What is capitalism?

Looking back at my postings, I notice that I keep charging people with not knowing what they are talking about when they talk about capitalism. I made the charge against Stefan Molyneux, against Jordan Peterson, against Peter Joseph, against Slavoj Zizek . . . and I could go on leveling this charge about almost every public intellectual and talking head on the internet.

In the literature on capitalism, various socialists and anarchists understood what capitalism was — including Karl Marx, Max Weber, Franz Oppenheimer, Bernard Shaw . . . Of contemporaries which I have considered, there was only one who clearly understood what capitalism was — this was G. A. Cohen, when he compared Al Cap’s Shmoo to land. [See Criticism of Capitalism by G. A. Cohen, reflecting on Al Capp’s creature, the Shmoo]

What is the source of this ignorance about capitalism? Well, we are all familiar with commerce — the idea of producing something, selling and buying. Or, just the idea of buying, and then reselling at a higher price.

People identify capitalism with commerce. Is this wrong? No, but this is only a necessary component of capitalism — a component which has always existed as far as history can tell us. Given the difference in talents and interests, people have specialized in some craft, and traded or sold their manufactured items or their services.

So why is this not a sufficient characterization of capitalism? For one, this type of activity has existed within and between tribes. It has existed under slavery and under serfdom.

Historically, capitalism is — as a widespread phenomenon — something that came historically after slavery and serfdom, and it came with industrialization, i.e., when machines became available for mass production.

What was needed for industry was workers. But where to get them?

Most people almost everywhere have been peasants, getting a living from planting edibles and keeping domesticated animals.

What was needed was to get these peasants into factories. But how? Deprive people of free access to land, or make it available only for a price.

This can happen, so to say, “accidentally” or as a deliberate political act. The “accidental” deprivation of land to the people occurred in England with the advent of industrial textile machinery. There was a great demand for wool, and consequently landlords evicted the peasants from their lands for the sake of sheep pastures. This created a landless class of people who were then desperate for wages. And there, you have your pool of workers!

The deliberate creation of wage workers is illustrated by the British policy in Africa of introducing a hut tax (today we have a “property” tax), which forced the indigenous people to work on plantations.

The upshot of these reflections is that modern capitalism requires the existence of people who do not have free access to subsistence land.

It is a system which forces you be an employer or an employee.

What is the alternative? Free access to subsistence land, which, incidentally, exists for all so-called primitive people, and for those who have escaped from States.

So, unless you mention that the necessary condition for capitalism is barring people from a free access to subsistence land, you do not know what you are talking about.

A necessary condition for Capitalism and a sufficient condition for Socialism

In the following presentation, Cohen presents an analogy between Al Capp’s creature, the Shmoo, and subsistence land. The Shmoo provides everything a person needs to survive, as does subsistence land.

Using Cohen’s analogy, socialism is the system which provides free access to the Shmoo, or, literally, free access to subsistence land. And capitalism is the system which does not. I understand that capitalism is a market economy — but that cannot be a sufficient condition for capitalism because barter or a free exchange of goods has always existed — under slavery and under feudalism. What unites slavery, feudalism, and capitalism is the denial of free access to subsistence land.

A necessary — though not a sufficient — condition for Capitalism is the prohibition of free access to subsistence land.

By contrast, I propose that the sufficient — though not a necessary –condition for Socialism is the right to a free access to subsistence land, or its equivalent (such as a universal basic income).

Is Capitalism an economic or a political system?

If you look up the definition of capitalism in Wikipedia, it reads: “Capitalism is an economic system based on the private ownership of the means of production and their operation for profit.” The Merriam-Webster definition on the internet is: “an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.”

The problem with these definitions is that they assume the concept of “ownership.” And ownership is a concept which has to be defined in a social context by a formula such as:

for two persons x and y, if x is the owner of item z, then y has to get permission from x to use z.

Well, who makes such a rule? If there are only two people involved, then the rule is founded on either an explicit or implicit (tacit) agreement. If there is an external government, such as the State, then it is the State which establishes such a rule by a law.

If the rule is established by a free agreement than we may call it an economic matter, if however it is established by the State, then it is a political matter.

The “private ownership” which is pertinent to capitalism, concerns the ownership of land. Since land is a given of nature — like air or water — it can be used either by mutual agreement or subject to the laws of the State.

Now, I cannot make the use of land without either the permission of a private owner or the State. For example, I cannot camp in State or Federal forests without getting “permission” — normally, by paying a fee. And, of course, if I want to hunt or fish, I have to pay some other fees.

