What is Capitalism?
An Attempt to Accurately Define and Critically Examine the System of Capitalism
Bernie Sanders’ dual presidential campaigns and the virality of Alexandria Ocasio-Cortez have made left ideologies more popular in the United States than they’ve been in decades; I think it’s fair to say that millennials and Gen Zers calling themselves “socialist” is pretty common now. You really wouldn’t even be that hard-pressed to find a self-identifying communist, most likely.
Of course, this resurgence of leftist, anti-capitalist ideas has brought with it a resurgence of criticism towards these same ideas. Socialism and communism have been the boogeyman of American conservatives and liberals for over a century, but the use (and misuse) of those terms as an attack undeniably accelerated during the Obama presidency and has continued to accelerate since then.
This is not in and of itself a problem. Leftists should be open to criticism of their ideas and forced to deal fairly with the difficult and impractical facets of their beliefs and proposals. Where I take umbrage with these criticisms though is when they come from people who clearly don’t know what these three distinct systems of political economy even are. The terms “capitalist”, “socialist”, and “communist” are all incredibly contentious, but in the larger cultural and political discussion of them, there doesn’t seem to be any sort of agreed-to definitions.
So what do these words mean? Most of the time if you ask people what “socialism” is, you’ll get a lot of answers along the lines of “it’s when the government doing more things” or “it’s when government regulates the economy” or “it’s when the government nationalizes an industry”. Along those same lines, most people would essentially define communism as just hardcore socialism; total nationalization of industry, a totalitarian state, and absolute state-management of the economy. On the other side of the spectrum, when liberals and conservatives are asked to define capitalism, the definitions given generally will boil down to “capitalism is free market economy” or “capitalism is free enterprise and supply/demand-driven enterprise”.
As unarrogantly as possible, I want to state that these commonly believed definitions are largely hogwash. This inability to properly define these terms hamstrings everyone but the demagogues on all sides — naming anything the government does “socialism” is convenient for conservatives and libertarians, and blaming every social ill or market failure on capitalism is convenient for leftists to do, but it mires real, meaningful debate and discussion on these subjects in the inescapable quicksand of intellectual dishonesty.
So — perhaps somewhat quixotically — I am going to attempt to lay out definitions for these systems that I believe to be not only far more useful for good-faith discussion, but also entirely grounded in the seminal texts and theories of each system.
The Essential Tenets of Capitalism
I am going to start off by defining capitalism. To be transparent, I am choosing to do this for my own convenience; I tend to think of socialism in terms of how it it is distinct from capitalism (and I tend to think of communism in terms of how it differs from socialism). Because that’s the way my thought processes on these systems works, that’s the path I’m going to follow.
Capitalism is probably the system out of the three at hand that is the most difficult for me to define, so the following definition is not as precise as you might hope but as concise as I feel comfortable making it:
Capitalism is a web of profit production and profit distribution relationships, where the means of production (and the value produced by those means) are privately owned and labor is sold for wages.
Obviously, this definition covers lots of different subtypes of political-economy. Everything from an Austrian, Mises-approved free market to a Chicago School system to a Keynesian regulated market falls under the big tent of capitalism. A internationalist free-trade economy and a protectionist mercantilistic economy can each by capitalist. Contrary to what a Tea Partier or right-libertarian might tell you, economic regulation and capitalism are not mutually exclusive of each other. An economy can be extremely regulated and still be capitalist, and I don’t think this in any way contradicts the conclusions or theories of big-tent capitalism scholars, including Adam Smith.
The key tenets of capitalism are: an intricate web of property and profit relations; privately owned means of production; and wage labor. The key tenets are not voluntary action or a lack of state regulation.
The Web of Relations
There’s a lot to break down from that sentence, but I want to start by expanding on that idea of capitalism as a “web” of property relations. It’s important to remember that capitalism is not just one type of property relation, but rather a bunch of different types interacting and criss-crossing together. These relationships aren’t just as simple as, for example, a factory owner and a factory worker. There are lots of different kinds of property and capital that people come to own there are lots of different ways that these forms of ownership affect others.
People (including myself) often reduce capitalism to one thing, and what that one thing is differs depending on who’s doing the reducing. However, the most powerful criticisms of capitalism (and I would suppose the most truthful defenses, as well) are ones that see capitalism as the result of a lot of different processes going on at once, while also acknowledging that this result is always mutating and morphing. The key tenet here though is that capitalism is a web, a network of lots of different relationships working together all at once. (Of course, some of these relationships inevitably become antagonistic instead of cooperative, but even this antagonism can be channeled into preserving and growing the power of capital.)
Privately Owned Means of Production
The means of production include all the physical, non-financial components of production. This includes any machinery, computers, equipment, cloud space, vehicles, etc. that are used at a workplace to produce value. This also includes the workplace buildings themselves as well as the land they rest on. In capitalism, these are all owned by capitalists — private owners with enough capital to purchase these means of production.
