Democracy Against Capitalism: Conclusion Part 1

Index to posts in this series.

I didn’t see a precise definition of capitalism in Democracy Against Capitalism by Ellen Meiksins Wood, though it’s obvious Wood is talking about capitalism in the UK and the US. Here’s a definition I found in a 2006 paper by Bruce R. Scott, the Paul Whiton Cherington Professor of Business Administration, Emeritus at the Harvard Business School. The paper is titled The Political Economy of Capitalism.
Scott offers this definition of capitalism taken from the Palgrave Dictionary of Economics:

Political, social, and economic system in which property, including capital assets, is owned and controlled for the most part by private persons. Capitalism contrasts with an earlier economic system, feudalism, in that it is characterized by the purchase of labor for money wages as opposed to the direct labor obtained through custom, duty or command in feudalism…. Under capitalism, the price mechanism is used as a signaling system which allocates resources between uses. The extent to which the price mechanism is used, the degree of competitiveness in markets, and the level of government intervention distinguish exact forms of capitalism. P. 2-3, fn. omitted.

He comes up with a slightly different definition, and I’ll come back to this paper in another post. I doubt this definition would be acceptable to Wood, because it hides the reality of capitalism. For example, it says that in feudalism, one class “obtains” labor from another, which is probably not how peasants experienced it. She would at least state that almost all social systems enforce some form of expropriation by a dominant class, and discuss the mechanisms of that domination and expropriation in capitalism. She would want to discuss the logic that operates in capitalism, which I take to be something like this.

a. The goal of individual capitalists is to increase the amount of capital under their control.
b. The point of capitalism as a system is to produce returns to capital. Those returns come from producing goods and services for sale at a profit.
c. Capitalists only produce goods and services for sale. Capitalists produce nothing that cannot be sold for a profit.
d. Any means that can be used to increase the returns to capital will be supported by capitalists. These include cheating on taxes, use of tax havens, pollution, screwing workers, supporting tax cuts and tax advantages for capital (lower capital gains rates, ending Estate Taxes, lower marginal rates, special depreciation rules, outright exemptions for certain types of income, extortion of state and municipal governments for tax benefits), fighting unions, bribing legislators, regulators and executive branch officials, the list is endless and as far as I know has never been assembled in one place.

These four points aren’t laws, in the sense of the laws of physics. They are simple observations of the actual behavior of the capitalist class. They paint a bleak picture of capitalism, utterly unlike the way capitalism is portrayed in the media, by the government, by politicians, by educators and even by religious leaders. Wood argues, essentially, that any benefits it confers were forced by workers or governments, and are under constant assault. Violations of laws by capitalists are never punished as the serious crimes they are. Which executive of BP, Transocean or Halliburton went to jail for blowing up a drilling rig in the Gulf of Mexico, killing 11 people and poisoning the waters? No one is accountable for the damage done by capitalists behind the corporate shield, whether to the environment or to the people they employ.

I’ve gotten in the habit of referring to our current system of capitalism as neoliberalism, but for Wood, the capitalism we see today is just the logical growth of capitalism as Marx predicted, following the logic described above. When Marx wrote, capitalism had a solid foothold in England, but it had yet to reach its full extension. In both England and the US there were many artisans and free farmers who owned their own means of production, and were free from the imperatives of the marketplace. They had the ability to feed and shelter their families with little or no recourse to a market economy. They were for the most part free to sell or retain their production for their own use. Outside of Europe and the US, pre-capitalist economies were the dominant form.

That is no longer the case. It is very difficult for any not-rich person to provide for themselves and their families without selling their labor to capitalists. That is just as true of software engineers as it is of doctors and plumbers. No one, even the rich, can provide the necessities of life without using markets.

Wood argues that we have nearly reached the situation Marx predicted: a society of two classes, capitalists and producers. The capitalists provide some level of sustenance to those they hire, and the rest are dependent on the state or they are on the street. Or they die. The difference between the value produced by workers and their pay is sucked up by the capitalists. Although Wood doesn’t mention it, the financial sector eats up some of the sustenance received by the workers. All of us are forced to participate in a system dominated by the rich.

