Capitalism and Definitions

We have argued that the essential element of capitalism as a system is not, as is often contended, proletarian wage labor or production for the market or factory production. For one thing, all of these phenomena have long historical roots and can be found in many different kinds of systems. In my view, the key element that defines a capitalist system is that it is built on the drive for the endless accumulation of capital. This is not merely a cultural value but a structural requirement, meaning that there exist mechanisms within the system to reward in the middle those who operate according to its logic and to punish (materially) those who insist on operating according to other logics.

We have argued that, in order to maintain such a system, several things are necessary. There has to be an axial division of labor, such that there are continuous exchanges of essential goods that are low-profit and highly competitive (i.e., peripheral) with high-profit and quasi-monopolized (i.e., core-like) products. In order to allow entrepreneurs to operate successfully in such a system, there needs in addition to be an interstate system composed of pseudosovereign states of differing degrees of efficacy (strength). And there also have to be cyclical mechanisms that permit the constant creation of new quasi-monopolistic profit-making enterprises. The consequence of this is that there is a quite slow but constant geographical relocation of the privileged centers of the system. (xiv)

These words are Immanuel Wallerstein's, from his new prologue to the 2011 edition of volume III of The Modern World-System: The Second Era of Great Expansion of the Capitalist World-Economy, 1730s-1840s. I quote them here because definitions matter and we have too many of them for capitalism.

I have, in the last year or so, found myself embroiled in various online discussions here and there about capitalism and our current predicament, etc, in which the conversation can only go so far because we, the participants, are not operating under the same set of assumptions on what capitalism, in fact, is. I tend to avoid lengthy online back-and-forths, for a variety of reasons, not least of which is the inadequacy of my available devices (which means the mechanics of it are unpleasant). But also, where once I was quick to write lengthy responses to people, usually via email, now I shy away from them. In part, I don't want to lose a piece of writing in the bowels of another blog's comments, and I write too slow to effectively respond here. It's also true that I'm simply not read deeply enough in the Marxist or liberal economic literature to respond to certain kinds of pedantry. So if someone cites a particular of a given debate, I'm often at something of a loss. However, though I would like to deepen my reading of such literature, the truth is I'm only going to get to so much of it, and things are happening right now. My gut tells me that most of it is unnecessary.

A few years ago I read Ellen Meiksins Wood's Origins of Capitalism, and I found it very helpful. She is, of course, a Marxist, writing in the aftermath of the Brenner debates of the 1970s. She helped me to see a number of different things much more clearly than I had seen them before (for just one example, the state's role in enforcing propertylessness). I was further helped along by essays from the Midnight Notes Collective, and then David Harvey's book-length study of Marx's Capital, The Limits to Capital, as well as a couple of Harvey's other books. Then came the first volume of Capital itself, along with Harvey's online lectures, and the feminist approaches of Maria Mies (Patriarchy and Accumulation on a World Scale) and Silvia Federici (Caliban and the Witch). The feminist works are crucial; they seem to take the analysis to its logical conclusions that too many Marxists seem unwilling to take it (so they said; but I had no trouble taking their word for it, given my own limited experience with the literature). Readers will notice that I've rehearsed this sequence before. All apologies. In any event, my point here is that something nagged at me. I was still having trouble understanding where it came from, and why, and it seemed really important that I do understand it, in order to wrap my head around the problems facing us today. Then I read Giovanni Arrighi's The Long Twentieth Century, my first exposure to world-system analysis, and many things began to fall into place in my mind. This led me to Wallerstein. First to his slim World-Systems Analysis: An Introduction, then to his now four-volume study, The Modern World-System. (David Graeber's work plays a big role here, too; I'm thinking a few of the essays in Possibilities, as well as the more recent Debt.)

I realized that what had troubled me were questions of focus and certain sets of assumptions. I had difficulty with the idea of a particular capitalist "state" (or "states" competing with each other) (though, indeed, Wood, in her Empire of Capital, had helped clarify for me the necessity of the state apparatus for capitalism), with the very focus on "mode of production", with questions and apparently long-running debates about such topics as whether or not slavery was capitalist, which seemed silly on their face (of course it was capitalist; for just one point, the feminist focus on how unpaid labor underpins the wage system is important here). I desired, and insisted, without knowing it, a longer view (somewhat ironic, considering the subtitle of Wood's book is, in fact, "a longer view"; it's not quite long enough), and a more detailed view. Arrighi's and then especially Wallerstein's books have helped me enormously, providing a framework in which things fit together much better (not like a puzzle, but like life, if you'll pardon the expression). Anyway, I provide the passage at the top of this post as a placeholder and reference point: this is the definition of capitalism I'm working from, the one that makes the most sense to me. Recent claims that we've already moved away from capitalism into a feudalism-like "rentism" seem to me to misunderstand both feudal arrangements and capitalism itself, and especially miss the ease with which the former historically shaded into the latter. There's nothing un-capitalist about monopolies or rent. Misplaced emphasis on wage labor and modes of production are distracting. Here Wallerstein continues:

Capitalism is a system in which the endless accumulation of capital is the raison d'être. To accumulate capital, producers must obtain profits from their operations. However, truly significant profits are possible only if the producer can sell the product for considerably more than the cost of production. In a situation of perfect competition, it is absolutely impossible to make significant profit. Perfect competition is classically defined as a situation with three features—a multitude of sellers, a multitude of buyers, and universally available information about prices. If all three features were to prevail (which rarely occurs), any intelligent buyer will go from seller to seller until he finds one who will sell at a penny above the cost of production, if not indeed below the cost of production.

