Manifesto of the Socialist Movement

Capitalism is an economic system based on three things: wage labour (working for a wage), private ownership or control of the means of production (things like factories, mines, farms, and offices), and production for exchange and profit.

While some people own means of production, or capital, most of us don't and so to survive we need to sell our ability to work in return for a wage, or else scrape by on welfare benefits. This first group of people is the capitalist class or "bourgeoisie" in Marxist jargon, and the second group is the working class or "proletariat".

It is a basic simple process that has gone on for centuries. Money is invested to make more money. When money functions like this, it functions as capital. For instance, when a company uses its profits to hire more staff or open new premises, and so make more profit, the money here is functioning as capital. As capital increases (or the economy expands), this is called 'capital accumulation', and it's the driving force of the economy.

Those accumulating capital do so better when they can shift costs onto others. If companies can cut costs by not protecting the environment, or by paying sweat-shop wages, they will. So catastrophic climate change and widespread poverty are signs of the normal functioning of the system.

Furthermore, for money to make more money, more and more things have to be exchanged for money. Thus the tendency is for everything from everyday product to carbon dioxide emissions – and, crucially, our ability to work - to become commodified, something to be sold on the market. In a world where everything is for sale, we all need something to sell in order to buy the things we need. Those of us with nothing to sell except our ability to work have to sell this ability to those who own the factories, offices, etc. And of course, the things we produce at work aren't ours they belong to our bosses. That is crucial - money does not turn into more money by magic, but by the work we do every day. The wages we get roughly equals the cost of the things necessary to keep us alive and able to work each day. The difference between the wages we are paid and the value we create is how capital is accumulated, or profit is made. This difference between the wages we are paid and the value we create is called "surplus value". The extraction of surplus value by employers is the reason we view capitalism as a system based on exploitation - the exploitation of the working class. It’s essentially the same for all work, not just that in private companies but government employees also face constant attacks on their wages and conditions in order to reduce costs and maximise profits across the economy as a whole.

In order to accumulate capital, businesses must compete in the market with other companies. They cannot afford to ignore market forces, or they will lose market share to their competitors, go bankrupt or get taken over in a merger. 

Therefore even the CEOs aren't really in control of capitalism, capital itself is. It's because of this that we can talk about capital as if it has agency or interests of its own, and so often talking about 'capital' is more precise than talking about bosses, who are the functionaries of capital.

Both capitalists and workers, therefore, are alienated by this process, but in different ways. While from the workers' perspective, our alienation is experienced through being controlled by our boss, the business owners experiences it through impersonal market forces and competition with other companies.

Because of this, both management and politicians are powerless in the face of ‘market forces,’ each needing to act in a way that facilitates the continued accumulation of capital (it is incidental that they do quite well out of it). They cannot act in our interests, since any concessions they grant us will help their competitors on a national or international level.

So, for example, if a manufacturer develops new technology for making cars which doubles productivity it can lay off half its workers, increase its profits and reduce the price of its cars in order to undercut its competition.

If another company wants to care for its workforce and not make people redundant, eventually it will be put out of business or taken over by a less compassionate  competitor - so it will also have to bring in the new technology and have a policy the lay-offs to stay competitive.

The primary role of governments in capitalist society is to maintain the capitalist system and assist in the accumulation of capital. As such, a government will pass laws against workers when we try to further our interests against capital. When the excesses and conflict between the employer and the employee threaten the general stability of society with disruption governments will endeavour to create a “balance of power” but one which always favour the capitalist class but with enough compromise and concessions to the workers to placate any determined dissent.

Abridged and slightly adapted from here
http://libcom.org/library/capitalism-introduction