@[email protected] asked “why are folks so anti-capitalist?” not long ago. It got quite a few comments. But I noticed a trend: a lot of people there didn’t agree on the definition of “capitalism”.
And the lack of common definition was hobbling the entire discussion. So I wanted to ask a precursor question. One that needs to be asked before anybody can even start talking about whether capitalism is helpful or good or necessary.
Main Question
- What is capitalism?
- Since your answer above likely included the word “capital”, what is capital?
- And either,
- A) How does capitalism empower people to own what they produce? or, (if you believe the opposite,)
- B) How does capitalism strip people of their control over what they produce?
Bonus Questions (mix and match or take them all or ignore them altogether)
- Say you are an individual who sells something you create. Are you a capitalist?
- If you are the above person, can you exist in both capitalist society and one in which private property has been abolished?
- Say you create and sell some product regularly (as above), but have more orders than you can fulfill alone. Is there any way to expand your operation and meet demand without using capitalist methods (such as hiring wage workers or selling your recipes / process to local franchisees for a cut of their proceeds, etc)?
- Is the distinction between a worker cooperative and a more traditional business important? Why is the distinction important?
Capitalism is a socioeconomic system in which private individuals (capitalists) own the means of production and employ others to work them. The employer exploits the employed through wage labor, a system in which the surplus value of a laborer is taken as profit for the capitalist. Capitalism is often characterized by market relations and generalized commodity production, but there are always exceptions as in any system.
I think your first point is the most important: it’s a system in which those who own the means of production, those who benefit the most from production, produce nothing.
I’ll toss my two cents in
What is capitalism?
Capitalism is a form of economy where individuals are allowed to obtain, keep, and distribute capital as they see fit, so long as they have the means to do so.
What is capital
Capital is a combination of property and money. Property being the things you own, with money being a measure of potential property you don’t yet own.
How does capitalism empower people to own what they produce?
It’s at the core of the concept. Individuals are allowed to obtain, keep, and distribute capital as they see fit. You and you alone own your capital.
I see a lot of comments saying workers are not allowed to own what they produce. That their employer takes it from them. I feel this is flawed and possibly comes from a place of frustration. So let me ask this: What does an employed worker produce?
If that worker is a self employed craftsman making sprockets, the answer’s clear. They produce sprockets. They can then go out and sell those sprockets for goods, services, or money as they see fit.
If that worker is employed by a sprocket making company; they still make sprockets, but that’s not what they produce. They produce labor. Which they’ve chosen to sell to the sprocket company for money and/or other benefits. They may not care about sprockets themselves, don’t go to sprocket conventions, and certainly don’t want to deal with figuring out how to sell all the sprockets they’re making. It’s a better deal to sell your labor and use the profit you make off your employer to do the things that actually interest you. It’s your employer’s job to handle everything else.
Note that selling your labor is no different than selling capital. You set the price you’re willing to accept, and your employers (who are your consumers) can accept that price or not. That doesn’t mean you can set your price at any number and expect it to stick. Just like how the price of sprockets is dependent on consumer need and competitive prices, so is the price of your labor.
Bonus Questions!
Say you are an individual who sells something you create. Are you a capitalist?
If you also exist in a capitalist economy, then yes.
If you are the above person, can you exist in both capitalist society and one in which private property has been abolished?
No. Capitalism cannot exist if you don’t have control over your own property.
Say you create and sell some product regularly (as above), but have more orders than you can fulfill alone. Is there any way to expand your operation and meet demand without using capitalist methods (such as hiring wage workers or selling your recipes / process to local franchisees for a cut of their proceeds, etc)?
Yes. Ideally you raise your prices so fewer people buy your product while you still make the same profit as if you were filling those extra orders. Alternatively, you can work to optimize your production methods to create more product in the same amount of time. Be it finding more efficient methods you can practice to make each product, or creating or purchasing equipment which can make each product faster. The balance between price and optimization is up to you.
Is the distinction between a worker cooperative and a more traditional business important? Why is the distinction important?
It’s a term to describe a type of business. No different than “corporation” or “partnership” or “nonprofit”, among others. The distinction’s important in that there’s value in being able to describe different types of businesses.
I think this answer misses the mark a little bit with regards to the context of what it is about capitalism that causes so much controversy.
People who critique capitalism aren’t usually advocating for an economic system completely devoid of private ownership (though some are). They’re often raising issue with a certain type of capital ownership.
