What Makes Capitalism a Competitive Political-economic System

Exploitation is a crux of capitalism. What makes capitalism unique compared to other exploitative social systems?
1) Exploitation in capitalism is relatively obscured–for example, in the gap between value creation (mobilizing society around using human labor to produce wealth) and the exchange commodity, money, that’s used to pay for the exchange value of labor, wages. (Without creative human labor you don’t have value creation; and the capitalist, owning the means of production, has the power to command a higher share of the value created than other work that enters the means of production.)

The exchange value of commodities can systematically differ from the value they produce in society–that’s a unique trick of capitalism. Exchange values can be determined on the market, but value production is instigated through coercive social relations and institutions.

In capitalism, the monetary exchange value of labor a) is supplied as wages to working class people (after labor is rendered to the capitalist) so that they compete as consumers on the market in order to supply themselves with the goods and services required to reproduce themselves (from day to day, and through generations), and b) must be less than the value the labor produces in society. 

So this difference must be bolstered as legitimate–this difference has to be secured by force–law, police, military, prisons; and by coercion–advertising, propaganda, media, management. Therefore, this difference–exploitation in capitalism– is accomplished by three means: i) obscurantism–the unseen gap between socially-necessary labour time for production (value) and commodity price that is surplus value (realized in profit), as well as ii) force and iii) coercion.
2) Unlike between feudalism and capitalism, there is no elite transition path between capitalism and socialism. Sure, there was conflict when feudal authority was challenged by upstart merchants; but when all was said and done, capitalism could win over aristocratic converts because capitalism preserves elite privilege and social inequality.

You can still create value and develop a socialist political economy that could practically supplant capitalism. But there is no incentive for capitalists to give up their power, prestige and privilege and put their endlessly-touted innovative brilliance to work in a cooperative. On the contrary, the would-be capitalist converter would only rightly fear that he had abdicated all the militarized police, secret police, legal, judicial, and political protections that capitalists enjoy, transferring these protections from himself to the well-organized capitalists who stayed anti-socialist. The next Enlightenment movement that is socialism is massively blocked by capitalist elites’ absolute, enculturated sense of entitlement to a top berth in a steep social hierarchy.

3) In capitalism, it is the capitalists that are a class in and for themselves. Duh. There is absolutely, firmly class consciousness and class political consciousness in capitalism–capitalist consciousness, networks, ideology, emotion, mobilization, organization, infrastructure, institutions.

Capitalism organizes capitalists as a class-conscious group and fosters price competition among capitalists in a very controlled way; generally, though, and as it develops, it fosters a high degree of collusion among rival capitalists, who must always exploit (and so oppose) the working class and nature in order to even join the capitalist network.

In this post, I’m arguing that by and large capitalism is distinguished by deferring (though certainly not eliminating) intra-elite exploitation, fostering rivalries (eg. geographic, gender, race/ethnic, skill) to temporarily bribe sectors of the working class, and using myopic economic nationalism, co-opting  countries’ political management to help a-nationalistic finance capitalists extort wealth from other countries (For example, where Canadian political management, aspiring to sell goods and services to a-nationalistic European capitalists, pressure European politicians to transfer taxed European social wealth to failed European bankers). Capitalism enforces tiered networks. Oligopolists exploit national competition, as well as workers, nature, and the small, competitive, disposable firms that they foster. Capitalism maximizes those rivalries that foster capitalist collusion. In this way, capitalism creates super-social elites and autistic non-elites.

Katz on Marx’s view of what makes capitalism a competitive political economic system: “Karl Marx on the transition from feudalism to capitalism” (Theory & Society 1993).

Why is a labor aristocracy not the salient problem in capitalism?

