Pages

Pages

Sunday, January 19, 2020

The Economics of Insanity

Capitalism is not an efficient way of supplying crucial human needs. Just by virtue of being human, are entitled to certain basic conditions of freedom and dignity which have to be respected by others. That’s something the Socialist Party hopes everyone can accept. Yet, we live today in a capitalist world, and capitalism has completely transformed the meaning of political rights and their relation to economic and social rights. Capitalism has created a separate economic sphere with its own rules and its own forms of power; and political rights have been emptied of economic and social content. The system has produced a whole new set of social problems which belong specifically to capitalism.  

Under the capitalist system basic goods and services are produced for and obtained from the market. But above all, it’s a system in which the main economic actors, workers and employers, are dependent on the market. Market dependence is the essence of the system. This unique way of organising material life has had a relatively short history. Other societies have had markets, but only in capitalism is dependence on the market the fundamental condition of life. This means that a wide range of human activity is subject to the market and determined by its requirements in a way that was never true before. In capitalism, the workers who supply our goods and services are market-dependent because they live by selling their labour-power for a wage. In other words, labour-power has become a commodity. Capitalists depend on the market to purchase labour power and capital goods, and to sell what the workers produce.

Workers are paid for their work. That seems just the opposite of peasants exploited by landlords, peasants who pay some kind of rent to the landlords. But do workers in capitalism really get paid for all the work that they do? What are they actually paid for? They’re paid for their labour power for a certain period of time, not for what they actually produce during that time. Whatever the workers produce belongs to the capitalist, and the capitalist appropriates the difference between what the workers are paid and what their products or services will fetch on the market. So capitalists appropriate the surpluses produced by workers in the form of profit, just as landlords appropriate surpluses from peasants in the form of rent. Karl Marx called this, exploitation. Capitalism, however, means a very specific way of extracting surpluses from workers — it’s not done by means of direct coercive force but through the market.

The fact that capitalists can make profit only if they succeed in selling their goods and services on the market, and selling them for more than the costs of producing them, means that making profit is uncertain.

Capitalists have to compete with other capitalists in the same market. Competition is, in fact, the driving force of capitalism — even if capitalists often do their best to avoid it, by means, for example, of monopolies. But the social conditions that, in any given market, determine success in price competition is beyond the control of individual capitalists.

Since their profits depend on a favourable cost/price ratio, the obvious strategy for capitalists is to cut their own costs. This means above all constant pressure to cut the costs of labour. This requires constant pressure on wages, which workers constantly have to resist. It also requires constant improvements in labour productivity. That means finding the organisational and technical means of extracting as much surplus as possible from workers within a fixed period of time, at the lowest possible cost.

To keep this process going requires regular investment, the reinvestment of surpluses. Investment requires constant capital accumulation. So there’s a constant need to maximise profit. The point is that this requirement is imposed on capitalists, regardless of their own personal needs and wants. Even the most modest and socially responsible capitalist is subject to these pressures and is forced to accumulate by maximising profit, just to stay in business.

We can talk as much as we like about corporate social responsibility. But capitalism itself puts severe limits on that. The need to adopt maximising strategies is a basic feature of the system and not just a function of irresponsibility or greed — although it’s certainly true that a system based on market principles will inevitably place a premium on wealth and encourage a culture of greed.

The need constantly to improve the productivity of labour generates constant improvements in technology and what’s conventionally called economic growth. But the same market pressures that make it so dynamic also have contradictory effects. Capitalism is prone to constant fluctuations and business cycles producing continual periodic crises.

Capitalism may be efficient in producing capital, and it’s certainly true that capitalism has generated great material and technological progress. But there’s a huge disparity between the productive capacities created by capitalism and what it actually delivers.

Production is determined not by what’s needed but by what makes the most profit. Everyone, for instance, needs decent housing, but good and affordable housing for everyone isn’t profitable for private capital. There may be a huge demand for such housing, but it’s not what the economists call “effective demand,” the kind of demand with real money behind it. If capital is invested in housing, it’s most likely to be high-cost homes for people with money. That’s the whole point of capitalism.

Where production is skewed to the maximisation of profit, a society can have massive productive capacities. It can have enough to feed, clothe, and house its whole population to a very high standard. But it can still have massive poverty, homelessness, and inadequate health care. You only have to look at the United States, where there are some of the highest rates of poverty in the developed world and where tens of millions have no access to affordable health care. What possible excuse can there be for that in a society with such enormous wealth and productive capacities?

