Two Foundations of Capitalism

Capitalism is best understood as a method to create a pool of people who must work to survive (proletarians). This method — carried out by the State in the form of laws — is twofold: (1) forbid free access to subsistence land, (2) introduce a property tax. [The British in Africa called it a “hut tax.”]

The consequence is that even after buying a property and getting rid of a mortgage on the property, no one can live on such a property for free because there is a rent to be paid to the government — a property tax.

I came across an interesting article explaining the origin of property taxes:

Alana Semuels, “The Feudal Origins of America’s Most-Hated Tax,” The Atlantic, August 24, 2016.

Her source of information seems to be:

Jonathan R. T. Hughes, The Governmental Habit Redux: Economic Control from Colonial Times to the Present, 1991.

Richard Wolff’s failed definition of capitalism

I have watched Richard Wolff many times in his insightful criticisms of capitalism. And I agree with these criticisms. However, I disagree with him about his solution to capitalism, which is the establishment of worker-controlled enterprises as contrasted with privately-owned enterprises. This is not a solution, mainly because this does not address the problem of the unemployed. And the reason for Wolff’s non-solution is that Wolff does not really know what capitalism is as is evident from his attempt to define it.

First, capitalism is not an economic system, as he says; it is a political one, just as are slavery and feudalism.

It is a political system which prohibits people from taking land for free for subsistence. This forces people to work for other people. And the forcing is not done by the kind of laws, as in slavery or feudalism, or by laws against vagrancy (homelessness), but simply by laws forbidding free access to subsistence land.

Watch the episode below. You will hear nothing about a free access to subsistence land.

In the debate below, Gene Epstein argues convincingly that worker-owned enterprises are compatible with capitalism.

Capitalism = def. a political system which by barring people from a free access to subsistence land creates a market economy and a monetary way of life

From a sociological perspective, I don’t think people are aware of this definition or are concerned with this definition. Why?

First, because the so called “intellectuals” do not offer such a definition.

Second, because most city people’s concern (including students’ concern) is to succeed in this (capitalist) system by either getting a good job, or by creating a good business.

Third, because if city people had access to land, they would not know what to do with it. People have become alienated from the use of land except in some aesthetic or romantic way of walking through it or viewing it. People do not know how to grow food or how to care for animals.

However, the correctness of this definition is known instinctively by peasants, who when they have rebelled or protested did so invariably under the slogan “land and liberty.”

The difference between Richard Wolff and me

Richard Wolff condemns the capitalist system, and so do I. But whereas he finds fault with the employer-employee relationship, in that the employer “exploits” the workers, and he recommends that all businesses be worker-owned and operated; I, on the other hand, do not find fault with this. It is a normal human desire to seek profits, or a better deal whenever possible. So, an entrepreneur takes advantage of the situation as best he can. And if he does not, his competitors will.

The root evil of capitalism — which is really a political system — is that politically it bars people from using land for free for subsistence. Not having such free access to subsistence land, drives people to becoming either employers or employees, depending on their capabilities and good fortune.

I am surprised that Wolff, who claims to be a Marxist economist, does not find this truth in the writings of Marx. It is there in Chapter 26: “The Secret of Primitive Accumulation” of Capital.

Again: What is Capitalism?

I keep reading and viewing items about capitalism. It is almost universally assumed that we know what capitalism is, and with this assumption the discussion goes on to praising, condemning, or improving capitalism. What is praised is the efficiency of production and technological innovations, making more goods available at cheaper prices. What is condemned in the resulting poverty and unemployment. What is advised — as by social democrats — is more government involvement is regulating industry, promotion of worker-owned factories, and extending welfare programs.

But the question of what is capitalism is not addressed. And when it is addressed, it is misrepresented. The first misrepresentation is to view that capitalism is only a form of economy — specifically a market-economy. But a market-economy is just barter or trade, which has existed from time immemorial. Neither can capitalism be identified with factory production — again something that has almost always existed as a specialized form of production.

Contrary to being an economic system, it is a political system. How so? It is a political system which bars people from taking up free subsistence land. This is a necessary condition for the existence for an industrial market-economy. What I am saying is that capitalism is a political system which forces people into a market-economy.

So, what would be the antithesis of capitalism? It would be a political system which grants everyone the right to a chunk of free subsistence land. Does such a system exist anywhere in the world? Yes, all indigenous people who have not been forced into the market-economy are free of capitalism. The next closest to this are, for example, the peasant villages which are to be found in Eastern Europe and Asia, which are more or less self-sufficient.

Because under capitalism one is, as Chomsky says, “driven into the industrial system, and into wage-slavery”, and “driven” is another word for “forced,” and the “force” comes from the laws of government, capitalism is a political system.

* * *

There are only a few writers that have viewed the essence of capitalism as I view it. See my previous postings:

  • What is capitalism?
  • Is Capitalism a Political rather than an Economic system?
  • Criticism of Capitalism by G. A. Cohen, reflecting on Al Capp’s creature, the Shmoo
  • Capitalism = Proletarianism
  • Origins of the State, Land and Population
  • Primitive Accumulation of Capital (Dispossession of peasant land)

  • Noam Chomsky: “driven into the industrial system” — “driven into wage-slavery”

    In the following interview of Noam Chomsky by Chris Hedges, Chomsky starts with the historical reality of people in the United States “driven into the industrial system.” And he goes on to describe the workers’ resistance to this state of affairs, and he also describes the government’s successful efforts to foster compliance through the “manufacture of consent,” including through general education.

    Chomsky’s economic solution is to have a system of worker-owned enterprises. A solution, incidentally, which is also supported by Richard Wolff.

