Capitalism is a type of economy in which wealth is privatized, as individuals own the means of producing goods and earn a profit. This economic system has shown itself historically to be highly innovative, since some of the profit can be reinvested to improve the business, and private ownership entails competition between companies to solve problems by meeting or creating new demands.
There are economists and businesspeople who practically worship capitalism. They see the rapid technological advances, the enormous wealth created, and the trickling down of some of that wealth which eliminated much world poverty and created the “First World’s” so-called “middleclass.”
We take this progress for granted because we’re no longer acquainted with the ancient world which capitalism overcame, in which power and wealth were so unequally distributed that women, foreigners, and slaves weren’t entitled even to personal rights, let alone to property and the chance to start a business.
The major population-centers of the ancient world belonged to different empires, or to what Lewis Mumford characterized as “megamachines.” The monarch held absolute power and embarked on vainglorious feats of engineering such as the building of pyramids, or waged war to expand the empire. The king or emperor lived in luxury with his family and coterie of enforcers, while the majority performed their roles as farmers, labourers, or soldiers, earning very little for their efforts.
There were no such things as “people” in our sense of the term, in that the ancients didn’t think of themselves as having a common nature, and our genetic continuity hadn’t been discovered. The sense of our shared rights and purposes burst into being in the Axial Age revolutions, in the first millennium BCE. For the most part, though, the royals were effectively worshipped as divine, while women and slaves were considered property.
Capitalism and modern industry, then, were parts of a liberal humanist revolution in which science crippled the dehumanizing myths that propped up the ancient empires, while philosophers and economic theorists promised a way for secular society to ascend like the proverbial phoenix.
Not the divine right of kings, but sheer individual, animal selfishness would be the engine of progress. Pit individuals against each other in an organized struggle, allowing them to keep most of what they produce in the process and society as a whole would flourish as though an “invisible hand” were ensuring the outcome, as Adam Smith said.
With this long view in mind, there’s evidently some irony in treating capitalism as sacrosanct or in viewing the “free market” as a panacea, as though capitalism needed to be treated like ancient imperialism and defended with magical thinking and obscurantist bluster; on the contrary, the social progress should speak for itself. So let’s explore the irony by considering a few apparent drawbacks of capitalism.
Sustainability and the Environmental Crisis
Monarchs often sought to expand their reach by conquering territory and enslaving the local tribes, but in the long run, their advances were checked by their tendency to overreach, as the despots’ concentrated power made them decadent and myopic. Moreover, what one despot might gain, the next in line might lose, because the ability to rule was inherited rather than earned. Alexander the Great’s global empire crumbled soon after his death, for example.
Capitalists also seek to expand the reach of their businesses, to maximize profit and protect them from competitors, so that capitalist economies are fixated on the ideal of growth. Again, in the ancient world, the growth of territory was about glorifying the gods and the empire’s religious brand, and flattering the despot’s vanity. But in a capitalist society, growth is caused by the democratization of selfishness, which fuels the demand for technological advances and for the carving out of fiefdoms for every free citizen and worker.
The hoarding of wealth in the ancient world limited the growth of the civilization as a whole, since most workers were inured to the idea that they didn’t deserve to live like kings. But the liberal impetus of capitalism entails that even peons are equal to aristocrats in personhood, which means we should strive for a society in which we all have homes and our every home is our castle.
Combine that egalitarian deflation of ancient elitism with capitalism’s strength in innovation, and you can see how swiftly we come into conflict with the planet’s ability to sustain our economic adventures. The ancient world exterminated animal species and cut down forests too, but not with the superhuman efficiency afforded by science and capitalist industry.
The problem, then, is that that efficiency may be as short-sighted as the selfishness that fuels modern secular progress. To be sure, we have civic ideologies such as humanism and nationalism, which invite us to identify with groups and fight for larger causes. But these substitute religions are pale imitations of the ancient originals that science and philosophy made disreputable. In any case, these unifying ideologies are belied by the tangible social fragmentation, as profits are privatized, producers and consumers become jealous of their neighbor’s possessions, and as those who can’t keep up succumb to depression, anxiety, or opioid addiction.
If the goal of economic growth is to feed the selfishness of the masses, and this growth comes into conflict with the planet’s finite resources, capitalism as such may be unsustainable. At least, if the liberal ideal of economic growth is presumed to be infinite, the growth will soon have to be carried out off-world, which is a dubious proposition; otherwise, the fallout from global warming should make capitalist progress untenable.
Sustainability and Worker Alienation
There’s a second threat of unsustainability for capitalists, which Karl Marx explained, although his best insights are mixed up with his speculations about how the problem would inevitably be resolved.