Say you’re the owner of a sprocket manufacturing corporation, and I’m a worker. You yourself don’t work, you just inherited a sprocket empire from your grandfather, who founded that sprocket empire using funds from selling his emerald mines that were worked by slaves.
I put in an honest days work 5 days a week, and in those 5 days, I produce $2000 worth of sprockets. It costs $10 per week to maintain the sprocket machines, $10 per week for electrical power to cover my sprocket making activities, $30 per week to repay the loan that was taken to build the factory, and $50 per week in other miscellaneous expenses needed to allow me to make sprockets.
That means that of the $2000 worth of sprockets I produced, $1900 of profit was generated.
You pay me a salary of $500 per week, and collect $1400 per week from my (and each other laborer’s) work.
The point of criticism is that you’re accumulating wealth, which other people had to work to produce, without doing any work yourself. You’re simply a parasitic freeloader on society because of an arbitrary concept of “ownership” over something that you don’t use personally.
Some responses to these criticisms include the following:
“You should just negotiate for a higher salary, or go work somewhere that’s paying more.”
This is the example from classical economic theory, and there are a whole handful of reasons that it doesn’t work. The voluntary exchange between a worker and a capitalist (meaning one who owns the means of production) isn’t actually (fully) voluntary. A worker who finds his working conditions unsatisfactory can’t reasonably just choose not to work. The threat of financial ruin, homelessness, and starvation act as a metaphorical gun to the head of the laborer giving the capitalist a significant negotiating advantage.
Add to this the fact that it’s been theorized and demonstrated that capitalism tends toward regulatory capture and monopoly, and you have a situation where the means of production become more and more concentrated in the hands of a group of elites, while the workers’ bargenaining power becomes weaker and weaker due to less competition in the labor market.
“The capitalist deserves the profits that they extract because of [this work that they’ve done]”
If the owner of the factory is functioning as a floor manager, they should be paid a fair salary for being a floor manager. If they’re working as a director, they are entitled to a director’s salary. These critiques of capitalism aren’t saying that there should be no hierarchy in an enterprise (though some alternatives to capitalism do call for that). Just that the only people who are entitled to the wealth from something that’s produced are those who are working to produce it.
This same thing goes for other forms of capital ownership too, by the way. Landlords are a classical example. I’ve heard it claimed that landlords are entitled to their rents because many of them work so hard at repairs and managing their properties. They’re totally entitled to be compensated for any labor they engage in, but the wealth that they extract from tenants far exceeds the value of the labor that they supply. Which is kind of the whole point of rental property, if “investors” couldn’t extract a passive income (income in excess of work performed), they wouldn’t be buying homes and then renting them out.
I think you’ve written a good, neutral summary critique that increases our common ability to debate this. Thank you.
I would argue, however, that your example makes it sound especially egregious as the profit margin in your example is 95%. The advantage of capitalism, according the people who support it (like I do), is that other sprocket making companies exist and together they bring the profit margins down and down and down (due to competition), forcing continual innovation to bring it back up. Thus, not only is the profit margins typically much, much smaller (1-10%), but society collectively advances, which benefits the workers too as the produce they need to acquire increases in quality and lowers in price.
The truth is probably somewhere in the middle.
So I agree with you when arguing against monopolies.
Hot take, but it’s mostly a buzzword at this point. It more productive to talk about wealth distribution and the structure of industry directly, and in which ways they can be good or bad.
Capitalism is an economic system where capital is considered a valid input to the production process, worthy of renumeration. Contrast with some other systems where labor is the only valid input.
Capital is material wealth used productively.
Capitalism empowers ownership of produced good by laborers by funding new ventures where laborers can be more self-directed than if they were forced to labor under the direction of others. Capitalism erodes control from laborers by introducing a non-labor stake in the venture. Both are true.
An artisan who sells what they produce is free to be a capitalist or not, the two are unrelated.
Such a person cannot exist in a society without private property, as “selling” is not a valid concept in such a society. Artisans in general would still exist, though, and probably more abundantly.
An artisan who has more work orders than she can fill alone can expand without the methods you describe. She can form a partnership with another artisan, and teach or otherwise share her methods of production, tools, and branding. This could be an equal partnership or something more like taking an apprentice.
The distinction between worker coöps and other businesses is important, but it’s also important to recognize that coöps are a subset of businesses, not an opposing type of entity. Coöps have just as much ability to behave in a predatory manner towards consumers, and almost as much potential to seek self-perpetuation and growth at the expense of their environment. That they will be less predatory towards laborers is nice, but it’s not enough to make them “safe”.
