What Capitalism is Not (specifically, it is not markets)

Streetlight

There’s a particular confusion that crops up alot, that confuses the existence of markets, with the existence of capitalism. But the two are not the same, not by a long shot. So this is a thread to try and clear up some things on this front.

Markets: Impersonal Exchange

First, what is a market? A market is, first and foremost, a site of what might be called impersonal exchange. It is ‘impersonal’ insofar that those who participate do not, for the most part, have any pre-existing obligations, bonds, or relations to one another. This ‘impersonal’ aspect of markets is what makes it different to say, gift economies, where gifts might be exchanged in order to keep up good relations between tribes. Or else different to relations of patronage or villeange, in which labour or goods are exchanged for protection or use of land.

One might say that what defines the ideal market is the ‘spot exchange’. The exchange ‘on the spot’, of goods, money, or labour, after which the participants no longer have any social relation to one another at all. They are free to go their separate ways. In reality, markets do not really work like this - there are always all kinds of extra-market relations of debt and obligation between market actors - but that can be put to the side for now.

Capitalism: Impersonal Production

Nonetheless, if a market is defined by impersonal exchanges, what defines capitalism? Well, a few things. First, capitalism implies a generalization of impersonal exchange to all spheres of the economy. That is, impersonal exchange must begin to replace all kinds of regimes of personalised and social exchange. So in medieval Europe, for instance, although markets existed everywhere, they were in many cases peripheral or in the interstices of society. Traders and merchants existed, but as far as medieval economies went, they only made up a fraction of the economic activity that took place. Merchants were in fact very often looked upon with disdain by many in medieval society. In any case, the generalization of impersonal exchange involves an increase in commodification: making things commodities for the market.

Yet the generalization of impersonal exchange still doesn’t yield us capitalism. All we have so far is limited instances of capital. For capitalism proper to get off the ground, what you need is the reproduction of impersonal exchange. Impersonal exchange not only needs to be generalised in space, it needs to be extended in time. And for this you need institutions. History shows us that more than any other, it was the existence of states that were crucial in the reproduction of impersonal exchange. Not only did states provide say, fiat money that could be used across wide swathes of territory (and other kinds of standarization: weights, measurements, addresses, etc), they also provided security for traders, without which trading would be impossible. Their most important role being their ability enforce contracts and defusing issues of trust. In any case it is the reproduction of the conditions of impersonal exchange that begins to make instances of ‘capital’ into capital-ism: a systematization of ‘capital’ in society.

Yet even here, neither the generalization nor the reproduction of the conditions impersonal production is enough to get us to capitalism. One further, crucial step needs to be taken. And this involves looking not at ‘exchange’ - how goods or money circulate - but production. In the absence of impersonal exchange, the production of stuff often does not take place for the market. Rather, one produces so that one can pay the lord’s taxes; or else one produces so that one can feed one’s family. And so on. However, once impersonal exchange becomes wide-spread enough, it brings with it a change in the ‘who’ or ‘what’ production is geared towards: no longer lords and family, but markets.

It is at this point, where the general mode of production becomes geared towards the market, that capitalism proper can be said to come into being. And this, ultimately is the difference in kind between markets and capitalism. Markets bear upon issues of exchange: how goods move from one set of hands to another. Capitalism on the other hand, cannot be understood apart from issues of production: of who and what is it that stuff is produced for. It is precisely because capitalism has to do with production (and not just exchange), that capitalism cannot be understood apart from changes in labour, in how labourers go about producing things, along with the conditions under which they labour.

Streetlight

A Note on Neoliberalism, Financialization, and Debt

If the above defines capitalism, what is this thing called ‘neoliberalism’ that people often talk about? It means many things, but for this note, it can be said to represent one further step in the generalization of impersonal exchange. Neoliberalism is what happens when not just economics becomes a matter of impersonal exchange, but politics and governance too. That is, when governments themselves become subject to market imperatives: hence mass privatisation of previously ‘public goods’, along with the treating governments as market institutions themselves: not governing for the sake of people and populations, but for the sake of markets, which substitute in place of political governance.

Finally what does financialization have to do with this? We often hear about the rise of financialization, and the predominance of ‘speculation’ and debt, but what does this have to do with the above? Well, one answer is that the above model of capitalism based on markets is, in a word, failing. Markets - the exchange of goods - simply no longer deliver the kinds of profits that is generally sustainable and re-producible (and reproducibility is one of the things that defines capitalism!) As such, cooporations no longer look (just) to selling stuff to make their profits, but to making money from money itself: not commodities but assets (housing, stocks, debt) are now the key to making profits. Although they are sustained by markets, they are parasitic off of them, even as they engender larger and larger crisis at the level of markets themselves - and vice versa. In a word, the rise of financialization is an index of capitalism in crisis.