That there is the trick; because these means of production often require vast amounts of capital to acquire initially, they are de facto limited to being owned by the already wealthy and/or connected. If you do not already possess wealth, if you are not connected to the right people, or if you are unable to get a loan from a financial institution (often for arbitrary and discriminatory reasons), then your chances of ever owning (and maintaining ownership of) significant means of production are near-nonexistent.
It seems clear to me that this component of privately owned means of production serves to maintain class structure so that certain people stay in power and certain people are disempowered. Certain people’s stranglehold on capital is made of steel, while others are barred from collective property or are compelled to sell their labor to capitalists. This permeant antagonistic class structure is the result of several things of course, but one of the main drivers is privately owned means of production.
The third essential part of my definition is that labor is sold for wages. There are some forms of labor in contemporary capitalism that might not immediately look like a wage, such as salaries or working for commission in a gig economy job, but at the end of the day these forms are still selling labor time for wages.
Because everyone needs capital in order to purchase the goods and services needed to survive, those without the luck, ability, or privilege to acquire their own means of production are compelled to work for others in exchange for wages. This is an inherently unequal relationship in almost all cases, where the capitalist employer has more power and agency than the employee. If the employee is not happy with their wages and attempts to use their labor power to gain better pay or conditions, the capitalist can always replace them (absent strong labor organizations, which have been steadily declining in most capitalist economies for decades). Laborers are replaceable to capitalists, but wages are not replaceable for a vast number of workers.
Criticism of Capitalism
Anyone familiar with me or my writing knows that my political and economic persuasions are leftist, I’ve made no attempt to hide that (why would I? It’s something I’m proud of). So now that I have offered what I believe to be a concise and historically accurate definition of capitalism, I would be remiss if I didn’t expound on my criticisms of this system (this is something that I will do with socialism and communism as well, so please hold off on any premature accusations of unfairness or unequal treatment).
Now, regardless of how you feel about him, if you are truly interested in critically breaking down and analyzing the system of capitalism from a material and historical perspective, Karl Marx is the place you should start. You don’t have to agree with his conclusions, but looking at the world and describing the system as he saw it was his life’s work. Many people neglect to realize that Marx and Adam Smith essentially did the same thing — they looked at history, they looked at the world the saw, and they described it. The real differences between the two boil down to 1) Marx was generally more critical of the present system than Smith was, and 2) Marx ventured into the realms of prediction and politics more than Smith did.
Marx’s Web of Relations
All that to say, I highly suggest that anyone — capitalist, anti-capitalist, or somewhere in-between — read Capital by Marx. It’s a very long but very interesting book that Marx wrote trying to piece together the different parts of capitalism’s political economy that he observed. Marx doesn’t begin his analysis and synthesis of capitalism by coming out and saying “capitalism is X”. Rather, he begins by talking about commodities: what commodities are, how they work, and how they relate to a capitalist economy.
To be completely honest, when I first read Capital I was frustrated that Marx didn’t initially lay out a simple definition of capitalism. Of course, there’s good reason for why he choose to go about examining capitalism they way did, by picking a random aspect of it and expanding out form there. He did this precisely because capitalism isn’t just one thing, one type of business model, once way of regulating (or not regulating) an economy. Capitalism is a varied, complex, and ever-changing way of organization the relationships between people and things. It just so happens that in all of these varied relationships, private owners of capital retain and increase their capital at the expense of other people with less capital.
The metaphysical quality, the relational texture of these relationships is critical too. These relationships do far more than facilitate buying and selling, and I think it’s important to understand how these relationships change the participants’ lives not only externally, but internally. Towards the later part of his life, Marx wrote mainly about the political-economy aspects of capitalism, but when he was younger Marx was much more philosophic than economist or political theorist. In his work the Economic and Philosophic Manuscripts of 1844, he writes about how these relationships specific to capitalism between the workers and the profits they produce results in the alienation of workers, in workers feeling disconnected from and dispassionate about the products or services they produce. This is important to think about — not only should we recognize the gulf that capitalism creates between workers and wages and the production of goods and profits, but we must also recognize this very real affective element of the system. We have to recognize the that how workers feel about their work matters.
For a more contemporary example of how capitalism results win worker alienation, I highly suggest Silvia Federici’s book Wages for Housework, in which she shines a spotlight on the ways that domestic labor is engrained into the gendered and misogynistic concept of womanhood in most capitalist societies. This is work that is critical for creating and maintaining the type of domestic life necessary to foster workers, but it is not rewarded by the capitalist system that requires it. I use this as an example to point out that the way capitalism organizes the relationships between people and objects, and people and people, results in a lot of the labor that produces said objects and maintains said people being hidden. This is another aspect of capitalism that I believe is important to understand, and one that I believe contains an eventually-unbearable contradiction. This system requires that labor be bought from people via wages, but it also essentially erases much of the labor of those people, to an extent that if discovered by a majority of workers, the system would immediately be despised and derided by nearly all.