Obtaining significant profit requires a monopoly, or at least a quasi-monopoly, of world-economic power. If there is a monopoly, the seller can demand any price, as long as he does not go beyond what the elasticity of demand permits. Any time the world-economy is expanding significantly, one will find that there are some "leading" products, which are relatively monopolized. It is from these products that great profits are made and large amounts of capital are accumulated.

I could go on, but will not, not now. But consider this a re-beginning, of sorts, on this topic.

Giovanni Arrighi

Lost in the shuffle of recent events has been the death on June 18th of Giovanni Arrighi, described as "one of the foremost scholars of the history and future of capitalism" at Verso's blog.
I actually haven't yet read anything by Arrighi myself, though his monumental books The Long Twentieth Century: Money, Power and the Origins of Our Times and the more recent Adam Smith in Beijing are on my ever-lengthening list of books I feel that I need to read in order to understand our time (while I'm here, allow me to again point you to jane dark's excellent recent post on world system hegemons, which draws on Arrighi's arguments in both of these books). In March 2008, not long after Adam Smith in Beijing appeared, I happened to catch a panel discussion with Arrighi, David Harvey, and Joel Andreas at 2640 in Baltimore (Arrighi taught at Johns Hopkins University, Andreas still does, and of course Harvey taught there for the better part of two decades). It was a fascinating and occasionally heated discussion. I took copious notes intended for use on this blog, but I was never able to get my act together to organize them. (However, it turns out you can view a film of the event here; it's worth looking at if you have the time.) I was especially interested in this discussion, precisely because of its focus on China. As I've mentioned here previously, I'm greatly interested in China, but I've been unsure how to proceed. I'd like to read a history of the communist revolution and the cultural revolution that takes it seriously, without being fawningly Maoist or something. Perhaps Arrighi's later book covers some of the history; no doubt the book is equipped with a substantial bibliography (I'm also aware that, as one would expect, Monthly Review Press has some titles that look just right for this investigation, such as perhaps this one or this one or, especially, this one.)

One thing I remember from the panel discussion was Arrighi's contention that China's emergence as an economic power has been in large part dependent on the advances of the revolution, which resulted in a generally healthy and educated populace. Harvey and Andreas didn't dispute this point, but they were far less sanguine about the prospects of China becoming a major power, given its, in their view, particularly virulent form of capitalism. (This contention of Arrighi's reminds me, incidentally, of this talk given by Dmitry Orlov, in which he argues that the USSR, because of its socialism, however deeply flawed, was much better prepared to handle its collapse than the USA will be to handle its inevitable collapse, when it comes.)

Anyway, this great, great interview (link via Verso) of Arrighi by Harvey, which appeared in the New Left Review this Spring, has me dying to dive into his work sooner rather than later. The interview covers a lot of ground, from his work in Africa, where he cut his teeth in the 1960s ("the mathematically modelled neo-classical tradition I’d been trained in had nothing to say about the processes I was observing in Rhodesia, or the realities of African life"), up through to China and the current financial crisis. Here is a short excerpt:

One of Marx’s conclusions in Capital, particularly Volume One, is that adoption of a Smithian free-market system will lead to increases in class inequality. To what degree does the introduction of a Smithian regime in Beijing carry the risk of even greater class inequalities in China?

My argument in the theoretical chapter on Smith, in Adam Smith in Beijing, is that there is no notion in his work of self-regulating markets as in the neoliberal creed. The invisible hand is that of the state, which should rule in a decentralized way, with minimal bureaucratic interference. Substantively, the action of the government in Smith is pro-labour, not pro-capital. He is quite explicit that he is not in favour of making workers compete to reduce wages, but of making capitalists compete, to reduce profits to a minimum acceptable reward for their risks. Current conceptions turn him completely upside-down. But it’s unclear where China is headed today. In the Jiang Zemin era, in the 1990s, it was certainly headed in the direction of making workers compete for the benefit of capital and profit; there is no question about that. Now there is a reversal, one which as I’ve said takes into account not only the tradition of the Revolution and the Mao period, but also of the welfare aspects of late-imperial China under the Qing in the eighteenth and early nineteenth centuries. I’m not putting bets on any particular outcome in China, but we must have an open mind in terms of seeing where it’s going.

In Adam Smith in Beijing, you also draw on Sugihara Kaoru’s work in contrasting an ‘industrious revolution’, based on intensive labour and husbanding of nature, in early modern East Asia, and an ‘industrial revolution’, based on mechanization and predation of natural resources, and speak of the hope that there could be a convergence of the two for humanity in the future. How would you estimate the balance between them in East Asia today?

Very precarious. I am not as optimistic as Sugihara in thinking that the East Asian tradition of ‘industrious revolution’ is so well entrenched that it may, if not become dominant again, at least play an important role in whatever hybrid formation is going to emerge. These concepts are more important for monitoring what’s happening than saying, East Asia is going this way, or the United States is going the other way. We need to see what they actually do. There is evidence that the Chinese authorities are worried about the environment, as well as about social unrest—but then they do things that are plain stupid. Maybe there is a plan in the works, but I don’t see much awareness of the ecological disasters of car civilizations. The idea of copying the United States from this point of view was already crazy in Europe—it’s even crazier in China. And I’ve always told the Chinese that in the 1990s and 2000s, they went to look at the wrong city. If they want to see how to be wealthy without being ecologically destructive, they should go to Amsterdam rather than Los Angeles. In Amsterdam, everybody goes around on bicycles; there are thousands of bikes parked at the station overnight, because people come in by train, pick up their bicycles in the morning and leave them there again in the evening. Whereas in China, while there were no cars at all the first time I was there in 1970—only a few buses in a sea of bicycles—now, more and more, the bicycles have been crowded out. From that point of view it’s a very mixed picture, very worrying and contradictory. The ideology of modernization is discredited elsewhere but so far is living on, rather naively, in China.