Capitalism is the predominant economic system in the world at present. It is a mode of production in which most of the materials and equipment necessary for economic activity are owned and controlled by private companies and wealthy individuals, while the majority of people own little of such means of production, and must therefore work for the few who do, in order to make a living. These and several other distinguishing features of the system are listed below:

There must be a meeting between:

  • "owners of money, means of production, means of subsistence"; and
  • "free workers," ie., without property but not property themselves.[1]
  1. Most of the means of production are owned by a minority of the population, called capitalists (or bourgeoisie).
  2. The majority of people are legally free but must of necessity work for a wage or salary (because they do not have enough means of production to enable them to make an adequate living independently).
  3. Pervasiveness of markets: Many, perhaps the majority, of the products of people's labour are sold, and many or most of the things a person consumes, she obtains by buying them. This contrasts with earlier forms of economy, where most of the products of the individual or family were consumed within the same family; or where the product was distributed according to rules of custom, eg. feudal dues, or the tithe. In capitalism, besides the basic fact that products are now so often exchanged, there is also the feature that the exchange is usually for money: barter is now rare.
  4. Advantage of capitalists: Because of her greater wealth and social position, the capitalist has a degree of power over the worker which enables her to,
    • control the production process, including
      • what is produced
      • how it is produced;
    • take part of the product for herself although she does not necessarily work (she appropriates surplus-value).
  5. Pervasiveness of competition: Individual capitals operate in an environment of competition with other capitals either producing the same commodity or a substitute, or just fighting for markets or loans. This forces the capital to, among other things, adopt new techniques and practices which will cut costs, and to attempt to increase its size so that it can dominate its competitors as well as achieve economies of scale.[2]

`The need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe. It must nestle everywhere, settle everywhere, establish connexions everywhere.' — Marx & Engels, Communist Manifeso, Chapter 1

A IWW poster critiquing Capitalism by showing the class system

For a capitalist situation to exist, the owners of means of production have to have the power to skim surplus value from the workers' production stream — which they do because obviously they are the powerful ones (they have resources, the labourers have none). So it's not a question of labour hiring capital.

Along with the economic features of capitalism, certain legal, political, and social forms typically occur: such as a powerful state which strenuously upholds the legal institution of private property; and various forms of bourgeois philosophy, ideology, and art which justify or glorify the system.

In Marxist analysis, capitalism is a class system , in which there is a basic division between the owners of means of production, the bourgeoisie or capitalists; and the non-owners of means of production, who must work, and are called proletariat or workers.

Under the dictatorship of the bourgeoisie capitalists control not only the global economy,[3] but governments too:

`The executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie.' — Communist Manifesto, Ch. 1

"The capitalist mode of production cannot ... be considered as a simple effect of one term or element — it is a relation, or an ensemble of relations" — Jason Read, The Micropolitics of Capital, 2003, p 23.

In capitalism, `the social allocation of resources and labour does not, on the whole, take place by means of political direction, communal deliberation, hereditary duty, custom, or religious obligation, but rather through the mechanisms of commodity exchange.' — Ellen Meiksins Wood, Democracy Against Capitalism (1995), p 29.

The workings of capitalism

Capitalism is a dynamic economic system which, ideally, rewards innovation and efficient production and produces a cornucopia of physical and intellectual products greatly enriching human life. But it has a sinister side: it produces inequality and insecurity, it manipulates human consciousness to serve capital, and its accumulative drive is uncontrolled by any overarching human reason. Because of the latter feature it is crisis prone and is now degrading the Earth's biosphere in a seemingly unstoppable fashion in defiance of widespread concern.

The history of capitalism has featured an attempt to reconcile the benefits of capitalism with the public resistance arising from its baneful effects by creation of a welfare state which provides a minimum floor on income. In the 21st century globalization has disrupted this arrangement resulting in growing inequality and public dissatisfaction.[4]

The bourgeoisie has, through its exploitation of the world market, given a cosmopolitan character to production and consumption in every country. To the great chagrin of reactionaries, it has drawn from under the feet of industry the national ground on which it stood. All old-established national industries have been destroyed or are daily being destroyed. They are dislodged by new industries, whose introduction becomes a life and death question for all civilized nations, by industries that no longer work up indigenous raw material, but raw material drawn from the remotest zones; industries whose products are consumed, not only at home, but in every quarter of the globe. In place of the old wants, satisfied by the production of the country, we find new wants, requiring for their satisfaction the products of distant lands and climes. In place of the old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal inter-dependence of nations. — Marx & Engels, The Communist Manifesto (1848)

