Capitalism and Socialism
The Cause of the Trouble
‘Socialism’ is a word that was coined almost two hundred years ago.1
In practice, it can mean many different things. But, in principle, it means something simple. It is the belief that the quality of human life can be improved if people are enabled and encouraged to cooperate for the common good, rather than being forced to compete among themselves for access to resources, power and status.
So why should anyone believe that this nineteenth-century philosophy could have the answer to twenty-first-century problems?
Because our major problems today have exactly the same cause as the major problems faced by people in the early 1800s: industrial pollution, urban squalor, growing inequality, social insecurity, a widespread sense that society was falling apart and that nobody knew what to do about
it, while a few were getting very rich as a result.2
The Cause of the Trouble …
The most obvious cause of such problems is, always, technological change. The Industrial Revolution swelled the cities of Britain, poured smoke into the atmosphere and spelled the end of an older, agricultural way of life. In recent decades, the revolution in information technologies has made it possible for jobs to be relocated from one side of the planet to another at the click of a mouse, producing insecurity and inequality all around the world. Millions have been forced to migrate or reinvent themselves in the search for steady wages. Global trade – dependent on road, sea and air transport – has accelerated to the point where climate change threatens the very viability of life on Earth.3
But social changes like these are never simply the direct effect of new technologies. It was never inevitable that the invention of steam power, canals and railways would lead to grinding poverty in the cities of northern England. In the 1960s, many commentators assumed that the development of computing and robotics would make us all richer
and happier: we would work shorter hours, communicate instantly, and be free to fill our days as we please, because machines would be doing most of the work.4
Things could have turned out that way; but they didn’t.
In each case, the way things have actually turned out has been the outcome of technological change taking place under very specific circumstances. Some people have made themselves rich and powerful mostly by using those technologies in order to make things and sell them.
But the best technology in the world cannot enable an individual entrepreneur, or a chief executive, to make and sell things without help from other people. Those other people have to be paid. And, if they are paid too much, it will not be possible for the entrepreneur or corporation to accumulate vast profits. So, for the most part, corporations and their chief executives used new technologies to try to keep down their wage bills, at their own workers’ expense, whenever the opportunity presented itself.
For all this to happen, the social circumstances had to be right. There had to be a small group of people rich enough to use the new technologies in these ways. There had to be large numbers of people around who had no choice but to work for the wages that they were offered. There had to be a whole legal system in place, and a culture, that treated the accumulation of vast profits by private individuals or corporations as legitimate, legal, and morally acceptable. These conditions actually wouldn’t have obtained in most human societies that we know to have existed since Homo sapiens first appeared as a species. But they did in many European countries by the end of the eighteenth century. And they soon would almost everywhere else.
There is a name for this specific set of social circumstances: ‘capitalism’. This term refers to a situation in which private individuals or corporations are allowed to use any means available to them – short of openly violent coercion – to accumulate vast profits from the sale of commodities, even if, in the process, they are paying workers very low wages, wrecking the local environment, or forcing people to change their way of life against their will.
This was already happening in the early nineteenth century and is still going on today. It is in the pursuit of unlimited profits that corporations undertake fracking, chop down rainforests, and belch carbon dioxide into the atmosphere. When companies relocate manufacturing plants from one country to another – disrupting communities, spreading insecurity throughout the working population of a whole region – they very rarely do it because they absolutely have to in order to make any profits at all. They do it because, however much profit they are making at that moment, they will make even more if they move.
Why Is It Called ‘Capitalism’?
‘Capital’, in the economic sense of the term, refers to wealth that exists in a form that allows it to be invested, or lent (and often this means the same thing), in the expectation of returning a profit: a profit that will take the form of more capital.5
‘Capitalism’ is a word that only started to be used towards the end of the nineteenth century, but the term ‘capitalist’ had already been around for decades, designating someone who profits from his or her ability to invest capital. And, at its simplest, ‘capitalism’ can mean only this: it can just be a word for what capitalists do, which is to invest capital with the aim of increasing their total stock of capital. As we will see shortly, ‘capitalism’ can
also refer to a whole way of ordering society, and to a set of values and beliefs about how society should be ordered. But at its most basic it can simply refer to a type of activity: investing capital with the aim of accumulating profit in the form of more capital.
This is what economists call ‘capital accumulation’. This isn’t the same thing as merely making profits. If you generate a lot of profit, but you use it all to finance a luxurious lifestyle – or even just to keep yourself and your employees comfortable – then you are not necessarily doing capitalism. Capitalism is what you are doing once the accumulation of further capital becomes the principal objective of your activities. So ‘capitalism’ can just mean the pursuit of capital accumulation through investment.
But nothing is that simple. For one thing, even before Karl Marx (the greatest analyst of capitalism in the nineteenth century)6
began writing, economists were clear that the profitability of such investment was generally dependent on capitalists employing workers, while paying them as little as possible for their work.7
This doesn’t mean that every business owner who employs a couple of dozen people is an enemy of the people. In fact it doesn’t mean that such a person is necessarily a capitalist: if he or she is not engaged in a relentless
pursuit of unlimited profit, then it might be that he or she is not really practising capitalism at all. On the other hand, it does mean that, even today, every profitable ‘investment’ that is derived from the pursuit of capital accumulation is always dependent on the exploitation of someone’s labour somewhere. If your pension fund owns shares in Apple or Facebook – two organisations that are absolutely committed to capital accumulation – then the profits that accrue from those investments don’t simply materialise out of thin air. They are dependent on the labour of actual human beings: assembling phones in China, coding in Bangalore, moderating ads from Menlo Park.8
A World of Commodities
So ‘capitalism’ is the practice of accumulating capital through the exploitation of wage labour to produce commodities for sale.
A commodity is anything that can be bought and sold for profit, and there have been commodities throughout recorded history. But in Europe a number of step changes occurred between the fifteenth and the nineteenth centuries. Colonialists ‘discovered’ new commodities such as tea, sugar
and coffee; they also ‘discovered’ new populations around the world to whom they could sell other commodities (textiles in India, firearms in Africa, opium in China, etc.). The Industrial Revolution made possible the production of commodities on a completely unprecedented scale; it also disrupted rural economies based on subsistence farming and local crafts, leaving city dwellers having to buy all kinds of things (food, clothes, furniture) that they would once have made for themselves or acquired from a skilled neighbour.9
The result is that today we live in a society in which almost every object we ever touch is a commodity. This is a strange situation. Even in Britain, the first industrialised country, less than three hundred years ago most of the physical objects in most people’s lives – their food, their clothes, their tools, everything – would have been made by themselves or by someone that they knew. Now we live in a world in which our entire material culture is a product of capitalism.
This has dramatic effects on how we relate to the world and to the other people in it. We are surrounded by all this stuff – everything from pens to cars to houseplants to icecreams – and all of it is made by people. Those people actually have to cooperate with one another on a vast scale in order to make it and get it to us: their activities have to be coordinated in factories, in global distribution networks, in retail outlets and in packing warehouses. But all that cooperation tends to be invisible to us. All we see is the stuff. We tend to behave as if the stuff has come out of nowhere and has a magical life of its own. Marx called this ‘comm...