Cooking the Books – What does ‘capitalism’ mean?

Last month the BBC released a podcast of Laurie Taylor discussing capitalism with two authors of books on the subject.

The first was Michael Sonenscher, author of Capitalism, The Story Behind the Word (reviewed in the January 2023 Socialist Standard). He told Taylor that the word originated in the 18th century (in France as capitalisme) to refer to the practice of governments borrowing money-capital to finance their activities. Capitalism was the name of this practice and those who lent governments the money were capitalists. He contrasted this with what he called ‘commercial society’ that arose from the division of labour and which made people dependent on each other linked through market transactions.

He pointed out that Marx himself never used the actual word ‘capitalism’ and seemed to suggest that Marx regarded capital as a term of property ownership. In fact, Marx saw capital as the expression of a social relationship rather than as a legal concept. And he did use the adjective ‘capitalist’ to describe a particular ‘mode of production’, one where money was invested in production with the aim of ending up with more money, obtained by the exploitation of wage-labour for surplus value. So ‘capitalism’ would be where money-capital was invested in production rather than lent to governments.

Marx, too, noted the existence of Sonenscher’s ‘commercial society’ which he called ‘civil society’, also translated as ‘bourgeois society’.

Taylor’s second guest was Rainer Zitelmann, author of In Defense of Capitalism: Debunking the Myths in which, according to the blurb on Amazon, he ‘examines the ten most common objections to capitalism: capitalism leads to hunger and poverty, to rising inequality, to unnecessary consumption, to environmental destruction, to climate change and wars. Capitalism, its critics say, prioritizes profits over humanity, creates dominant monopolies, and undermines democracy.’

He is a strident free-marketeer who sees any state interference in the market as ‘socialism’ (so he sees ‘socialism’ everywhere). He defines capitalism as:

‘an economic system based on private ownership and competition, in which companies themselves are free to determine what and how much they produce, aided in their decisions by the prices set by the market’.

This differs from Marx’s definition which sees capitalism as the investment of money-capital in production with a view to increasing its value (making a profit), even if invested by the state. Zitelmann fails to mention profit at all or that it is how much of this that capitalist enterprises expect that determines ‘what and how much [and if] they produce’.

Zitelmann only had time to ‘debunk’ the first two of his ‘myths’ — that capitalism leads to hunger and poverty and that capitalism leads to rising inequality. His refutation of the first was that, as capitalism spread, it vastly reduced ‘absolute poverty’. But the socialist criticism of capitalism on this score is not that it causes world ‘hunger and poverty’ but that, despite the technological means to end it, capitalism can’t solve the problem; hungry and poverty-stricken people, having no money, do not constitute a market and so don’t count as far as capitalism is concerned.

Zitelmann’s response to the charge that capitalism leads to rising inequality was to say that there was inequality in ‘socialist’ countries too, a prelude to a rant against ‘socialism’ (government interference in the market) in general and conditions in Venezuela in particular. Clearly bluster to disguise the fact he couldn’t deny that in a system geared to making and accumulating profit there will be a tendency for the class of those with invested capital to grow richer.

This said, the poll he commissioned about what the word capitalism meant to people in different countries sounded interesting. He mentioned that in Britain only 14 percent thought that capitalism was improving things and that countries with the most positive opinion of capitalism were in order: Poland, the US, South Korea, Japan and Nigeria).

Next article: George Galloway’s ‘Workers Party’ ➤

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