It's Time to Rethink Anti-Capitalism

People throw around the word capitalism without having a particularly clear idea of what it means. People on the left also throw around the term ‘anti-capitalism’ without having a clear idea of what they think the alternative is.

During the Cold War, this wasn’t much of an issue. ‘Capitalism’ can be used to refer to countries with a free market to distinguish them from the socialist countries that were numerous at that time. Since almost all of those countries have collapsed now, most people have abandoned their enthusiasm for workers’ states, hammers, sickles and red flags, and the distinction between capitalism and socialism has become more nebulous and arguably less relevant.

In fact, the word ‘capitalism’ only really gained currency because of its use by the the ‘old socialists’ in the mid to late 19th century, who wanted to distinguish the existing economic order from a hypothetical one that could be created in some kind of revolution. Marx, for example, referred to capitalism as a specific ‘mode of production’ that would become obsolete when certain technological and economic conditions were met, whereupon it would inevitably give way to a new mode of production called communism. It was also to be distinguished from various historical modes of production, such as feudalism.

Marx’s theory became very influential among historians and economic historians in particular, but these days, a growing number of them are realising that Marx’s analysis is a major over-simplification of the facts. ‘Feudalism’ and Marx’s notoriously vague concept of ‘the Asian mode of production’ are such broad categories that their usefulness is questionable at best. I argue that the same applies to ‘capitalism’. Economic history does not stride neatly from one perfectly-defined pigeon hole to another perfectly-defined pigeon hole after all.

So what was supposed to define the pigeon hole of capitalism? Usually the following features are considered to be distinguishing characteristics:

• Private ownership of business and industry
• Allocation of goods and services by a free market
• Predominance of wage labour (over, for example, forced labour or self-employment)
• Investment of capital for the sake of profit (“money making more money”)
• Accumulation of wealth by reinvesting profits

In fact, not only are all of these features attested since ancient times, but as a practical matter it would be impossible to eliminate all of them and still hope to have a functioning society. Consider, for example, that some of the earliest surviving writings from one of the earliest civilisations in ancient Mesopotamia concern interest payments on loans, which is, needless to say, one of the clearest examples of “money making more money”.

What might happen if interest-bearing loans ceased to exist? Well it so happens that charging interest on loans is forbidden in Shariah Law[1]. The main way to comply with this ruling is that banks or other interested parties hand over the money on the condition that they become partners in the business that wants to take out the loan, or co-owners of the property that a person is borrowing for. In doing so, they still profit from the investment, and their motivation is still precisely so that they can make money out of their money. It’s also clear that this way of ‘abolishing interest’ is only possible where there is private ownership of businesses and property, i.e. one of the other characteristic features of ‘capitalism’.

Interestingly enough, the Islamic world had a thriving commercial economy in the Early Middle Ages (unlike Europe), despite the prohibition on interest, to the point where some historians have used the word ‘capitalism’ to describe it[2]. This contradicts the usual Marxist narrative that capitalism had its origins in Western Europe in the 15th and 16th centuries[3]. But it’s still a stretch to claim that usury (i.e. interest-bearing loans) was actually abolished. Muslims weren’t allowed to charge interest, but they could still pay interest, such as to the minority Jewish population who had no religious scruples about usury[4].

Like in Medieval Islam, there were forms of partnership available in Ancient Babylon and Ancient Rome where one or more investors could finance the productive activity of one or more labourers, with the profits being shared according to pre-defined rules[5]. In this case, the investors were certainly putting up their money with the expectation of a return, and many of them would then turn around and reinvest their profits in other businesses, hence accumulating wealth[6].

Wage labour is also attested in early civilisations. In fact, just like with other ‘capitalist’ relations, recent historians have had to rebuke earlier ideas about the irrelevance or non-existence of wage labour in early civilisations[7]. In Ancient Rome, for example, free labourers were an important part of the labour force despite the relatively large number of slaves[8].

Naturally, with the abolition of slavery and increasing urbanisation drawing people away from subsistence agriculture, I can hardly deny that wage labour has become more prevalent in recent centuries. But one could not claim that it became dominant until at least the 20th century when it became increasingly common for women to enter waged employment, and some people claim that wage labour still isn’t the dominant form of labour when all of the domestic, family-based and voluntary labour is accounted for[9]. Not only that, but wage labour has already been retreating in favour of some more precarious freelance jobs we see these days, like the Youtuber and the Uber driver - but few people are heralding a retreat of capitalistic relations because of this!