This system is supported by neoliberalism, an ideology dreamed up by economists and other academics. There is no point of contact with democracy. In fact, there is good reason to think that neoliberalism would work better in an autocracy or an aristocracy, and some conservatives, such as the New York Times columnist Ross Douthat, think the 17th Amendment (direct election of Senators) should be repealed as a step in that direction.

The main goal of neoliberalism is to provide a theoretical basis for denying governments the power to interfere with the business activities of capitalists, an utterly anti-democratic goal. Most people spend a huge part of their time working and commuting to work, and thinking and worrying about work. Corporations now make decisions that have massive impacts on individual lives, and on society, with little or no input from government or non-rich individuals or society, and regardless of whether they serve any purpose that outweighs the damage. It’s absurd to say that the bulk of our lives should be controlled by the decisions of the rich and powerful with no democratic control. But it’s just fine under neoliberal theory. To be very specific, holders of private capital have created the current planetary environment, which is rapidly becoming inhospitable to human life. A theory that supports their efforts to do so is suicidal.

As I say, it’s a bleak picture. In the next part I look at a somewhat less somber picture.

27 replies
  1. Tommy D Cosmology says:

    I was a teen-age Republican (literally had a TARS button) and went to Reagan’s second inauguration with Tom Ridge, my congressman at the time. That part of me believes that science, and technology, and, yes, corporations, are what make the world advance for the better. There were liberal Republicans. But no more. What I saw at age 18 in the grand ballrooms in DC (the inauguration was moved inside due to sub-zero temperatures) appalled me: Conservative values are not grounded in empathy. Not a single conservative point of view or policy puts the well-being of others as the primary factor considered. “Small government”, “personal responsibility”, “law and order”, etc., are all shitty values if they are not grounded in empathy.

    Since Nixon, the Republican Party has become more conservative, meaning more motivated by greed and informed by prejudices. The politics of fear and hate and anger work, and the lazy excuses for greed and prejudice are, sadly, very powerful. It’s way easier not to give a shit. Conservatism is tied to basic psychological fight or flight responses. Another reason it sticks.
    Don’t get me wrong, we all look out for number one when the shit hits the fan and we all have polarizing filters through which we see the world. One example: yesterday I heard someone say that I should not care if the Dallas Cowboy Cheerleaders got paid well for performing at the Formula 1 race in Austin. They enjoy it, they choose to do it, they make money in other ways because of who they are. The point of view was conservative and I was persuaded not to care too much about a certain group of people.

    Now, back to the corporate/ Marxism debate: I worked for a multinational that was on the Dow Jones Global Sustainability Index and I was very proud what we were doing regarding social responsibility. We were literally the best place to work in the US (although I was living in Europe during those 6 years) and the culture was that of world citizens and caretakers. We helped write our own regulations in each countey and our books were open to the public. This is how it’s going to succeed: the future, our survival, the whole enchilada. We had measures of the well-being of the planet and our net contribution.

    My idea is to apply the mathematics of this (it is my field): strive to maximize the minimum quality of human life. you literally measure the worst-cases (poverty, environment, life expectancy) and maximize quality of life (with quantitative measures, that’s key). Abject social engineering. The math is fun because the competing objectives play out and demand for things to be well-quantified.

    The role of corporations is to do what they do (the reason they are in existence), and to “maxi-min”: Their profit is part of the objective function and laws are written and penalties formulated by experts in the fields.

    We were in France and the UK, then back to the US, and had a kid in each country. The multinational got acquired by a “political” Fortune 100, our benefits stripped, moral sank, turnover soared, our carbon footprint skyrocketed, I felt disgusted by the regulatory trouble we were always in but always seemed to find (make) a loophole in the law.
    I ran into Tom Ridge a couple of years ago. He’s lobbying for a fucking fracking company.

  2. Ken Muldrew says:

    I wonder if your four points should include something of the morality of capitalism. Such as the pursuit of self-interest is a virtue (so long as self-interest is defined as the accrual of personal capital) while the accumulation of debt (at least debt not realized in the pursuit of capital) is wholly immoral. I suppose these are really just items in the list from point 4.