Since capitalism is a function of ownership, and ownership is determined by the State, capitalism is also a political system. The following “Google definition?” is more accurate: “an economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state.” But it is not accurate enough because there is such a thing as “state capitalism” which characterized the USSR.

Capitalism = Proletarianism

Definitions of capitalism stress freedom of trade. But trade has always existed. Well, trade is a necessary condition of capitalism, as is industrialization (mass production), but the other necessary condition — which is much too often omitted — is the existence of workers, who are drawn from the proletariat class. Proletarians are people who do not have a free access to land on which to subsist.

I don’t know any writer, other than Shaw, who understood and emphasized this existence of proletarians, and wanted to substitute for the term “capitalism,” the more appropriate term “proletarianism.”

In chapter 28 of his book, he makes his reasoning quite clear. (I have taken the liberty to emphasize some words.)


 

Bernard Shaw, The Intelligent Woman’s Guide to Socialism, Capitalism, Sovietism and Fascism, 1928


28
CAPITALISM

Nobody who does not understand Capitalism can change it into Socialism, or have clear notions of how Socialism will work. Therefore we shall have to study Capitalism as carefully as Socialism. To begin with, the word Capitalism is misleading. The proper name of our system is Proletarianism. When practically every disinterested person who understands our system wants to put an end to it because it wastes capital so monstrously that most of us are as poor as church mice, it darkens counsel to call it Capitalism. It sets people thinking that Socialists want to destroy capital, and believe that they could do without it: in short, that they are worse fools than their neighbors.

Unfortunately that is exactly what the owners of the newspapers want you to think about Socialists, whilst at the same time they would persuade you that the British people are a free and independent race who would scorn to be proletarians (except a few drunken rascals and Russians and professional agitators): therefore they carefully avoid the obnoxious word Proletarianism and stick to the flattering title of Capitalism, which suggests that the capitalists are defending that necessary thing, Capital.

However, I must take names as I find them; and so must you. Let it be understood between us, then, that when we say Capitalism we mean the system by which the land of the country is in the hands, not of the nation, but of private persons called landlords, who can prevent anyone from living on it or using it except, on their own terms. Lawyers tell you that there is no such thing as private property in land because all the land belongs to the King, and can legally be “resumed” by him at any moment. But as the King never resumes it nowadays, and the freeholder can keep you off it, private property in land is a fact in spite of the law.

The main advantage claimed for this arrangement is that it makes the landholders rich enough to accumulate a fund of spare money called capital. This fund is also private property. Consequently the entire industry of the country, which could not exist without land and capital, is private property. But as industry cannot exist without labor, the owners must for their own sakes give employment to those who are not owners (called proletarians), and must pay them enough wages to keep them alive and enable them to marry and reproduce themselves, though enough to enable them ever to stop working regularly.

In this way, provided the owners make it their duty to be selfish, and always hire labor at the lowest possible wage, the industry of the country will be kept going, and the people provided with a continuous livelihood, yet kept under a continuous necessity to go on working until they are worn out and fit only for the workhouse. It is fully admitted, by those who understand this system, that it produces enormous inequality of income, and that the cheapening of labor which comes from increase of population must end in an appalling spread of discontent, misery, crime, and disease, culminating in violent rebellion, unless the population is checked at the point up to which the owners can find employment for it; but the argument is that this must be faced because human nature is so essentially selfish, and so inaccessible to any motive except pecuniary gain, that no other practicable way of building up a great modern civilization stands open to us.

This doctrine used to be called the doctrine of The Manchester School. But as the name became unpopular, it is now described generally as Capitalism. Capitalism therefore means that the only duty of the Government is to maintain private property in land and capital, and to keep on foot an efficient police force; and magistracy to enforce all private contracts made by individuals in pursuance of their own interests, besides, of course, keeping civil order and providing for naval and military defense or adventure.

In opposition to Capitalism, Socialism insists that the first duty of the Government is to maintain equality of income, and absolutely denies any private right of property whatever. It would treat every contract as one to which the nation is a party, with the nation’s welfare as the predominant consideration, and would not for a moment tolerate any contract the effect of which would be that one woman should work herself to death prematurely in degrading poverty in order that another should live idly and extravagantly on her labor. Thus it is quite true that Socialism will abolish private property and freedom of contract: indeed it has done so already to a much greater extent than people realize; for the political struggle between Capitalism and Socialism has been going on for a century past, during which Capitalism has been yielding bit by bit to the public indignation roused by its worst results, and accepting installments of Socialism to palliate them.

