Capitalism is an economic system built on a simple but rarely questioned assumption, which is that capital has the ultimate claim on the financial rewards an enterprise generates.
Capitalism is the private ownership of productive assets.
Capitalism is an economic system built on a simple but rarely questioned assumption, which is that capital has the ultimate claim on the financial rewards an enterprise generates.
Capitalism is the private ownership of productive assets.
Capitalism is an economic system built on a simple but rarely questioned assumption, which is that…
if the state nicks what you build, other people will notice and not bother building anything.
Yep, the state has the ultimate claim on the financial rewards an enterprise generates.
Which is what the Blighted Potato really mashes his spuds about.
Anything can be “rarely questioned” if you make it up.
Capitalism is investing now (originally seedcorn, but it can be money, goods, labour, time …) for a future reward.
Does Murphy want a world of hunter-gatherers?
john – he does
As long as he is in charge of it – he would be fine with that. He just wants faces ground into the dirt, he doesn’t care much about his own circumstances as long as he’s the one doing the grinding.
I am reminded of a phrase by the Great Peter Simple (Another who like Lord Bauer could be described as the ‘Anti-Murphy’):
‘These people seem unaware that the first people normally liquidated by a Communist takeover are the intellectuals – which would mean that Canon Collins would be up against the wall ten minutes before I was. It wouldn’t be much consolation!’
Intellectuals? Murphy’s safe then.
No, he’s definitely an intellectual, and as thick as a plank.
Quite. Being an intellectual doesn’t mean that what your intellect produces has any value, or even coherence. In fact the further up the intellectual pole a person is the greater the ability to spout pure crap.
Capitalism was Marx’s pejorative for free enterprise.
Capitalism, in a word, is freedom.
It gets worse as it continues:
That assumption is so deeply embedded in our economic thinking that we hardly notice it. A capitalist business employs people, buys goods and services, pays interest and meets its other costs. What remains is called profit, and that profit belongs to the owners of capital. Labour is treated as a cost to be deducted on the way to calculating that return.
There is something called a ‘worker’s co-operative’ and other ownership arrangements do exist. If you had studied conventional economics rather than walking out of the first lecture perhaps you’d be better informed.
There is, however, nothing natural about this arrangement. It is not an economic law. It is a choice about how businesses are organised, whose claims have priority, and ultimately who has power.
Given it holds good in large swathes of the world then it seems to be amenable to significant numbers of people but of course – you’re special
That is the issue I want to explore here, but doing so requires an important distinction. Capitalism is not the same thing as neoliberalism, which I have defined in a separate glossary entry. Capitalism existed long before neoliberalism, and understanding the difference between them matters if we are to decide whether capitalism can be reformed, or whether something more fundamental has to change.
In the words of Roger Daltrey ‘ Who the F£$%ing hell are you?’
In the decades after the Second World War, and particularly until about 1980, capitalism in countries such as the UK operated within significant democratic constraints.
It’s 1945 to 1979 that is the anomaly , rather than the period subsequent to that.
Governments maintained substantial public services.
An arrangement whose merit needs to be challenged more broadly, most notably in the arena of health and education.
Significant parts of the economy were publicly owned.
And run badly for the most part – as anyone who had service from BT or a car from British Leyland can testify
Trade unions had real power.
Which they abused mercilessly
Capital movements, most especially internationally, were regulated.
The road to then Moscow or Pyongyang seemed a lot shorter then than it does now – much to the annoyance of generations of fellow travellers, like yourself, who imagine in such a system they will be the one calling the shots.
Taxes on higher incomes and wealth were high by current standards.
And even with this the UK had recourse to the International Monetary Fund
Full employment was an explicit policy objective. Capital remained powerful, but it did not have an unquestioned right to organise society around its own interests.
How, in Burn ’em’s Britain, can anyone describe capital as being unfettered?
There was, in effect, a compromise between capital, labour and government. Capital expected a return. Labour received wages and had significant economic and political rights. Government mediated between the two, provided public services and social security, regulated markets, and sought economic stability.
A regime that existed rather uneasily throughout the period and which was always likely to crumble when external circumstances rendered the model too inflexible, as happened in the mid to late 70s.