Unlike in earlier forms of class society such as slave-owning society and feudalism, in capitalism the people who enforce the rules and the people who organise production and appropriate the surplus product are usually not the same. Society's rules are enforced by the state and its coercive departments such as the police, judiciary, and military, while economic organisation and appropriation are in the hands of the private business or capitalist class. Compared to this, in slavery and feudalism, coercion and economic activity were more unified; for example, the slave-owning planter organised production, appropriated the surplus, and also imprisoned and could punish the labourers. As Ellen Meiksins Wood writes, there is now a `division of labour in which the two moments of capitalist exploitation – appropriation and coercion – are allocated separately to a private appropriating class and a specialized public coercive institution, the state: on the one hand, the "relatively autonomous" state has a monopoly of coercive force; on the other hand, that force sustains a private "economic" power which invests capitalist property with an authority to organize production itself...' (p. 30). Capitalism's separation of coercion and appropriation probably makes work less dreadful; but it also has the effect of masking the fact that economic relations are still backed up by coercion, including enforcement by the state of the capitalists' private property right to the means of production[5] and of the capitalists' control of the food suply.

`Capitalist' can describe not only a large owner of means of production but also any ideological supporter of the system.[6] Capitalists are opposed to egalitarian economic systems such as socialism and communism which are favoured by leftists because they are meant to be controlled by and function for the benefit of The People. The ideology of capitalism is the antithesis of communist and revolutionary theory and is the main opponent of the argument for communist progression.

Capitalist relations

Relations between firms are non-authoritarian but relations within the firm are authoritarian:

`Whereas capitalism develops the division of labour between industries in society in a non-authoritative and anarchical order, it contrastingly develops the detailed division of labour inside the workshop in an authoritative order.' — Makoto Itoh, The Basic Theory of Capitalism, p 146 (cites Capital vol I, p 477: tr. Fowes & Fernbach, Penguin 1976).

Legal foundation

The legal foundations of capitalism, "Free Trade", the reduction of all human interactions into commodities, enshrined in the Constitution of the United States, but inherent in the constitutional structure of all capitalist states, are "liberty", the "sanctity of contract" and "property rights". These principles authorize and protect systemic binding of obligation and privilege and exploitation of the proletariat by the bourgeoisie.

Capitalist politics

Capitalists have split political tendencies, liberalism and conservatism, although both strongly support capitalism and have a history of suppressing socialism.

Liberals such as the mainstream financiers who support the Democratic Party in the United States believe in rule by an enlightened elite which adequately manages the capitalist economy so that the working class has a standard of living above absolute poverty. This tendency may be seen in certain organizations such as the British Labour Party, The New York Times, CBS News, the Council on Foreign Relations, or the World Bank. Liberals are aware of the dynamics of capitalism revealed by Karl Marx's work and take his warnings seriously, attempting to avoid excessive concentration of capital and excessive unemployment. Conservatives, on the other hand, dismiss such considerations as nonsense and proceed aggressively to concentrate power in their own hands and engage in active oppression of any sign of working class organization. Conservatives often align themselves politically with backward, reactionary elements such as religious fundamentalists and nationalists. Either tendency is prepared to employ the mechanisms of a police state, war and terrorism to retard working class organizing and to violently oppose rule by socialists, or even reformers, of any tendency. Generally, successful revolutions, or socialist governments that are democratically elected, remain in power only if capitalist forces are exhausted or distracted due to major global disruptions such as World War I in the case of the October Revolution and the Great Depression and World War II in the case of the Chinese Civil War.

More bad things about capitalism

Capitalism alienates the workers from the means of production:

...the peasant, the artisan, the lawyer and the man of science are stripped of their halo and reduced to nothing more than a paid wage slave"

Levels of analysis

Capitalism can be thought about using three levels of abstraction:

  1. Highly abstract. This can be called the theory of a purely capitalist mode of production, or of the `inner logic of capital', `capital's deep structures', etc.[7] One assumes that all goods and services are exchanged in markets; there is no mixture with other modes of production such as feudalism, independent artisanal production, or socialism; and there is no government intervention into the economy. Here one attempts to understand the most basic tendencies of the system, looking at categories such as commodity, value, surplus-value, etc. and their interrelations in a somewhat mathematical fashion.
  2. Mid-level analysis. Here one considers the effects of incomplete commodification (that is, not all goods and services are exchanged in markets), mixture of modes, and political and ideological practices. This can produce theories of different sub-types of capitalism. These are sometimes regarded as occupying different eras, for example the following series is sometimes given: merchant capitalism (ca. 1500-1800); liberalism or industrial capitalism (ca. 1800-1900); recent capitalism, variously called imperialism, monopoly capitalism, or finance capitalism (ca. 1900-now). Examples of things which can distinguish sub-types from one another are: the growth of productive power through leading industries, the forms of leading capital, social position of workers, and the economic policies and structure of the world market at a given time.[8]
  3. Concrete (non-abstract). Sometimes called `empirical' or `conjunctural' analysis. Looks at actual events. Here a broad range of non-economic factors may be brought into consideration. The consequences of history's many accidents comes into view.