Do not, by the way, let yourself be confused by the common use of the term private property to denote personal possession. The law distinguished between Real Property (lordship) and Personal Property until the effort to make a distinction between property in land and property in capital produced such a muddle that it was dropped in 1926. Socialism, far from absurdly objecting to personal possessions, knows them to be indispensable, and looks forward to a great increase of them. But it is incompatible with real property.

To make the distinction clear let me illustrate. You call your umbrella your private property, and your dinner your private property. But they are not so: you hold them on public conditions. You may not do as you please with them. You may not hit me on the head with your umbrella; and you may not put rat poison into your dinner and kill me with it, or even kill yourself; for suicide is a crime in British law. Your right to the use and enjoyment of your umbrella and dinner is a personal right, rigidly limited by public considerations. But if you own an English or Scottish county you may drive the inhabitants off it into the sea if they have nowhere else to go. You may drag a sick woman with a newly born baby in her arms out of her house and dump her in the snow on the public road for no better reason than that you can make more money out of sheep and deer than out of women and men. You may prevent a waterside village from building a steamboat pier for the convenience of its trade because you think the pier would spoil the view from your bedroom window, even though you never spend more than a fortnight a year in that bedroom, and often do not come there for years together. These are not fancy examples: they are things that have been done again and again. They are much worse crimes than hitting me over the head with your umbrella. And if you ask why landowners are allowed to do with their land what you are not allowed to do with your umbrella, the reply is that the land is private property, or, as the lawyers used to say, real property, whilst the umbrella is only personal property. So you will not be surprised to hear Socialists say that the sooner private property is done away with the better.

Both Capitalism and Socialism claim that their object is the attainment of the utmost possible welfare for mankind. It is in their practical postulates for good government, their commandments if you like to call them so, that they differ. These are, for Capitalism, the upholding of private property in land and capital, the enforcement of private contracts, and no other State in interference with industry or business except to keep civil order; and for Socialism, the equalization of income, which involves the complete substitution of personal for private property and of publicly regulated contract for private contract, with police interference whenever equality is threatened, and complete regulation and control of industry and its products by the State.

As far as political theory is concerned you could hardly have a flatter contradiction and opposition than this; and when you look at our Parliament you do in fact see two opposed parties, the Conservative and the Labor, representing roughly Capitalism Socialism. But as members of Parliament are not required to have had any political education, or indeed any education at all, only a very few of them, who happen to have made a special study, such as you are making, of social and political questions, understand the principles their parties represent. Many of the Labor members are not Socialists. Many of the Conservatives are feudal aristocrats, called Tories, who are as keen on State interference with everything and everybody as the Socialists. All of them are muddling along from one difficulty to another, settling as best they can when they can put it off no longer, rather than on any principle or system. The most you can say is that, as far as the Conservative Party has a policy at all, it is a Capitalistic policy, and as far as the Labor Party has a policy at all it is a Socialist policy; so that if you wish to vote against Socialism you should vote Conservative; and if you wish to vote against Capitalism you should vote Labor. I put it in this way because it is not easy to induce people to take the trouble to vote. We go to the polling station mostly to vote against something instead of for anything.

We can now settle down to our examination of Capitalism as it comes to our own doors. And, as we proceed, you must excuse the disadvantage I am at in not knowing your private affairs. You may be a capitalist. You may be a proletarian. You may be betwixt-and-between in the sense of having an independent income sufficient to keep you, but not sufficient to enable you to save any more capital. I shall have to treat you sometimes as if you were so poor that the difference of a few shillings a ton in the price of coal is a matter of serious importance in your housekeeping, and sometimes as if you were so rich that your chief anxiety is how to invest the thousands you have not been able to spend.

There is no need for you to remain equally in the dark about me; and you had better know whom you are dealing with. I am a landlord and capitalist, rich enough to be super-taxed; and in addition I have a special sort of property called literary property, for the use of which I charge people exactly as a landlord charges rent for his land. I object to inequality of income not as a man with a small income, but as one with a middling big one. But I know what it is to be a proletarian, and a poor one at that. I have worked in an office; and I have pulled through years of professional unemployment, some of the hardest of them at the expense of my mother. I have known the extremes of failure and of success. The class in which I was born was that most unlucky of all classes: the class that claims gentility and is expected to keep up its appearances without more than the barest scrap and remnant of property to do it on. I intrude these confidences on you because it is as well that you be able to allow for my personal bias. The rich often write about the poor, and the poor about the rich, without really knowing what they are writing about. I know the whole gamut from personal experience, short of actual hunger and homelessness, which should never be experienced by anybody. If I cry sour grapes, you need not suspect that they are only out of my reach: they are all in my hand at their ripest and best.

So now let us come down to tin tacks.