Agent Smith

My hunch is capitalism piggybacks on (the promise of) freedom. Liberty is so god damned important that we don't mind becoming slaves so long as we're not! :snicker:

In other words, there's diabolical nexus between so-called democracy and capitalism.

Jamal

Succinct and useful :up:

A followup question might be: how much does neoliberalism allow capitalism to abandon states, that is, nation states?

Wayfarer

In a word, the rise of financialization is an index of capitalism in crisis. — Streetlight

Acute observation and an excellent analysis. I suppose trade what are called ‘financial derivatives’ exemplifies and underpins this kind of abstractification, if that’s a word.

Tom Storm

↪Streetlight

Nicely done and helpful.

Streetlight

A followup question might be: how much does neoliberalism allow capitalism to abandon states, that is, nation states? — Jamal

I think the state remains as important as ever. What does happen though, is that the state fundamentally changes in its function and orientation. Where once it functioned - at least in the West - as a social bulwark to market generalization (via social security, investment in infrastructure, efforts at redistribution, etc), it now functions more and more as a simple police apparatus. That is, instead of taking care of your population, it's much simpler to punish and incarcerate them. As it so happens, the latter affords more opportunities to profit, even though it may, in the long run, be more expensive for all involved. Related to this, the rights of property above all else are the focus of state action: the state exists to protect - and expand - property rights. All other rights - like say, rights to be in control of one's own womb - are negotiable. Workers rights above all, are subject to destruction by states, instead of protecting them. It is a concerted and sustained political effort.

On the foreign policy front, the is state still vitally important to maintain overseas markets, along with expanding the reach of 'open markets'. This usually means negotiating so that companies have access to production in poorer - although somewhat stable - countries like China, Indonesia, or Vietnam. It takes enormous state organization to ensure that all this happens smoothly so products can be manufactured there and then shipped in to the core nations. And then of course these war to subdue threats to market generalization - which is a partial explanation of what is happening in Ukraine right now.

And the other thing states do, more and more - I think maybe among the most consequential and least talked about - is to take on private risk. That is, private business risk is 'offshored' to state, who bear the burden when capitalist markets fuck up. The political economist Daniela Gabor has a really, really excellent and easy to read paper [PDF] on this topic. From the abstract: "The state risk-proofs development assets for institutional investors by taking on its balance sheet: (i) demand risks attached to commodified (social) infrastructure assets, (ii) political risk attached to policies that would threaten profits, such as nationalization, higher minimum wages and climate regulation, (iii) climate risks that may become part of regulatory frameworks; (iv) bond and currency markets risks that complicate investors’ exit". This 'taking on investment risk' tracks with the increase of financialization: states can function as lenders of last resort and prop up 'too-big-to-fail' institutions without which everything goes tits-up.

One thing to note is that while states are important, this has very little to do with state sovereignty. States do all this, but not because they are sovereign, but because they are largely held hostage by market forces: states are largely the bureaucratic systems of market actors in all of this. This is most clear in places like the EU, where states more or less simply do not have control of their own fiscal or monetary policies. Which again means, in lieu of actual governance, they are reduced to a simple security apparatus. International "trade agreements" like GATT and NAFTA do the same on a global scale. So there's a kind of separation of 'the nation' from 'the nation-state'. Insofar as nations have anything to do with it, it's as a scape-goat: nationalism blossoms to compensate for the abandonment of the state for the people. Instead of blaming capitalism, migrants, minorities, sexual deviants, and colored people are blamed for decaying societies. The separation of nation and state makes the nation something deadly.

Also I haven't said anything about currency but oh boy states and currency and the necessity of states to try and keep currency under control for the sake of markets has basically driven the last 80 years of global history.

frank

First, what is a market? A market is, first and foremost, a site of what might be called impersonal exchange. It is ‘impersonal’ insofar that those who participate do not, for the most part, have any pre-existing obligations, bonds, or relations to one another. — Streetlight

One of the ancestors of free markets was an aspect of the Bronze Age palace economy. People brought their wheat and other goods to the palace. Priests would then take a cut for the palace and distribute the rest to the people.

The late Bronze Age was similar to our world in that there were a handful of powerful states which controlled the known world. Free markets appeared around the time this international complex began to disintegrate. They may have been a response to collapse.

So free markets don't necessarily require states. However a free market can be a brutal and dangerous environment. Prior to the advent of money, every possible way to cheat and rob were explored in free markets.

