Capitalism: What it is and How to Abolish It

M.K. Owen provides an analysis of capitalism as a historically specific mode of production and provides a vision towards what an alternative to this system would look like, calling for democratic planning of the economy that carries on the work of Project Cybersyn. 

Much ink has been spilled on the question of capitalism: not only on its definition, but whether it can be abolished, and how one would go about doing that. If we contrast capitalism with anything which came before it, and therefore anything which might come after it, we find that not only do commodity markets exist, but a very specific market—the market for labor-power—defines it. This results in the existence of classes of buyers of labor-power—the bourgeoisie, and by extension any employer—and sellers of labor-power—the proletariat. As Friedrich Engels put it in the 1888 English introduction to the Communist Manifesto:

By bourgeoisie is meant the class of modern capitalists, owners of the means of social production and employers of wage labour. By proletariat, the class of modern wage labourers who, having no means of production of their own, are reduced to selling their labour power in order to live.¹

What is this unique commodity—labor-power—which is bought and sold under capitalism?

Marx and Engels provide the basis to understand not only labor-power but also the historical specificity of capitalism, in Chapter 6 of Capital, Vol. I: “The Buying and Selling of Labour-Power”. As this will provide the basis of much of what is to follow, let us quote the opening passage of this crucial chapter at length:

The change of value that occurs in the case of money intended to be converted into capital, cannot take place in the money itself, since in its function of means of purchase and of payment, it does no more than realize the price of the commodity it buys or pays for; and, as hard cash, it is value petrified, never varying.

Just as little can it originate in the second act of circulation, the re-sale of the commodity, which does no more than transform the article from its bodily form back again into its money-form. The change must, therefore, take place in the commodity bought by the first act, M-C, but not in its value, for equivalents are exchanged, and the commodity is paid for at its full value. We are, therefore, forced to the conclusion that the change originates in the use-value, as such, of the commodity, i.e., in its consumption. In order to be able to extract value from the consumption of a commodity, our friend, Moneybags, must be so lucky as to find, within the sphere of circulation, in the market, a commodity, whose use-value possesses the peculiar property of being a source of value, whose actual consumption, therefore, is itself an embodiment of labour, and, consequently, a creation of value. The possessor of money does find on the market such a special commodity in capacity for labour or labour-power.

By labour-power or capacity for labour is to be understood the aggregate of those mental and physical capabilities existing in a human being, which he exercises whenever he produces a use- value of any description.

But in order that our owner of money may be able to find labour-power offered for sale as a commodity, various conditions must first be fulfilled. The exchange of commodities of itself implies no other relations of dependence than those which result from its own nature. On this assumption, labour-power can appear upon the market as a commodity, only if, and so far as, its possessor, the individual whose labour-power it is, offers it for sale, or sells it, as a commodity. In order that he may be able to do this, he must have it at his disposal, must be the untrammelled owner of his capacity for labour, i.e., of his person.

He and the owner of money meet in the market, and deal with each other as on the basis of equal rights, with this difference alone, that one is buyer, the other seller; both, therefore, equal in the eyes of the law. The continuance of this relation demands that the owner of the labour-power should sell it only for a definite period, for if he were to sell it rump and stump, once for all, he would be selling himself, converting himself from a free man into a slave, from an owner of a commodity into a commodity. He must constantly look upon his labour-power as his own property, his own commodity, and this he can only do by placing it at the disposal of the buyer temporarily, for a definite period of time. By this means alone can he avoid renouncing his rights of ownership over it.

The second essential condition to the owner of money finding labour-power in the market as a commodity is this – that the labourer instead of being in the position to sell commodities in which his labour is incorporated, must be obliged to offer for sale as a commodity that very labour-power, which exists only in his living self. ²

Let us tease a few implications out of this passage:

1. The workers do not sell themselves: they rent out their ability to work, or labor-power.  As such, that rental is subject to the dynamics of any other rental, say of a house or car: the law of diminishing marginal returns, which governs rent in general, should likewise apply to the rental of workers. This is also vital for communist economic planners to understand, as we shall see below.
2. Since the markets for labor-power and for the commodities produced by it are independent of one another, a profit can be realized whenever the purchase of the former is cheaper than the revenues the latter bring in. This inequality can be illuminated only if one first abstracts away from exchange and distribution to reveal the production of surplus-value, then adds exchange and distribution back into the discussion: this is why Capital had to be divided into three parts.
3. Unlike the rental of any other commodity, since this involves the rental of a person’s ability to work, this is an inherently political transaction: the worker sells control, or power, over work for a definite period.

This therefore politically defines capitalism: a system in which power must be sold for a paycheck. This definition lays bare the relation of capitalism to democracy: they are mutually exclusive. Either one or the other must triumph if it is to survive. It also reveals how to politically abolish capitalism: replace it with democracy. This is exactly what happened, in a very specific context, during the Paris Commune of 1870–71 and the Soviets of 1905 and 1917.