Capitalism is inefficient in another sense too. With its emphasis on profit maximisation and capital accumulation, it’s necessarily a wasteful and destructive system of production. It consumes vast amounts of resources; and it acts on the short-term requirements of profit rather than the long-term needs of a sustainable environment. All aspects of life that become market commodities are outside the reach of democratic accountability. They answer not to the will of the people but to the demands of the market and profit.

Capitalism is unique, because unlike any other system before it, the capitalist doesn’t need direct coercive force to get access to the worker’s labour.

Workers aren’t legally dependent on capitalists. They’re not slaves or serfs. They’re not in conditions of debt bondage or peonage. They’re obliged to work for capital not because they’re compelled by the capitalist’s superior force, but because they need to sell their labour power for a wage just to get access to the means of subsistence. This means that economic and political power have been separated in a wholly new way.

It doesn’t mean that the capitalist market can exist without support from the state. If anything, capitalism needs intervention by the state in some ways more than any other system, just to maintain social order and the conditions of accumulation. But the economic power of capital is separate from political power in two senses: the capitalist’s power over workers doesn’t depend on privileged access to political or legal rights, and possession of political and legal rights by workers doesn’t free them from economic exploitation.

The second major point is that the capitalist system is driven by certain inescapable imperatives, certain compulsions, the economic imperatives of competition, profit-maximisation, constant accumulation and the endless need to improve labour productivity. These really are imperatives. They’re not just choices made by greedy capitalists. They’re conditions of survival for capital. When we talk about the capitalist market, we’re talking about compulsions, necessities, not simply opportunities and freedom. And much of human life is driven by these imperatives. They drive not just production and the allocation of labour and resources but many aspects of life outside the workplace, even down to the most basic organisation of time.

There’s no such thing as a capitalism governed by popular power, no capitalism in which the will of the people takes precedence over the imperatives of profit and accumulation, no capitalism in which the requirements of profit maximisation doesn’t dictate the most basic conditions of life. The essential condition for the very existence of capitalism is that the most basic conditions of life have been commodified, turned into commodities subject to the dictates of profit and the “law”’ of the market. Every human practice that’s commodified is outside the reach of democratic accountability.

Capitalism has certainly marginalised and impoverished many people, and it continues to reproduce poverty even in developed economies. But there’s no doubt that it has tremendously improved material conditions in general and raised the standard of living for vast numbers of people throughout the world. The point, though, is that it has also produced distinctive problems of a kind that never existed before, even in more prosperous economies. The basic point is that market dependence in capitalism means that people have lost non-market access to the means of production and the means of subsistence.

When people are in direct possession of land, for instance, and when that possession doesn’t depend on success in the market, there isn’t what I’m calling market dependence or market imperatives. What we see in the history of capitalist development is the loss of that kind of possession. We see either complete dispossession for the majority, or the imposition of conditions that make possession dependent on success in the market, which for many people ultimately leads to dispossession.

We also see the destruction of communal networks — village communities, and so on — which traditionally gave people some kind of support in times of need. In the earliest days of capitalism, in England for instance, this meant among other things the loss of customary rights to the use of common land, in the famous process of enclosure. It also meant a change in communal values and changes in the way the law was applied. It meant new legal definitions of property in which any traditional commitment to a basic right of subsistence was replaced by the imperatives of profit. As capitalism developed into its industrial form, there were also measures, like changes in the system of relief for the poor, designed to uproot people from their local communities, to increase the mobility of labour. It means the privatisation of just about everything. It means what some people have called a whole new process of enclosure. It can mean outright dispossession of small landholders, or it can mean the imposition of economic policies that force producers to abandon strategies of self-sufficiency in favour of export-oriented strategies, the production of single cash crops, and so on. It also means, as it did in the early days of capitalism, the break up of various social networks which people have relied on for support.

The basic principle of the capitalist system is the isolation of individuals and their naked exposure to market imperatives. It means eliminating everything that stands between people and dependence on the market, everything that makes them autonomous from the market. And when social life is driven by market imperatives, it’s also subject to the cycles and crises of the market. For example, dispossessed workers, who depend on selling their labour-power for a wage, have nothing to fall back on when the market doesn’t need them. It’s not hard to see how this has created new social problems.

Social services and welfare safety-nets are vulnerable and precarious not just because of changing political fashions but for a more fundamental reason, and that’s because it’s in constant tension with the imperatives of capitalism. It’s the imperatives of capitalism that make these rights necessary, and it’s capitalist imperatives that constantly threaten them. How do we challenge those imperatives? It’s hard to see how we’ll ever overcome them completely without moving beyond capitalism and the commodification of labour-power.


No comments:

Post a Comment