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Paul Bowles

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Paul Bowles

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About This Book

Capitalism stands unrivalled as the most enduring economic system of our times. Since the collapse of the Soviet bloc the world has become a new stage for capital, and yet despite this dominance capitalism is still not widely understood. It remains a subject of enduring interest that is discovered and rediscovered over time by each successive generation of students.

Exploring the life of this world-shaping system and the writings of leading thinkers, this study also now takes into account recent developments, including the impact of the Global Financial Crisis and the complexities of China's political economy. Paul Bowles addresses these key questions:

- what are the central, unchanging features of capitalism?

- how does capitalism vary from place to place and over time?

- does capitalism improve our lives?

- is capitalism a system which is 'natural' and 'free'? Or is it unjust and unstable?

- what about today's global capitalism?

- will capitalism destroy or liberate us?

This updated edition of a classic text is now supported by a comprehensive documents section, chronology and who's who, as well as a new colour plate section. It offers a concise, lucid and thought-provoking introduction for undergraduate students or anyone with an interest in this most pervasive, long lasting and adaptable yet crisis-ridden of economic systems.

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Part 1
Analysis and Assessment

How to think about capitalism


Capitalism is the most enduring economic system of our time. After a century of failed challenges to its dominance – from state socialist economies such as the former Soviet Union – the vast majority of the world’s population now lives in capitalist economies. However, despite its contemporary dominance, capitalism remains contested. World organizations such as the World Bank and the International Monetary Fund (IMF) and many world leaders promise that global capitalism will bring prosperity to us all. Meanwhile, ‘anti-globalization’ movements have been evident on the streets of major world cities from Seattle to Hong Kong, arguing that global capitalism will only bring more poverty and more environmental degradation and give more power to corporations. The Global Financial Crisis of 2008 provided another reminder of capitalism’s volatility and has sparked more protest in the form of those seeking to ‘Occupy Wall Street’. But capitalism’s pervasive grip on the daily lives of billions remains. Capitalism generates passion and sparks opposition. But how does capitalism work?
World Bank: Established in 1944 to finance and promote economic development.
IMF: International Monetary Fund, set up in 1944, and responsible for governing the world economy. Its methods for doing this have been the subject of criticism by many as being too favour able to rich country creditors and imposing too high burdens on poor country populations.
Battle of Seattle: The pro tests and street battles between anti-globalization activists and police which accompanied the World Trade Organization Ministerial meetings in 1999.
Capitalism certainly has daily familiarity. We are continually exhorted, by the close to half a trillion US dollars spent worldwide annually on advertising, (ZenithOptimedia (2011)) to buy this good or that good. Television channels find it necessary to inform us at hourly intervals of the latest gyrations of the stock market. The influence of capitalism can be found everywhere, including in our language – we ‘spend’ time, we ‘value’ friendships, we ‘earn’ respect. Even the mundane world of national income accounting is influenced, for example, in what we count as ‘economic activity’ – anything performed in the market sphere – and excludes other activities, such as working in the home. And yet, despite this pervasiveness, capitalism’s workings remain obscure. Why do we find works which offer us expositions on the ‘logic’ or the ‘essence’ of capitalism or the solution to its ‘mystery’? (See, for example, Heilbroner (1985), McQueen (2001) and de Soto (2000) respectively.) Why should capitalism require expositions of this kind? Why isn’t it obvious what capitalism is and how it works? Why is it, as Harvey (2010) says, an ‘enigma’?
One reason is simply that capitalism appears in a variety of guises across countries. For example, it has been described as ‘gangster capitalism’ in present-day Russia (Klebnikov 2001), as ‘welfare capitalism’ in Nordic countries, as ‘laissez-faire capitalism’ in Hong Kong, as ‘crony capitalism’ in parts of Asia and Latin America (Kang 2002 and Haber 2002), as ‘petro-diamond capitalism’ in Angola (Hodges 2001), and as ‘red capitalism’ in China (Walter and Howie 2011); and yet all are still capitalism. Capitalism not only varies across space, it also changes through time. For example, seventeenth century ‘merchant capitalism’ is in many ways vastly different from the ‘digital capitalism’ (Schiller 1999) of the twenty-first century; and yet, there are constants too.
Gangster capitalism: Type of capitalism characterized by lawlessness and private enforcement (often by force) of contracts.
Laissez-faire capitalism: Capitalism in which the market plays a relatively major role and the government only a minimal role. Similar to market capitalism and most closely associated with Anoglo-American capitalism.
Crony capitalism: Describes capitalist economies in which the relationship between government and business is too close giving rise to the possibility of corruption and crises caused by unsound lending practices.
Red capitalism: Description of capitalism in countries ruled by socialist or communist parties in which party cadres play important roles as economic managers motivated by profits.
Merchant capitalism: Early form of capitalism in which profits were made in the trading of goods.
Commodity fetishism: A term used by Marxists to describe the way in which we see goods as objects divorced from the human labour which made them.
Part of the challenge of understanding capitalism is therefore precisely that it is capable of exhibiting great variation across countries and through time and yet still retaining the common elements that enable all its varieties, spatial and temporal, to be similar at root. Capitalism, as a form of economic organization, is simultaneously adaptable, flexible and evolving but also contains constant and unchanging central features.