Among other things, it also reminds us of the extreme difficulty of the task: the Commune and the first Soviet Republic failed to spread from the capital cities to the rest of the country; the second Soviets didn’t expand from Russia to any advanced capitalist country, leaving them with the impossible task of building socialism—as understood by Marx—in a peasant rather than proletarian country.

Let us first examine efforts to abolish capitalism economically rather than politically, for it is here that we first meet that which bedevils our effort: the collective capitalist. Note that the first iteration of the collective capitalist was invented by the capitalists themselves: the corporation. Workers employed by a corporation work not for an individual capitalist, but for the corporation, charged with securing the interests of its shareholders. Already, the form of ownership is social—or rather, a social way to appropriate the surplus-value the workers produce.

What if, however, the workers own the corporation and manage it democratically? This—the cooperative—was very prevalent in Marx and Engels’ day, and has as its modern flagship the Mondragon Cooperative Corporation of the Basque Country.

On the one hand, Marx offered this in Vol. III of Capital:

The co-operative factories run by workers themselves are, within the old form, the first examples of the emergence of a new form, even though they naturally reproduce in all cases, in their present organization, all the defects of the existing system, and must reproduce them. But the opposition between capital and labour is abolished there, even if at first only in the form that the workers in association become their own capitalists, i.e., they use the means of production to valorise their labour.³

This illuminates why the Mondragon Cooperative Corporation wasn’t able to abolish capitalism, even within itself: in order to survive in a capitalist economy, the cooperative itself is forced to become a collective capitalist! It is the markets, not the workers, which determine what to produce, how to produce it, and what must be done with the proceeds from the sale of products. This is why workers at Mondragon found it necessary early on to elect a second body—the “social council”—to check and balance the board of directors. Although the board was elected, they were forced to act like any other such board. The problem became particularly acute when Fagor, the flagship cooperative which produced household appliances, suddenly found itself without its largest customers: home-builders. After strenuous efforts to adjust the operations of Fagor to the situation without selling out its workers, it was finally forced, by forces beyond its control, to shut its doors.

What if, however, workers do seize the means of production on a massive scale? What if the problem is solved politically rather than economically? What is to be done next? This was how Marx looked at the problem as faced by the Paris Commune:

“If cooperative production is not to remain a sham and a snare; if it is to supersede the capitalist system; if the united co-operative societies are to regulate national production upon a common plan, thus taking it under their control, and putting an end to the constant anarchy and periodical convulsions which are the fatality of Capitalist production—what else, gentlemen, would it be but Communism, “possible” Communism?” ⁴

After the fall of the Paris Commune, Marx dealt with this question in his Critique of the Gotha Programme, juxtaposing to the various socialist notions floating around at the time a very specific formulation: “the revolutionary dictatorship of the proletariat” exemplified by the Paris Commune. While this was the minimum required to break with capitalism, Marx acknowledged that it would inevitably inherit much of capitalism’s defects, and these would have to be overcome in a process of post-revolutionary communist development. It also reveals a major problem: if a revolutionary dictatorship of the proletariat is the only possible transition between capitalism and communism, what happens if the preceding class struggle—that of the world’s peasants to avoid being reduced to proletarians—is still going on in much of the world?

This question which dogged the Paris Commune and the Soviets is why Marx, Engels, and subsequent Marxists insisted that the path to communism would have to include advanced capitalist countries: otherwise, peasant revolutions would result not in communism, but in state-capitalism: the final form post-crisis capitalism takes in order to stave off revolution. Lenin, in particular, was quite up-front about this when he characterized the New Economic Policy as a conscious and deliberate retreat into state-capitalism, pending the spread of socialist revolution into advanced capitalist countries—which came very close to happening in Germany, particularly during the hyperinflation of 1923. Such forthrightness has been unmatched since.

State-capitalism is a political economy in which a bureaucracy rather than the market determine what to produce, how to produce it, and what to do with the products. Since a bureaucracy is based on the same employer-employee relationship specific to capitalism, it is premised on the existence of a labor-power market, and hence is inherently capitalist. This formed the basis of Marx’ critique of Ferdinand Lasalle’s state socialism as state-capitalism and has been the basis of the Marxist understanding of state capitalism ever since.

If we look at the revolutions Marx, Engels, and Lenin took as their examples, we see that they were the products of extreme crisis: war, defeat, military occupation, etc. Those extreme crises could only be ended by an even more extreme revolution. But they happened in cities surrounded by a peasant countryside—where the previous struggle over the means of production (land) was still being fought—so that a revolutionary dictatorship of the proletariat as a realization of democracy was impossible.