“In Marx’s terms, class conflict within a mode of production typically ends not in ‘a revolutionary re-constitution of society at large,’ but rather ‘in the common ruin of the contending classes.’ Only the clash between two dominant classes culminates in the rise of a wholly new society and economy.” Katz 1993: 18.
Marx understood that the Enlightenment could be expanded as the working class gathered the strength of a potentially-dominant class under capitalism, so that it could go toe-to-toe with the capitalist class. Sometimes, in some places, the capitalist class tries to buy the loyalty of a portion of the working class. The development of a “labor aristocracy” or middle class within the working class is only a problem if that social sector agrees to render loyalty in exchange for the increased access to the accumulated social surplus. The middle class doesn’t have to fulfill the capitalists’ service contract. Instead, it can use the social power to advance the working class and the Enlightenment. Right now, it’s not just that the middle class was dumb (unorganized as working class) and failed to act strategically, and that the capitalists successfully used portions of the working class to maintain power. It’s also that capitalists are destroying the nascent infrastructure of working class power (eg. in the welfare state). It threatened them. The working class agrees to this destruction because that nascent infrastructure was started as a compromise between working class aspirations to social power and capitalist aspirations to control the working class–so it has been partially coercive. (As well, many working class people, conservatively hoping to avoid powerful class conflict and the risks of system change, fall back into hoping they can become capitalists, or at least capitalists’ labor aristocracy, in the capitalists’ system. They offer themselves up.)
In other words, dragging out and obsessing on working class – middle class conflict or how the welfare state is still partially coercive primarily benefits capital. A better use of time is organizing to remind the middle class that they are working class and that their interests will be advanced most emphatically by using their access to resources to make the working class stronger so that it can overcome the capitalist class.
I know with the injuries of class, it’s hard to keep focused on overcoming capital; and yet that’s what serious effort is required, lest we remain mired in the same injurious relations and fail to build working class strength required to challenge capital–instead driving a weak but contentious working class into ruin.

Back to point 3: Capitalist class organization in capitalism 

Capitalism is a very competitive political-economic system because it fosters a high level of cross-border ruling class coordination. It is distinguished from other economic exploitation systems by how within-capitalist class exploitation is both structurally and politically discouraged (contrast with mercantilism); instead societies’ collective efforts are focused keenly on exploiting the working class and nature. The capitalist ruling class is broader than under feudalism, but more cohesive than under mercantilism. This creates a more robust net of social control.
This stabilizing “externalization” of exploitation– outside a capitalist class-for-itself (and moreover, an exploitation hidden by a combination of commodity exchange and hegemonic effort)–results in privatized profits and socialized costs that reinforce capitalism’s social hierarchy of power and control. Capitalism is a system of exploitation that, however riddled with contradictions and crisis tendencies, is stabilized through systematically privatizing profits and socializing costs. With capitalism’s (nearly-)automatically-politicized and -organized ruling class, privatizing profits and socializing costs provides infrastructure that automatically offloads contradiction and crisis from the capitalist class, and it provides superior capacity for efficient accumulation that can be translated into countermeasures to crisis.
In Imperialism and Capitalism, Lenin foresaw the international concentration of capital.

Evidence that capitalism tends toward reduced competition within the capitalist class comes from Foster, McChesney & Jonna 2011, who argue that capitalism in the neoliberal era has produced international global oligopoly.

“As in all cases of oligopoly, where a few firms dominate particular industries or spheres of production, what is evident is not competition in the classic sense. Rather we are confronted with a dialectic of rivalry and collusion…The dialectical counterpart of such oligopolistic rivalry (often mistaken for simple competition) is a tendency toward collusion, particularly where threat of destructive price competition between the giants is concerned. The logic of this process was well described by Paul Baran and Paul Sweezy in Monopoly Capital…”

Why oligopolistic rivalry is not competition in the classical economics sense:

“Today’s now-dominant firms strive for ever greater monopolistic advantages derived from strategic control of the various elements of production and distribution, while resisting genuine price competition, not only at the national but also the international level.”

“The typical or representative firm today is a monopolistic multinational corporation—a firm that operates in numerous countries, but is headquartered in one…”

“This (global monopoly capital) is reflected in record annual levels of global mergers and acquisitions up through 2007 (reaching an all-time high of $4.38 trillion), and in vast increases in foreign direct investment (FDI), which is rising much faster than world income. Thus FDI inward stock grew from 7 percent of world GDP in 1980 to around 30 percent in 2009, with the pace accelerating in the late 1990s. (See Chart 1, below.) Even these figures are conservative in demonstrating the growing power of multinationals since they do not capture the various forms of collusion, such as strategic alliances and technological agreements that extend the global reach of such firms. Nor is there any accounting of the massive subcontracting done by multinational corporations, extending their tentacles into all areas of the global economy. In these and other ways, the rapid expansion of multinationals is creating a more concentrated world economic system, with the revenue of the top five hundred global corporations now in the range of 35-40 percent of world income.”

