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.

The Insanity of Economics

Humanity have had centuries of scientific and technological progress that it ought to be easy to make give ourselves a reasonable and comfortable life. Instead, humanity is in the grip of capitalism which impels us to tear our world apart, turning our own human productive powers against ourselves, transforming them into forces of self-destruction. Set against one another, we are reduced to a state of powerlessness. Today’s society is devoted a huge part of our energy and ingenuity to lying and cheating, to hurting or killing each other. 

Scientific and industrial activity has been devoted to fabricating the means to kill, torture and maim human beings. In every part of the world, there has been a drive to expand industry and to apply ttechnological discoveries to agriculture. The consequences, however, have never been what was intended. They include the destruction, not only of natural ecological systems, but also of older forms of social and community life. Society is increasingly divided. Those at the bottom are deprived of decent housing, education and health care. In turn, this condemns them to a life of unemployment or of the most degrading work. The market, of course, is what links the whole world together. Money really makes the world go round, determining every aspect of the life of society as a whole as well as the lives of individuals. From politics to football, from music to newspapers, every activity is driven by the thirst for money, which does its own thing, almost as an independent force.

 Human beings, equipped with the means to control the natural world, are bereft of the power to control their own lives. At the same time, they are in the grip of forms of thinking which make the resulting inhuman ways of living appear perfectly ‘natural’. Since they lead increasingly fragmented lives, how can they possibly grasp the true nature of the situation as a whole? The failure of all previous attempts to liberate ourselves is taken as proof that there is no such way to a successful revolution. Ideas which were developed as part of the struggle for the freedom of mankind from exploitation and oppression were debased and used by cynical capitalists and politicians to promote their power and to hide their privileges. More and more, people are dominated by the thought that there is no way out. We can collectively alter our way of life. We can make this possible.

The Insanity of Capitalism

There are many signs of a drift into an uncertain society of dysfunction, full of decay of social, economic and political institutions. socialism is incalculably more necessary in today’s world because the only alternative under capitalism is barbarism for the entire population of our planet. While capitalism has provided the skilled workers and the technology, i.e., the machines, factories and techniques which are necessary for a socialist reorganisation of society, it long ago ceased to provide for the simple wants and needs of the plain people. Working people want peace, instead of bloodshed and destruction. We want security and jobs, instead of insecurity and joblessness. We want decent homes for our families and good schools for our children. We want comfort and prosperity, instead of slums, child labour, low wages, unemployment and starvation. We want democracy and freedom instead of totalitarianism, bureaucracy and racial and religious conflict. But in our world, with its elaborate industries, complex machines and abundant natural resources, capitalism is unable to provide us with these elementary wants. It is unable to avoid periodic world wars. It is unable to give working people freedom but dooms them to serfdom and poverty. Under this system of capitalism a handful of plutocrats and oligarchs control the wealth and power of the world. They own industry, banking, mining, transportation. They own our jobs. They own governments because they finance the political parties which put their servants into office. They send men and women to war to protect their vested interests. They have the power of life and death over all of us. We cannot begin to estimate the waste of humanity living in latter-day barbarism.  They starve or they pillage. They are wracked by disease. hat is why we say socialism was a necessity. That is why we say socialism is a necessity.

The insanity of this system of capitalism is that it creates inequality, poverty and unemployment and all the crises of society because it produces too much! Not, to be sure, in relation to human needs, but in relation to the market. While the monopoly capitalists are united against the workers and their political and economic organisations, they are in competition against each other and against their capitalist counterparts abroad. They all try to outproduce and outsell each other on the market because the mainspring of capitalist production is profit, not human needs. This fact alone indicts capitalism as the great obstacle to human progress. The more advanced become the technology of our society, the more wealth becomes polarised at one end, and poverty at the other. We see the phenomenon of poverty in the midst of plenty. On a world scale capitalism has reduced the standard of living and decreased the freedom of mankind. It has produced privation across most of the world. It will continue to make the rich richer, and the poor poorer. It will continue to divert more and more production into armaments production, to protect the wealth by the few. Capitalism produces more and more environmental destruction. Socialism only becomes more vitally and urgently necessary as we observe how capitalism may destroy the whole of civilisation through it s complicity with the climate crises.

Workers desperately need a political movement of our own. A movement which puts our interests first because it is a movement by, for and of us. Since the system we live under, capitalism, is based on our exploitation, such a movement needs to be explicitly anti-capitalist. It needs to aim for the overthrow of the capitalist system and its replacement by a new truly socialist society, based on organising production to meet the human needs of all rather than private profit for a super-rich few. One part of building such a movement is running in elections, to challenge the parties which defend and manage exploitation and oppression and to get our ideas out to the widest possible audience. We need international workers’ solidarity. That’s the only way we’ll be able to stand up to international capitalism.

We are entering into a new era in which irrational profit-oriented production will have to be replaced, and in which the development of human productive power desperately needs to be liberated from alienated labor in order to satisfy a variety of human needs. Unless there are basic changes in existing social institutions, we will be confronted with dangerous, ominous consequences for the human prospect. Such a demand for a revolutionary change in the nature and purpose of human work and human communities requires a profound transformation of social institutions. It requires the democratisation and humanisation of all aspects of social life. The most important commitments of the Socialist Party is the overcoming of capitalism, of social transformation of economy, of worker’s participatory democracy. The Socialist Party is recommending a world society as an alternative. It is proposing the socialist solution to capitalist insecurity and barbarism.