What is Capitalism?

Capitalism is the form of society which (with only minor exceptions) exists throughout the world today. It is the system of society which is responsible for the major problems of the world but is incapable of solving those problems. Take one of the most basic of human requirements, housing. This is a problem that has been “about to be solved” over and over again. Yet, as is well-known, it remains. And when appalling slums are offered “cheap” to the workers, they fall over themselves in the rush to get at them. The GLC, for instance, have a policy of offering unusable property at very low rents to families who can’t get anything else. And of course those workers who could not afford other accommodation rushed in hundreds to try to get these miserable abodes. (See for example The Times 21/8/76). If there were no housing problem, workers would not be queuing up for slums.

But although workers are still facing similar problems to those of their parents and grand parents, the capitalist class, even in the midst of the current crisis, are doing quite well thank you. The Daily Mirror pointed out that although last year workers’ living standards were pushed down, “it was the rich wot got the pleasure. Profits and dividend payouts jumped by one sixth.” (8/4/78)

Now to the question: “What is this system that gives profits to the rich and slums to the poor — what is meant by the term “capitalism”? One thing can be stated with confidence; if workers want to do something about the problems that face them throughout the world it is necessary to have an understanding of how this society works, and why it cannot solve their problems.

Now it is true that capitalist society takes different forms in different parts of the world. Much depends on the level of development of any particular country. Detailed examination of, for example, the Russian system will reveal many differences from the form of capitalism in the USA. Nevertheless, all forms of capitalism, no matter how diverse, exhibit the following five basic characteristics:

1) Property

Society is based on property. This means that it is recognised (almost inevitably via a complex legal process) that individuals, groups or the state own wealth, in whatever physical form wealth takes. The converse of this is that it is also recognised that other individuals or groups do not own wealth.

2) Commodities

Society produces what are called “commodities”; that is, the need of the class that owns wealth to for exchange or sale. The production of commodities is of course much older than capitalism. In previous forms of society, though, the production of commodities for sale was a relatively minor aspect of wealth production. Under capitalism it is the major social form. In previous forms of society commodity production existed as a small part of the social structure. Today the social structure exists as a huge machine for the production of commodities.

3) Profits

Profits are realised when commodities are sold. That is, a surplus is received by certain sections of society. This surplus is something that is derived from the following simplified process: The majority of people (the workers) sell their working ability (known as “labour-power”) to the minority of people (the capitalists) approximately at its value; that is, at its cost of production and reproduction. Because of the special quality of this labour-power when it takes part in the production process, it produces both its cost of production and reproduction and something over. But when the worker sells his labour-power to the capitalist, he receives as wages from the capitalist only his cost of production and reproduction— what it cost (roughly speaking of course) to produce the worker and keep him fit for production. The “something over”, the balance, is kept by the capitalist. The extra which the worker has added is, in general terms, the source of all profit.

4) Accumulation

The driving force of the system is accumulation; that is, the need of the class that owns wealth to increase the wealth they own. As Marx put it, in a well known phrase: “Accumulate, accumulate. That is Moses and the prophets.” The ability of the capitalists to accumulate comes from the profits produced by the workers being used by the capitalists to increase the production of commodities to allow for the possibility of further profits.

5) Classes

Society is divided into classes. Those individuals who own wealth constitute one class; that is, they are a group of people with the same economic interest, the receipt of profits. They are the buyers of labour- power. The rest, the propertyless class, are the workers; they are the sellers of labour-power. They live off wages, the price of labour-power. The economic factor that binds them as a class, a group with a common economic interest, is the receipt of wages. They are what Marx called the “free” class. That is they are free from property; they have no property (or none of any social significance). And they are also free in a second sense that they are freely available for sale to the highest bidder on the labour market.

It is this system of society which is now responsible for the major problems in the world. Paradoxically, it is this system that enables the potential solution to the problems of the world to be developed. It is this system of society that needs replacing with Socialism.

Ronnie Warrington