this post was submitted on 21 Jul 2023
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I'll toss my two cents in
Capitalism is a form of economy where individuals are allowed to obtain, keep, and distribute capital as they see fit, so long as they have the means to do so.
Capital is a combination of property and money. Property being the things you own, with money being a measure of potential property you don't yet own.
It's at the core of the concept. Individuals are allowed to obtain, keep, and distribute capital as they see fit. You and you alone own your capital.
I see a lot of comments saying workers are not allowed to own what they produce. That their employer takes it from them. I feel this is flawed and possibly comes from a place of frustration. So let me ask this: What does an employed worker produce?
If that worker is a self employed craftsman making sprockets, the answer's clear. They produce sprockets. They can then go out and sell those sprockets for goods, services, or money as they see fit.
If that worker is employed by a sprocket making company; they still make sprockets, but that's not what they produce. They produce labor. Which they've chosen to sell to the sprocket company for money and/or other benefits. They may not care about sprockets themselves, don't go to sprocket conventions, and certainly don't want to deal with figuring out how to sell all the sprockets they're making. It's a better deal to sell your labor and use the profit you make off your employer to do the things that actually interest you. It's your employer's job to handle everything else.
Note that selling your labor is no different than selling capital. You set the price you're willing to accept, and your employers (who are your consumers) can accept that price or not. That doesn't mean you can set your price at any number and expect it to stick. Just like how the price of sprockets is dependent on consumer need and competitive prices, so is the price of your labor.
Bonus Questions!
If you also exist in a capitalist economy, then yes.
No. Capitalism cannot exist if you don't have control over your own property.
Yes. Ideally you raise your prices so fewer people buy your product while you still make the same profit as if you were filling those extra orders. Alternatively, you can work to optimize your production methods to create more product in the same amount of time. Be it finding more efficient methods you can practice to make each product, or creating or purchasing equipment which can make each product faster. The balance between price and optimization is up to you.
It's a term to describe a type of business. No different than "corporation" or "partnership" or "nonprofit", among others. The distinction's important in that there's value in being able to describe different types of businesses.
I think this answer misses the mark a little bit with regards to the context of what it is about capitalism that causes so much controversy.
People who critique capitalism aren’t usually advocating for an economic system completely devoid of private ownership (though some are). They’re often raising issue with a certain type of capital ownership.
Say you’re the owner of a sprocket manufacturing corporation, and I’m a worker. You yourself don’t work, you just inherited a sprocket empire from your grandfather, who founded that sprocket empire using funds from selling his emerald mines that were worked by slaves.
I put in an honest days work 5 days a week, and in those 5 days, I produce $2000 worth of sprockets. It costs $10 per week to maintain the sprocket machines, $10 per week for electrical power to cover my sprocket making activities, $30 per week to repay the loan that was taken to build the factory, and $50 per week in other miscellaneous expenses needed to allow me to make sprockets.
That means that of the $2000 worth of sprockets I produced, $1900 of profit was generated.
You pay me a salary of $500 per week, and collect $1400 per week from my (and each other laborer’s) work.
The point of criticism is that you’re accumulating wealth, which other people had to work to produce, without doing any work yourself. You’re simply a parasitic freeloader on society because of an arbitrary concept of “ownership” over something that you don’t use personally.
Some responses to these criticisms include the following:
This is the example from classical economic theory, and there are a whole handful of reasons that it doesn’t work. The voluntary exchange between a worker and a capitalist (meaning one who owns the means of production) isn’t actually (fully) voluntary. A worker who finds his working conditions unsatisfactory can’t reasonably just choose not to work. The threat of financial ruin, homelessness, and starvation act as a metaphorical gun to the head of the laborer giving the capitalist a significant negotiating advantage.
Add to this the fact that it’s been theorized and demonstrated that capitalism tends toward regulatory capture and monopoly, and you have a situation where the means of production become more and more concentrated in the hands of a group of elites, while the workers’ bargenaining power becomes weaker and weaker due to less competition in the labor market.
If the owner of the factory is functioning as a floor manager, they should be paid a fair salary for being a floor manager. If they’re working as a director, they are entitled to a director’s salary. These critiques of capitalism aren’t saying that there should be no hierarchy in an enterprise (though some alternatives to capitalism do call for that). Just that the only people who are entitled to the wealth from something that’s produced are those who are working to produce it.
This same thing goes for other forms of capital ownership too, by the way. Landlords are a classical example. I’ve heard it claimed that landlords are entitled to their rents because many of them work so hard at repairs and managing their properties. They’re totally entitled to be compensated for any labor they engage in, but the wealth that they extract from tenants far exceeds the value of the labor that they supply. Which is kind of the whole point of rental property, if “investors” couldn’t extract a passive income (income in excess of work performed), they wouldn’t be buying homes and then renting them out.
Oh, I agree there's plenty of pros and cons to talk about regarding a capitalist economy. There's also plenty to talk about regarding the form capitalism has taken in our global and local economies. However, that's for the other discussion OP mentioned. This one is only about defining what capitalism is.
To that end, and in regards to your critique about parasitic owners living off the labor of workers, I'd like to pose another question: Does a capitalist system require workers and employers?