Money, as far as we know was invented one time in Lydia. It eventually revolutionized human life by becoming the prime abstraction. It facilitated trade by eliminating one of the ways people cheated. Everywhere money went, societies lurched out of stagnation into progress. Strictly speaking, you don't need a state to mark gold ingots that all weigh exactly the same, but state backing increases confidence.

Now that abstraction is seeping into every aspect of human life with the prime abstraction: value, the next leap in human capacity comes from banks which provide the technology of virtual value. Since the Italians perfected the art, we've been living beyond our means. We basically discovered how to walk into our dreams.

This is one of the things I wish I could get across to some leftists. Money and banking, which are both products of a laissez-faire environment, aren't just objects in our world that we can extricate ourselves from by wearing red bandanas. Those things are literally part of who and what we are. They're part of the way we think and see the world.

Finally what does financialization have to do with this? We often hear about the rise of financialization, and the predominance of ‘speculation’ and debt, but what does this have to do with the above? Well, one answer is that the above model of capitalism based on markets is, in a word, failing. — Streetlight

Failing how, though? I've been pondering this for a while, and I still don't quite understand other than it has to do with the 1970s.

The outcome was the emergence of a new elite, new opportunities, new horizons, new dangers.

Streetlight

One of the ancestors of free markets was an aspect of the Bronze Age palace economy. People brought their wheat and other goods to the palace. Priests would then take a cut for the palace and distribute the rest to the people. — frank

First, I don't know why you keep referring to 'free' markets, rather than markets. Not sure what this qualifier is doing. Second, this is far from an impersonal spot exchange, and fits quite nicely as one of the modes of social exchange that defines pre-market society. Not sure what point you're trying to make here. "Free markets" is something Americans like to say because they don't really understand the term, and has to do primarily with international trade and the absence of protectionist policy. But that's not what we're talking about, really.

This is one of the things I wish I could get across to some leftists. Money and banking, which are both products of a laissez-faire environment, aren't just objects in our world that we can extricate ourselves from by wearing red bandanas. — frank

I'm not sure why you think 'money and banking' is a target here. Money absolutely facilitated markets, allowing for impersonal exchange to be even more impersonal. But part of the reason I've emphasized that capitalism takes root at level of production rather than exchange, is to make clear that money and banking is, at best, a peripheral problem, and certainly not a central one. In fact there's nothing wrong with money or banking per se - only what we do with them. Far more interesting - and worth abolishing - is the private property form, which is a enormous limiter to human potential.

Failing how, though? I've been pondering this for a while, and I still don't quite understand other than it has to do with the 1970s. — frank

Here you go:

https://thenextrecession.wordpress.com/2022/01/22/a-world-rate-of-profit-important-new-evidence/

https://thenextrecession.wordpress.com/2020/07/25/a-world-rate-of-profit-a-new-approach/

frank

First, I don't know why you keep referring to 'free' markets, rather than markets. — Streetlight

A free market has no price controls. The oldest version of controlled markets is where priests set prices (in quantities of cacao nuts in South America). There were harsh penalties for trading without permission.

In a free market prices are set by the operation of the market itself.

I'm not sure why you think 'money and banking' is a target here — Streetlight

What we think of as capitalism developed hand in glove with money and banking. Separating them would be a leap in the dark.

But part of the reason I've emphasized that capitalism takes root at level of production rather than exchange, — Streetlight

So the Bronze Age economy was not capitalist. It was clearly socialist. It's interesting to contemplate why it failed after centuries of robust contribution to culture.

More importantly: why, having failed, it never came back.

Streetlight

What we think of as capitalism developed hand in glove with money and banking. Separating them would be a leap in the dark. — frank

You're welcome to read the OP for why this is an irrelevancy.

So the Bronze Age economy was not capitalist. It was clearly socialist — frank

This is an anarchonism so terrible it does not deserve attention.

Still not sure why you want to talk about priests or what that has to do with anything.

frank

So the Bronze Age economy was not capitalist. It was clearly socialist
— frank

This is an anarchonism so terrible it does not deserve attention. — Streetlight

Really? Why doesn't the palace economy count as socialism?

Streetlight

palace economy — frank

socialism — frank

Thanks for playing.

frank

↪Streetlight

IOW, you don't know.