Whereas socialism used to have a strong anti-market current, the perceived failure of real socialism in the USSR and elsewhere led many socialists not just to accept market relations as unavoidable, but even to embrace them as a fundamental good. In order to continue calling themselves anti-capitalists, they needed to claim that markets and capitalism are not logically connected, leading to a renewed interest in theories of ‘market socialism’. Even those on the left who do not explicitly identify as market socialists nevertheless find it hard to imagine an alternative to ‘capitalism’ that doesn’t involve some kind of market, especially when the Soviet Union’s concerted attempts to abolish it only led to the development of a tolerated but illegal black market, an entire ‘shadow economy’ in fact.

Some market socialists have an even narrower concept of capitalism based around property income - that is, the dividends, rents and interest payments that accrue to the owners of businesses, property and money capital[10]. The reason for making this distinction is that property income is ‘unearned’ income - in other words, it doesn’t come from the sweat of the labourer’s brow which is where socialism expects to derive its support base. But this objection is somewhat spurious, since left-wing people usually support social safety nets, benefit payments and free public services that allow people to earn things they may not have toiled for.

The objection to property income rests on an unreasonable assumption about economics - that scarce resources should be allocated on the basis of ‘hard work’. But credit is also a scarce resource, and just like other scarce resources such as hard work and pillow cases, a market has arisen to reward people for making that scarce resource available to those who need it. The same goes for land and vacant space in general. As I’ve explained elsewhere, lots of morally upstanding people receive property income - anyone who has money in a savings account or a pension fund, for example. I don’t see why those people should be demonised for the sometimes meagre amounts they might receive in their evil attempts to turn their surplus cash into even more surplus cash, while other people make millions by playing football, simply because the former is ‘property income’ and the latter isn’t (not that we should be demonising footballers either!).

I’m not saying market socialism contains nothing of interest. But I do think the left makes a mistake in seeing ‘anti-capitalism’ as an end in itself. Now that ‘capitalism’ is such a nebulous concept, the equation “capitalism = evil” (which left-leaning people are expected to instinctively accept) allows people to define it more or less however they want, and then proclaim that abolishing these aspects of the economy must surely lead to endless roses and sunshine, based on the logical fallacy “not capitalism, therefore not evil”. Using a game of semantics, market socialists can claim that just because their system doesn’t count as capitalism - by criteria they have devised themselves - it must therefore be desirable and good.

It goes right back to Marx and Engels, who had heavy criticism for so-called “utopian socialists” like Proudhon and Dürring, who thought they could end capitalism just by “juggling with money”[11]. But in my view Marx and Engels invited this kind of thinking themselves by identifying ‘capital’ as the source of society’s exploitative core, and by framing capitalism as something that had a historical starting point and which could have a definitive end point. Moreover, the Marxist theory on how to distinguish between capitalism and historical market economies is ambiguous enough that it gives plenty of fodder for the “utopian socialists”, and people are still debating it over a century later[12].

We began with a very simple and understandable distinction between free market capitalist countries and state-planned socialist countries in Cold War terms, yet in the 21st century we see people like David Graeber wrecking this usage by proclaiming that markets and capitalism are “opposites” because apparently capitalists usually try to limit the power of the free market in order to secure a monopoly. He credits the prosperity of Ancient China to their ‘pro-market anti-capitalism’ while simultaneously acknowledging how “bizarre” this terminology sounds[13].

Indeed the definition of ‘anti-capitalism’ could not be muddier. For Donnie Maclurcan and Jennifer Hinton, going beyond capitalism means replacing for-profit businesses with not-for-profit businesses[14], while a market socialist like James Yunker thinks his ‘stock market socialism’ is in fact a paradigm shift away from capitalism despite unapologetically glorifying the profit motive[15]. Meanwhile the anti-capitalism of the Zeitgeist Movement means a wholesale shift away from all forms of money, markets and exchange; while that of Enric Duran includes the use of cryptocurrencies to supplant the “evil” of fractional reserve banking[16].

Flailing around in the left’s comparative weakness, people have cited many economic mechanisms as the ‘real’ source of society’s woes - anything from interest-bearing loans to fractional reserve banking or even money itself. I think this reflects the lingering influence of an outdated socialism, encouraging us to problematise systemic economic paradigms and then think utopia springs naturally from their absence. In the process, we lose sight of the real problems society faces - the real poverty, the suffering, oppression and exploitation, climate change and ecological destruction - as well as how they can be addressed in the here and now. This isn’t the time to pin our hopes on a distant revolution.