Do we really live under capitalism?

In short: yes.

However, some claim that the regulating role of the state means that this system is not ‘true capitalism.’

Capitalism can be defined quite straightforwardly, if tautologically: an economic system based on the private ownership of capital. This is a descriptive definition rather than an ideal one: capital can be defined as financial and productive wealth (shares, land, factories etc). This definition is not distinctly socialist: The Oxford Dictionary defines capital as “wealth in the form of money or other assets owned by a person or organization or available for a purpose such as starting a company or investing.” (Later we will break this concept down further, but Oxford’s definition will suffice for now).

In other words, capital is private property used to generate profits. This is distinct from previous social systems, such as indigenous societies, where land was collectively rather than privately owned. Under capitalism, an investor may own and profit from miles of irrigated land he will never visit, an inconceivable concept in most indigenous societies.

Although many libertarians define capitalism as a free market without state involvement, we again define capitalism straightforwardly: a system based on the accumulation and circulation of capital. The relationship between property owners and the state varies, but the property relations are the common feature.

The involvement of the state does not in itself negate capitalism. In fact, the state often serves capital. This is most obvious in the case of massive subsidies and tax breaks given to corporations. There are also more extreme cases: in Chile 1973, a democratically elected socialist government was overthrown by a military regime that implemented pro-market reforms, the first of the so-called ‘neoliberal’ policy regimes that would soon sweep the world. By contrast, in countries such as Aotearoa and Australia, a relatively representative democracy operates alongside undemocratic private property relations. Democracy can be tolerated by the powerful, up to a point.

Even state regulations that help workers also stabilise capitalism as a whole. For example, clashes between labour and capital over the work-day were resolved in the interests of labour, with a state-imposed 8-hour work day, but this also prevented that bloody conflict from destabilising capitalism itself (it’s also a reform that has largely slipped from our grasp again). Similarly, minimum wage laws guarantee a certain amount of social stability, as well as ensuring that workers have the money to buy commodities, thereby lubricating the profit system. Individual capitalists, by acting in their own interests – increasing the work day, cutting wages – destabilise capitalism as a social system. Through regulation, the state saves capitalism from itself.

The state also develops infrastructure necessary to capitalism. Roading, railways, and other national infrastructure are too expensive for any given capitalist to produce, so the state uses its accumulated resources to invest in this infrastructure (often giving individual capitalists lucrative contracts in the process). Taxes, seen by some right-wingers as an attack on capital, enable this investment that ensures a stable basis for capitalism.

The capitalist state also provides police, and the military, to protect and enforce the capitalist system. The police first developed in 19^th century Britain and the USA, not in response to any increase in crime, but in response to angry working-class mobs: riots, strikes and slave insurrections.¹

Even some nominal socialists claim that the state is inherently socialist, just as right-wing libertarians do. Bernie Sanders claimed that the military and police are socialist, because they are provided by the state. However, Irish socialist James Connolly explains the problem with this in his work State Monopoly versus Socialism:

Socialism properly implies above all things the co-operative control by the workers of the machinery of production… state ownership and control is not necessarily Socialism – if it were, then the Army, the Navy, the Police, the Judges, the Gaolers, the Informers, and the Hangmen, all would all be Socialist functionaries, as they are State officials… To the cry of the middle class reformers, “make this or that the property of the government,” we reply, “yes, in proportion as the workers are ready to make the government their property.”

For revolutionary socialists, the question is not state or capital: state ownership can exist in a capitalist system. The question is private exploitation, or collective liberation. We may use the levers of the state at times, but only where they benefit liberation struggles, not because the state is automatically socialist. Capitalist states continue to predominate in the world today, and in Australasia specifically.

This article is a part of Fightback’s ‘What is Capitalism’ series, to be collected together in our next magazine issue. To subscribe to our e-publication ($20 annually) or physical magazine ($60 annually) through PayPal or credit card click here.