That system was far from perfect. Women were denied equality. Racial discrimination was embedded in many institutions. Colonial and post-colonial relationships supported prosperity in ways whose costs were imposed elsewhere. There is no reason to romanticise the period, and I do not do so.
Is this some kind of pathetic sop to the Greens and Corbynites – seems jarringly out of place?
However, what that period did demonstrate was something important. It showed that capitalism could operate within limits imposed by democratic government. It could coexist with strong trade unions, public ownership, progressive taxation, regulated finance and substantial public services. It could also do so whilst delivering rising living standards and greater equality.
All of which collapsed in 1977 through 1979 and would have become even more marked in the 1980s had Callaghan prevailed. You seem to forget that Thatcher won legitimately.
Adjusted for inflation, GDP per capita rose from £17,456 in 1979 to £25,419 in 1997.
A 45.6% real increase during those nasty evil neoliberal days.
During which time the UK was dirt poor. Not just compared to the US but even to places like West Germany where a much lighter hand was taken during the rebuild. Germany went from flattened to richer *during a time when a foreign government had direct control over most of the German economy*.
How does he look so longingly at a period when the UK economy was so stagnant that mainlaind Europe was catching up and overtaking it? And its not like the ‘social services’ during that time were all that great. You didn’t get a cradle-to-grave welfare state with a good level of material comfort.
I think the analysis, once all the cloud of meaningless verbiage is stripped away boils down to the fact had they been born in the 1950s his children would be able to buy a house – that was what happened in the 70s prior to Fatcha ergo the 70s must be better. That really is about the size (and intellectual depth) of it.
I don’t think I have ever seen more words used to less effect.
And his problem is historical illiteracy – most people in the 1950’s were not able to buy houses either. 25-33%. It rose to nearly 50% just before Thatcher. Amazingly enough, the percentage rose from 1970-1990 – mostly the ‘orrible fatcher years – to 69%. It was actually Thatcher’s government’s changed policies that cause a massive *immediate* bump in home ownership.
Today home ownership is 65% in England and 36ish% in Scottland.
Its almost as if socialism is shit(e).
They would be able to afford a house now if we had kept immigration, and government spending as a percentage of GDP, at the levels they were in 2000.
(well, assuming they got a better job than filming their father ranting)
During which time the UK was dirt poor. Not just compared to the US but even to places like West Germany where a much lighter hand was taken during the rebuild. Germany went from flattened to richer *during a time when a foreign government had direct control over most of the German economy*.
Germany succeeded by ignoring that direct control.
https://intellectualtakeout.org/2019/01/the-man-who-created-the-german-economic-miracle/
Yeah, that was kinda my point – the nation that had direct control where that control was lightly applied and/or ignored, outperformed the nation where government and ‘labor’ (ie, unions, not labor) were controlling things ‘for the greater good’.
Man City beat Man Utd 1-0. As I predicted.
No question, you did. Well done. What a predictor of events.
I despair that in year IMF predictions of GDP growth are taken seriously. They should be laughed out of the playground.
It’s like a pundit saying “I want to predict the winner of the Premier League with high accuracy”
And the analyst replies “Wait until the New Year fixtures are done and make your prediction then”
Isn’t the first a consequence of the second? (or was that your point?)
The second is definitive. The first could be a result of that, yes. I’d also mutter about residual rather than ultimate….
Neither is right.
Under fascism, you still have “private ownership of productive assets.”
So he is saying workers and suppliers do not get paid? Generally workers get paid *first* so it would seem they have the priority to the ‘financial rewards an enterprise generates’.
Good point. Hence Tim’s “residual rather than ultimate” point, above.
Women were denied equality.
Men were and still are denied equality as well. Bastard bigoted biology refuses me the equality of getting pregnant.
Where’s the foetus gonna gestate, you gonna put it in a box?!
I would define it slightly differently. Capitalism is ownership of the means of production by someone other than the labourer.
