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!

    Is an employer a capitalist?

    We — including me — often use the word “capitalist” as a synonym for “employer,” “entrepreneur,” or “businessman.” But on reflection, this is a mistake; or, at best, a problem of ambiguity. Capitalism is a kind of theory, and a “capitalist” should be the name of a person who subscribes to this theory.

    To illustrate the linguistic problem here, consider the case of Friedrich Engels, Karl Marx’s doppelganger. Both were arch anti-capitalists. But Engels was the son of an owner of textile factories in Salford, England and in Barmen, Prussia. He was, thus, an employer. And if one uses the word “capitalist” as a synonym for “employer,” than we get the paradoxical result that the arch anti-capitalist was a capitalist!

    This apparent paradox is due to the ambiguous use of the term “capitalist.” If we were writing a dictionary, we would have to introduce two meanings for the word: Capitalist-1, an employer; Capitalist-2, someone who subscribes to the politico-economic theory of capitalism.

    With that distinction, we could then get rid of the paradox by saying that Engels, the capitalist-1, was an anti-capitalist-2.

    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.