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But is it Really Capitalism?

Can it truly be the case that capitalism no longer exists? We examine some claims along these lines.

Socialists argue that the dominant economic system today is capitalism, characterised by class ownership of the means of production, wage labour and commodity production. A very small part of the population (perhaps just one percent) own and control the land, factories, offices, raw materials, patent rights and so on. These people form the capitalist class, and the rest of the adult population – the working class – have to sell their working abilities for wages in order to live. Goods and services are produced for the sake of profit, hence the general rule of ‘no profit, no production’.

At the same time there are those, mainly on the so-called political ‘right wing’, who claim that what exists nowadays in much of the ‘developed’ world is not really capitalism at all. Let’s leave aside those who consider that present-day society is socialism or some strange mixture of socialism and capitalism. Instead we shall focus on those who use some such term as ‘corporate’ or ‘crony capitalism’ to describe the social system. Underlying this is a claim, sometimes explicit, that everything would be fine if we could get back to ‘proper capitalism’ rather than the ill-functioning spin-off that has taken its place.

There is no doubt that capitalism has undergone a number of changes since, say, the late eighteenth century, when Adam Smith wrote The Wealth of Nations, changes surveyed in Ha-Joon Chang’s Economics: The User’s Guide. In Smith’s day, most capitalist firms and factories were owned by individual capitalists or small partnerships, people who were closely involved in supervising production and, for instance, individually combating strikes. Nowadays, factories, offices, etc are mostly the property of companies, which are themselves owned by large numbers of shareholders; as one example, Superdrug is wholly owned by the Hong Kong-based Hutchison Whampoa, which has a number of other brands too. Corporations now are often huge, with Walmart, for instance, having over two million employees. With lots of different competing firms, eighteenth-century capitalism supposedly knew far more competition than today, when in some cases a small number of companies are enormously powerful in particular areas (as with Amazon and Boeing in ebooks and aircraft, respectively). The state, too, has a much larger role now, with everything from regulation of competition to the welfare system and investment in infrastructure. But the question is to what extent these changes have altered the basic nature of the economy.

One writer who distinguishes between capitalism and corporatism is Michael Labeit (see In his view of the world, capitalism is based on the recognition of individual rights, including that to private property; hence theft and murder are illegal. Capitalism involves the free market, ‘the vast network of voluntary exchanges of property titles to intermediate and final goods’.

Under corporatism, in contrast:

‘the government intervenes aggressively into the economy, typically with political instruments that benefit large corporations and enterprises to the detriment of smaller businesses and private citizens. … corporatist authorities seize control of land and capital goods when they feel it is necessary to do so without regard for private property rights.’

Subsidies, tariffs, anti-trust laws and licences are all seen as examples of government working in the interests of large companies and so against the interests of small capitalists and ‘ordinary’ people. Note that corporatism and government interference do not mean state ownership.

Here is another, very sanitised, depiction of ‘genuine capitalism’ (from

‘Capital is invested by individuals to further ideas and enterprises that the investor thinks will create a return on the money invested. If the enterprise in question is a good one, both investor and business owner win. If not – better luck next time.’

The Economist  (15 March) developed a crony-capitalism index, focussing on industries that are particularly vulnerable to monopoly or to heavy state involvement, such as banking, defence, infrastructure and energy. They looked at how rich the billionaires in these crony sectors were, as a percentage of GDP. Top by some margin was Hong Kong, followed by Russia, Malaysia and Ukraine. Britain was only fifteenth, the US seventeenth, China nineteenth and France twentieth. Apparently, ‘French and German billionaires … rely rather little on the state, making their money largely from retail and luxury brands.’ As the magazine pointed out, the data were not always reliable, so the precise results needed to be treated with caution. And the claim of people like Labeit is that the economy as a whole, and not just particular sectors, is subject to cronyism.

So is there any real difference between crony or corporate capitalism and ‘the real thing’? As far as the working class are concerned, the answer has to be, very little. All forms of capitalism involve wage labour and exploitation, and it is of minimal relevance for workers to what extent a capitalist company depends on government interference. And of course all companies benefit from the government’s defence of private property and class rule, its anti-worker legislation and its fighting of wars to protect trade routes and access to markets and raw materials.

The descriptions we have cited above all focus on the capitalist class and how they obtain their wealth, whether simply by investment or by relying on government facilitating their profit-making (by licenses, zoning, import duties or whatever). None of them recognise workers and their unpaid labour as the source of the wealth of the capitalists, or the role of exploitation in profit-making. Big capitalists no doubt exercise more sway with the state than smaller ones, but that should not make us feel sorry for the latter, or accept that they have the same interests as workers. Those who criticise corporatism can be seen as standing for the interests of the owners of small businesses (a point that has also been made about the Tea Party movement in the US).

And what of the free market? Many leftist economic commentators have argued that the recession which started in 2007–8 came about because of the free market and the unregulated nature of the financial industry. Thus Seumas Milne of the Guardian wrote in 2008 that ‘it is the free-market model, not capitalism, that is dying’. But the view of those discussed here is that the market prior to then was not truly free, as there was plenty of government regulation. This position, however, inevitably leads to the conclusion that there never has been a free market, since government has always defended the interests of the capitalist class as a whole: in 1700, for instance, the British government banned the import of cotton textiles from India in order to boost the native textile industry. Tariffs, government regulation and war played a crucial role in the growth and spread of capitalism.

Capitalism can take various forms, including state capitalism, where the major industries are owned by the government. The degree of government interference can vary in its extent and its nature, but whichever variant exists it is based on class ownership, commodity production, the wages system and exploitation. So yes, it really is capitalism, and it needs to be done away with as soon as possible.