The Japanese school of Marxist economics founded by Kozo Uno has been particularly concerned to elaborate the middle level of analysis, which is nascent but not much developed in Marx's own works.

According to the Marxist economist Makoto Itoh,

The fundamental aims of the revolutionary socialist movement, which are usually expressed in the basic programmes, must be grounded on the basic principles of a capitalist economy, whereas the more concrete strategies and tactics must utilise the more concrete studies of world capitalism and individual countries at the levels of stages [mid-level] theory and of empirical analyses. (Basic Theory ..., p 66)

See also


Further reading

  • Gingrich Marx on Social Class University professor's handout.
  • Itoh, Makoto, 1988. The Basic Theory of Capitalism. Makoto Itoh is a Marxian economist belonging to the Japanese Uno school.
  • Marx, Karl, and Fredereick Engels, 1848. The Communist Manifesto. Available free at Marxist Internet Archive and
  • Meiksins Wood, Ellen, 1995. Democracy Against Capitalism.
  • Schweickart, David, 1980. Capitalism or Worker Control?. A point-by-point exposition of the advantages of a worker self-managed economy with market exchange and governmental control of new investment, over capitalism.


1. ↑ Jason Read, The Micropolitics of Capital, p 23.

2. ↑ Definitions of capitalism David Schweickart, Capitalism or Worker Control?, pp 4-5:

`But first a word about the key term. What is this "capitalism" about which our discussion will pivot? I shall understand capitalism to be a socioeconomic system characterized by three sets of institutions. First, the means of production are for the most part privately owned – by individuals directly or through the mediation of corporations. Secondly, the bulk of the economic activity is directed toward the production of goods and services for sale on a free market. Prices are determined largely without governmental interference by producer-consumer interaction. Third, labor-power is a commodity. That is, a large percentage of the workforce sell their capacity to labour to those who can provide them with tools, raw materials, and a place to work.

`To be capitalist, a society must feature all three sets of institutions: private property,* a market, and wage-labor. Many societies have existed, and do exist, which exhibit one or two of these characteristics, but not all three. For example, a feudal society consisting of self-sufficient estates worked by serfs has private property, but neither a market nor wage-labor. A society of small farmers and artisans – Colonial New England, say – is not capitalist, for despite private property and a market, there is little wage-labor. On the other hand, all noncommunist industrial nations today are capitalist. The presence of an elaborate welfare apparatus, a number of nationalized industries, and/or a ruling party self-labelled socialist does not render a society noncapitalist. So long as the bulk of the enterprises are privately owned, worked by hired labor, and produce goods for sale on the market, a society is capitalist.' ( * `I shall adopt the Marxian terminology, which distinguishes between private property – factories, farmland, productive machinery – and personal property – consumer goodsd purchased for their own sake, not for the sake of making money.')

3. Makoto Itoh, The Basic Theory of Capitalism, p 1:

`Capitalism is a special social formation where both the selling and the buying of commodities organised by capital dominate human economic activities.' Meghnad Desai, in his article `Capital' in Tom Bottomore's Dictionary of Marxist Thought, lists capitalists' control over financial decisions as a feature of capitalism in addition to the five I have given above. However, I think this can be viewed as part of capitalists' control over production (especially what will be produced).

4. ↑ "Imperialism and the Split in Socialism" V.I. Lenin, October 1916, published in Sbornik Sotsial-Demokrata No. 2, December 1916. Signed: N. Lenin. Published according to the Sbornik text. Source: Lenin Collected Works, Progress Publishers, 1964, Moscow, Volume 23, pages 105-120. Translated: M. S. Levin, The Late Joe Fineberg and and Others. Transcription: Zodiac HTML Markup: B. Baggins and D. Walters. In the Public Domain: Lenin Internet Archive 1996(z), 2000(bb,dw), 2002 (2005). You may freely copy, distribute, display and perform this work; as well as make derivative and commercial works. Please credit “Marxists Internet Archive” as your source.

5. "Capitalism and Inequality: What the Right and the Left Get Wrong" essay by Jerry Z. Muller in Foreign Affairs March/April 2013

6. The state will shoot workers if they try to take over and run their workplace themselves.

7. WordNet

8. Robert Albritton, Economics Transformed, footnote, p 5.

9. Itoh, Basic Theory ..., p 66.

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