Number2018

↪Streetlight

Capitalism: Impersonal Production — Streetlight

It is the reproduction of the conditions of impersonal exchange that begins to make instances of ‘capital’ into capital-ism: a systematization of ‘capital’ in society. — Streetlight

once impersonal exchange becomes wide-spread enough, it brings with it a change in the ‘who’ or ‘what’ production is geared towards: no longer lords and family, but markets.
It is at this point, where the general mode of production becomes geared towards the market, that capitalism proper can be said to come into being.
Capitalism on the other hand, cannot be understood apart from issues of production: of who and what is it that stuff is produced for. — Streetlight

What should be added to this account of the birth of capitalism is the reciprocal interrelation between the impersonal production and reproduction and the emergence and development of the personal sphere itself. In parallel to the continuous process of decoding, destroying, and reconstructing archaic social, institutional, economic, and individual norms and relations, there has been the ongoing activity of creating and animating private life and personal interests.
The omnipresent deterritorization has been compensated, balanced, and concealed by the all-embracing re-territorization.

Tom Storm

there has been the ongoing activity of creating and animating private life and personal interests.
The omnipresent deterritorization has been compensated, balanced, and concealed by the all-embracing territorization. — Number2018

Examples?

Deleted User

A followup question might be: how much does neoliberalism allow capitalism to abandon states, that is, nation states? — Jamal

I think the state remains as important as ever. — Streetlight

. ..the market in which the new elites operate is now international in scope. Their fortunes are tied to enterprises that operate across national boundaries...Their loyalties - if the term is not anachronistic in this context - are international rather than regional, national, or local...Many of them have ceased to think of themselves as Americans in any important sense...their ties to an international culture of work and leisure...make many of them deeply indifferent to the prospect of American national decline. — Christopher Lasch, The Revolt of the Elites and the Betrayal of Democracy

Mikie

Interesting.

It is at this point, where the general mode of production becomes geared towards the market, that capitalism proper can be said to come into being. — Streetlight

A necessary thread indeed.

My only comment is that I’m surprised you didn’t include the existence of owners/employers as a distinguishing feature of this socioeconomic system.

We can imagine a world where production was controlled by workers and yet geared towards markets. Would this still be considered capitalist?

Streetlight

I’m surprised you didn’t include the existence of owners/employers as a distinguishing feature of this socioeconomic system. — Xtrix

Heh, it would have needed at least another paragraph, and things were getting a bit long. I could only gesture at it in the last line regarding changes to labour that follow from changes to production. But yes, the owner-employer relation is the next step - it follows from (or with) production being geared towards markets. Because once the latter begins to happen, market actors themselves begin to take direct control of the production process. Before the emergence of capitalism full-blown, labour tended to have, in a broad sense, control over their own means of production: land in particular, would be theirs to do with as necessary (even if this 'necessary' included having to harvest for a lord).

But once capitalism emerges, workers comes to be dispossessed from such means: they become 'free workers' - freed from their lands such that their only means of production are their bodies alone. Land - and capital - starts to belong directly to merchants, or, at this point, capitalists. And they do this in order to squeeze out 'efficiencies' from production, and root out any resistance to the market-orientation of production. Hence, for instance, the importance of 'enclosure' movement in England, among other historical turning points. It is at this point that the owner-employee (capitalist-worker) relation takes definitive shape. But in the order of things, free labour follows from the institution of capitalism, rather than precedes it.

We can imagine a world where production was controlled by workers and yet geared towards markets. Would this still be considered capitalist? — Xtrix

I think so, yes. Certainly a far more conciliatory capitalism than we know, but to the degree our conditions of life are dictated by markets - and not the other way around - this would still be a case of capitalism ascendant. I'm not 'against markets' per se - they undoubtedly help solve coordination problems, under certain conditions - but they need to be a tool among others in our arsenal of life. We must put them to use for us, rather than putting us to use for them.

Streetlight

↪ZzzoneiroCosm

I tried to acknowledge what Lasch was talking about in the last paragraph of my response to Jamal. But the internationalization of markets is not in any way opposed to the centrality of states. In fact the centrality of states underlies the internationalization of markets, without which the latter could not take place.

Streetlight

What should be added to this account of the birth of capitalism is the reciprocal interrelation between the impersonal production and reproduction and the emergence and development of the personal sphere itself. — Number2018

Yes. And this makes sense - insofar as markets are a matter of impersonal exchange, their generalization effects a 'disembedding' of exchange from social contexts. Nothing matters (in principle) outside the spot exchange, which means the only agents that begin to matter are individual market-actors, and not say, communities, groups, territorial bands, or even hierarchical relations. Social relations are (in principle) irrelevant.