Marx pointed out that there’s an inherent dichotomy in capitalism between the owner and the worker, the “bourgeoisie” and the “proletariat.” Although everyone may have the legal right to start a company in a capitalist society, the notion that everyone might be an owner or a “capitalist” in the narrow sense isn’t even theoretically coherent. If you start a business and it succeeds, you’ll need workers who couldn’t, then, serve as owners.
Moreover, natural differences between our skills and interests, together with the ever-present role of luck in our affairs mean that some businesses will be more successful than others, and in the struggle to compete, some people will have to settle for jobs that pay only meager wages.
The upshot of that dichotomy, for Marx, is that the lower class will be unfulfilled and estranged from their natural drive to be in control of what they create. Workers are paid a wage for their labour, but the lion’s share of the profits goes to the owners who are free to reinvest it or to use it to live like kings. There’s a division of labour in capitalism, so that workers join a company and must perform their menial tasks, while the decisions are made at the executive level. The workers surrender what they produce to the company, of course, because the workers don’t own the company, the materials, or the equipment.
But there isn’t just a division of labour in capitalism; for Marx, the concept of profit in this system is inherently exploitative, since the owner extracts surplus value and maximizes profit at the expense of the workers, necessarily paying them less than their work is worth. There’s little defense in saying that the value of labour is subjective, since this would only raise the question of why the owner would choose to ignore so much value brought by the workers, including their education, life experience, and roles in the community, when deciding what to pay them. Whether the assessment of the workers’ value to the company is objective or arbitrary, the wages are exploitative, considering the profits that don’t go to the workers.
The owner isn’t exactly the villain, though, since the capitalist system imposes restrictions on both the owners and the workers. If the owner pays the workers more, the company may not be able to compete with more ruthless companies.
In any case, there was a division of labour in ancient societies, too, and a comparable degradation or self-alienation of the workers, but there are some crucial differences between the ancient and modern varieties. First, the ancients had operable myths and religions that justified their class divisions, whereas modernity and the scientific worldview tend to deprive us of those defenses.
For example, we can say that we get what we deserve in a competition, depending on how hard we work, but this familiar justification turns out to be extremely thin. Luck and the unearned natural differences in our strengths and weaknesses mean that a marketplace isn’t much like a wholly fair game such as chess or baseball. In scientific terms, our skills have no inherent value. The differences in wealth we end up with may be just as much brute facts as the variation between our heights: these aren’t entirely earned or justified so much as they’re objective outcomes we have to live with. The capitalist struggle promotes the impact of our traits, by enabling us to capitalize on them or to fail utterly as a result of them.
The second difference in the ancient and modern divisions of labour is due to the rise of liberal individualism: workers in the ancient world had no right to appeal or to revolt or unite in protest against their conditions. They had the physical capacity to do so, but they would have been hemmed in by their theocratic culture. By contrast, workers in a free market are empowered to protest their poor treatment by forming a union, going on strike, boycotting the company, or by acts of civil disobedience.
Marx’s prediction, then, was that eventually workers would go a step further and abandon capitalism and the bourgeoisie altogether in favour of a communist system in which the workers own a share of the means of production, and class differences are abolished. The details of Marx’s theory needn’t concern us here. But the main point that capitalism involves class struggle which carries the seed of capitalism’s termination in another mode of production is hardly as farfetched as many blinkered defenders of capitalism presume.
Technological advances such as the internet and social media already establish, in effect, a collectivist system that’s more like a giant library than a set of businesses. Also, there’s currently a global grassroots backlash against the neoliberal consensus on capitalism, although this backlash is being led by right-wing populists rather than by left-wing critics of capitalism.
The Ruse of Self-Regulated Capitalism
The question of whether capitalism might come to a dramatic end either in the rise of communism or in a populist return to theocracy or kleptocracy may be mooted by the third criticism, which is that capitalism has always been something of a ruse.
It’s not just that capitalism is inherently unstable, as Marx said; rather, capitalism has never been as revolutionary as we’ve been led to believe. Yes, under capitalism there’s private profit and ownership of business, and amazing innovation and wealth creation. But the selfishness at the heart of capitalism has always conflicted with the promises that this kind of economy would be self-regulating and that a capitalist society would be culturally compatible with liberalism.
Self-regulation and liberalism really would be revolutionary, but despite all its wizardry in applying scientific advances to technological products, capitalism imposes thinly-disguised versions of premodern class divisions.
A striking thing about capitalism is that the so-called invisible hand has to be made visible to avoid economic catastrophe. The more deregulated the market, the more the businesses proceed in starts and fits, in a boom-and-bust cycle that can lead even to a depression or a failed state. The government has to intervene to bail out certain parties and jumpstart the economy. The Great Depression, for example, ended due to government spending and mobilization in WWII.