Another reason for the opaqueness of capitalism despite its daily familiarity is that, while capitalism has been described in the variety of ways just illustrated, it has also been a term that has been studiously avoided. ‘Capitalism’ is, as one commentator has noted, ‘a funny word’. As he explains, ‘just using the word – otherwise a neutral enough designation for an economic and social system on whose properties all sides agree – seemed to position you in a vaguely critical, suspicious, if not outright socialist stance: only committed right-wing ideologues and full-throated market apologists also use it with the same relish’ (Jameson 1991: xxi). Many have not wished to be so positioned – as either ‘suspicious socialists’ or ‘market apologists’. Capitalism has therefore been subject to ‘non-naming’. It is common to find a variety of terms to describe the contemporary world: the ‘information age’, ‘post-industrial society’, the ‘free market economy’, the ‘global economy’, the ‘postmodern or post-colonial world’, the ‘consumer society’ or the ‘network society’, to name but some of them. In all of these terms, the word ‘capitalism’ is conspicuous by its absence; and yet, all of them implicitly presuppose a capitalist economy.
To these reasons we must add a further explanation: capitalist societies are well practised in the art of concealing their workings. That is, we are invited to see the goods that the capitalist economy produces simply as objects and not as the products of labour and resources. Our lives as consumers and as producers are somehow divided. Accepting this division has been described by Marxists as ‘commodity fetishism’, as viewing goods as providing us with some particular qualities – glamour, sex appeal or whatever – rather than as seeing them as the output of a process of production involving people. Indeed, social activist and big business critic Naomi Klein (2000) has argued that we are increasingly being urged to define ourselves by our allegiance to particular corporate brand names – as a Nike or as an Adidas person, or as a Mac or an IBM devotee, for example. BMW advertises that it sells a ‘lifestyle’ rather than cars.
If we did think of goods as the outputs of processes involving people, we might be more inclined to ask who these people are, under what conditions do they work, and what are the environmental consequences of producing these goods. In general, capitalist societies do not encourage us to ask these types of questions. True, there are some exceptions: the ‘Fair Trade’ movement, supported by organizations such as Oxfam, has tried to impress upon us that as consumers we should be aware of working conditions and wage levels. We can then use our power as consumers to purchase those brands which pay their workers a ‘fair wage’, whether it be picking coffee or making souvenirs. The ‘no sweatshop’ campaigns in the clothing industry provide another example of the attempts to make us view goods as the outcomes of social processes. Many goods are now advertised as being ‘environmentally friendly’ although telling fact from ‘green washing’ is not always easy. But consumer and fair trade campaigns face an uphill task. Capitalist firms simply find it necessary – and easier – to bombard us with glossy images of satisfied consumers rather than to encourage us to dwell on production conditions and consequences. Occasionally events make us take notice of production conditions. For example in the summer of 2010 thirteen Chinese workers at Foxconn factories in China attempted suicide; nine were successful. Foxconn is the world’s largest producer of electronics components used in the computer industry. This brought an embarrassing spotlight on the industry but soon these events were largely forgotten and attention turned to the wonder of the apps available for iPhones etc. This was as true for Chinese purchasers as it was for others. Winner of an ‘Alternative Nobel Prize’ in 1993, Indian activist Vandana Shiva (2000: 112, italics added) went as far as to argue that there is ‘a deliberate production of ignorance about ecological risks such as the deregulation of environmental protection and the destruction of ecologically sustainable life-styles for peasant, tribal, pastoral and craft communities across the Third World’.
Fair trade: An idea, which grew into a movement, to channel more of a product’s selling price to its (usually developing country) producers who are often farmers and women handicraft workers. Concept of ‘fair trade’ now expanded to include goods produced respecting labour standards.
Third World: A term adopted by developing countries which sought to differentiate themselves and their interests from those of the First World (rich capitalist countries) and the Second World (Soviet socialist bloc).
Given these reasons why capitalism can be regarded as opaque despite its daily familiarity, it is now possible to deduce how to think about capitalism and what questions should be answered. When thinking about capitalism, three central issues need to be addressed. Firstly, what is capitalism and how does it function in an abstract way? That is, to identify the constants, the defining characteristics, of capitalism, and what they imply about the way capitalism operates. Secondly, why is it that capitalism generates such passion both for and against, to the extent that mere mention of the term is often avoided? That is, to examine the case for capitalism as a form of social and economic organization and to analyse why others view it as a form of organization which must be replaced. Thirdly, what are the variations of capitalism over time and space?
Thinking about capitalism requires us to think at several levels, as Box 1.1 indicates. We must think abstractly to identify capitalism’s central features, and think historically to chart variations over time and space. We also need to think normatively about how the present capitalist system works, that is, how desirable it is as a system for the organization of life, in order to understand the passion that it generates both for and against.
BOX 1.1 How to think about capitalism
  1. Abstractly – to identify defining characteristics.
  2. Normatively – to assess strengths and weaknesses.
  3. Historically – to see the variations over time and space.

