What is capitalism?

Jun 24, 2014

Photo: Joel Northam

The economic reality of the United States today is one of vast inequality in wealth and living standards. At present, 31.1 million households do not have enough food to eat in an average year. Housing within the means of average Americans is increasingly scarce, forcing people, including families, to live on the streets. Even for those who are insured, medical care involves ever-increasing costs for routine and critical care.

This suffering is not evenly distributed among the working class. Almost half of all Black children today grow up in poverty, compared to 15 percent of white children. The Indigenous nations that predated the United States, their land stolen and most of their population slaughtered, have had only small tracts of land returned to them, where incomes are markedly lower than the rest of the nation, and acquiring medical care and other basic needs is a struggle for many.

This is notable in itself, but it stands in stark contrast to the lifestyles of a privileged few. With the exception of the 2008 financial crisis, the country’s GDP has grown every single year for many decades. Worker productivity has skyrocketed, yet the value created did not accrue to working people suffering in intense poverty. So where has all that value gone?

Wealth accrued to a very small number of people in the United States while the many go without. Of the richest ten families on the planet today, half are U.S. citizens. Of the ten wealthiest individuals on the planet today, seven are U.S. citizens. The three people at the top of this list have a net worth as equal to that of the poorer 50% of the country combined.

The United States is only one among many nations in which this state of affairs can be seen: widespread, profound lack, among more than plenty concentrated in the hands of few. The situation replicates itself on a global scale as well: the pervasive lack of basic needs for the many in the United States stands in the shadow of an ever more pervasive lack of basic needs endured by workers in South America, Africa, or many parts of Asia. This is reflected in the fact that eight people alone hold as much wealth as the poorer 50% of the entire world combined.

The phenomenon of plenty for the few, and little for the many, is representative of an economic arrangement that spans nearly the entire globe. That economic arrangement is Capitalism.


Capitalism is not one or another set of government policies. It instead describes a manner of arrangement of society on the most fundamental level. It describes a way society is arranged with respect to the production of goods, the things that people use in the course of their lives. To put it succinctly, capitalism is an economic arrangement in which the means of production are privately owned.

The means of production are things like machines and raw materials used to produce goods and services of any kind. Under capitalism these are privately owned by wealthy individuals and corporations. Thus, although workers do the actual work, what they produce is owned by the capitalists.

The working class operates machinery belonging to the capitalist class, producing goods that the capitalists bring to market to sell. What is significant about the sale of goods on a market is that the capitalist returns from a sale of goods with more money than they invested, or that they spent on means of production and wages. Where does that extra value come from? The capitalists could not simply have gotten a good deal on their machines; and not every boss can hire their workers below the going rate. Rather, the capitalists’ profits come from the labor of the workers. The capitalists accumulate wealth because the workers created that wealth.

The accumulation of capital

Workers, when they have money, spend it on the things they need: food, shelter, health care, transportation, and the like. Capitalists spend money on all of these things too, of course, but this is not what they use all of their money for. In fact, the vast bulk of capitalist profits are reinvested into their corporations, so that they can increase production, create ever more wealth, and repeat the cycle. Capitalism is a never-ending cycle of the accumulation of profits, and it functions this way independently of the wishes or intentions of any of the capitalists. Capitalism has a life and logic of its own.

The capitalist wealth that is constantly deployed simply to produce more wealth is called capital, and the fact that it is perpetually accumulating under capitalism Marx referred to as its “self-expanding” nature. That capital is necessarily self-expanding means that capitalists, despite controlling society through their control of production, must, in the end, put profit before all else. Common sense, ethical decency, rationality — profit comes before any of these. This is why we see, today, a Pacific Ocean that is essentially a global-scale garbage dump; a rapidly deteriorating ecosphere; and a climate that will one day no longer sustain human life. Even the principles of ecology that dictate the future of all life come before the accumulation of capital.

This is the purpose to which society in its entirety is oriented under capitalism: the accumulation of profit. Education, for instance, prepares individuals to participate in the capitalist economy: workers receive training adequate to prepare them to work and produce wealth for the capitalists; the capitalists receive training in order to manage their affairs and the affairs of the capitalists in general. It is even common for political debates about education to be framed this way: what model of education best prepares workers to participate in the economy? Some argue that there need to be more trade schools for workers, others that workers should learn science and technology; some question whether the majority of workers need education at all. The question of education for the capitalists is no topic of political debate, of course; education for capitalists serves the valuable purpose of reinforcing their own status within the capitalist system, and therefore will exist in exactly the forms they desire, for as long as they hold political power.