What if such an extreme crisis were to occur in an advanced capitalist country? In many countries, the proletarianization of the peasantry has resulted in societies where revolutions to end extreme crises have the potential to develop into revolutionary dictatorships of the proletariat. These have greater potential to spread to neighboring countries: from Venezuela to Colombia, Catalunya to Spain and France, etc. It is this potential which drives the gendarmes of international capital to defeat any such revolutionary potential, and to back any regime—including fascists—to crush such potentials.

So daunting is the political project of abolishing capitalism that the economic development of communism may seem at first blush a utopian project. Yet if we lose sight of that goal, we mistake the present for the future, and any political victories the working class wins risk being hollowed out.

How would a free association of producers increase its own freedom? Marx provided this insight in Vol. III of Capital:

they accomplish this task with the least expenditure of energy and under conditions most adequate to their human nature and most worthy of it. But it always remains a realm of necessity. Beyond it begins that development of human power, which is its own end, the true realm of freedom, which, however, can flourish only upon that realm of necessity as its basis. The shortening of the working day is its fundamental premise.

Hence we see illuminated the distinctive goal of communist development: the shortening of the working day and week. How might communist economic planners go about engineering that?

One would have to have a way to scientifically determine the mix of means of production which would most rapidly reduce the time needed in production; if in the sector that produces means of production inputs and outputs were proportional to one another, one could theoretically reinvest all such production into that sector.⁵ One would never do this, of course, given that this sector was responsible not only for its own production but for all production; but if inputs were not proportional, one could not even theoretically reinvest means of production into its sector! Reinvestment would be constrained by a bottleneck industry, holding the entire economy back like a single-track block constipating a railway. It follows that, in order to shorten the working day and week as quickly as possible, socialist economic planners would have to be able to find the bottleneck industry in order to direct investment into it.⁶

A serious effort was made by the government of Salvador Allende in Chile to undertake such an effort, which produced an early version of the internet called Project Cybersyn. While Allende’s government was overthrown in a right-wing coup before the potential fruits of this project could be fully explored, the legacy of Project Cybersyn can help give us a vision of what a democratic form of planning may look like.

Cybersyn aimed to construct a distributed decision support system—a system that could help process complex levels of information for decision making. Given the difficulties faced by Soviet planners, the use of a distributed support system seemed to point a way beyond their bureaucratic system of the USSR for a more democratic form of planning that directly engaged the needs of workers. Based on the theories of Stafford Beer, Cybersyn aimed to put the most advanced scientific knowledge in the field of cybernetics to work in making an effective and democratic planned economy.

Project Cybersyn consisted of a national network of telex machines in nationalized enterprises and an operations room to which they were all linked. Information from each enterprise would come in through the Cybernet and fed into statistical modeling software, allowing a bird’s-eye view of production indicators for the Operations Room in Santiago. This meant that workers had a way to directly communicate their needs to the planners, and planners had the ability to adjust accordingly. The government also used economic simulation software to forecast the outcomes of economic decisions. Cybersyn was basically reactive: it took in data from the various enterprises and transmitted it to workers in the system in order that demands would consistently be met.⁷

In order to facilitate communist development, a Cybersyn-type planning mechanism would need:

1. a macro (similar to the one I wrote) to identify and facilitate investment in the bottleneck industry holding back the development of the basic industrial sector, and therefore of the entire economy;
2. a mechanism to set the working day and week at a level to eliminate unemployment, hence maximizing labor productivity by replacing the least productive hours of previously employed workers with hours for previously unemployed or underemployed workers.

Unlike under capitalism, communist development has as its object the shortening of the socially necessary working day and week, growing the realm of freedom at the expense of the realm of necessity.

Once the political transition from capitalism to communism is underway—because the domain of workers’ control would be confronted from the outset, even while still under capitalist rule—the process of communist development must be immediately begun. A scientific understanding of communist development is indispensable to that process.

 

1. Engels, Introduction to the Communist Manifesto, 1888 English edition
2. Capital, Vol. I, First English Edition, 1887, as published by International Publishers, p.119 et. Seq.
3. Karl Marx, Capital, vol. III (London: Penguin, 1981, 571).
4. Karl Marx, The Civil War in France, in Karl Marx and Frederick Engels, Collected Works (New York: International Publishers, 1975), vol. 22, 335).
5. Department I, in the language of Capital, Vol. II
6. In my book Capitalism vs. Economic Democracy, I illustrated how a Sraffan input-output model could be used to guide economic planners to invest means of production in order to optimize the shortening of the working day and week: subsequently, I was able to determine the bottleneck industry for ten years of the US economy using the input-output models of Leontieff and Sraffa, and economic data gathered by the US Bureau of Economic Analysis, which can be found here: https://www.bea.gov/industry/historical-benchmark-input-output-tables: Nine times out of ten, it was the paper industry.
7. For more info on Cybersyn, see Cybernetic Revolutionaries by Eden Medina, MIT Press (2011)