What Has Capitalism Done For Us?

A fistful of dollars — my own work

People are increasingly complaining about capitalism and its impact on our society as if it were the root of all evil. They are then contradicted by apologists who insist that without capitalism we wouldn’t have the benefits of living in a technologically advanced society. The only way to determine who’s right is to take a closer look at capitalism; what it means, what it does, and how it affects us.

What it means

It’s important to remember that capitalism has always existed in a range of forms. The activity we tend to think of as capitalism is “free market” capitalism. This is what I’m going to discuss here because this is what I get into arguments about.

Private money-making in various forms (renting, banking, merchant trade, production for profit, etc.) preceded the development of the capitalist mode of production as such. The capitalist mode of production proper, based on wage-labour and private ownership of the means of production, and on industrial technology, began to grow rapidly in Western Europe from the industrial revolution, later extending to most of the world. — Capitalist mode of production (Marxist theory) — Wikipedia

A brief history of capitalism

According to some theories, property ownership is based on force. Assume that’s true. This means the home you live in, to which you may or may not hold the title deed, ultimately derives from “See this pointy stick? Off you go, sunshine,” or words to that effect. A brief read through the Domesday Book will confirm this. Those people who received lands as a result of force of arms, etc., had tenants on the farms thereon, the idea being that they would pay rent and tax to their liege lord, and this would form the basis of his income.

Plague: the game-changer

This feudal system fell apart due to the advent of the Black Death. The enclosure of land (and subsequent consolidation of farms), the shifting of the population to the cities, and reliance on the guild system to provide training for the artisan trades followed. The Renaissance and the exploration that followed precipitated the rise of the merchant class, which resulted in a larger and more diverse “middle class” who served the trades in the kind of administration job I do today. This led to the Industrial Revolution and the Age of Enlightenment as the practical considerations of production superseded religion as a social control method.

The role of philosophy in capitalism

The individualism inherent in the philosophy of the time drove an increase in capitalist activity which resulted in mercantilism and the rise of the multinational corporations. The underlying philosophy of self-reliance assumed that since workers were disposable they didn’t have to be paid or treated particularly well and per the laissez-faire doctrine it was up to the workers to ensure improvements in their personal circumstances by shopping around for a better deal, and making themselves more attractive to employers by becoming more skilled and experienced.

What it does

Capitalism creates opportunities for entrepreneurs to enter the market with goods and services for consumers of all kinds, including the government. Capitalism has always been involved in government in some way, shape or form because governments require the goods, services, and the money it provides and capitalists require the support of government for large projects and their patronage for specialist products, e.g. weapons.

Capitalist theory

In general, capitalism as an economic system and mode of production can be summarised by the following:
Capital accumulation: Production for profit and accumulation as the implicit purpose of all or most of production, constriction or elimination of production formerly carried out on a common social or private household basis.
Commodity production: Production for exchange on a market; to maximise exchange-value instead of use-value
Private ownership of the means of production
High levels of wage labour
The investment of money to make a profit
The use of the price mechanism to allocate resources between competing uses — Capitalism Characteristics — Wikipedia

Basically, capitalism is about creating products or services to sell to consumers with the aim of making a profit for the owners of the business. Shareholders may be involved; they provide money to invest in the business in exchange for a share of the profits. Effectively, they are part-owners. After the bills are paid, the profits go first to the owners, then to the shareholders as dividends. Wages are considered to be a cost so capitalists tend to advocate keeping them as low as possible. That said, some companies have profit-sharing schemes for their employees.

Technology

All of our modern technological advances are the result of capitalism. Piped water? Capitalism. Electricity to power our appliances? Capitalism. The wide variety of food and clothing products in our shops? Capitalism. Motorised transport? Capitalism. Telecoms? Capitalism. The internet was a government-sponsored initiative but it was capitalism that brought it to the public. Even the medicines we use to treat our ailments are ultimately provided by capitalism. Why? Because the entrepreneurial spirit that prods people to seek investment in the development of an idea to bring to market is ultimately due to individualism. Bear in mind that investing is a risk; the product might not become popular or someone else might come up with something better, in which case investors might lose money. Alexander Graham Bell struggled to get funding for his invention until he found backers because of his family responsibilities, though they helped where they could. This doesn’t mean that only free-market capitalists can invent. State capitalism has led to great inventions too but that willingness to reject the status quo, break free from the herd, and think for themselves is what prompted the inventors to innovate.

How capitalism affects society

Capitalism affects every aspect of our society whether we like it or not. From the home you live in to the food you eat and the clothes you wear it’s a part of your everyday life. Socialists who decry the evils of free-market capitalism forget that state capitalism is ultimately inefficient because it’s not focused on providing value but in carrying out ideological diktats, and inefficient systems create more problems than they solve.

Providing for our material needs

Capitalism provides the vast majority of the goods and services we need. The push and pull of supply and demand keep prices in check for the most part but when regulatory capture occurs or there are failures in the market, costs and prices spiral out of control leaving social devastation in their wake.

Power without responsibility

This is a big one, the reason I get into all those arguments: capitalism creates a power imbalance between employer and employee. Without legislative protections in place employers can and will exploit their employees. It’s unreasonable to leave us to the mercies of our bosses in the hope that he or she is a decent person and will do right by us — that assumes that there’s a decent one to run to if the situation at our current job is a bad one. Every single piece of employment law we have was created because a boss was either abusive or negligent. Regulation is essential to protect workers and consumers; the threat of taking your business elsewhere rings hollow when they’ve already got your money and have rigged the law to make it hard to get it back or to be compensated for malpractice.

Involvement in government

One of the funniest things free-market capitalist apologists say to me is that the government needs to stop interfering in business. This is hilarious given the amount of interfering business does in government. From writing our laws (remember SOPA?) to setting trade policy to legislating the locking out of competition, business is more busy getting in the way of government than government is in the way of business. Politicians are pretty much owned by their campaign donors, remember. Effectively, if you’re anti-government, you’re anti-business.

How it can be better

Capitalism will always be with us in one form or another, but personally I’d rather have it as our servant than our master. I don’t have a problem with capitalism per se, I just don’t like the abusive practices and policies that cause the social problems we’re experiencing.

Capitalism can work for us, not against us

It can start with raising the minimum wage so people aren’t living on the breadline any more. This is not wealth confiscation or stealing from the rich to distribute to the poor, it’s giving workers a fairer share of the wealth they have created.

If average Americans don’t get paid living wages, they can’t spend much money buying products and services. And when average Americans can’t buy products and services, the companies that sell products and services to average Americans can’t grow. So the profit obsession of America’s big companies is, ironically, hurting their ability to accelerate revenue growth.
One obvious solution to this problem is for big companies to pay their people more — to share more of the vast wealth that they create with the people who create it.
The companies have record profit margins, so they can certainly afford to do this. — Sorry, It’s Not A ‘Law Of Capitalism’ That You Pay Your Employees As Little As Possible, by Henry Blodget for Business Insider

There are, of course, companies that can’t afford to do this. Their problem is with revenue more than costs. If they were taking more money in they’d be able to afford to pay higher wages. A brief check on why generally tends to reveal a clientele too poor to afford to pay for more goods and services from those companies as often as it would take to increase their profits — this is an economic problem, not a failure to run the business well enough. That is not to say that many businesses aren’t badly run, but that’s not a good enough excuse to underpay employees.

There is more to be done than that but I’ll save it for another day. Suffice it to say that if we didn’t have capitalism we wouldn’t have the modern world we live in today. Even the government-sponsored initiatives that created the internet, etc., were underpinned by capitalism, which created the tax revenues required to fund them. We need it but as I said it’s better as our servant than as master.