What is Capitalism?
The wealth of capitalism takes the form of value. Everything has an exchange value which has nothing to do with its real utility as a means of satisfying some human want or need. The exchange value of a product depends not on its usefulness but on the amount of time taken under average conditions to produce it from start to finish; or, expressed in another way, on the amount of socially necessary labour incorporated in it. The aim of production under capitalism is to increase the amount of exchange value in existence, to accumulate capital — a sum of exchange values.
We are so used to wealth taking the form of value — to everything having an exchange value and a price — that this seems to be quite natural. It is only when you think about it a bit more deeply that you realise how strange this situation is. What human beings need to survive are specific, tangible things — food, clothing, housing and the like. This in fact is what wealth is: a product of nature or of human labour that is useful to human beings.
All societies previous to capitalism produced most wealth directly as useful things for consumption. This was so even in class-divided societies where the aim was indeed to produce more and better useful things for the ruling class than for the oppressed class, but where there was still production for use. When you think about it. producing wealth directly as useful things is the obvious, natural aim of production. But under capitalism this is not the case. Wealth now takes the form of value and the aim of production is continually to increase the amount of value in existence. It is completely mad and illogical from the point of view of satisfying human needs.
If you don’t believe that the aim of production under capitalism is to increase abstract exchange value (to accumulate capital) rather than to produce concrete useful things to satisfy human needs, just turn to the business section of any newspaper and you’ll find them talking about the “Gross National Product” and saying what a tragedy it is that it has remained stagnant for a number of years now, and so on and so forth. But what precisely is the Gross National Product? How is it measured? From its name it should logically be a catalogue of all the various items of wealth produced in a particular part of the world over a given period. Since it is not possible to compare potatoes with slabs of steel, or tins of paint with wooden chairs, and so on, this would have to be a long list of items expressed in tonnes of this, yards of that, cubic metres of something else. But of course it isn’t. The GNP is expressed in a single figure, as so many billions of pounds. How is this possible? How is it possible to compare potatoes, steel, paint, chairs and so on? Well, it isn’t, but it is possible to compare the economic value which all these things have under capitalism and this is what the GNP is: an aggregate of the exchange values — prices — of all the items of wealth produced in a country in a year.
Wealth under capitalism is produced as value, in more or less autonomous economic units — enterprises — which employ wage-labour. For, under capitalism, labour power — the human ability to work, a person’s mental and physical energies — is also a commodity, an object of commerce, having an exchange value and a price, more commonly called a wage or a salary.
Basically, an enterprise is an economic institution controlling a sum of capital which, as we saw, is a sum of exchange values expressed as a sum of money. Its economic aim is to end up, after producing and selling its commodities, with a greater sum of exchange value (money) than it started with. Of course as exchange value is an abstraction it must be embodied in real concrete things and, since the things necessary to production are raw materials, machines and labour power, it is in these that exchange value (money) is embodied or invested.
The source of the increase in exchange value which enterprises seek and, generally, obtain is the unpaid labour of those who work in the enterprise. For labour power has the peculiar property of being able to create new value. This is a consequence in capitalism of the unvarying fact that wealth, as something useful to human life and survival, is produced by human labour applied to nature-given materials. But labour power produces not only new value but an amount over and above its own value which it is paid as wages. This extra value, or surplus value as Marx called it, belongs not to the workers but to the enterprise. At first it is embodied in concrete things, in the particular product that the enterprise produces, but when these have been sold it has been converted into money and becomes the monetary profit which is the practical aim of production under capitalism.
But enterprises are not free to do what they like with these profits. They are compelled by the economic forces which come into operation precisely when production is carried on for profit by more or less autonomous enterprises, to re-invest the greater part of it in expanding production. Thus capitalism is essentially an economic mechanism, that of the accumulation of capital out of the surplus value produced by wage-labour. It is an impersonal mechanism in the sense that it operates independently of human will. Those in charge of enterprises and those in charge of governments have to implement it: they are cogs in the mechanism. Who benefits from the process of capital accumulation, and how, is also irrelevant because everywhere a part of the surplus value is in practice consumed in good living by a privileged group instead of being re-invested. A whole range of different arrangements are possible here and exist in practice.
In other words, it is not legal property forms and the internal organisation of enterprises that define capitalism. Capitalism is not a particular form of property ownership nor a particular form of industrial control, but an economic mechanism. Where this mechanism exists and operates, there capitalism exists, irrespective of who controls enterprises or enjoys a privileged consumption. This is why neither the state ownership nor the workers’ control of industry nor even the abolition of legal private property incomes amounts to the abolition of capitalism. What must be ended to abolish capitalism is the production of wealth as value: production directly and solely for use must replace production for sale on a market with a view to profit — which can only be done on the basis of the common ownership and democratic control of the means of production.