    • Anon says:

      I would say that is covered in the first point. If the singular goal is to increase capital under your control then it follows that profit is the highest duty and that debt, to the extent you take it, should be paid by others.

      • earlofhuntingdon says:

        Capital could describe itself as having many and varied goals.  Those who hold the most of it have self-limited their objective to increasing their holding of capital.  They have further self-limited the goal of holding capital to extracting profit.

        That’s a goal, not a duty.  Using the language of “duty” attempts to elevate the work of capitalists to a moral plane that their actions cannot support.

        Debt is opportunistic and relativistic.  In the hands of a holder of capital, it is a tool to increase its profitability.  In the hands of a wager earner, it is a risk to capital, one capitalists deem morally bad so as to allow draconian acts to protect against it.  (Capitalists obviously can be both creditor and debtor, in which case they allow themselves rules of play they do not allow the wage earner.)

        Note that capitalists arrogate to themselves the ability to denominate risk as useful to capital or a moral risk to it.  The special pleading and one-sidedness of capital’s arguments are meant to be hidden, in the manner of the goblet-face illusion.  Wage earners are meant to see only the goblet of capital, not its darker face.

        • Greenhouse says:

          I hear you EOH. But I remember a few years ago Al Franken saying that it’s literally malfeasance for a corporation not to maximize profits as a “duty” to shareholders. If I’m not mistaken, Franken was basing his opinion on eBay vs. Newmark decision in 2010. If you could shine some clarity on that decision, that would be great, and thanks Ed for your awesome platform and all the other commentators.

          • Bruce Olsen says:

            Franken was speaking at Netroots on 7/24/2010, and the verdict was released afterward, on 9/9/2010. Apparently Franken was widely mocked for his liberal fearmongering, but the court decided to embarrass all the critics and find for eBay (backing up Franken’s statement).

            The court found that a for-profit corporation had to, ummm, seek profit. In the context of this case (where eBay was one of only 3 shareholders, and knew full well craigslist’s priority on community service and other nonprofit-like goals before it invested) the finding seems a little silly. But it’s hard to find fault with the idea that calling yourself for-profit should mean you actually seek profit.

            As if it isn’t already obvious IANAL, but apparently this affects only Delaware, and other states are free to interpret their body of corporation law as they see fit. But incorporating in Delaware means doing as the Delawareans want you to do.

            A decent writeup on the case:


  3. EWTRTW says:

    The era between the Great Depression and today was the anomaly. “Any benefits it (capitalism) confers were forced by workers or governments, and are under constant assault.” Our democracy is now nearly completely dysfunctional, compromised by the dependency of all politicians on the donations of big money interests in order to run a credible campaign. If democracy cannot “force” fair benefits to the working class, how much worse will things need to get before another, less civilized method of force is applied?

    • Bruce Olsen says:

      The GOP has been applying this force for years, and Trump has accelerated it dramatically.

      Even his silence on Erdogan’s thugs beating up protesters in DC is such a force (to say nothing of the positions taken on the Skripals and Khashoggi).

      And, of course, the Proud Boys’ welcome into the GOP is a mere half-step away from an GOP Sturmabteilung.

      • skua says:

        This might sound  strange but the GOP being strongly associated with companies of thugs would (I think) be a clear signal to all who remember, or have learnt, of the beginnings of the 3rd Reich. I think we still have some remaining social equivalent of immunological function to Brown-shirts.

        What I fear we have widely lost is the ability to see tyranny by federal bureaucracies and government agencies. The separating of children from their parents when they arrive at the border to seek protection being one example of such tyranny. It was bureaucratic tyranny, and the uses made of the railways and concentration camp factories, that caused the greatest worries and doubts about the future of Western civilization after WWII.

  4. Marinela says:

    Great article.

    The problem I see with capitalism is not that producers need to sell their labor for capital to capitalists.  The issue is that capitalists are incapable of providing work to all producers out there.

    There are more producers than the labor generated by the capitalists.

