“Capitalism” Doesn’t Exist

“Capitalism” Doesn’t Exist

I want to talk about a word.

But first, an introduction.

I’ve been on a Philosophize This bender recently — it’s a great podcast for nerds of that orientation, and I cannot recommend it highly enough.

One of the pleasures of philosophy is the excitement of considering new ideas without the burden of reality. Very often, in the real world, one is confronted with real problems, and there is often a price for choosing the wrong answer (or at least, less desirable trade-offs). If you’re on a road-trip, and there are two possible routes to take, and one is likely to hit serious traffic but your family thinks that’s the better way, not persuaded of the seriousness of the traffic. The probability of sitting in gridlock for hours means that their bad choice isn’t just incorrect; it’s actually costing you.

Philosophy isn’t entirely divorced from the real world, but it does take the conversation out of the real world and put it on a plane of abstraction. This re-contextualization allows one to look at arguments without the weight of real-world consequences, which ironically might allow one to make real-world decisions better (the knowledge of obvious consequences might, for example, bias us against considering less obvious “hidden” costs which might outweigh the more obvious and immediate consequences).

It was in this kind of mindset that I was listening to an episode on Antonio Gramsci — the Italian neo-Marxist who gave us the concept of “cultural hegemony” as an explanation for why the workers of the world did not unite in the Western world, against Karl Marx’s predictions.

The trouble, according to Gramsci, was that Western workers had essentially been brainwashed. They had been living in a capitalist system which would only permit educators and cultural taste-makers who endorsed capitalism (at least tacitly). And so the “system” which Western workers lived in was so thoroughly controlled at a cultural level to support capitalism that it appeared as a normal. It was, it seemed, “life” — as in the expression, “that’s just life.” They could not even fathom that there was another alternative that might perhaps be available to them, besides the status quo.

But what is this “capitalism” that is controlling this culture so? What is this “system” that is so evil, or at least, so harmful to the workers and which must inevitably be overthrown, unless thwarted by the cultural hegemony of the capitalists?

After doing a little digging, I discovered that “capitalism” was not used until 1850. The word “capitalist,” however, goes back further, and refers to people who own capital. The word “capital” itself seems to have emerged as an independent word sometime in the 13th century — derived from Latin caput, meaning “head” — and essentially means “something that increases your ability to make money. Technically speaking, this can refer to basic tools. If you are a laborer, a shovel is a force-multiplyer for your efforts, and permits you to dig much more dirt in the same time than you would with a stick. If you are paid for work done, rather than hours worked, then your shovel is “capital.” From this understanding, most people would have understood a “capitalist” to be “someone with a lot of capital,” someone with a lot of leverage for accumulating wealth. Maybe they own a textile mill. Maybe they own a small fleet of boats or carts for transportation. Maybe he is an inventor with a lot of patents, and possession of those patents permits him a kind of monopoly to manufacture a particular kind of product; that monopoly established by his patent is also a form of capital.

When Marx was talking about Capitalism — or, “the capitalist mode of production” — he was specifically referring to money used in this manner. A businessman makes large investments in some venture, and if that venture proves successful, he reaps large rewards. In this way, the money multiplies itself.

Now many people today — on both the left and the right side of the economic spectrum — see something perverse in this. It seems like these people are somehow just manipulating the system. They aren’t making anything; there is no product they are creating, no service they are providing. It seems like black magic.

There is a rabbit hole we could go down discussing the trading of intangibles like “risk” (you may be familiar with the idea of “insurance,” for example), but I want to talk about the use of the word “capitalism” here, especially as it relates to another word: “markets.”

Markets are important to understand here because a market is not a system. A market is any place where people can exchange. This is an extremely broad concept, and applies to all sorts of situations which we (perhaps wrongly) don’t usually associate with economics — the “sexual market” of dating, for example. There is a professional field of study called “behavioral economics,” and one can speak with perfect coherence about markets for violence and markets for honor (prison gangs are popular examples of honor economies).

After hundreds of years of studying how humans behave in markets, economists have all kinds of different theories which conflict with each other and which home in on different aspects of the economy. It’s an almost unfathomably complex field of study. But one thing which all economists agree on, and which really sits at the heart of economics as a field, is the relationship between two things: supply and demand.

Economics 101, MS Paint edition

The premise is simple: people are willing to exchange based upon how valuable something is to them. As the supply of some item decreases, the demand will increase, as more people are vying for smaller quantities of the same good. As the supply increases, the demand will decrease. Conversely, as demand increases, the relative supply will decrease. As demand decreases, the relative supply will increase.

Acknowledging this essential truth about markets is not a system. It is not a theory of how one ought to run an economy, nor is it a policy that a nation might implement, any more than a nation might implement a policy of “humans have sex” or “deserts ought to be dry.” Market supply and demand forces simply are. They exist prior to nations, let alone national policy. They actually exist prior to humans at all; markets exist in nature.

So with this basic economic knowledge in mind, let us return to the concept of “capitalism.” “Capital” is something which increases production power, and a “capitalist” is a person with a lot of capital. So “capitalism,” as it was referred to an attacked, probably conjured the idea of a society run by, or at least a society which favored, capitalists. This coincides with the more common conception of capitalism, which is a state of affairs in which a country’s trade and industry are controlled by private owners, rather than the state.