I would say no. It's entirely feasible for everyone in a capitalist society to produce and trade their own sprockets. It would be up to each individual to either inherit a given trade from someone who's retiring, or else find something society needs that they can fulfil. Our current use of capitalism may largely contain organized businesses built on employer/worker relationships, but that's not a defining trait of the system.
The cost and price of sprockets is also not a defining trait of capitalism. You're free to set your own price on any sprocket you own. You could ask for a handful of dirt as payment, or you could ask for the literal moon. Is the moon a fair price for your sprocket? That's debatable, and largely decided by your consumers
I think you’ve written a good, neutral summary critique that increases our common ability to debate this. Thank you.
I would argue, however, that your example makes it sound especially egregious as the profit margin in your example is 95%. The advantage of capitalism, according the people who support it (like I do), is that other sprocket making companies exist and together they bring the profit margins down and down and down (due to completion), forcing continual innovation to bring it back up. Thus, not only is the profit margins typically much, much smaller (1-10%), but society collectively advances, which benefits the workers too as the produce they need to acquire increases in quality and lowers in price.
The truth is probably somewhere in the middle.
So I agree with you when arguing against monopolies.
That's not frustration. The viewpoint you are describing (that workers are not allowed to own what they produce) actually comes from a different definition of "capital" and "capitalism" than the one you are using. And that difference in definitions is why I created this post. And I appreciate your answer. It lets me highlight the differences in definitions and the consequences of those differences. Because in the case of capitalism, the difference in definitions are actually more important than any difference in values or priorities.
You noted that people are saying "workers aren't allowed to own what they produce in capitalism." But those people are not referring to capitalism as you have defined it.
Capital
I'm sorry, but no one who disagrees with you thinks that the ability to accrue property and money deprive workers of control over what they produce. Not even Marx and Engels. Not even Mao or Stalin. Certainly, property and money can we wielded in such a way that they become capital. But until then, property and money are merely wealth.
The definition used by people like Marx and Engels -- or by the entire field of economics -- is: capital is property that allows or speeds up the production of goods. A mine. An oil rig. A McDonalds burger conveyor-belt-oven-thingy. A 3D printer. In other words, the word "capital" is about the function of the property. Not its value. A painting can cost $1,000,000 and still not become capital. Because no one will ever operate that painting to cook burgers. Or to mine ores.
Capitalism
Now "the ability to own commodity-producing property" is still not quite sufficient for a system to become "capitalism." In fact, Marx and Engels didn't want any capital to be destroyed at all in the overthrow of the bourgeoisie. Because even under the definition of "capital" that communists still to this day believe in, the existence of capital and ownership of it are still not inherently a source of coercion.
There's another crucial piece to the puzzle that leads to people complaining about the whole system:
In capitalism as a system, some form of employment contract always allows the owner of capital to own everything produced using that capital.
For example, the oil rig owner -- according to employment contracts -- owns all of the oil produced using the oil rig. But not only did the owner not need to work the rig to extract the oil: the owner also did not need to weld the seams or turn the screws to build the oil rig. All the owner needs is official ownership of the oil rig and a system that acknowledges their right to everything the oil rig produces, (regardless of who needed to input their labor to turn the oil rig into anything other than a metal sculpture in the ocean.) and with those two things, they are entitled to all of the proceeds of the rig.
Now, hopefully, you can see that, provided a worker has entered into such a contract, "workers are not allowed to own what they produce" is not a statement born from frustration: it's just true by definition. It's not saying "the worker is NEVER allowed to own anything they ever create in this society." It's saying: "within the relationship laid out by the employment contract, the worker who operates capital is not entitled to the direct consequences of their labor."
Now, whether the worker benefits from this arrangement is another picture, but in accepting an employment contract, the worker is entering into a dynamic where they do not own the outcome of their own labor.
Bonus Question #4
Which is why bonus question #4 (the difference between a workers' cooperative and a company that uses these employment contracts) is extremely important to understanding the consequences of the difference between these definitions. You even touched on its importance in your earlier replies, saying yourself:
(Aside: what you're describing here is literally Marx's theory of alienation.) But more importantly,
I'm assuming the sprocket company "produces" sprockets by your definition of "produce." Well, in a workers' co-op, the workers vote in the decisions of the company. They elect the CEO (if there is one) and the managers. They take shares of the profits. They are the company. And if the workers are the company, and the company produces sprockets, then the workers are once again -- just like if they were self-employed, but with the benefits of efficiency and networking that come from being part of an organization -- producing sprockets. They are no longer (as Marx would say) alienated from the results of their labor.
In other words, the co-op is a form of self-employment according to the definitions you appear to be using. Which makes the distinction between cooperatives and other kinds of companies... massive.
The people saying, "capitalism strips workers of the results of their labor" love workers' co-ops. Love them. Despite you probably defining the workers' cooperative as "another example of capitalism," not even avowed Marxists would in any circumstance suggest that the worker co-op "disallows workers from owning what they produce." In fact, they strongly believe the opposite. To them (and to Marx himself) the worker cooperative operates under an entire opposing paradigm to the worker contract. And to them, it is therefore a rival philosophy to capitalism.
You don't have to accept their definitions. You don't need to believe Marxist definitions are correct. You can believe co-ops are capitalist all you want.
But please: try to understand that when people criticize "capitalism," they are (I 100% guarantee) referring to something far more narrow and far more specific than what you call capitalism.