Before capitalism, a labourer had to create or buy their own means of production. You start with nothing, and you work with your own hands to gather seeds. You improve the fertility of the land by clearing away competing weeds by hand, digging pools for collecting water, digging your own irrigation ditches, fertilising the land. You grow more seed, some of which you save to plant next year. When you have enough to take a little time off weeding and digging and planting, you invest it in making crude tools. That boosts your productivity, which enables you to make better tools, then tools for making tools, and then recursion happens and you start getting really productive. Just as you’re about to make big, you get old and die.
With capitalism, the labourer starting out with nothing uses the means of production – the fertile fields, tools, accumulated seed, etc. *of somebody else*. They are really productive right from the start of their career. *In exchange* you give the owner of the means of production a share of what you produce with their stuff. You can produce a significant surplus right from the beginning of your life, and by the end of it have built something that no one person would be capable of accumulating.
The first farmer who starts with nothing and has to build it all himself has private ownership of the means of production, but this isn’t what we normally mean by capitalism. Capitalism is where the person doing the work is different from the person who owns the farm. It’s where one person goes to work for another, who owns the land, the tools, the seed, has the money to buy fertilisers and weedkillers – or beyond the agrarian economy, it’s where one person starting with nothing goes to work for another who owns the factory, the tools, the offices, the delivery vans, has the money to buy in supplies and materials for the worker to work on.
Don’t like that? Then build *your own* factory to work in!
The opposition to capitalism is the belief that the provider of the means of production isn’t contributing anything significant to the enterprise, and therefore deserves no return from it. The first guy is doing all the sweating. The second guy is sitting in his deck chair listening to the clinking sound of the money rolling in. This seems unfair to the first guy. He’s working and poor. The other guy is rich and idle. Somehow, the owner has wangled it so he gets a slice of what everyone else is producing, simply by “owning” the enterprise in which they produce.
Thus the calls for the workers to seize the means of production. Steal the resources from the “owners” and own them yourselves, and then you can keep all you produce for yourself, and therefore you’ll all be as rich as the wealthy landowners and factory owners were.
It doesn’t work, because they don’t understand that the means of production represents hard work *done earlier* by somebody else. They didn’t have to produce it themselves, they didn’t see it happen, so they’re unaware of what its existence means. It’s also a temporary thing. It requires continual maintenance and management, or it gets worn out or frittered away and vanishes. If there’s no reward for lending it out, it won’t be made available. People won’t bother to accumulate if they know it is going to be immediately stolen and redistributed to people who didn’t earn it. Without that accumulation of resources, there is no capital. You end up eating all the seed laid by for next year, and the year after that you starve.
The workers seizing the means of production leads to famine, and then brutal totalitarianism as the rulers fight to *force* reality into the shape it has in their heads.
The assumption he is questioning is the idea that the owner of the means of production actually *owns* it, and thus has a right to any part of what is produced with it. It is, of course, not rarely questioned at all – he has apparently reinvented Marxism without realising it. The idea goes back to the Levellers, and the French Revolution, and no doubt the thought has very frequently occurred to people working as peasants in the fields of their Feudal barons long before that. It’s one of the most commonly questioned assumptions in the history of historic humanity.
I’ll also accept this. “Capitalism is ownership of the means of production by someone other than the labourer.” Even, the capital is coming from outside the unit of production. If the state national bank was the sole provider of capital to production I’d still call that a form of – probably a very bad form of – capitalism. The capital is not coming from those inside the production unit. Of course, wholly insisting on this definition would then mean that a legal ractice – which unitl v recently could not, legally, accept outside capital other than that of the partners – would be a non-capitalist org. And, in a way, it is.
If the state national bank was the sole provider of capital to production I’d still call that a form of – probably a very bad form of – capitalism.
isn’t that Chinese socialism or Marxism with a Chinese twist or some such?
Sorry, but NO. There are some (very many) cases where that is the case but it is still capitalism if the worker supplies the capital utilised.
There are, as always, grey areas and fuzzy lines.
The economic system we call ‘capitalism’ consists of a number of different inventions and insights. (‘Capitalism’ is distinct from ‘free trade’, for example.) It’s the definition I personally use for thinking about it, I can’t guarantee it’s the consensus in economics.
I think the state owning the means of production could still be called a form of capitalism when the state is a person. When it all kicked off, the land owners became powerful, and formed aristocracies which evolved into kingdoms. In a proper monarchy, the king *is* the state, and also a capitalist land-owner.
