What is Capitalism?

The late, great Ernest Mandel who was banned from entering the US for much of his life, wrote what is probably the very best introduction to Marx’s Capital ever written. Though trained as an economist, Mandel had a knack for explaining things in a simple, straightforward way that most people could understand. His long book on Marxist economic theory is really a remarkable achievement and demonstrates that even though Marx, like any important thinker, had flaws, he was also remarkably brilliant. One can use Mandel’s work to understand the ways that Marx outlined the complex ways in which capitalism functions and, amazingly, the ways that it continues to develop in ways that Marx’s ideas suggest it would.

One of the most interesting passages in Mandel’s introduction to Capital is found on page 82 of the Vintage paperback edition (1977) and concerns the definition of Capitalism. Now, defining an economic order is an immensely difficult conceptual task for many reasons. In the age of post-structuralist thought, so-called “meta-theories” are usually considered more than a little dodgy and maintaining a strict definition of an economic or social order is bound to not only find detractors but also to incite conceptual resistance. I fully understand, and often sympathize with this resistance, but I also understand the need for practical thought that helps to focus and encourage political and social activism. With this in mind, I give you Mandel’s outline for the conditions that define a capitalist order.

“(1)the fact that the mass of producers are not owners of the means of production in the economic sense of the word, but have to sell their labor power to the owners. (2)The fact that these owners are organized into separate firms which compete with each other for shares of the market on which commodities are sold, for profitable fields of investment for capital, for sources of raw material, etc. (that is the institution of private property in the economic sense of the word);  (3) the fact that these same owners of the means of production (different firms) are therefore, compelled to extort the maximum surplus-value from the producers, in order to accumulate more and more capital – which leads, under conditions of generalized commodity production and generalized alienation, to constantly growing mechanization of labor, concentration and centralization of capital, growing organic composition of capital, the tendency of the rate of profit to fall, and recurrent crises of over-production.”

Now, with a few addendums, I find this to be a remarkably cogent statement of explanation which, though written forty years ago, is still relevant today. Keeping this definition in mind also helps us understand certain apparently contrary elements in our modern capitalism. One thing that Mandel’s outline helps us remember is that even though large modern governments contain many social-democratic elements, they still function largely to grease the wheels of an increasingly globalizing capitalist order. In fact, putting aside the various socially-minded programs instituted in the last couple of generations (and these, though now being lost, are still very important), government increasingly exists to maintain the power and dominance of a relatively few very large corporations that actually dominate the economic production and distribution at a global level. In recent years we have seen a much greater concentration of wealth which is a direct result of the capitalist order as outlined by Mandel, and this concentration is integral to the nature of the capitalist order in general, and attempts during the 20^th century to mitigate it were quickly overridden by a more or less open conspiracy between big-capital and government.

Another thing that Mandel’s outline reminds us of is that modern forms of “command-capitalism” such as fascism or that which we see in the modern Chinese state are the exact opposite of socialism. Despite the fact that deeply ignorant people imagine that because the NAZI party had the word “socialist” in its name, fascism had (and continues to have) nothing to do with socialism and is in fact a form of command-capitalism. Hitler’s use of the word “socialist” was purely strategic and his party in fact functioned to maintain the very order that Mandel has outlined above. (Let us not forget that Fortune Magazine once said that Fascism was the future of Capitalism) Similarly, though the Chinese government which calls itself ‘Communist’ (never underestimate the Chinese wit), it oversees a system that is distinctly capitalist in nature.

I encourage everyone to read Mandel’s work to aid in the understanding of our modern capitalist order, a system that is increasingly lopsided at a social and economic level. Though modern technological gadgetry convinces people that they are prosperous even when they are not, economic exploitation and monetary inequality are leading to political inequality and an increasing misunderstanding of the economic order in which we live.

Who said it is a free country – your rent is due.