Capitalism: On Its Way Out?


I’m going to try to keep this simple. The answer to my own question in the title of this post is: of course. All things come and go. The era of capitalist domination will inevitably come to an end one way or another. How long capitalist domination can hang on is open to conjecture but it carries within itself the seeds of its own destruction.

I’m actually researching a series of blog posts on the relationship between capitalism, liberalism and democracy. Below I consider the most important dimensions of capitalism including its life-historical reality, its structure as a set of social relations, its difference from other modes of human production and its effects on morality and other aspects of life. If you haven’t read my post Is Canada a Capitalist Country?, now would be a good time. I may have been a bit too strident in that post, but I’ll try to make up for that here.

Some writers, actually many writers who might now be considered apologists for capitalism (and some left-wingers too) claim that the spirit behind capitalism has always existed in us humans. They argue that the key to capitalism becoming the dominant mode of production in history was removal of the fetters that kept it from emerging. I don’t buy that and neither does Ellen Meiksins Wood. Capitalism didn’t evolve next to feudalism and just wait until the time was right to overthrow feudal social relations. Capitalism grew out of the failing social relations of feudalism.

Simply capitalism is based on the system of wage labour. As feudalism was on its way out, there was a lot of stress between serfs and lords. Many lords couldn’t keep up with their responsibilities towards their serfs and serfs were reluctant to wait around for the lords to get their shit together. The productivity of agrarian England, particularly regarding wool production, for example, was rapidly diminishing to the point where in the 17th Century a half of English workers (called servants then) were wage labourers. I’ll not get into the specific mechanisms and forces that led to that outcome in this post but will explore it later in review of C. B. Macpherson’s book The Political Theory of Possessive Individualism (Oxford, 1962).

As workers we have a relationship to our bosses, our employers, based on wage labour. In a classic capitalist scenario, a capitalist hires workers to extend his or her own capacity to produce commodities for sale. It’s no surprise that businesses that mine oil and gas, for example, are referred to as petroleum producers. That designation does not include the people who work for those businesses. Hasbro is a toy producer. No reference to their workers as the real producers. Their labour power has been bought and paid for by the capitalist and he or she can therefore refer to it as his or her own labour. After all, it was bought and paid for.

Capitalists buy our labour power. Not our labour, but our labour power, our capacity to work. Of course a lot of us never work for an individual capitalist. We work for governments at various levels or non-profits. So, it’s more accurate to say that workers as a class work for capitalists as a class.

The system of wage labour has infiltrated every nook and cranny of our worlds. We expect to grow up to be nothing else than workers or employees (as many people prefer to be called) and we are trained at home and at school to expect no other outcome. We just want a good job. So few of us can ever become capitalists despite our dreams. Besides, the reality is that we, as individuals, are not very important in the scheme of things. It’s capital versus labour on a grand scale that counts historically. Individuals are simply personifications of our classes and no one is indispensable. Steve Jobs, the founder of Apple died a while ago but Apple lives on. Us workers are a dime a dozen. You want to find meaning in your life? For most people it’s futile to even contemplate finding ‘meaning’ in their work.

So, why will capitalism die? Because of its own efficiency and effectiveness. Due to severe stresses often caused by periods of overproduction of commodities, the capitalist class embarks on a program of renovation that changes the relationship between capital and labour. Globalization is a result of that renovation. Capitalists seeing their profits drop from failing sales have some options. They can curtail production and they can make their production processes more efficient, meaning that it takes fewer units of labour to produce the same product. They can also move production around like build a factory in Sri Lanka to take advantage of low wages, favourable labour and safety laws, better access to raw materials, and new markets.

Let me back up a bit to a very simplified illustration of what happens when someone wants to produce a product. Let’s look at a hypothetical product called a widget. It’s for ducks to perch on. So Sam McGee, a prominent local duck hunter and entrepreneur decides he wants to produce widgets. What does he do? Well, he gathers together all the things that he will need, what I call INPUTS in the table below. He hires a manager and the manager gets on with it. Sam sits back and watches the whole thing unfold from his condo in Panama.

The dollar values on the right in the table below are the costs per widget. In this case they add up to $28.50. He envisions making a profit of $12.50 per widget. Not bad. Note that McGee has to hire workers before he starts operations. Workers are part of the inputs. Workers do not share in the profits of the business. Workers’ labour is part of the costs of production like the land, equipment, and raw materials. McGee has agreed to pay market value for all the inputs. In this scenario, McGee gets $40 per widget which he also sells at market value. So how does McGee make money?