Where things get fuzzy and grey is when ‘the state’ is not a name for a group of actual people who own and run everything, but a sort of nebulous concept representing ‘the people’ or ‘the commons’ which isn’t really anyone but rather everyone. The idea of ownership breaks down. ‘The state’ can still own things, but the functionaries of the state are only acting in its behalf, as servants of the state. When you try to trace back what ‘state ownership’ means to the question of which *actual people* this refers to, it’s the *concept of ownership* that dissolves rather than the definition of capitalism.
And when the leader of a ‘socialist’ government starts acting like a monarch, as if the state is their own personal possession, it starts to look more like capitalism again. The distinction, of course, is that this is the sort of ownership that a bandit claims over the things they steal. They didn’t earn it. They didn’t work for it. They’re not worthy of it.
Questions also arise over partnerships and cooperatives, which ownership is shared between the labourers using it. You could also question the employee with a pension scheme that invests their savings in the company they work for. Or Singapore’s government ‘owning’ but not controlling large businesses and investment funds.
But I think the core of the idea and why it works is that separation between the owner of the means of production and the producer. It’s the fact that a producer with no means of production of their own can use somebody else’s. Others may differ. As Churchill put it: if you put two economists in a room, you get two opinions, unless one of them is Lord Keynes, in which case you get three opinions.
But they employ lots of other people, including lots of other lawyers – almost always some multiple of the number of partners. The salaried lawyers grumble about it, but still do it because they generally end up with more money working for the firm than they would on their own (except for a few who can do better outside, who do).
So isn’t it still a form of capitalism under NiV’s definition that X’s capital allows Y to be more productive? But more mixed because X’s capital is also allowing X to be more productive.
(Also it was only outside equity capital that was banned; outside debt capital was OK. Either by the firm itself, or new partners taking out personal bank loans to fund their equity investment)
When I was working as a proofreader for city law firms in the 90s there was a clearly-understood (even I understood it) distinction between “fee-earners” and “support staff”.
A Self-employed craftsman (blacksmith, stonemason, cabinet-maker, pewterer ….) is a capitalist even if he has no apprentices or journeymen working for him. A yeoman farmer was a capitalist. When I was a self-employed Consultant, I was a capitalist (the overwhelming majority of the capital employed was intellectual capital, but the modest financial capital was also essential as I was paid on completion).
Your definition is *inadequate* – it is accurate in some cases but not in others. Go to the City of London and read the names of all the Guilds – or read the occupations of all the Lord Mayors for a thousand years up to 1945 and every one of them was a small-scale capitalist who also worked with his hands.
A surpisingly large number of the Lord Mayors were Fishmongers. (or at least, members of the guild)
Until over-fishing by Russian factory trawlers decimated herring stocks in the North Sea, fish was more plentiful and cheaper than meat in London which was a major port. There was even a special law that permitted mackerel to be sold in the streets of London on a Sunday because mackerel goes off very quickly if it isn’t frozen (impossible in the Middle Ages).
Could be. What’s your definition?
I’m guessing it’s something like ‘using the means of production to produce’, yes?
Like I said, the economic system we call ‘capitalism’ consists of a number of different inventions and insights. If you want to, you can consider tool-making and tool-using to be ‘capitalism’ (a tool is a capital asset), or the concept of ‘owning’ a territory (land is a capital asset), or the intellectual capital of knowing what’s good to eat and where to find it. But that would put the invention of ‘capitalism’ far back in evolutionary prehistory with the animals – before humans existed. Everything is capitalism.
In the modern sense, the argument between ‘capitalism’ and ‘communism’ is based on Marx’s concept of capitalism, which was basically him moaning about the fact owners of the means of production took a slice of the working man’s production despite doing no work. It wasn’t the self-employed I think he was referring to.
Sometimes people disagree because the disagree about the facts, and sometimes because they disagree about the definitions.
I’ve already given it. Capitalism involves investing something of value (be it seedcorn, money, labour, effort – e.g. to make a flint tool) today in order to get a return in the future.
Marx invented the term. He did not define it. He railed against it, in a reification fallacy.
