Capitalism is a way of organizing the economic activities of a society which can be defined along two major thoroughfares; one the actors of the class relationship and two the coordinates of economic coordination.
Class relations are the social relations through which the means of production are owned and power is exercised over their use. In capitalism the means of production are privately owned and their use is controlled by the owners or their surrogates. The means of production by themselves cannot produce anything; they have to be set in motion by human labour. In capitalism this labour is provided by the workers who do not own the means of production and who, in order to acquire an income, are hired by capitalist firms “to work” the means of production. The fundamental class relation is between capitalist and workers. Of course this is highly simplified view of class structure while in actual capitalist countries there is a variety of other class locations loosely grouped under the title “middle class.”
Economic coordination in capitalism is accomplished primarily through mechanisms of decentralized and voluntary exchange by privately contracting parties-or what is generally called “free markets” –through which the prices and quantities of the goods and services produced are determined.
Market coordination is conventionally contrasted with authoritative state coordination in which the power of the state is used to allocate resources for different purposes. The famous phrase “the invisible hand” captures the basic idea; individuals and firms, simply pursing their own private interests, engage in bargaining and voluntary exchanges with other individuals and firms, and out of this uncoordinated set of micro-interactions comes an economic system that is more or less coordinated at the aggregate level.
The combination of these two features; class relations and economic coordination generate the characteristic competitive drive for profits and capital accumulation of capitalistic firms. Each firm in order to survive over time must compete successfully with other firms. Firms that innovate lower their costs of production and increase productivity can undercut rivals, increase their profits and thus expand at the expense of other firms. Each firm faces these competitive pressures and thus in general all firms are forced to seek innovation of one sort or another in order to survive. The resulting relentless drive for profits generates the striking dynamism of capitalism relative to all forms of economic organization.
This of course is a simplified and pure version of capitalism. As most economic sociologists stress no capitalistic economy could function effectively or even survive it it consisted exclusively of the institutions of private property and market competition. Many other institutional arrangements are needed to make capitalism actually work and are present in all real capitalistic economies.
Some capitalism has strong affirmative states that regulate many aspects of the market and empower workers in various ways to control certain aspects of the labor process and in other capitalistic states both firms and workers are organized into various kinds of collective associations that provide significant forms of coordination distinct from both market and state coordination (pg 35 Envisioning real Utopias).
Trade associations, unions, chambers of commerce and other kinds of associations help constitute what some people have called “organized capitalism.” All varieties of capitalism also contain a significant domain and economic activity that occurs outside both the market and state regulations especially economic activity within households and kin networks, but also within the broader social settings often referred to as community (pg 36 Envisioning Real Utopias).
Eleven Criticisms of Capitalism
One of the central task of socialists is to convince people that capitalism creates such a range of undesirable consequences that one should at least entertain the idea that an alternative to capitalism might be possible and is in fact even desirable.
1. Capitalism class relations perpetuate eliminable forms of humans suffering.
2. Capitalism blocks the universalization of conditions for expansive human flourishing.
3. Capitalism perpetuates eliminable deficits in individual freedom and autonomy.
4. Capitalism violates liberal egalitarian principles of social justice.
5. Capitalism is inefficient in certain crucial respects.
6. Capitalism has a systematic bias towards consumerism.
7. Capitalism is environmentally destructive.
8. Capitalist commodification threatens important broadly held values.
9. Capitalism in a world of nation states fuels militarism and imperialism.
10. Capitalism corrodes community.
11. Capitalism limits democracy.
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