International monopoly capital constructed strategic alliances in the neoliberal era that “led Joseph Quinlan, senior economist of Morgan Stanley Dean Witter, to coin the term “Alliance Capitalism” in 2001. “Foreign direct investment and trade,” Quinlan wrote, “are the primary, although not the only, means of global engagement.” Other means include “subcontracting agreements, management contracts, turnkey deals, franchising, licensing, and product sharing. Of particular importance…has been the rise of strategic alliances and partnerships, which have become nearly as prominent—if not more so in some industries—over the past decade as global mergers and acquisitions.” The illustrative example is the world’s airlines’ mega-alliances. For example, United Airlines controls the international Star Alliance of airlines. Control through outsourcing has now become 40% of world trade. For example, Nike outsources its production in order to preside over and profit from grotesque levels of exploitation, thereby managing its oligopolistic rivalry.”

Centralization is greatly enhanced by finance, which facilitates gargantuan mergers and acquisitions. “In 1901, for example, 165 steel firms were combined in a single year to create U.S. Steel, the first billion-dollar corporation, with J.P. Morgan’s financial empire providing the necessary credit.”

Why?

“Large firms enjoyed enormous advantages over small firms: not only economies of scale of all kinds, but also specifically monopolistic advantages resulting from barriers to entry, and the capacity, therefore, to acquire monopoly rents. Moreover, once a corporation became big enough to impact the economy generally, it exercised its power in the political sphere, enabling it to draw more fully on state subsidies and support—as the whole history of monopoly capitalism has demonstrated.”

“‘Combining the share of US MNE parents and that of foreign affiliates in the US, MNEs accounted for 77% of US exports and 65 percent of imports in 2002.’ Hence, where U.S. international trade is concerned, it is fast approaching the situation where multinational corporations are the only actors. ‘Transnationalisation,’ Cowling wrote in 2005, referring to the global growth of multinational or transnational corporations, ‘introduced an added dimension of control over the market—it brings control by giant firms to the pattern and dimensions of trade and therefore undermines the possible impact of trade in restraining monopoly or oligopoly pricing behaviour within national markets.'”

This is an economic and social problem:

“The main consequences of the internationalization of monopoly capital for accumulation are the intensification of world exploitation and a deepening tendency to stagnation. the giant firms, unable to find sufficient investment outlets for their enormous economic surpluses within production, increasingly turn to speculation within the global financial sphere.59 As a result, financial crises have become both more common and more severe, while state systems everywhere are increasingly subject to the whims of giant capital and are forced to bail out corporations that are deemed “too big to fail.” Governments at the national, regional, and local levels seek to clear up the resulting fiscal crises by hammering the general public, cutting back on social services while creating more regressive tax systems, thereby ratcheting up the effective level of exploitation in society. “

Here is the geographic dispersal–production and consumption, not ownership– that is occurring under global oligopolistic rivalry:

“As recently as 1990, the foreign affiliates of the world’s top one hundred nonfinancial multinationals accounted for only a little over a third of the total assets and less than half of the sales and employment of these firms, with production still largely based in their parent companies headquartered in their home countries. By 2008, however, these top one hundred global corporations had shifted their production more decisively to their foreign affiliates, which now account for close to 60 percent of their total assets and employment, and more than 60 percent of their total sales.”