Capitalism is trade without government interference. Free enterprise. Virtually every definition of capitalism you will find calls it a ‘system.’ Even Marx did when he invented it. It is not a system. It is the ABSOLUTE LACK of a system.
The term ‘capitalism’ is commie speak. Conservatives unfortunately been caught up in the trick. No conservative should ever use the term.
Many above have cited trade with no capital at all. Capital can be a secondary result of trade, but it is not a requirement.
The economic system we call ‘capitalism’ consists of a number of different inventions and insights. (‘Capitalism’ is distinct from ‘free trade’, for example.)
It seems to me that ‘capitalism’ has to have something to do with capital (the wealth employed in carrying out a business, originating around 1640), or the name would be unrelated to its subject, and it has to be related to the capitalist-communist argument, or trying to use it in the modern debate would just confuse everyone.
Free trade is entirely different and entirely unrelated. You can trade goods and services that are not capital goods.
Karl Marx didn’t invent the term. It was used by the French socialist Louie Blanc in 1850 (‘capitalisme’ in his book ‘Organisation du travail’) and also Proudhon around a similar time.
I would agree that a lot of the time when we make arguments for “capitalism”, we are often actually referring to free trade. Freedom from government interference, from artificial trade barriers, from taxation and redistribution. But there is a *separate* issue at stake, which is the merits of rich business owners getting a slice of the workers’ production. It’s the argument about those enormously fat men in the cartoons with the top hats and the bags of money marked with $ signs, exploiting poor orphan children in the dark satanic mills of industry. That’s not about free trade. You can (and we did) have rich fat-cat capitalists without free trade. Protectionism was classically a sin of the rich businessmen. (“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”) It’s a distinct issue.
So you trust Marx was being straight up with you.
?
All I said was Karl Marx didn’t invent the term.
The modern argument about ‘capitalism’ (which is distinct from free trade) is based on Marx’s concept of ‘capitalism’ (which he didn’t invent), which was basically him moaning about the fact owners of the means of production took a slice of the working man’s production despite doing no work.
If you want to refute Marx’s argument, you have to use the definition Marx and everyone else talking about it is referring to (which is distinct from free trade) or you would be engaging in some sort of straw man equivocation fallacy.
We argue about free trade too, but it is a separate argument.
None of that means Marx was right. None of that assumes he was being ‘straight up’. (Although I suspect he genuinely believed in a lot of what he was saying. It’s a common misunderstanding, even today.) I already explained (at great length) why Marx’s criticism of capitalism is wrong, why capitalism is the source of much of the world’s wealth and the lifting up of humanity out of poverty, and why Marx’s prescription would lead to famine and disaster (as it did). Why ever would you think I was trusting Marx to be “straight up”?
You call capitalism “an economic system.”
“Capitalist” (if you must) economic activity is distinctly NOT a system. A billion independent exchanges a day. There is no complex whole.
See here: https://www.merriam-webster.com/dictionary/system
1.f a form of social, economic, or political organization or practice
e.g. the capitalist system
2 an organized set of doctrines, ideas, or principles usually intended to explain the arrangement or working of a systematic whole
e.g. the Newtonian system of mechanics
3.a an organized or established procedure
e.g. the touch system of typing
3.b a manner of classifying, symbolizing, or schematizing
e.g. a taxonomic system
e.g. the decimal system
I was thinking of it in sub-definition 2, as a set of organising explanatory concepts, actually, but we can also consider the market (I quite like Hayek’s ‘Catallaxy’) as a system of interacting, interrelated, interdependent elements consisting of billions of independently motivated exchanges that collectively converge on the optimal allocation of resources for maximising wealth generation at a price producers are willing to work for and consumers are willing to pay.
This is Adam Smith’s Invisible Hand.
The cogs in the machine and indeed the atoms that constitute them all respond independently to the forces applied by their neighbouring cogs/atoms, without consciousness of any greater purpose. But their collective effect is as if they were acting as one great entity.
Emergent behaviour, holism, synergy, hive minds, parallel computing, hierarchical organisation – being composed of many parts acting independently does not rule out it being a system.
But it doesn’t make them a system.