What is Capitalism?

Know your enemy is an old and useful maxim. The enemy of the working class movement and of millions of others round the world – peasants, students, intellectuals etc – is capitalism. Yet amongst the general public and also within the movement there is often only the vaguest of notions what capitalism is.

This is because our rulers want it that way and thus ensure that from the lowest journalism to the top universities confusion reigns on the subject. Above all they want it to appear that capitalism is practically eternal – a matter of human nature – so as to dispel any idea of getting rid of it.

Consequently they identify capitalism with a human character trait, namely ‘greed’ which, at least to some extent, has been around as long as humans, or with ‘money’ which has been around about 5000 years or with ‘private property’ which has existed for about 10,000 years. Inevitably ‘ordinary’ people are influenced by this. It doesn’t stop them disliking capitalism, especially the effects of capitalism which they experience daily. Nor does it stop them resisting capitalism, sometimes very fiercely. But it does seriously hamper any attempt to overthrow it.

It was one of the most important of Karl Marx’s many intellectual achievements that he produced a clear and precise analysis of what defines capitalism, of how it emerged historically, and of the fundamental dynamic that drives it.

The first thing to grasp is that capitalism is neither an attitude nor an idea, but a definite economic system, a way of organising production, which arose initially spontaneously and relatively recently in human history. It began to develop seriously in Europe in the late Middle Ages within the previous mode of production, feudalism.

It was, and still is, a system of commodity production (commodities are goods produced for sale on the market) in which labour power becomes a commodity and wage labour becomes the main form of labour. The system is dominated by capital ( hence its name ), which is accumulated wealth used to employ wage labour with the aim of increasing its value in competition with other capitals. The wage labour /capital relation is the fundamental social relation that defines capitalism.

In order to fully assert itself capitalism had not only to develop economically, the owners of capital, the capitalists or bourgeoisie, had also to conquer political power. This they did first in the Dutch Revolution of the 16th century and the English Revolution of the 17th century. Following the American Revolution, the French Revolution and the Industrial Revolution (in Britain) capitalism came to dominate the world. Today it rules virtually everywhere.

These basic features explain why capitalism was a more progressive system than feudalism. First, wage labour was an advance – in terms of human freedom, productivity and revolutionary potential – on the labour of slaves, serfs and peasants that preceded it. Second, the competition between capitalists compelled them to develop production on a scale unthinkable under the sway of the feudal lords or any previous set of rulers.

However these same basic features also contain the seeds of all the inhumanity, inequality, crises, wars and destructiveness that have characterised the history of capitalism and make its overthrow so vital today.

The development of generalised commodity production leads to a world in which everything is for sale – they would sell air if they could. The transformation of labour power into a commodity alienates workers from their labour and the products of their labour. It turns work into mindless drudgery and workers into appendages of the machine ( and the office). The employment of wage labour by capital is a process of exploitation, which grinds workers down and results in ever increasing inequality.

The relentless uncontrolled competition between capitals produces periodic crises in which businesses go bankrupt, production falls, and mass unemployment and poverty ensues. The same competition means that smaller weaker businesses are taken over by larger stronger businesses and capital and production become ever more concentrated in the hands of a few giant corporations. Competition between these corporations – for resources (oil!), markets, labour, investment outlets – leads to wars of increasing ferocity and growing destruction of the environment to the point where the survival of society is threatened.

Historically the two most important errors in the understanding of capitalism have been its identification with a) private ownership and b) the free market. In both cases the mistake has been to equate one important and sometimes dominant feature of the system with the essence of the system.

The social democrats (like the German SPD and the British Labour Party) used to believe that by expanding state ownership and state planning, by the capitalist state, it would be possible gradually to abolish capitalism or at least tame it. They were wrong. It produced not a mixture of capitalism and socialism but only a mixture of capitalism and state capitalism. The Stalinists believed that those countries where state ownership and state planning were close to total (the USSR, China etc) were therefore socialist even though the workers controlled neither production nor the state and wage labour remained and the state was in competition with the rest of world capitalism. They were wrong. Control of society by a privileged state bureaucracy was not socialism but bureaucratic state capitalist tyranny.

In today’s anti-globalisation movement there are some who identify the enemy as only neo-liberalism, not capitalism as such. Neo-liberalism is indeed an enemy , but it is only one head of the capitalist hydra. Cutting it off , which is both good and necessary, will not, however, render the other heads less deadly.
Ultimately there is only one way to abolish capitalism and achieve socialism. That is for workers themselves to take ownership and control of the process of production and to do that , like the bourgeoisie before them, they must take political power.

Rosa Luxemburg summed it all up when she wrote, "Where the chains of capitalism are forged, there must they be broken!"

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This article was written for the Koran socialist newsletter CounterFire in June 2006.