to pay for to satisfy their needs but by what the capitalists
calculate can be sold at a profit. Those goods may satisfy human needs
but those needs will not be met if people do not have sufficient money.
The profit motive is not just the result of greed on behalf of
individual capitalists. They do not have a choice about it. The need to
make a profit is imposed on capitalists as a condition for not losing
their investments and their position as capitalists. Competition with
other capitalists forces them to reinvest as much of their profits as
they can afford to keep their means and methods of production up to
date.
As you will see, we hold that it is the class division and profit
motive of capitalism that is at the root of most of the world's problems
today, from starvation to war, to alienation and crime. Every aspect of
our lives is subordinated to the worst excesses of the drive to make
profit. In capitalist society, our real needs will only ever come a poor
second to the requirements of profit.
Capitalism = free market?
It is widely assumed that capitalism means a free market economy.
But it is possible to have capitalism without a free market. The
systems that existed in the U.S.S.R and exist in China and Cuba
demonstrate this. These class-divided societies are widely called
'socialist'. A cursory glance at what in fact existed there reveals that
these countries were simply 'state capitalist'. In supposedly
'socialist' Russia, for example, there still existed wage slavery,
commodity production, buying, selling and exchange, with production only
taking place when it was viable to do so. 'Socialist' Russia continued
to trade according to the dictates of international capital and, like
every other capitalist, state, was prepared to go to war to defend its
economic interests. The role of the Soviet state became simply to act as
the functionary of capital in the exploitation of wage labour, setting
targets for production and largely controlling what could or could not
be produced. We therefore feel justified in asserting that such
countries had nothing to do with socialism as we define it. In fact,
socialism as we define it could not exist in one country alone—like
capitalism it must be a global system of society.
It is also possible (at least in theory) to have a free market
economy that is not capitalist. Such a 'market economy' would involve
farmers, artisans and shopkeepers each producing a particular product
that they would exchange via the medium of money. There would be no
profit-making and no class division—just independent producers
exchanging goods for their mutual benefit. But it is doubtful whether
such an economy has ever existed. The nearest that may have come to it
would have been in some of the early colonial settlements in North
America. Some Greens wish to see a return to this kind of economy. We do
not think that it is a viable alternative for modern society. Such a
system would almost inevitability lead to capital accumulation and
profit making—the definitive features of capitalism.
[For more detailed accounts of what capitalism is, see Marx's Wage Labour and Capital, Marx's Value, Price and Profit, or Fredy Perlman's The Reproduction of Daily Life.]
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