Capitalism is an economic system based on private ownership of the means of production and their operation for profit. The characteristics of capitalism are commonly associated with private property, capital accumulation, wage labour, voluntary exchange, a price system, and competitive markets. In a capitalist market economy, decision-making and investment are determined by every owner of wealth, property or production ability in financial and capital markets, whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.
Critics of capitalism argue that it establishes power in the hands of a minority capitalist class that exists through the exploitation of the majority working class and their labour; prioritizes profit over social good, natural resources and the environment; and is an engine of inequality, corruption and economic instabilities. Supporters argue that it provides better products and innovation through competition, creates strong economic growth, and yields productivity and prosperity that greatly benefits society as well as being the most efficient system known for allocation of resources.
Capitalism and commercial trade have existed for much of history, but it did not lead to industrialisation or dominate the production process of society. That required a set of conditions, including specific technologies of mass production, the ability to independently and privately own and trade in means of production, a class of workers willing to sell their labour power for a living, a legal framework promoting commerce, a physical infrastructure allowing the circulation of goods on a large scale and security for private accumulation. Many of these conditions do not currently exist in many Third World countries, although there is plenty of capital and labour. The obstacles for the development of capitalist markets are therefore less technical and more social, cultural and political.
During the Industrial Revolution, industrialists replaced merchants as a dominant factor in the capitalist system and affected the decline of the traditional handicraft skills of artisans, guilds and journeymen. Also, during this period, the surplus generated by the rise of commercial agriculture encouraged increased mechanization of agriculture. Industrial capitalism marked the development of the factory system of manufacturing, characterized by a complex division of labour between and within work process and the routine of work tasks; and finally established the global domination of the capitalist mode of production.
(Burnham, Peter (2003). Capitalism: The Concise Oxford Dictionary of Politics. Oxford University Press.)
Capitalism was carried across the world by broader processes of globalization and by the beginning of the nineteenth century a series of loosely connected market systems had come together as a relatively integrated global system, in turn intensifying processes of economic and other globalization. Later in the 20th century, capitalism overcame a challenge by centrally-planned economies and is now the encompassing system worldwide, with the mixed economy being its dominant form in the industrialized Western world.
Industrialization allowed cheap production of household items using economies of scale while rapid population growth created sustained demand for commodities. Globalization in this period was decisively shaped by 18th-century imperialism
(James, Paul; Gills, Barry (2007). Globalization and Economy, Vol. 1: Global Markets and Capitalism. London: Sage Publications. p. xxxiii.)
I found the documentary, once again, interesting but a bit depressing. It also really highlighted how complicated our world is.
The film also highlights why we work and when a work society ‘works’.
We work for the satisfaction of needs and a work society works when it enables social as well as individual well-being on the basis of work and employment.
The film introduces these concepts in comparing capitalism in America prior to the 1980s to capitalism in and after the 1980s under Reagan. The earlier years are portrayed as somewhat idyllic, with plenty of wealth for most people, investment in infrastructure, booming manufacturing industries, little personal debt and safe pensions. The film shows stereotypical housewives, new cars, and smiling families. People earned a living wage and could support their families adequately, and even though the wealthiest people were taxed heavily (90%!), they still enjoyed luxurious lifestyles; symbolised by champagne, evening gowns and nights at the opera.
The main mode of production was industrial; car manufacturing played a big role in American wealth and there was a lack of competition from other countries, the film notes that Germany and Japan’s car (and other) industries were devastated by the war. The satisfaction of needs was based around this and other industries, enabling union membership to protect the rights of workers, provide health care and secure pensions, as well as integrating people in society. While their individual jobs may have differentiated them, workers were integrated through reliance on others for the production of goods, as well as through their union memberships, enabling them to negotiate the norms and values of their workplaces. It seemed that capitalism and the free market were providing social and individual well-being through employment and social infrastructure. In Australia, Whitlam was trying to introduce the precursor to Medicare, women’s rights and Indigenous rights were being fought for and the unions held a strong position under both Whitlam and Fraser.
This ideal lifestyle is then contrasted with the 1980s: Jimmy Carter tries in vain to warn America against the consequences of capitalistic greed and is swiftly replaced. Reagan comes to power, ‘turning the bull loose’ and swinging Polanyi’s pendulum towards the free market. In Australia, under the Hawke government a similar swing is in place as there is a general deregulation of markets, including the labour market, paving the way for enterprise bargaining agreements and later Work Choices. In both countries, the power of the unions is drastically reduced and the free market is, instead, responsible for employment, resulting in increased inequality for workers. Unfortunately, competition is a cornerstone of capitalism and the level of competition in the car manufacturing industry increases, thanks to Germany and Japan. With the collapse of the car industry, the mode of production is no longer able to satisfy the needs of people and for many, this work society no longer works. Rationalisation leads to the layoff of workers in exchange for short-term profits, deregulated banking means many individuals and families agree to loans and mortgages that cause them to default on their mortgages, and people are incarcerated at an increasing rate. The film shows the spiraling effect of this, particularly in regard to the housing market and then the stock market and then the banking industry, resulting in the subsequent bail out by the government. I particularly enjoyed the part where the sheriff points out that those who advocated for economic liberalism and free markets the most then had to turn around and ask for a government bailout, whereas the market had obviously decided that their businesses were not viable (at 1:39 “Doesn’t it seem strange to you that they would seek a government bailout…I thought the free market is just sink or swim? I just saw them sink and cry like babies for assistance from everybody else”. The sheriff then goes on to stop all mortgage foreclosure sales in his county). Bush’s staunch commitment to the free market despite these disastrous consequences are reflected in the film when he says “if you seek social justice and human dignity, the free market system is the way to go”. Obviously voters disagreed with him, as Polanyi’s pendulum swung back towards the state with the election of Obama, despite him being labelled a socialist.
A bit of a side note, I thought that the part about the Citigroup memo, that the only worrying thing is that everyone has a vote, goes to show why the US wouldn’t want to make it mandatory to vote – you wouldn’t want the poor and disadvantaged to realise they have a mechanism for exercising their rights and influencing the way their country is run!