So the early-modern promise was that the unleashing of mass selfishness would work out for the best, because competitors would strive to meet the demand. If you were in the market for a sandwich, for example, you would have many to choose from, sold by numerous competitors and each priced fairly according to what the market can sustain. Should you find an overpriced or otherwise flawed sandwich being sold, you could avoid that producer in the future, and if enough customers were to do so, that would signal to the sandwich seller that she had better modify her techniques or go out of business.
But in practice, the struggle between competitors which brings the price down and the product’s quality up is only an initial or artificial stage in the development of capitalism. What tends to happen is that the winners and losers sort themselves out, and the winners consolidate their hold over the market by buying up or bankrupting competitors until the winning companies become monopolies or oligopolies that are too big to fail and are more powerful even than the government. Once again the government has to intervene with antitrust regulation to maintain its power in society.
Walmart, Amazon, Facebook, Disney, Coca-Cola, and from an earlier time, American Tobacco, Rockefeller’s Standard Oil, and Carnegie’s Steel Company—once such behemoths are formed, they become parasitic rather than self-regulating and may have to be broken up or otherwise modified by the government for the public good.
The Ruse of Liberal Humanism
Instead of treating the customer as king and striving to meet the existing needs and demands in the marketplace, companies learned, after Freud, that they could manufacture demands by selling to unconscious desires associated with their products. Instead of selling just a bottle of beer, you could sell the associated sex appeal. This makes a mockery of capitalism’s liberal fanfare, since business and advertising are no longer premised on the idea that individual customers are autonomous, rational, and virtuous.
Remember that capitalism was meant to be part of a meritocratic revolution that would bring down the decadent aristocracy, forcing everyone to work hard to earn a living. However, the American middleclass was produced not so much by free-market capitalism, as by the New Deal and American advantages in the aftermaths of the world wars. The “libertarian” spirit of deregulation weakens and deligitimizes the government, helping to clear the way for plutocracy and for the capture of regulatory bodies by powerful special interests. These interests exert their freedom from cultural checks and balances, becoming increasingly cavalier and corrupt until their short-sighted practices blow up the economy, as happened in the US in 2001 (the dotcom bubble) and 2008 (the real estate bubble).
Beginning in 1980, the real economy became dwarfed by finance and by the earning of rents on trillions of otherwise inert dollars that are used to speculate or that are parked in hedge funds or stock buybacks. As one article puts it, the financial, banking sector has “accelerated the ‘slow retreat’ from providing credit for productive investments to fund speculation for short term gain from unproductive investments.”
Moreover, “Reversals of capital inflows trigger sharp drops in asset prices, typically triggering systemic problems, sometimes destabilizing the real economy via violent price fluctuations, or worse, cataclysmic financial crises that may take years to recover from.” Plus, “the overblown financial sector sucks financial resources and human talent away from the real economy.”
In short, whereas capitalism was heralded as a liberal humanist challenge to ancient imperialism and to the elitist degradation of the masses, capitalism re-imposes virtually the same class divisions. Instead of monarchs we have plutocrats; instead of kingdoms, monopolies or oligopolies; instead of empires, transnational corporations; and in place of slaves, we have wage earners stuck in dead-end jobs whose future is held at the mercy of a cabal of billionaire predatory financiers and speculators that blow up the economy once a decade.
The Double Irony of Capitalism
It’s as though there were a default, inhumane social order, cobbled together over millions of years of evolution of the dominance hierarchy, which seeps back into any attempt at progress, re-establishing the grotesque social inequalities in spite of all the liberal, socialist, or even communist rhetoric. Once again, there’s a tiny minority of ultra-rich elites living like gods or emperors, and the equal theoretical personhood of the billionaire and of the average worker—whose wages have been stagnant for decades in the US even as productivity has gone up—is hardly much to celebrate.
The automation of work helps complete the picture of neofeudalism and pseudomodernity, when hundreds of millions of workers will become useless and irrelevant to the movers and shakers, as Yuval Harari has said. Long ago, slaves and peasants were disposable to the royals, and it’s hard to see how the hollow rhetoric of liberalism can prevent a return to a similar harsh reality.
There’s a double irony, then, in the libertarian’s or the neoclassical economist’s faith in the miracle of capitalism. Again, capitalism was supposed to end the ancient megamachines which had to be supported by religious propaganda, since capitalist progress would be secular and manifest. But for all the private ownership of businesses and the liberties of the individual, the old societal divisions present themselves again in new garb.
The first irony, then, is that modern progress would have to be supplemented by a kind of theology, by the economist’s and the neoliberal politician’s sanctifications of capitalism. But the second irony is that this magical thinking about capitalism may be apt, after all. Let’s pretend a deregulated market is self-governing and tends to reach a favourable equilibrium, and let’s celebrate our equal rights and freedoms as persons—just as the ancients deferred to their myths to overlook the gross injustice of their social arrangements.