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Sunday, November 01, 2015

The System

By 'The System' we mean capitalism. To the casual observer investments seem to grow as if by a force of nature, like a seed which sprouts a plant if well-treated. "Let your money work for you" say the ads. Getting rich is generally seen as a matter of foresight and some luck. This is equivalent to thinking that water comes from a tap, milk comes from the supermarket , and electricity from the wall outlet. What actually happens is that investors get paid out of the profits of companies their money is invested in. Even most of those who realise that nevertheless think that each company wins its profits on its own, and thus by choosing companies which act "responsibly" one can invest in a politically progressive manner.

But an individual company's profit is not simply the result of sales, of that specific company's revenues exceeding costs. Even such as Adam Smith and David Ricardo came to realise this around 200 years ago. Every seller is also a buyer of something. So if all sellers were to sell at 10% above cost, what they gain as sellers they would lose as buyers, leaving them where they started. At best, sales can (and do) explain the redistribution of money from some enterprises to others, but cannot explain economic growth at the level of society as a whole. Both Smith and Ricardo, who deemed capitalism to be simply human nature, sensed profit had something to do with human labour, but admitted they could not figure out exactly how. It fell to latter critics of political economy, especially Karl Marx, to discover that the explanation lay in the fact that, on a world-wide basis, human beings working in the production of goods and services spend more time working during a given time period than it takes society to produce what they need to survive for that period. This surplus work-time, embodied in money form, is the source of a general global profit pool. Individual enterprises "drink" out of this pool at a level based upon their market competitiveness, by selling their product. This favours the huge companies, which keep their unit costs down via vertical/horizontal integration, the use of more machinery and technology versus direct human labor, and market domination by sheer size. Also in force is the nature of the functioning of capitalist competition, which tends to distribute surplus to larger units.

The surplus is thus largely produced by small labour-intensive sweatshops, but largely appropriated by corporate giants. In fact, a lot of it is appropriated by banks and other financial institutions, which play absolutely no role in producing wealth, but suck up ever larger portions of it via interest payments. And a growing number of workers are engaged not in producing wealth, but in circulating it (for example, sales, advertising, information processing) and in maintaining the structure (such as state workers), likewise fed from the surplus pool. These workers are wage labourers, whose work, even though unproductive of surplus, is necessary for the system's functioning, and whose conditions and social disempowerment are just as bad as those of production workers.

This understanding was incorporated by the 19th Century movement for a new post-capitalist society, by both its "communist" and "anarchist" components (most anarchists accepted Marx's analysis of capital, though they generally rejected his political prescriptions). Not surprisingly, it was greeted by the powers-that-be with sheer horror. One result was the complete abandonment of the understandings reached by Smith and Ricardo in favor of a new "science" called economics, which not only treated capitalism as ordained by nature, but deemed that only market interactions between individuals needed to be studied to fully understand the workings of the system. Class relations were deemed irrelevant. Thanks to domination by the capital-owning class of all social institutions, including the media and education, the basic underlying view implied by economics has become accepted by the vast majority of the population, even by many who consider themselves on the political left. The system now appears as natural as the weather. Few people even know of the previous understandings. And thus, each company is seen as if it alone is ultimately responsible for its profit performance.

In fact, capitalism is not at all natural, or even the result of a basic evolutionary process inherent in human social development. It is a social system that was born not via evolution in Europe's trade centers, but via imposition upon the post-feudal English countryside starting in the late Middle Ages, a process referred to as the Enclosures, which was not completed until the 19th Century. Formerly un-owned land (the commons) and small estates were expropriated by large landowners. Most of the peasants living there were expelled, and those remaining turned into wage workers. The new large estates became competing enterprises whose aim was wealth accumulation, the first truly capitalist entities. The expelled peasants, no longer able to produce their survival needs, flocked to urban centers, where they were to become the workforce of the industrial age, likewise in the form of wage labour working for capital.

This process expanded out of England to encompass the whole world. It is still proceeding quite openly in places such as Latin America, Africa and South Asia, and in more subtle ways even in the advanced industrial world. This is why every day there are more people willing to sell their labour power for a wage; they have to in order to survive. The profitability of every single enterprise thus depends upon the continued operation of the global process of capital accumulation, a process which inherently requires the vast exploitation of human labour and the continued conversion of the natural world and all human needs into saleable commodities. Such a system cannot fail to be destructive to the human community and the planet's eco-system, regardless of all the good intentions (however sincere) espoused by managers of investment funds and companies.

But the notion that good investment decisions can lead to a better world is wrong not only as a long-term strategy, but even as a short-term tactic. For every dollar invested with a "socially responsible" intent, there is a pool of a billion dollars seeking the maximum return no matter what. Control of the vast majority of the world's capital is concentrated in the hands of a tiny portion of the population made up of billionaires and multi-millionaires. And companies receiving their investments are the ones that will thrive and out-compete rivals by being able to buy new technology, extend control of both markets and supplies, obtain government assistance (military interventions, trade pacts), and a host of other advantages.

The very idea that the market (and money) is freedom, and participation in it, whether as a consumer or as an investor, is like political democracy, is skillful propaganda. The main effect of the notion of "socially responsible" investment is that of supporting this propaganda, much as participation in the two-party electoral charade legitimates the claim of the political system to be a "democracy". Some people lament that “Oh well, capitalism is here and nothing more we can do about it. Most people (even socially aware ones) accept it, might as well make use of it. They may have learned a lot about the symptoms of the current system, but little of its underlying operating principles. This shows a major problem of the workers’ movement, its general eschewing of hard analysis in favour of "practical action" based upon gut reactions to perceived injustices. Many on the Left have yet to grasp any notion of change beyond some rules (e.g. environmental and labour legislation) which will make the process more "fair" and less harmful to the world's working people and environment. They have not been able to visualise any social arrangement that goes beyond the current one, i.e. capitalism.

Accumulation is capital's very reason for being. Otherwise it wouldn't be capital, a sum of money whose aim is to expand itself into a larger sum. And this accumulation has only one source: the time that working people all over the world spend working beyond that which is necessary to produce our needs, surplus time. As capital develops, it relies more and more on machines, due to a process which favors enterprises that produce more cheaply per unit. Thus, even as there is more and more capital demanding to be invested for a profit, there are proportionally fewer and fewer people to produce the surplus to create that profit. Capital thus finds itself under pressure to cut costs ever more, especially wages, and eliminate regulations which keep it from going where it wants to go, doing what it wants to do, and getting around obstacles. This has been its way since its birth. And the current state is the culmination of its drive to conquer the world, to turn every activity, every facet of living, into a commodity ruled by the rules of capitalist production.

Notions that the current system can be changed to one which safeguards (and even restores) the environment, and which lifts the living standards of all of the world's people, while still sustaining profitable production, are at best naive and illusory. At worst, they are deceptions, meant to channel people away from a direct challenge of the status-quo and towards some sort of a managed situation. They will rely less upon open repression (while of course not doing away with that option) and more upon cultivating an image of people who really care, who are willing to compromise, provided the opposition is likewise willing to compromise, to drop any notion of radical social change, and settle for a seat at the table, even if it's a seat at the end of the table, whose rewards are everyone else's scraps. This only shows the workers’ movement desperately need to do some reflection, to understand what they are up against and where they want to go, if they are not to become mere cogs in a campaign to spruce up the present system.

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