    The point of capitalism generating capital without regards to the environment is probably the worst of the implications. The government is probably the only entity that can correct the unbalance, meaning creating jobs that are clean, for the portion of the producer class that is unable to sell their labor to capitalists.

    Nor sure what the alternative to capitalism is. Communism for sure is a broken system.

    • Bruce Olsen says:

      A job guarantee is the solution. There’s plenty of work to do that provides returns to society that capitalists won’t do. And it provides a buffer stock of employed people who are ready for a private sector job as the economy expands.

      And we can easily afford it.

      To anticipate some responses, basic income doesn’t solve the buffer stock problem (which is significant since it causes the unemployed to rapidly become unemployable). Further, whether the effect of moral hazard is strong or weak, most voters view it as a significant barrier to implementation. Since UBI is not as good a solution anyway, we should focus on a job guarantee and use UBI as a way to support those who are truly unemployable (whether due to physical or mental infirmity or due to family leave policies we implement).

      • Marinela says:

        What is the UBI short for in your comment?

        How do you guarantee a job for producers that are 100% employable? You need capitalist willing to hire the producer. My point is that there are not enough jobs generated by the capitalists.

        Your point about people that are unemployable is valid.

        Capitalists are only going to pay for profit. Another use case for the government, which should be funded mostly by the capitalists. Capitalists need to be regulated by the government to hire people that are “umemployable”,

        • Bruce Olsen says:

          Universal Basic Income (it has other names also). The idea is to give everyone cash without respect to income, though some proponents do include a means test. All or most other social payments would be eliminated. Eliminating or simplifying means testing would reduce costs further.

          The federal government would provide the jobs, not the private sector. Most plans would pay $15/hour and include health care. The benefits to the economy would be dramatic, and as the private sector expanded it would hire people away at higher wages.

          This article is better than most explaining it; the MMT links I posted above explain how it’s paid for.

  5. Tommy D Cosmology says:

    One aspect of “running the government like a business” to borrow could be the concept of shareholder equity: our technological and societal advances are investments that should allow us to generate reliable dividends: i.e. a minimum basic income. The way we do this is by taxing equity (especially equity in hidden tax shelters!). An economy is money in motion, so this is stimulative. It is robust, predictable, and minimal in volatility: there’s > $100 trillion in assets (including real estate owned by banks), taxed at 1% per year, and 2% for off-shore money (estimated at $25 trillion). This would generate about $15k/year per household in fungible money. I’m sure others have better formulas/sources, but the idea is the same. The end result is that earnings (through labor plus dividends) go up, the value (price) of labor goes up, supply goes down (intentionally), and we spend more time in school / training, and with more time off for having kids and in retirement. The trick is wrenching the equity out of its hiding places.

    • Bruce Olsen says:

      Well, the government should not run like a business. It’s one of the biggest fallacies there is. We should tax all the stuff you say, but for different reasons.

      Spend some time with MMT. Here’s a reasonable start, about 20 minutes with Bill Mitchell:

      And an hour-ten with Randall Wray:

      Have two hours? Try this:

      Apologies in advance about the multiple links.

      • earlofhuntingdon says:

        Neoliberalism argues that government should run itself like a business so that capital can impose on government the priorities that exclusively benefit capital.  The argument is entirely self-serving.

        The reality, as you say, is that government should not run itself like a business.  Nor should any other public body, from college or university to museum or homeless shelter.

        The goals of capital, on the one hand, and government and public service organizations, on the other, are fundamentally in conflict.  Arguing otherwise is capital’s attempt to win the argument before it begins.  We see a lot of that in politics these days.

        • Bruce Olsen says:

          Better to say that capital and government have different sets of goals. Some align (fostering basic research, which leads to thing like the internet) some are orthogonal (public libraries? capital is indifferent, though Andrew Carnegie saw the value) and some seem to conflict.

          But the conflicts aren’t always real. A narrow-minded business (which, perhaps, is most of them) will happily squeeze its workers ever more tightly in the name of short-term profits, and disregard the long-term loss of customers its actions cause. Part tragedy of the commons, part next-quarter mentality.

