TL;DR: Any definitions of Capitalism
- don't account for the actual economy,
- or are un-falsifiable,
- or by definition is a system that must have already self-destructed.
Capitalism as a theory
"Capitalism" is simply a structure, or a framework, for examining and critiquing the political economy. It's a theoretical model, invented by socialists, to critique the political economy.
So wait. What happened?
In the 1800's there were a lot of people with all kinds of different utopian, communist, and socialist ideas. There were also extremely regressive people who were in favor of the stratified class systems and slavery and the systematic oppression inside the gender dynamic. Not any single person necessarily was on the right side of any of these issues. There were all sorts of various ideologies where people recognized that things were mightily screwed up, but they had rather differing views about how and in exactly which way the dominant system worked. There had been a very large number of people who adamantly objected to the oppression on religious reasons, but some thought that there could perhaps be a bit more scientific rigor in defining the political economy.
Enter Marx and Das Kapital.
Capitalism, the theory, was invented by socialists. Mostly, but not initially, it was invented by Karl Marx.1 He wrote the theory down in a great big book called Das Kapital.2 In Das Kapital, Marx steel-manned the pro-status-quo economic arguments at the time into a coherent economic theory. Then he then demonstrates, very conclusively, that the system he described would absolutely collapse under its own weight. Nominally, the folks who wanted to maintain the status quo paid no attention to the "inevitable collapse" part, but rather liked the beginning bits. Why? Well that's the thing. It was a pretty good theory. It really seemed to add some "science" to the whole dismal philosophy of economics.
Marx's Das Kapital is essentially the ur-text of Capitalism. Proudhon may have used the word "capitalism" first, but Marx's work really took it to a place with some real rigour.
It was such a good theory about how the political economy worked that that just about everybody bought into the theory. And I do mean nigh on everybody. Those who were against the status quo of the 19th Century (what we might broadly call the "left") took a look at this theory of capitalism and said "Yes. This is the system! It's oppressive and terrible!" Those who favored the status quo said "Yes, this is the system! It's great and perfect!" Left-wing antagonists of Marx (like Bakunin and Proudhon) may have hated virtually everything else Marx was into3, but thought Marx's analysis of "capitalism" was right-on.
I should reiterate that none of the commonly-cited right-wing thinkers on the economy used the word "capitalism" to describe the system before Das Kapital.4
Everybody5 believes that Capitalism exists. There's just one itty-bitty little problem.
It doesn't.
Now, Marx came up with the first serious theory of the political economy when he created the theory of capitalism in Das Kapital. He did an excellent job with it. Really. But that doesn't make it a perfectly working model. It is, after all, part of the social sciences, which has a fairly dreadful record overall. I would suggest, however, that the absolute brick walrus of capitalism is the notion of humans solely working in their own self-interest. This is a notion that right-wing economists have steadfastly clung to as though it is an self-evident truth. But even in Chicago, some economists are recognizing that homo economicus isn't a thing.6 Humans don't make decisions solely based on their economic self-interest.
To be fair, both Marx and Adam Smith were looking primarily at the second worse people in the world at the time: those being English factory-owners.7 Still, the biggest problem with "capitalism" is that the model relies on humans doing things in their own self-interest. Humans don't always act in their own self-interest. In fact we would have already had a worldwide working-class revolution if people did act in their own self-interest. Veblen did an excellent job of explicating how kerbonkers people actually behave.8 And this is why I say that "capitalism" does not apply to the actual political economy. It can't, because humans are at a minimum vastly more chaotic than accounted for in Das Kapital and, by extension, in capitalism itself.
Capitalism isn't any sort of "fact" about the political economy, it is merely the dominant narrative of our culture. I would suggest the lack of any sort of exact or precise definition that has any sort of salience indicates that. I would suggest the best definition of capitalism is the definition offered in Das Kapital.9 But obviously for many people (especially those in favor of "capitalism") recognizing that capitalism is a Marxist invention is not really their happy place. Is the definition of capitalism the so-called "free markets"? Of course not, free markets are like the Easter Bunny. They're a fun story to tell but they don't, and can't, exist. No, capitalism is [waves hands] "All of this." There are definitions of capitalism that lean more on a theoretically "pure" (but heavens to betsy, not "Marxist") model.
One could, if one so desired, define capitalism as the "commodification of labor", which might be largely a Marxist definition of capitalism. And to be fair to that definition, one would only have to establish that the dominant mode of production in an economy has labor as a commodity. That is, the system must include a way to make labor somewhat fungible, as I understand it. So this is ostensibly falsifiable in that (say) hunter-gatherer communities and subsistence farming are not "capitalist" under that definition. Still, homo economicus is required for the commodification of labor to really mean anything. A non-commodified labor under this definition would be (for instance) pretty much everything done by anyone who works for the government, the army, schoolteachers, or many medical professionals. And that would be fine except that also not only has the US economy become a service-economy but also the financial sector has overtaken manufacturing altogether which would render the US as "not capitalist" under this definition too.
