Private appropriation of the means of production and the division between capital and labour
One fundamental element of capitalism is the division between capital and labour, and the private appropriation of the means of production (capital) by a particular class (capitalists). The means of production refers to all the resources necessary for production: land, buildings, machinery, raw material and so on. These means of production can only produce wealth if they are put to work, and for this, capital requires a sufficient reserve of labour having the requisite qualities in terms of skills or flexibility, and willing to work for a wage (Harvey, 2011). While we now tend to take waged labour for granted, this has not always been the case (and is still not the case everywhere). The right conditions had to be created for the emergence of this sort of work.
Before the emergence of capitalism in Western Europe, most people produced what they consumed by possessing or having access to means of production (a small plot of land or access to common land on which they could grow food, raise animals, gather wood and so on). This was largely a rural subsistence economy where most people produced essentially for their own needs, selling whatever surplus they made on the market to buy the commodities they couldn’t produce themselves. The dispossession of the mass from direct access to the means of production was therefore essential to create a reserve of labour power that capitalists could hire. Small peasants were expropriated from access to common land through processes of enclosure, or driven off the land by more competitive and larger commercial farms, and formed a landless proletariat who had no choice but to sell their labour for a wage. This process of expropriation of the mass from access to the means of production (what is referred to as primitive accumulation by Marxist theorists) is what made it possible for industrial capitalism to develop in Britain in the late eighteenth century (Harvey, 2003). But it is still ongoing in many parts of the world. In developing countries, peasants or small producers are being deprived of the means through which they provided for themselves and are being pushed into a global reserve of relatively cheap labour available for hire in capitalist production (Harvey, 2011).
So capitalism is based on the division between the owners of the means of production, and workers who, not having access to means of production, have to sell their labour to ensure their livelihood.1 The relationships between these two classes are marked by conflict and power inequality. In order to maximise profit, capitalists will seek to maximise the surplus value2 they can extract from labour by increasing its productivity or decreasing its cost (Wright, 2010). Thus the relationship between capital and labour is hierarchical in the sense not only that labour relinquishes the goods and services it produces for capitalists (e.g. this book is the property of Routledge/Informa), but also in the sense that while in the hire of capital, labour subjects itself to its rules. And as we’ll see later in this chapter, capitalist firms have deployed various techniques to increase control over labour and lower its cost.
One final point worth mentioning about labour is its changing composition. At least in Western societies, contemporary capitalism relies less and less on the making of things, on factory work, and increasingly on ‘immaterial labour’, i.e. the kind of labour that relies on abilities such as language, creativity, knowledge or affect to produce the informational and cultural content of commodities (Lazzarato, 1996; Weidner, 2009). Of course things are still being made, but manufacturing has tended to be delocalised to developing economies, in particular China and South East Asia, where labour is cheaper. And the value of these commodities rests more on their branding, their symbolic value, than on their functionality. For example, while Nike shoes are still being physically produced in China, most of their surplus value is created by marketing teams in the West who, through branding, sell an image or lifestyle rather than a pair of shoes (Klein, 2000).
Free market
A second feature of capitalism is its reliance on the market as the main coordinating mechanism. A central motif of neo-liberal economics is the notion that the free market is the most efficient way of allocating resources, of organising the economy, and of harmonising competing interests. Adam Smith’s (1776) famous metaphor of the ‘invisible hand’3 has been deployed to suggest that, in a free market, all individuals and firms freely and rationally pursue their own interest in maximising their gain by engaging in voluntary exchange with each other, and that, in this process, the interests of all parties are reconciled. For example, it is in the interests of profit-seeking capitalists to produce what consumers want, at a price they are willing to pay. If they start producing poor-quality products, or charging too much, then they will be driven out of the market by better quality or cheaper producers.4 Similarly, if labour collectively organise in a country or industry to demand high wages, producers will delocalise somewhere with cheaper labour, bringing down wages (through unemployment) in the original place to levels that the market can bear. Another example is the trickle-down effect where the market will eventually distribute the increasing wealth of a rich minority to the majority: as the rich spend their wealth on new products and services, they create employment opportunities for the majority. On this view, it is only by opening themselves up to the free market that developing countries will grow and the poor will prosper.
So free market competition channels the self-interests of buyers, consumers and workers towards mutually desirable ends such as better products, lower costs, profitable enterprise or job opportunities. If producers are left free to produce, consumers free to choose, and workers free to sell their labour, the market will reach an equilibrium that will serve the interests of all. As such, the market is supposedly self-regulating and should be left to its own devices, free of government intervention. However, the issue of government (lack of) intervention is a moot point in the history and theory of capitalism. Even neo-liberal economists would agree that, at a minimum, states need to create and enforce contract and private property law (Wright, 2010). And, as we will see in Chapter 2, in many countries the state has played, and continues to play, an important role in creating the right conditions for capitalist development, or regulating the operation of the market and curbing its excesses. Indeed, all successful capitalist economies, including the UK and the USA, the supposed champions of the free market, have built their economic strengths on the back of government interventions, including protectionism, subsidies to help their nascent industries, or investment in infrastructure such as roads, rail or airports (Chang, 2010). States have also intervened, to different degrees, in mediating the relationships between capital and labour, and in setting limits on what can be bought and sold on the market (Chang, 2010). In many countries, the state bans or at least restricts the trading of organs, weapons, drugs, pornography and so on. Finally, the incapacity of markets to regulate themselves was vividly illustrated with the 2008 financial crisis where even the most neo-liberal governments had to bail out banks and industries ‘too big to fail’ to the tune of hundreds of billions of dollars to save the economy from collapsing.
All this suggests that the notion of the free market is a rather elusive one and seems to correspond more to a myth than a reality. Indeed, as Polanyi (1944) and many others since have demonstrated (e.g. Callon, 1998; Patel, 2009) markets are socially constructed and have no independent existence, therefore they cannot be set free. Nonetheles...