          In this regard government’s job is to ensure the commons is continually fed. Capitalists think they are the rightful beneficiaries of government action, everyone else disagrees.

          • earlofhuntingdon says:

            A narrow-minded business would be redundant.  Capital has decided that business can only be allowed to pursue the goal of increasing the worth of shareholders.  It seeks to prevent the business corporation, culturally and legally, from pursuing any other goal.

            Government’s responsibility, when not throttled by capital, is to pursue the interests of its citizens, the average citizen as well as those holding capital.  Debates about how that should be done and who merits benefiting from it have been going on since Hamilton led the Treasury.

            Most people do not hold capital more valuable than a lottery ticket.  Their interests are basic: food, shelter, medicine, education, transportation, and work needed to obtain the foregoing.  They want their interface with government to work well and promptly, and to be treated fairly and consistently.  Those aspirations sometimes come true.

            They want their interface with capital to be the same. But because of inherent inequalities of power, they want and need their government to prevent capital from fouling their homes, water, air, and land for the sole reason that it is cheaper to throw those costs onto others. Theoretically, that leads to balancing interests; more practically, it leads to conflict.

            Andrew Carnegie, like FDR, was considered a traitor to his family and his class when he outrageously gave away his money to help anonymous others.  That he benefited millions was irrelevant to capital, but not to society.

            Education is useful to government in that it breeds common purpose, acceptance of its norms, and conformity.  It channels energy into functions the government finds useful – and away from activities and perspectives it does not.  That’s one reason why textbook content is so politically charged in Texas.

            Infrastructure, such as post-WWII road building or the Internet, while useful to people and business, is an investment in national defense.  It protects the citizenry at large, but more directly, it protects politicians and parties, and the businesses who fund them.  Ag subsidies, too, ensure food supplies and lower social unrest, but whereas they once went to people, they now overwhelmingly go to industrial businesses.

            Today’s owners of capital would return us to the heady days before regulations protected, food, water, the environment, the workplace, and the business of extending credit, and before unions and income taxes.  Back then, it was white protestant men in smoke-filled rooms who did the people’s business, if indirectly, by pursuing their own.

            No, I would say government and business, while they can help or hinder each other, are in fundamental conflict.  That’s one reason business decided by the late 1960s to take a much more aggressive, overt role in controlling it.

            The Powell Letter did not create a movement, for example, it recognized one. Since he wrote it in the 1970s, we’ve seen development of a plethora of think tanks, coopted universities or departments, a plague of lobbyists and pay-to-play legislators, and construction of a detailed nomenklatura of politically reliable talent, most visible during the Bush/Cheney administration.

            Karl Rove once set himself the goal of owning every state judge in Alabama. He succeeded. He expected thereby to win for his party every legislator and business, thankful at his removal of a venue through their enemies could attack them – and, in the case of Democratic-leaning plaintiffs lawyers, shrink their funding.

            Having tested the idea, it is now being put to work nationally. Brett Kavanaugh is an example of both trends.

  6. James Moore says:

    Surely a definition of Capitalism requires an explicit foundation reference to it being a system of social relationships – otherwise you are left with a passive definition of things and externalities.

  7. Ed Walker says:

    @Ken Muldrow above raises the issue of the morality of capitalism, a fascinating issue.

    1. We have made work a moral issue. You have to work, or you aren’t a good person. That surely plays directly into the hands of the capitalists.

    2. Neoclassical economics has at its heart a moral point: a simple Benthamite utility, the idea that an increase in the benefit to one person that outweighs the detriment to another is moral. It plays out in ideas like Pareto Efficiency, and in judging the overall benefits of a policy choice. I don’t think much of it, but that’s for some different book.

    3. The four points I raised are simple observations about the way things are working. They are supported by an ideology. I think the morality issues are resolved in the ideology, not the observation. For example, feudalism was supported by a religious morality, not one in the Bible, but one constructed to support the system. The Bible doesn’t really say that the King of France is appointed by the Almighty and is his representative on earth, or that the aristocracy shares in that glorious power. Certainly the French don’t see themselves as the Chosen People, so the parallel to the Kings of Israel falls on its face. But that was the rule.