    My quick response it that a worker-owned enterprise is compatible with capitalism. It does not address itself to the problem of unemployment.

    The problem with this interview is that it does not address itself to the question: “How is the population driven into the industrial system?”

    The answer is tied to the necessary condition for capitalism, which is the political deprivation of people to a free access to subsistence land. And the other matter which has to be addressed is: How does such a political system work (and is possible) which drives people into wage-slavery ?

    What is required is a critique of the U.S. Constitution — a critique which neither Chomsky nor Hedges is prepared to give!

    Capitalism vs Anti-Capitalism

    There seems to be a renewed interest in what is called “socialism.” And there are all sorts of debates available on the internet, titled “Capitalism vs Socialism.” And as I listened to these debates, it is apparent that talk is at cross purposes. For one, no one in the current debates about capitalism seems to know how to define “capitalism.” All proffered definitions are inadequate. It cannot be defined simply as a market economy, because a market economy has always existed — it is called trade or barter. It cannot be defined by the incentive of profit, because that incentive again has always existed. It cannot be defined as a form of chattel slavery or serfdom. And it cannot be defined by an employer-employee relationship, because this too has always existed, as, for example, with mercenary armies.

    Capitalism — though it had prior existence — did not loom large until industrialization, i.e., until there occurred large scale factory production which needed workers. It is the method by which workers are recruited (or forced to seek work) which distinguished capitalism from such systems as slavery and feudalism. And perhaps a clear case of “recruitment” is illustrated by the British way of obtaining field workers in Africa — without resorting to slavery or feudalism, — simply by imposing a “hut tax,” which is equivalent to a contemporary property tax on real estates.

    But the root of capitalism is really even more basic. It consists in forbidding people to occupy subsistence land for free. And to enact such a policy there must be someone who by force prevents you from taking up free subsistence land. And that someone nowadays is the government. So, if the necessary condition for capitalism is this exclusion from taking up free subsistence land, and this exclusion is the work of a government, capitalism should be seen as a political matter, and, thus, the study of economics is better referred to — as it was in the past — as “political economy.” It is only, by abstracting the political element that the system thus engendered can be called “economics.”

    The upshot of my discussion is this. Anyone who talks about capitalism without mentioning the necessity of excluding people from taking up free subsistence land, does not know what they are talking about.

    Given this understanding of capitalism, the antithesis of capitalism is — if there is a government — the permission, or the right, of taking up free subsistence land.

    The only one of the recent writers who saw this clearly was Jerry Cohen, who vividly portrayed the situation by using Al Capp’s fanciful cartoon creature, the Shmoo, as representing the fruits of subsistence land.

    What is called “socialism” is meant to be a corrective to capitalism — not necessarily its antithesis, which, rightly understood, is anarchism (or “libertarian socialism”).

    The state or “authoritarian” socialist corrective relies on using a centralized government to institute welfare programs. The nearest remedy or compensation for depriving people of a free access to subsistence land, is something like a negative income tax, or a universal minimum income.

    What is presented by Richard Wolff as the “new socialism” or worker-owned and operated enterprises, seems to be a form of state socialism and social democracy. Wolff offers the Mondragon Corporation as a model. Such businesses are not antithetical to capitalism — and, in fact, are just one form of a capitalist undertaking, as are various communal enterprises, such as the Amish or the Anabaptist Mennonites. They are not antithetical to capitalism as long as their land could be purchased, and they are subject to property taxes.

    Is Capitalism a Political rather than an Economic system?

    As I keep thinking about capitalism and socialism, and keeping in mind Max Weber’s characterization that the necessary condition for capitalism is the presence of a proletariat (= people who are deprived of access to means of production), it strikes me that the existence of a market economy is not essential (i.e., not necessary). Using John Searle’s insights about institutional facts, capitalism as a market system is a consequence of a law which forbids people from free access to subsistence land. And the law making power is the result of the government structures which are in existence. The market economy is, thus, the result of having governments which pass such laws. Capitalism is then rightly to be understood as a market economy which is created as a byproduct of a law which bars people from a free access to subsistence land.

    The only one who focused on this political fact was Bernard Shaw, who said the following: “To begin with, the word Capitalism is misleading. The proper name of our system is Proletarianism.” [See Capitalism = Proletarianism] Barring people from doing whatever, can be called a political or coercive act. In that case Proletarianism [aka Capitalism) is a political system.

    I know that people who defend Capitalism focus of the market transactions between a employers and employees, pointing out the benefits to the economy — technological innovations, mass production, and better living conditions. And this is true, except for the existence of the unemployed, the underemployed, and poverty.

    I tried to understand the characteristics of capitalism (=proletarianism) by the model of two persons marooned on an island. [See Three forms of slavery: chattel slavery, serfdom, and wage-slavery]

    There was one transaction between Crusoe and Friday which has bothered me. This is the situation in which Crusoe and Friday share the island equally, but Crusoe has a rifle and bullets, and the island if full of wild animals which can easily be hunted with the rifle. Crusoe offers Friday the use of the rifle on the condition that Friday is to provide to Crusoe half of all his kills. Friday agrees because he will be better off hunting with a rifle rather than by some more primitive mode. He will have more food with less effort, and more leisure. Here we have a situation in which Crusoe reaps a profit from Friday without doing any work himself. We can also call this an employer-employee relationship.

    My point here is that you can have a market economy without slavery, serfdom, or wage-slavery. Or, put otherwise, a market economy can exist without Proletarianism (aka Capitalism).

    What prevents Friday from making his own rifle and bullets?

    On the island, nothing.

    On the mainland, a government with a patent law!