The birth of 'the individual' follows quite nicely from the birth of generalized market-society. It is no surprise that liberalism - whose unit of analysis is precisely the individual, upon whom rights and obligation accrue (and property rights above all!) - is born exactly at the end of feudalism at the point at which markets become ascendant. The 'bourgeois revolutions', French, English, American and so on, all took place against the weight of feudal hierarchies and their appropriation of productive processes, all the better to champion the individual as the prime actor in history and society. And it is liberalism above all which championed - if not outright invented - the very distinction between the 'personal' and the 'public' - @Tom Storm.

Mikie

Land - and capital - starts to belong directly to merchants, or, at this point, capitalists. — Streetlight

:up:

Certainly a far more conciliatory capitalism than we know, but to the degree our conditions of life are dictated by markets - and not the other way around - this would still be a case of capitalism ascendant. — Streetlight

That makes sense.

It’s a matter of definition, but here my own answer would be “no.” I think if workers controlled production— if we essentially democratize the workplace — then it’s no longer a capitalist system, despite the fact that markets, production-for-markets, and profit-making continues. It implies that people will decide what to produce, where to produce, how to do so, and what we do with the profits/surplus — so I see this changing the markets/conditions of life you mention as a natural consequence. But this is speculation on my part.

The co-op model is a real world example. All that’s really changed is throwing out the small group of owners — which is what so much of this system creates and is designed to perpetuate.

Benkei

↪Streetlight

↪Xtrix

isn't there a fundamental problem left of the perpetual nature of corporations and limited liability. Even co-ops externalise costs and risk by limiting liability and its perpetual nature means it will always have benefit over dying people. Even if IN the co-op it is now democratic and presumably fair, then it's interaction with the rest of the world isn't. The corporation will become political, there's still no limit on how big and powerful they'll become, so we'll just have incorporated miniature countries in the long run where employees have similar interests (and likely to vote similarly) but those interests still compete with other people in society who have no say whatsoever.

Streetlight

↪Xtrix

↪Benkei

The guiding light I follow in thinking about this is the exchange/production distinction. To the degree that capitalism ultimately makes a change at the level of production so that production becomes production-for-market, so long as this remains in place, I think what we have is still capitalism. A key notion here is that of market-dependency. If our social (and thus life) arrangements are dependent on markets to reproduce themselves, then, to put it bluntly, we're in trouble. It's simply a matter of imperatives and necessities: if even a democratically governed workplace will be subject to market imperatives, there's every chance that the planet-killing imperatives to further commidification and assestization will chug along regardless.

Ultimately the goal is going to have to be freeing ourselves from market-dependency. That's the left project of freedom. Actual freedom, and not the fuck-you-I-got-mine bullshit peddled by the right. And part of that is going to be abolishing, or at least severely curtailing, the private property form. That said, I do see democratic workplace ownership as an enabling condition of that state of affairs. People should decide how, where, what, and how much to produce, but instituting workplace democracy won't get us all the way there without putting into question market-dependency, without which even collective decisions will be severely constrained in their decision making wiggle-room.

Importantly, being free of market-dependency doesn't mean getting rid of markets tout court. I'm not sure that would be either possible nor desirable. But it would mean incorporating markets into wider circuits of social life in a way that does not make the latter depend on the former.

Deleted User

↪Streetlight

:cool:

Gotcha. Posting on the fly.

praxis

Importantly, being free of market-dependency doesn't mean getting rid of markets tout court. I'm not sure that would be either possible nor desirable. But it would mean incorporating markets into wider circuits of social life in a way that does not make the latter depend on the former. — Streetlight

I was wondering if you or anyone else would give examples of incorporating markets into wider circuits of social life.

Streetlight

↪praxis

The entirety of pre-capitalist societies, for instance.

praxis

And in contemporary societies?

Streetlight

↪praxis

Anywhere where exchange is not impersonal: families, friends, strangers asking for directions in the street, co-workers passing pens to each other across the room. Market exchanges make up a tiny, tiny, tiny fraction of our lives. It just so happens their influence is unimaginably deep. Their extensity does not match their intensity in society. Markets are parasitic on non-market exchange that happen everywhere, all the time, among everyone, at all levels. I'm not even charging you for this!

frank

Anywhere where exchange is not impersonal: families, friends, strangers asking for directions in the street, co-workers passing pens to each other across the room. Market exchanges make up a tiny, tiny, tiny fraction of our lives. It just so happens their influence is unimaginably deep. Their extensity does not match their intensity in society. Markets are parasitic on non-market exchange that happen everywhere, all the time, among everyone, at all levels. I'm not even charging you for this — Streetlight

This is utter nonsense.

Streetlight

↪frank

Oh good, coming from you, this means I am exactly correct.

What Capitalism is Not (specifically, it is not markets)

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