Under a capitalist society, basic necessities are not produced because people need them. Rather, they are produced in order to facilitate the accumulation of capital. Houses are not places to live, according to capitalist logic; they are things to be sold for profit. This is why so many houses remain vacant while so many people struggle to keep a roof over their head. It is why so many in the United States go without health care despite the fact that there are 1 million highly-trained medical doctors and over 5,500 hospitals in this country. It simply is not profitable to share health care with those who cannot pay the right sum. Health care under capitalism is not to keep people healthy, but a source of revenue. An economy oriented toward accumulating capital is specifically not one oriented toward meeting basic human needs.

Accumulation and the Status of the Worker

Because each capitalist wants to accumulate as much capital as possible, they do everything possible to increase the rate of production, including investing in labor-saving technologies. This means production becomes more efficient, yet fewer workers are needed, creating an “industrial reserve army” of unemployed who are willing to accept employment for lower and lower wages. In pursuit of accumulation, the capitalists push workers fortunate enough to have employment to work more intensely and for longer hours. For instance, it is well-known that over the past few decades, productivity in the United States has skyrocketed, while wages and employment levels have fallen and prices have risen. Marx puts the point in vivid language. The accumulation of capital

“establishes an accumulation of misery, corresponding with accumulation of capital. Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, agony of toil slavery, ignorance, brutality, mental degradation, at the opposite pole, i.e., on the side of the class that produces its own product in the form of capital.”

Capitalism and bigotry

By pitting workers against one another, the capitalist class weakens the working class as a political force and makes it more difficult for workers to fight for higher wages, better working conditions, and its other interests. In colonial America, the capitalist class feared unity between Black and white indentured servants, and intentionally elevated the status of the white worker, while forcing Black workers into slavery. Newspapers, politicians, and other ideologists encouraged the idea that Black people were a distinct kind of human being, a separate race, and that they were intrinsically stupid, childlike, and violent. In this way white workers came to identify their interests with those of the white capitalists, despite the fact that their interests are, as an objective matter of fact, diametrically opposed to those of the capitalists.

As a “self-expanding” system, capitalism drives wars, as the biggest capitalists seek to open up new markets in search of ever more profits. Workers have nothing to gain from these wars, and in order to convince the working class to fight in them, capitalists depict nations in a light that will justify their aggression. As U.S. aggression in the Arab world escalated, the country saw a new explosion of Islamophobia and anti-Arab racism. The people of the Democratic People’s Republic of Korea (North Korea) are depicted as brainwashed–the only conceivable reason they could support their own country–and their leaders as inscrutable and mad. Through such ugly forms of bigotry the capitalists attempt to garner support for their criminal wars that serve no benefit to any working person.

Patriarchal attitudes, like other forms of chauvinism, predate capitalism, but take on a new life under it. Historically, under capitalism, women have been expected to do domestic labor without pay. In order for the working class to produce wealth for the capitalists, they must reproduce themselves as individuals and as a class. Yet women, as domestic workers, do not receive a cent from the capitalists for their work. When women enter the workforce, capitalists frequently pay them less than their male counterparts in order to reduce the cost of doing business and maximize their profits. As in the case of racism, male workers are encouraged to look down upon women workers, impeding the unity that working class political power requires.

Capitalism and the state

It is clear that the present state of affairs is not oriented toward the well-being of the many, but only the few. Capitalism is an existential threat to our species. Many today recognize this. They seek to mitigate the damage that capitalism does to human beings and to the planet by electing politicians who rhetorically espouse noble goals and principles, who promise higher wages, new investment in public goods, to bring justice to oppressed people in the U.S., and to scale back the state of perpetual war. This rhetoric can’t be transformed into reality through the state.

No matter how sincere any elected official may be in their professed desire to change our present circumstances, they will occupy a role that existed before they ever assumed it, defined by a political constitution and centuries of legal precedent, in a state apparatus continuous with and financed by the capitalist class. The role of an official in the federal government, whether elected or appointed, is one that serves the interests of capitalist class.

The state under capitalism is no different than the state under any other any other economic system that differentiates classes: the state is a system for managing class conflict, under the direction of the dominant class. The state in a slave economy operates for the benefit and continued domination of the slave-owning class. In feudal society, the state operated for the benefit of its nobility, at the expense of serfs, merchants, and the like. Overthrowing capitalism requires overthrowing the capitalist state.

What Can Be Done?

Today workers continue to struggle for their rights and their well-being. Through union organizing, agitation, and struggle within the present political system, the working class has won reforms and protections. But those reforms immediately come under attack. Every accomplishment of workers’ struggle under Capitalism is transient.

The negation of capitalism is socialism. Socialism is a society where political and economic power is in the hands of the working class and the oppressed, instead of the capitalists. Socialism is a society where the basic needs of the population and the planet are planned for and guaranteed. With power in the hands of working and oppressed people, we can meet everyone’s needs and address all forms of discrimination and bigotry. As socialists we follow Vladimir Lenin’s words: “the abolition of every possibility of oppression and exploitation — that is our slogan!”

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