Another theoretical piece to draw out from Marx is the relationship between the capitalist class and the proletariat class. There are other people in other classes and sub-classes within these two, of course, but these are the two chief class distinctions that Marx focuses on particularly. To understand the way that relationships work in capitalism, you have to understand this primary antagonistic class relationship.
It’s easier to understand capitalism as as an “-ism” (as a system) if you can understand the capitalist as an “-ist” (as an individual). As simply as I can put it, a capitalist is somebody who privately owns capital, they own the things that allow for other things to be made or services to be rendered. Capitalists own the means that others need to make the profits they need to survive and thrive. As a result, capitalists must buy the labor of workers in the proletariat class (those who do not own the means of production). This helps the capitalists increase their own capital and then when they have to, they distribute some of that capital as wages to their workers. If you read Capital it’s very easy to get lost because Marx is trying to nail down a lot of moving parts all at once, he tries to describe all the ways these different relationships work. But primarily, I feel confident saying that the primary relationship in capitalism functions to maintain and grow the capital of the capitalists while ensuring that there are always some without capital (or that some own so much capital as to render other’s capital impotent).
French philosopher Guy Debord wrote the book Spectacular Capitalism, where he says “However we define capital, the capitalist is in favor of accumulating it, not losing it or taking it away. Capitalism by its own internal logic is about the accumulation of capital.” The whole system of capitalism is meant to help capitalists retain wealth while giving as little of it to other people as possible, because that would be counter to the point of the system. I agree with Debord that — regardless of what form it takes — there is one overarching rule of capitalism: don’t lose the things that you have appropriated from other people. That’s the rule, that capitalists are always trying to get more capital.
This seems like a really basic tenet of capitalism but what it adds is the idea that because of this very flexible logic of perpetual accumulation, capitalism is a super-flexible type of political economy. It can always wedge itself into any given situation by asking the simple question “how can I milk this for all it’s worth? How can I take all the money out of this given situation? How can I use this new technology or new situation to wring every last cent out of people who might use it?” Capitalism has one giant internal logic of insatiable accumulation, and it takes that logic and jams it everywhere it possibly can.
The Christian Connection
Before I conclude, I want to touch briefly on the Christian connection to capitalism that I see. Brevity here seems odd, because personally the Christian angle of all this is the most important to me, but I have already written two fairly-lengthy pieces on the relationships in capitalism, and simply restating that work seems redundant. If you would like to read that, you can do so here:
- Christ, Class, and Capital: A Relational Critique
- Christ, Class, and Capital: A Relational Comparison
For myself (and I think for a lot of non-capitalist Christians) it’s the affective aspect of capitalism’s relationships that encourages me to be a critic of capitalism. I remember just looking around at the people around (capitalists and workers) as well as myself and recognizing that this system is really making people feel bad, feel dispassionate, feel aimless. It creates unjust relationships and people feel the weight of that and suffer under that. From a very basic moral standpoint, that just seems intuitively not good. I wanted a way to explain all of that and eventually I stumbled across anti-capitalist ideologies, thinkers, and activists (yes, including Marxism). And while I don’t think that any man-made ideology or theory presents as strong of an anti-capitalist case for Christians as the Jewish and Christian scriptures themselves, these Marxist, syndicalist, anarchist, etc. theories help to ground my understanding in more contemporary, material contexts.
I completely understand that there are Christians in this world who don’t agree with me that socialism and communism are preferable to capitalism. And that’s fine. Nothing about Christianity demands that you embrace those ideas, but I do think that Christianity requires itself to be applied to your economic world view, and that such an application doesn’t require a critical approach to capitalism, but rather will inevitably result in such an approach.
Even if you don’t want to embrace these more leftist political-economy ideas, I still think there is tremendous value for all Christians in reading Marxists and anarchists that do critically analyze capitalism. Doing so lets you see a really good description of the world and what it looks like from a different angle, and angle that a lot of oppressed people throughout history have seen things from. If you’re a Christian, you should be interested in “the least of these”: people who have been exploited, people who have been in various types of oppressive situations. If you are interested in those perspectives, Marxists and anarchists know how to write about and explore them, they have the methods and they have the intuition to know where to look for them. If nothing else, even if you disagree with every anti-capitalist tenet there is, Marxists are very good at describing the world from the perspective of people Christians ought to care about.
I’ve given it my best shot, but if you’re unsatisfied with my description and examination of capitalism, you’re not alone: I am too. I think the nature of capitalism, the fact that it is a web of constantly changing relationships makes it really tough to summarize; you can try your best to do so, but you will always end up losing pieces of it. Despite its shortcomings, I hope that this has been at least somewhat helpful to your understanding of capitalism, or challenged you to be more critical of the way our economy is run and the relationships it requires.