But there is a problem here: this is how things have always been.

Throughout all of history, those who could generate the most value became the most wealthy and powerful. This is almost a tautology. When we step back and remember what economics is, that it has to do with exchanges of all kinds, and not merely money, the idea of the “capitalist” of 19th-century Europe buying a saw-mill and making more money from his money appears historically non-unique. This is not good or bad; it is how society is.

Consider this scenario: General Allen of Nation Albertson has a powerful army at his back. To strengthen his position against the armies of Nation Broderick, he has decided to advance upon Fort Charlie, a heavily-fortified hill position with a 360˚ view, and which could command the land in all directions with artillery for twenty miles. General Brock of Nation Broderick is positioned in Fort Charlie with a small garrison. Hopelessly outnumbered, he could defend the position and inflict heavy casualties, but ultimately he would lose the position either way. Should he stay and fight, or should he save the men he has and retreat with as many supplies as he can?

This is a military decision, and it is also an economic decision. In the market of violence, Fort Charlie is a force-multiplier. It is capital. And the superior power of General Allen’s army permits him to further improve his position. Value creates value. Power creates power. Money — as a rough fungible unit of value and power — creates more money.

But this is critical — money isn’t different from the value and power which it represents. It’s just a medium that makes exchange a little bit easier. But the dynamic of value, wisely employed, being used to create or acquire more value is not something new to the 19th century.

A hunter chases down a deer. He exhausts it, after running after it for two days without food or sleep. He finally pommels it to death with his bare hands, eats what he can, and then rests. The next time he goes hunting, he takes a spear with him; he traded the skin for an obsidian spear-head that another person had made. He is able to track down and kill this deer in minutes, rather than days. His skill permits him to sell more skins, and he even makes clothing for himself; this clothing permits him now to hunt in colder areas, and more options are available to him.

This primitive man is a capitalist! He is a man who, through wise application of the resources available to him, grows his power and wealth by acquiring things which improve his value-creating capacity. The spear is capital. The clothes are, in this case, capital.

We need not even be so primitive in our examples. Thales of Miletus engaged in some form of futures-trading all the way back in the 7th century BC. After being asked to prove the material value of philosophy, he applied his study of the stars and predicted an unusually high olive harvest in the coming year. With what little money he had, he went out and reserved in advance all olive-presses for the harvest time. When the harvest came, he immediately became one of the wealthiest men in town… just to prove a point.

What is ironic is that there is something circular in the way that Marxists describe capitalists “controlling the means of production.” If capital is whatever increase one’s ability to generate value, and a capitalist is one who possesses capital, then a capitalist is, by definition, one who controls the means of production…

When neo-Marxists talk about capitalism being evil, it isn’t actually clear what they are referring to. What is capitalism really? Is it studying the stars and making good decisions? Is it making spears, or buying them?

I especially love it when they append “…for profit” to the definition of capitalism (as in “trade and industry are controlled by private owners for profit“), as if there were some other motivation than profit that might motivate trade or industry. “Profit” just means improvement. We might “profit” spiritually through prayer; our health may “profit” if we eat better and exercise; our emotional state might “profit” by turning off current-event news and sleeping better. If we simply associate “profit” with “money,” we tacitly forget the nature of money, and the fact that people buy things that are of value to them with this money. If it lost this ability, it would cease to be money. For this reason, most critiques of this accumulation of money is a kind of critique of what people are valuing.

No state has ever implemented a policy of “capitalism.” There is no policy that is “capitalist.” Just as communists will say that “true communism has never been tried,” a libertarian might equally assert that “true capitalism has never been tried…” and he would be right.

He would be right because, as some kind of policy or system distinct from markets, “capitalism” does not exist.

What would it even look like to implement “true capitalism?” Would it be some kind of anarchy? Some night-watchmen state? Both of these would be to apply one’s own values as if they were universal to an entire nation, presuming that everyone shares the libertarian ideal, all evidence to the contrary. There seems to be a market for government, which may have something to do with the infinitely regulated and controlled market of violence. Talk about economic tyranny!

The fact is that “capitalism” does not exist… at least, not as a word describing some specific theory or economic policy employed by nations. What “capitalism” represents in Marxist theory is an attempt to conceptually capture the logic of markets themselves and frame this conceptualization as a Hegelian thesis, which will inevitably generate an antithesis. That antithesis was to be the liberation and revolution of the proletariat.

Perhaps that is why communism never really took off. It was a rebel without a cause; it was striking out against something which it had conjured from ink and paper, but which did not exist in the external world. Ironically, markets on their own behave in a kind of Hegelian, self-correcting fashion.

But markets are not the same thing as “capitalism.” Capitalism was a theory, a system of organization and policies which were never implemented. Perhaps more clearly, capitalism was a word attempting to ascribe an intentional, planned structure to the natural interaction between markets and people in a given time period. It was a category-error, treating universal patterns of interaction as if they were one thing, one possible policy among many to choose from.

But as the Soviets found out, markets will always exist, even if you supposedly demolish private property. It just shifts the currency from money to social power, sex, and violence.

And through all that struggle, all the furious denunciation of the capitalist bourgeoisie, the alienation of the worker, and so forth… does capitalism still remain?

Was it ever there to begin with?

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