    • earlofhuntingdon says:

      As you say, an entire topic of its own.  Work is a moral obligation for the wage earner because capital imposes on the wage earner an unremitting obligation to repay capital. 

      Coupon clippers are free to lounge, attend their private clubs, or scour their past with the gentle brush of a voluntary philanthropic present.

      The vaunted and heavily capitalist-sided Protestant ethic ignores the biblical recognition that debt relief must be routinely and periodically available for any society to be healthy and to function.

      Capitalism arrogates to itself the status of a religion, but it’s a religion shorn of justice and mercy, retaining only unquestioning (unthinking?) obedience and punishment.

  8. Willis Warren says:

    Keynes’ big contribution was that only gov’ts can mobilize to offset economic downturns that can turn into panics.  It’s a simple enough idea and it’s been attacked and misrepresented by every thinktank you can think of.

    Most of my online flame warring since 1999 or so has been with libertarian propagandists, many of whom conflate Keynes with Marxism.  Libertarians infiltrated the Republican party sometime during the Reagan administration, most likely when Charles Koch figured out his ideas were too batshit insane to win a popular election.

    The debate about what role gov’t should play in an economy is not possible at this time.  It’s a good and necessary debate, but extremists on the right prevent it from being honestly and openly discussed

  9. earlofhuntingdon says:

    The Palgrave Dictionary definition of capitalism is so rudimentary as to be useless. A basic issue is that it claims capitalism is a “political, social, and economic system,” then proceeds to minimally describe a narrow set of its economic features, focusing on a handful of issues that relate to “price,” presumably of some good or service. Were its political and social attributes too difficult or too explosive for Palgrave?

  10. Harold T Sansing says:

    This entire discussion appears to be frustration with systems that do not perform as desired. I suggest all participants take a break and obtain a copy of Gerald M.Weinberg’s, “An Introduction to General Systems Thinking.” An oldie of course, but pertinent for an occasional redirection of group thinking. A quote by Bertrand Russell is on the frontispiece, to wit: “Boys and young men acquire readily the moral sentiments of their social milieu, whatever these sentiments may be. The boy who has been taught at home that it is wicked to swear loses this belief when he finds that the schoolfellows whom he most admires are addicted to blasphemy.”

    • Ed Walker says:

      No one thinks systems work well all the time, or even most of the time. Mostly we can accomodate to the systems and change them over time.

      The problem is that this system is going to kill us by wrecking the planet.

  11. Tommy D Cosmology says:

    To Bruce Olson (from above):
    I enjoyed the videos very much, thank you, but I am left with a couple of questions:
    Are we anticipating the consequences of technology replacing labor, or even appreciating the effects that are happening already? The effects vary across industries and geography and disproportionately affect different groups. Obama (and many others) spoke of the dignity of work, I think there is something to that. Somehow, I think labor must be valued more and the way to engineer that is to decrease supply (number of years we work) and increase the price (wages). A guaranteed minimum income is part of that solution.

    I couldn’t figure out from watching the videos if the debt ever gets paid off (or down) and how—and which ways of paying it are best? I still think an asset tax is the best way to get parked money moving, especially by those who are hiding it in offshore accounts and dodging taxes. This method works in currency-generating and non-currency generating countries. It is merely scooting along money that is otherwise idle, and an economy is (yes, many things) money in motion.

    To our blog author, Ed:
    I’d like to address the somber tone: I’m a process engineer, and I have hope that those with the best ideas, plans, and with the best intentions (“objective functions”) will find the optimal solutions. I’ve seen industry and government work well together (e.g. in Denmark) and something tells me that in capitalism it will be the consumers and shareholders that rise up and demand sustainability and fairness. This is not anathema to corporate executives, at least the ones I know (ok, 80% of those that I know, the others are sociopaths). It (fairness) is anathema to the plutocrats and bigots, but we outnumber them. The person to persuade is the moderate conservative. Surely they are getting uncomfortable with the bigots and abject greed by now….right?

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