Perhaps the non-falsifiability of "capitalism" is part of the pervasiveness of the idea of capitalism. My overall critique of Mark Fisher's Capitalist Realism is that it accepts the idea of the pervasiveness of "capitalism" in our culture as though capitalism actually exists, rather than that it's an idea which infects our culture. Which it obviously totally does. Everything is "capitalism" if it's in our society. The reason we can't break out of what we might call the "capitalist paradigm" is because everything becomes capitalism unfalsifiably. Indeed, most any sort of "reform" inside capitalism is dismissed by the left as being "necessary for capitalism." Trotskyists call the Soviet Union "capitalist" (not that I really disagree.) The American right will call, say, welfare, "communist" but won't say that our system is communist10 while the left will say that welfare is just a band-aid to prevent insurrection against a capitalist system. These competing definitions of capitalism go from the right's this is actually socialism to the left's "until we have utopia, it's all capitalism".
So what am I saying? I'm saying that capitalism has no workable definition that is falsifiable. It's all capitalism all the time. You can't not have capitalism because it's all capitalism. Which is the same to me as saying "capitalism does not exist." Because, after all, it doesn't.
Now, although I argue here that "capitalism" really has no specific definition outside of Das Kapital, Marx does have a pretty good and logically sound definition. And as I show in my first point, I don't believe that Marx's Das Kapital definition of capitalism can exist. But there's more than that! Inside of Marx's definition, capitalism simply must collapse. Now, this isn't a completely new notion. There have been numerous collapses in "capitalism." I would suggest that if capitalism had existed at some point in the mid-19th Century, it was dead by the end of the 19th Century. Certainly most Marxists, using their interpretation of Das Kapital, thought that capitalism should have collapsed by then.
Why does this matter?
We want to make this entire system better. Objectively, the whole system is better than it used to be. I mean, here in the US we had flipping slavery. So what we have now is better, at least, than that. Still, we can do vastly better. What I suggest here is that the goal of abolishing capitalism is meaningless. Capitalism doesn't exist, so whatever we do to make things better should be directed at making them better, not worrying about a theoretical structure of how the political economy operates. Certainly, we should not rely on an archaic framework which doesn't apply to the political economy we actually have.
What about late-stage Capitalism?
What is typically considered as the low-hanging fruit of a critique of Marx is how the theory/theories don't address the systemic oppression based on sex/gender, race, and the problems of environmental destruction.
It is sorta fascinating just how much "capitalism" became such a dominant notion of what the economy is. This is what happened. In the 19th Century a whole bunch of radicals, revolutionaries, utopians, socialists, communists, religious and non-religious people were running around just looking at the world and not being terribly happy with society and the cruelties inflicted upon the poor. In the US there was also an issue of not only gender relations but, er, a peculiar institution11 and Marx was nominally irked by how there wasn't really a good description of what was wrong with people like Smith and Hume and others and decided he'd demonstrate that the system they thought was brilliant would necessarily fall apart. He also wanted to demonstrate to all the other socialist/anarchists/utopians that they were wrong with their theories because they just weren't scientific enough. So what did he do? He wrote a book called Das Kapital12 and "steel-manned" the nominal economic ideas of the status-quo. They he systematically curb-stomped the whole ideology of the right. And he offered a structure that demonstrated that the economic system could not survive as it was.
And perhaps I am over-influenced by Murray Bookchin:
Marxists lean on the fact that the system provides a brilliant interpretation of the past while willfully ignoring its utterly misleading features in dealing with the present and future.13
But I agree that whatever we call "Marxism" (which I do insist includes the entire notion of "capitalism") can be great at figuring out what's bad, but terrible at figuring out what's better. But us? We can figure out how to make things better.
- I think Proudhon was the first person to use the word "capitalism" to mean the economic system. Proudhon's quotes and ideas are sometimes mistaken for Marx's (lookin' at you Oppenheimer movie.) ↩︎
- I'm not a huge fan of German academic writing. It's unnecessarily obtuse even as compared to other academic writing. If you feel like reading Das Kapital, check out a series of videos by David Harvey where he does an amazing and enlightening seminar on the whole text. ↩︎
- Marx and the anarchists famously fell out at the First Internationale in 1872 (although Proudhon was dead by then.) ↩︎
- Note that Adam Smith never mentions "capitalism." Hume and others did discuss "capital" but only by using the older definition of the word, meaning "stuff" that a person might sell, not the system itself. ↩︎
- I mean, obviously, not me. ↩︎
- Chicago has a terrible reputation as a hotbed of right-wing economists. The "radical" ideas of Freakonomics are that sometimes humans don't act rationally [gasp.] ↩︎
- The worst on Earth, of course, being American slave-owners. ↩︎
- Veblen is cool. Groove to the Theory of the Leisure Class. ↩︎
- It's important to recognize that Marx's definition of capitalism does not require that the entire system be "capitalist." It only requires that the dominant mode of production is capitalist. So Marx's capitalism does not get falsified simply by some elements not being capitalist. This is helpful to the left-wing argument that socialism "props up" capitalism. However, I would argue that the dominant mode of the actual system we have is not capitalism. At least that's what the rest of this essay attempts to demonstrate. ↩︎
- Not usually at least. I'll say the US is communist, but not as a pejorative (and not in this essay.) ↩︎
- Slavery. ↩︎
- I'm insisting on spelling it the German way to distinguish it from "capitalism." ↩︎
- https://www.marxists.org/archive/bookchin/1969/listen-marxist.htm ↩︎
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