What is Capitalism?

I often wonder if today’s left wing activist or neo-pagan actually knows the answer to the above question. What is Capitalism?
Coke Cola Capitalism

Capitalism has been defined in various ways. In common usage, it means an economic or socio-economic system in which the means of production are overwhelmingly privately owned and operated for profit, decisions regarding investment of capital are made privately, and where production, distribution, and the prices of goods, services, and labor are affected by the forces of supply and demand.

Wikipedia, "Capitalism"

It often seems as if folks are confusing money with the system of capitalism. Money predates capitalism. And we need to remember that capitalism represented, at its infancy, a revolutionary ideal in the face of its predecessors, feudal and caste based systems. But just as feudal systems became oppressive after initially providing protection and security for agricultural based economies, capitalism’s initial appeal also faded.

What is capitalism? As a former Marxist, I tend to focus on the concept of surplus value. Unlike margin or what we commonly call profit, surplus value is the value earned from the product of someone else’s labor. It is what produces the leisure class, the true bourgeoisie.

Marxists “…believe that private ownership of the means of production enriches capitalists (owners of capital) at the expense of workers ("the rich get richer, and the poor get poorer"). In brief, they argue that the owners of capital do not work and therefore steal from or exploit the workers.”

Wikipedia, "Criticisms of capitalism"

For example, let’s say we purchase a pair of shoes at Payless. Say we spend $20. If fourteen people purchase shoes during a one-hour period at this same store for the same amount, the store earns about $280 during that hour. And let’s assume that the two store employees earn slightly more than minimum wage, $10 an hour, plus the cost of store rent, utilities, insurance, legal fees, sales tax, managerial salary and inventory costs – then maybe for that hour the actual costs hover at around $190. Then the store has produced a margin over cost, i.e. profit of $90 for that hour. And lets say that half that amount is re-invested into building the business, which leaves $45 left over. What happens to that $45?

Well if it is a normal American business, that money belongs to the owners. And the owners, who may never sell a shoe, stock a shelf, fill in any paperwork or do anything to make the store profitable, reap $45 for an hour of someone else’s labor. Now, this is not the case in most small businesses, the owner is right there, busting their tail right along side of their employees. And that extra $45 is payment for the risk they are taking. If their shop, restaurant, or gas station fails they may lose their home, unlike their employee who can in theory just find another job. But in most large multinational corporations, the owners or major shareholders do not lift a finger to earn their keep. Surplus value is one of the key features of capitalism. Generally, as workers, we produce far more value than what we are paid.

Another feature is the creation of a bourgeoisie class, the capitalist class of leisure. This class controls the vast majority of wealth and wealth creation mechanisms, which is another name for capital. Marx spoke of the “means of production”, but he referred primarily to factories and mills. Nowadays, the MoP is as nebulous as capital itself, no longer describing simply land, gold, labor, and machines. Venture capitalists create artificial business cycles of both boom and bust, while making money during the collapse of economies. The Internet boom and bust caused many to lose everything, but the real capitalists made a killing off of it. Think about it, where do you think all that money came from in the first place, and where do you think it went?

In all the complaining about SUVs and suburban sprawl, it seems we are focusing on the upper middle class – more accurately the higher paid working class – as if they were the source of the system’s power. When in reality, it is the seemingly invisible international capitalist class and their imperialist systems that are the real source of our western culture’s oppressive status quo.

It seems to me that we are wasting way too much time and energy fighting paper tigers and squabbling over pennies, while the real rich, not only get richer, but they also are consolidating power at a maddening rate.

First off, most folks have no idea who the capitalists are. Capitalists do not tend to be CEO’s, run for office, or act in film, on stage or on TV. Although there are exceptions, most real capitalists or bourgeoisie are never seen on TV period. Every once in a while, we can catch a glimpse into the machinations of the invisible hand, like when Al Gore abdicated for example. But for the most part, what we focus on is what is called the managerial class or strata, part of what is called the petty bourgeoisie class. Cheney and Bush are members of the managerial strata for example. The Saudi royal family are a more accurate example of the capitalist class.