Sam McGee’s World

The Widget factory
 INPUTS
raw materials$2.00
equipment$4.00
land$5.00
buildings$5.00
labour$8.00
power$0.50
overhead$4.00
TOTAL$28.50
OUTPUTS
Widgets $40.00

Well, McGee is a clever kind of guy and he’s figured out that he can make money as things are. All he has to do is make sure that his costs of production amount to less than what he can get for widgets on the market. If the workers shared in the profit, the table above would look somewhat different. The $8.00 Sam pays his workers would rise to $20.50. So, the only way Sam cam make money is by not paying his workers full value for their labour. The $12.50 in profit comes from not paying his workers a full share of the market value of the widgets.

His cleverness will be tested, however, when the market for widgets collapses because he’s now produced a lot of widgets and he’s saturated the market and because he also now has competitors that pay lower wages and make even more money than he did. Damn. What to do? Cutting production is an option. The problem is it takes 10 workers to make 100 widgets a day. They can’t make any more and if they make any less, the costs of labour per widget go up. So what to do. Sam, the clever guy, knows a guy in welding and fabrication who says he can build Sam a piece of equipment that will allow for the same output of widgets but using half the current employees. Not only that, the equipment will allow Sam to tailor his production of widgets to any number he wants. Bonus! Sam gets on that right away, installs the equipment and fires half his staff. He also cuts back on production temporarily and lays off half his staff again. He’s now down to 2 workers and is still producing widgets, but a lot fewer of them. Sam is still making money but his workforce is not doing too well by him. As a side thing, Sam needs to also figure out how to make flimsier widgets. The ones he makes last way too long. He has to cultivate a forever returning clientele.

I know this is a huge simplification of how capitalism works, but it’s the essence of the thing at least from the production end of things. Of course, there’s money to be made in the distribution of commodities too and in their consumption. And if Sam needs to borrow money all the better. Then Goldman Sachs can get rich too.

What I’ve just shown here, simplified as it is, is the way that the labour force is being squeezed right out of existence. Either production is automated to eliminate workers altogether or the value of labour power is so reduced that workers can’t survive on the wages they are offered. We’re in that place right now. Simply put, there is a greater and greater amount of capital going into production at the expense of labour and as the system gets closer and closer to essentially eliminating necessary labour, the margins of profit drop, and capital can no longer exploit workers.

Oh, but it’s so much more complex than this. Governments have gotten into the picture helping Sam McGee in his time of terrible trouble partly by helping to manage and maintain his now mostly unemployed workers. (On EI, they are always free to come back to work. They constitute a free pool of labour for Sam). Banks too have joined governments to ensured that Sam will be fine. After all, Sam is the creative producer and his workers are nothing more than part of the cost of production. Sam needs our help!

Now think of Sam McGee as the totality of global commodity production and think of his workers as the global labour force and you will begin to get the picture.

In my next post I tackle how capitalism along with its essential liberal legitimation has infiltrated our very psyches, our values and our morality, and I will address how that infiltration is not as solid as it might seem.

4 thoughts on “Capitalism: On Its Way Out?

  1. Good start to a most complex phenomenon. The modern global corporatist capitalism is the latest stage of development in a 270 year maturation process for capitalism. It is a multi-layered, often obscured, economic system feeding ”vampire-like” off of the surplus value generated by wage labour inside a closed objective system of unequal power relationships. The capitalist class, ably aided and abetted by governments, banks, state apparatuses, etc., perpetuates the myth of their ‘creative’ vigour and necessity to the integrity of the whole global system blinded to the inevitable collapse from within of the entire edifice. The global inequities of the new ‘Gilded Age’ portent the coming of a catastrophic demise of the capitalist economic world.

    1. Yes, indeed. I’ve got a ways to go with this and I have more groundwork to lay, but this post is a start. I have a pretty clear picture in my mind of where I’m going with this, but there is a great deal to cover. I will endeavour to stay on task and on track. Thanks for your comment, Paul. I hope warmth comes to you sooner than later. We’ve just had to buy a new clothes washer. They’re supposed to deliver on Tuesday. We’ll see if they can pull that off. We have over 8 inches of snow in the yard now.

  2. Wow! I mean, WOW! This well crafted analysis is so clear.

    I learned recently that many of the top capitalists are not returning large sums of money back into the system through reinvestment but are taking cash and gold and simply putting them into storage. With giant tax cuts for the most robust capitalists there is more to store as well.

    The squeeze, as you so aptly put it, is occurring over and above the squeeze on labour but is now squeezing the actual supply of capital itself.

    Is it no wonder there is no money to do good work for people, the environment, etc?

    I can’t wait for your next installment as you talk about the ramifications and manifestations of this popular trend.

    1. You’re right about capitalists hoarding large amounts of cash and governments keep propping up clearly out-of-control corporations like SNC-Lavelin and Bombardier.
      There is what some people call an oversupply of capital. That is just another indication that it’s more and more difficult for some types of capitalists to make money and there is greater and greater fear of investment. So the banks are getting bloated with stored cash. It’s all very interesting to watch. Thanks for your comment, Jack.

Leave a Reply to pswhyte Cancel reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.