Yet such dispersal should not be confused with democratized global prosperity:

“Today the richest 2 percent of adult individuals own more than half of global wealth, with the richest 1 percent accounting for 40 percent of total global assets. If, in the “golden age” of monopoly capitalism in the 1960s, the gap in per capita income between the richest and poorest regions of the world fell from 15:1 to 13:1—by the end of the twentieth century, the gap had widened to 19:1. From 1970 to 2009, the per capita GDP of developing countries (excluding China) averaged a mere 6.3 percent of the per capita GDP of the G8 countries (the United States, Japan, Germany, France, the United Kingdom, Italy, Canada, and Russia). From 2000 to 2006 (just prior to the Great Financial Crisis), this was only slightly higher, at 6.6 percent. Meanwhile, the average GDP per capita of the fifty-eight or so Least Developed Countries (a UN-designated subset of developing countries) as a share of average G8 GDP per capita declined from 1.8 percent in 1970, to 1.3 percent in 2006. The opening decade of the twenty-first century has seen waves of food crises, with hundreds of millions of people chronically food-deprived, in an era of rising food prices and widespread speculation…”

For workers in the periphery may experience more monetized relations, but their societies and economies are thereby increasingly subjugated to oligopoly capital.

“Just as, nationally, any state programs that aid the working-class majority are targeted by neoliberalism, so, internationally, the primary (neoliberal) goal is to remove—in the name of ‘free trade’—any limits on the power of multinational corporations exercised by nation-states. This mainly hurts the weaker states, where such rules are more stringently imposed by international organizations (principally the IMF, the World Bank, and the WTO) controlled by the rich countries—and where there is less capacity to resist the intrusion of global corporations. The very reality of economic stagnation in the neoliberal era has been used as a further justification for the freeing up of the market on behalf of the giant firms.”

Global monopolization is the flipside to increased competition within the working class:

“A final blockage to comprehending the tendency toward global monopolization consists of a simple category mistake, wherein competition between firms—what economists primarily have in mind when they discuss competition—is confused with competition between workers.” That is to say, analysts who refuse class conflict analysis mistakenly assume that the increased competition capitalist hegemony induces among the world’s workers is evidence of increased competition among capitals. Because it’s a capitalist system, the fortunes of the global capitalist class can be quite opposite of the global working class.

Jonna et al recall Bourdieu’s insight into neoliberalism’s disciplinary relationship to the working class:

“For French sociologist Pierre Bourdieu, ‘the structural violence of unemployment,’ including the ‘fear provoked by the threat of losing employment,” is the “condition of the ‘harmonious’ functioning of the individualist micro-economic model.’ Or, as legendary U.S. capitalist Samuel Insull put it nearly a century ago, with the candor of a pre-public relations era, ‘My experience is that the greatest aid to efficiency of labor is a long line of men waiting at the gate.'”

“Today we often hear—in the ideology of national competition so often used to channel class dissatisfaction—that U.S. workers are facing increased competition for jobs with Mexican workers, Chinese workers, Indian workers, etc. In our view, this is not a reflection of increased competition—certainly not in the sense that this term is used in economics—but of the growth of monopolistic multinational corporations, which, through their much larger number of foreign affiliates, their still larger numbers of subcontractors, and their corrupt domination of national governments and policymaking, are able to employ a strategy of divide and rule with respect to the workers of the world. Competition between workers is aggravated as the internationalization of monopoly capital grows more certain: they are two sides of the same coin. The result is a worldwide heightening of the rate of exploitation (and of the degree of monopoly). Tariffs and capital controls were battered down through GATT and WTO under the leadership of capital from the center because imperial corporations believed they were strong enough to outcompete firms in the periphery. The resulting free movement of capital has contributed to real wage stagnation or actual wage decrease for the relatively privileged workers in the countries of capitalism’s core, while worsening the conditions of the vast majority of the much poorer workers in the periphery.”

Neoliberal global oligopoly capitalism is an effort to reverse Enlightenment gains on behalf of a capitalist class that aspires to feudal political-economic power.

The “neoliberal campaign for the internationalization of monopoly capital is not merely an attack on the working class. Rather it must be understood, more broadly, as an attack on the potential for political democracy, that is, on the capacity of the people to organize as an independent force to counteract the power of corporations.”

Note: Facts above are cited in Foster, McChesney & Jonna’s Monthly Review 2011 V. 63 Issue 2 article here.

Nancy Folbre cites the above article by Foster, McChesney & Jonna (2011) in her review of networks and monopoly/oligopoly trends research, “Who rules the global economy?” (NYTimes).

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