Outline of the Book

These three levels determine the structure of this book. In the remainder of this chapter, I will set out the central features of capitalism, that is, identify and analyse abstractly those constant characteristics which are the defining features of capitalism. I will also discuss some of the ways of thinking about the periodization of capitalism, that is, the ways in which capitalism’s evolution over time have been interpreted.
In Chapters 2 and 3, I will present the normative arguments and review the cases for and against capitalism. I will present these cases through the ideas of some of the major analysts of capitalism, starting with works from the past such as those of Adam Smith and Karl Marx. There is a problem in starting from here, since the ‘capitalism’ which Smith analysed in the late eighteenth century and that analysed by Marx in the mid-nineteenth century differ in very significant ways from that which we observe in the twenty-first century. However, it is not possible to launch into an analysis of contemporary capitalism without first knowing something of its evolution and, equally importantly, knowing something about the early writers whose analyses have profoundly influenced the ways in which subsequent thinkers have approached the topic of capitalism. Chapter 2 presents the arguments made by the supporters of capitalism who view it as a system which is ‘natural’ and which makes us ‘free’. This is followed, in Chapter 3, with an overview of the arguments of those who view capitalism as a system which is better described as ‘unjust’ and ‘unstable’, and a discussion of the arguments which they have advanced for either the reform or the replacement of capitalism.
Chapters 1, 2 and 3 are mainly concerned with the analysis of capitalism as an abstract system. The rest of the book analyses capitalism historically. Chapters 4, 5 and 6 consider how capitalism has worked in particular societies. Here I will examine the forms that capitalism has taken in different countries (such as Japan and the United States). I will examine how capitalism has performed over the twentieth century with its periods of growth and recession. These three chapters therefore analyse variations of capitalism over time and space.
In Chapter 7, I will examine what we should make of the contemporary phase of capitalism, that of ‘global capitalism’. Is this a new stage of capitalism in which states are increasingly weakened in the face of powerful international market forces? Or is this a huge exaggeration with nation states still powerful? Should we think of global capitalism as a new form of imperialism? Or is regionalism really a more accurate description of the contemporary world?
Imperialism: The projection of economic, political and military power overseas to enrich and advance the interests of the home country.
Throughout the book, capitalism is analysed as a system. The ‘capitalist system’ is introduced as an abstract process, meaning that it has requirements and dynamics. The capitalist system is also introduced as a historical process, evolving over time in response to various pressures and forces. This idea of capitalism as a ‘system’ implies that its various parts are tied together by a set of processes which can be understood in a reasonably coherent way; it is precisely for this reason that many have sought to identify its ‘logic’ or ‘inner workings’. Search for underlying ‘truths’ or ‘logics’ is, according to some, a false search. It is likely to conceal more than it reveals and to impose commonalities where really there are only differences. This view, popular in contemporary social science under the banner of ‘post-structuralism’, is not one that is accepted here. Instead, I will argue that capitalism can and should be analysed as a ‘system’.
One implication of viewing capitalism as a ‘system’ is that it consists of interrelated parts. This enables us to see that the acts of consumption and production are part of the same process rather than separate activities; that is, it enables us to transcend ‘commodity fetishism’. It also means that the ‘capitalist system’ must be viewed as not only an economic system; although economic processes must be a central focus of any analysis of capitalism, other political and social processes also constitute parts of the ‘system’. This will become evident in the following chapters as the relationships between capitalism and democracy and between capitalism and social equity, to give two examples, are examined.

The Capitalist System: A Simple Definition and Some Not-So-Simple Issues Arising from it

What is capitalism? or, more precisely, ‘what is the capitalist system’? As noted above, Jameson (1991: xxi) argues that capitalism is ‘an economic and social system on whose properties all sides agree’. There is considerable truth in this, but the answer to my question is more complex than Jameson suggests. To start with the easy part, capitalism is a system for organizing production which is based upon the institutions of private property and the market, and which relies upon the pursuit of private profit as its driving force.
BOX 1.2 Capitalism: the defining characteristics
A form of economic organization based on:
  1. Private ownership of firms and society’s productive assets.
  2. The market, that is, the voluntary purchase and sale of goods, services and factors of production such as land, labour and capital.
  3. The profit motive as the driving force.
This is a relatively simple and straightforward definition which would not cause controversy. At this level, Jameson is right and this definition would secure widespread agreement; Box 1.2 is not controversial. However, if we delve a little deeper, then some points of contention do arise, contentions which have less to do with the definition of capitalism as a system in the abstract and more to do with its historical evolution. Let us briefly review some of these ...

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