The other key feature of capitalism is that the capitalist class is not a monolith. They operate in many areas as a united front, but there are bitter rivalries amongst them that can be exploited. For example, there is a politically left wing amongst the ultra rich. I am not saying that there are radical tree huggers in this class by any means, but some are genuinely concerned about the environment. Others have nationalistic leanings that can be harnessed for positive means, although they will tend to support many totalitarian regimes around the world if not courted properly by progressive forces. Others are interested in new technologies, which can be used to get support for alternative energy sources for example. And still others operate out of a since of noblesse oblige and contribute millions toward progressive causes. The key here is to understand their class allegiance, and not to confuse their interest as a sincere attempt to smash the system. In other words, do make yourself dependent on grants or the largess of large donors – that is capitalist money by and large. Use it where it makes sense, but do not make it your sole source of funding. Most capitalists, when it comes down to the wire, will not willingly commit class suicide. In the end, their class allegiance will frequently out strip all other motives.

Also for the most part, most small business owners are not truly capitalist. They are what we call, petty bourgeoisie. They existed as a class prior to capitalism; they are in fact descendants of the old merchant class of the feudal systems. The merchant class later became a major portion of the capitalist class, but being a merchant does not automatically make you a capitalist IMNSHO. Many Marxists may understandably disagree with me on this point.

If we are truly honest, the capitalist class includes not only merchants, but also members of the formally feudal class, plus the descendants of ancient monarchies. It also includes the descendants of pirates, bandits and other criminal lineages. Plus, of course, the capitalist class includes wealthy religious institutions and authorities such as the Vatican. And it is these distinctions that can be exploited.

Also capitalism is not necessarily democratic; it can co-exist with almost any political system including fascism, a monarchy, and religious fundamentalisms of all kinds. It is important to keep this in mind when discussing, for example, alternate forms of government.

Also, I am no longer convinced that the answer to capitalism is a planned economy, or a dictatorship of any kind. I think we need new solutions to the problems of capitalism that take in account the corporate globalization we now face. But before we can effectively change a system, it behooves us to first understand what we are up against.

It is not just money folks, it is an economic system built upon slavery, territorial conquest and a twisted ideal of freedom – market freedom. To confuse the two can be deadly to a movement seeking to build a sustainable economy.

©2006 Katrina Messenger

Posted in

Catherine (not verified) | Thu, 02/23/2006 - 10:54am

"Also capitalism is not necessarily democratic; it can co-exist with almost any political system including fascism, a monarchy, and religious fundamentalisms of all kinds. It is important to keep this in mind when discussing, for example, alternate forms of government."

Truer words were ne'er spoken, as we're learning today in George Bush's America. Having lived through the Enron debacle in California, I never want to hear about how wonderful free markets are ever again. They're wonderful, alright. Wonderful for people who are already so rich they'll never be able to spend all their money. We have to always ask: Qui bono?


Anonymous (not verified) | Tue, 06/06/2006 - 2:57am

"Also capitalism is not necessarily democratic; it can co-exist with almost any political system including fascism"

This is not what a true capitalist would argue however. Fascism is anti-thetical to a pure form of capitalism. In the strictest sense of the form of government, fascism is seen as a "middle-road" kind of government, arguably instigated by catholic social teaching encyclical Rerum Novarum in 1891, between communism and capitalism. As a social and economic system, fascism is not a third way between the free market and communism. It is merely another form of totalitarianism that sought to combine its general totalitarianism with the individualistic character of society. Such a middle-of-the-road policy created an extreme interventionist state whose chief production agent was the government-created monopolist.

Fascism fails to recognize the individual as the key social unit. Right economic reasoning begins not with the nation but with human action, and right social policy begins with the recognition that society is made up of individuals with souls. Fascism, on the other hand, by ignoring the individual soul, is socialism's close cousin because it exults in the idolatry of the state.


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