Capitalism

For a sizeable proportion of the world's population and, I suspect, for almost all of the people reading this entry, the word capitalism refers most obviously to the economic system in which they live. Moreover, many of the remainder currently have direct experience with development programs sponsored by the World Bank and the International Monetary Fund, through which a capitalist economy is that to which their countries aspire. Given the current conjuncture in international politics, in which all credible alternatives to the capitalist economy seem, at least temporarily, to have been exhausted, capitalism appears to reign supreme.

However, acknowledging its present dominance is not the same as saying what capitalism actually is. Here we encounter more difficulties because capitalism has many dimensions. At one level, it is nothing more tangible than an economic ideology, associated with a normative preference for private ownership and the delegation of production decisions to the individual. At another level, capitalism is a set of concrete institutions, associated with encouraging a particular pattern of exchange relations, such that the result is a distinctively market-based economy. In addition to this, capitalism is a legal structure, which enshrines the right to private property. Capitalism is also a set of sedimented practices, whose manifestation as embedded relations of production and distribution serve to reproduce the economic system in a distinctively capitalist form.

As is hopefully clear, there is no simple definition of capitalism. Any useful definition must be able to capture each of these aspects of the capitalist economy, but to attempt to do so necessarily complicates matters. Moreover, all definitions of capitalism reflect the political perspective from which they are constructed. For instance, those who are normatively opposed to the dominance of capitalist relations of production will choose a definition that suits this opposition. They are likely to define capitalism as a system of production in which individuals are required to subjugate themselves to the exploitative process of wage labor, as this creates the profits on which the maintenance of the system relies. Similarly, those who are normatively supportive of capitalism will choose a definition that evokes a much more positive image. They are likely to define capitalism as a system of production in which rewards accrue to the people who have been most able to harness their assets to the enrichment of society as a whole.

While these two definitions are describing exactly the same economic system, they could hardly be more different in their underlying political emphases. Where, then, given these definitional difficulties, should we start in our attempt to say what capitalism is?

Perhaps the best place to begin is with an assessment of the novel features of the capitalist economy, compared to what preceded it. In other words, we might learn more about what capitalism is by focusing on what distinguishes it from all previous systems of production. On this, the first thing to note is that individuals do not produce for their own consumption under capitalism; they produce for other people's consumption and, in turn, other people produce for their consumption. For capitalism to provide the basis for a functioning economy, then, some means must be created to ensure that goods can be transacted in order to [Page 68]satisfy even the most basic of consumption needs. That mechanism is money. Capitalist economies are money economies, in which all circulating commodities are given a price denominated in a common monetary measure, and it is at this price that goods are exchanged. Therefore, money is the dominant medium of exchange within a capitalist economy: Workers give their labor in order to be paid in money, because this money can then be used to purchase necessary consumption goods. In modern times, the state has been charged with the task of both controlling the supply of money and protecting its ability to act as a medium of exchange.

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