CHAPTER 1

The System: Capitalism

History suggests that capitalism is a necessary conditionfor political freedom.

—Milton Friedman

There must be something rotten in the very core ofa social system which increases its wealth withoutdiminishing its misery.

—Karl Marx, New York Daily Tribune, 1859

There are forty million poor people here, and oneday we must ask the question, "Why are there fortymillion poor people in America?" And when you beginto ask that question, you are raising a question aboutthe economic system, about a broader distribution ofwealth. When you ask that question, you begin toquestion the capitalistic economy. And I'm simplysaying that more and more, we've got to begin to askquestions about the whole society ... And you see, myfriends, when you deal with this you begin to ask thequestion, "Who owns the oil?" You begin to ask thequestion, "Who owns the iron ore?" You begin to askthe question, "Why is it that people have to pay waterbills in a world that's two-thirds water?" These arewords that must be said.

—Martin Luther King Jr.

In 1948, when I was ten years old, exploring the streets of downtownOakland, California, I was shocked to see a man sprawled outfacedown on the sidewalk. The populace passed by him, not payingany attention. Now, many years later, the homeless are common inthe streets of Oakland as well as most of our major cities, and inthe Oakland hills, where the rich live, the new houses are gettingbigger. We have more homeless and bigger houses, and our prisonsare overflowing. What happened? I believe the answer to thesequestions and others that involve inequality can be found throughan understanding (that I call a class analysis) of our economic/socialsystem—capitalism.

Capitalism is the dominant economy in our world. It beganto develop in Europe in the late Middle Ages within the previousmode of production, feudalism: an agricultural structure where serfsprovided labor and military service to a lord in return for the use ofhis land. In the late Middle Ages, capitalism established a marketthrough the use of the very few workers who were not tied to theland as the serfs but who became tied through the wage system to thegrowing class of owners, called capitalists, who owned the factories,workplaces, and raw materials.

For the purpose of this book, I will reduce the numerousinterpretations of capitalism to two: the mainstream and the classanalysis. Although both perspectives describe the same system, theyfocus on different aspects of it, as you will see in the slight variationsof the following definitions. The mainstream approach looks atcapitalism from the top down, from the perspective of the winners:the owners, the bosses, and the heads of corporations who control themajority of wealth and power. This is the view that you are probablyfamiliar with since most of the institutions in our society—themedia, education, government, and business—promote it.

Class analysis looks at the capitalist system from the bottom up,from the perspective of the grass roots: of those who do the work,who are the poorest, and, at the same time, who are made invisibleby the capitalist-controlled institutions of society (the newspapers,media, corporations, and educational systems).

For example: The mainstream perspective doesn't look uponclass as a key feature of the capitalist system (other than includingworkers' wages in the costs of production). Look in any newspaperand check out the business section. Then look at the labor section.Oops, there is none! In contrast to the mainstream perspective, classanalysis sees class as fundamental, as the motor of capitalism, butthis perspective is only found in some alternative media.

The mainstream definition concentrates on the following: (1) privateownership and private decisions, (2) the competitive free markets,and (3) economics in the narrow sense—linking people with things(the focus is on products, profit, and growth). It is based on theassumptions that we are naturally competitive, greedy, and isolated.Most people who don't concern themselves with the way capitalismworks or who see the capitalist system as natural, implicitly agreewith this view of human nature. Do you? (Lots of people disagreewith this view of human nature, but they are forced to act dailyas isolated, competitive, greedy individuals in order to survivecapitalism.)

In their praise of capitalism, mainstream advocates argue thatit is the greatest arrangement for producing wealth. It has liftedmillions from the hopeless lives of peasants into the modern officebuildings and apartments of industrialized nations.

Mainstream advocates also argue that capitalism is based on theprotection of the individual's right to life, liberty, and the pursuitof happiness. Free markets are founded on the individual's right topursue a career, trade the products of his or her effort, and enjoy thewealth he or she has earned, without having to seek permission fromothers. Capitalism doesn't just make people wealthy; it affirms thefreedom of the individual.

The top-down view misses the experience of those on the bottom.While this view sings the praises of the freedom of the individual,it ignores the fact that a small minority (capitalists) benefits whilethe rest of humanity suffers from war, racism, sexism, starvation,poverty, ill health, pollution, ecological catastrophe, and so on.

The class analysis definition concentrates on the following: (1)workers as a group, (2) the fact that workers are exploited (exploitationoccurs when one section of the population—the workers—producesa surplus that is controlled by the capitalists), and (3) economicsin the larger sense—where the economy is viewed as part of asocioeconomic system that includes all aspects of human life, notjust economic relationships. It is based on a different assumptionabout human nature: that we are interconnected social beings ratherthan isolated individuals in competition with one another.

An important distinction between the mainstream and theworking-class perspective is seen in their understanding of the word"economics." Where the mainstream approach assumes economicsis concerned with things, the working-class approach sees economicsas concerned with relations that appear as things. Michael Merrill,an American historian, addresses this distinction when he statesthat most historians mistakenly see capitalism as "just an economicsystem based on market exchange, private property, wage labor, andsophisticated financial instruments. A better approach would viewcapitalism as an arrangement of power relations that diverted thefruits of economic development into the hands of a small segmentof society."

Another way of saying this for the working class is that byselling our labor power to an employer, we turn ourselves intocommodities. We throw away our humanity and become things,since—under capitalism—all transactions are carried on throughthe exchange of commodities. So under the mainstream perspectivepeople are defined as being commodities, while under the working-classapproach, we see that beneath commodities are social relations,human relations.

Class analysis recognizes that capitalism is a great advance overfeudalism in that it is the first economic system that has createdenough material wealth to potentially feed and clothe everyone.But the struggle between the very few capitalists and the mass ofemployees ends up with enormous inequalities: superrich capitalistsand poor workers. This is because the capitalists own almosteverything, while the working class only owns its power to labor.Thus, the working class must work under capitalist-controlledconditions. If you own nearly everything and need employees towork for you, you have a great advantage over them (especially ifyou make it difficult for them to organize and struggle against yourpower by pitting subgroups of workers against one another throughthe use of racism, sexism, and ethnic strife).

This unequal relationship between capitalists and workerscan only be corrected when there are no classes and when workersdemocratically control their own production and produce goodsbased on need and not for profit.

Class analysis is not only arguing for material fairness but also foremployees to be treated like human beings, a demand that capitalismis incapable of meeting, because in creating wealth, the capitalistclass must focus on profit, not use—on what makes the most money,not necessarily on what is most useful for the community. Andworkers are thrown into that process. They turn themselves intorobots or zombies for capitalism by selling their labor power to thecapitalists, thus losing control of their bodies. Worker-robots alsodon't see their work as part of their creative contribution to theircommunity.

Under the mainstream perspective, employees have no sayover their work and no control over their lives. The class analysisperspective argues that it is through labor, through our cooperativetransformation of nature for our needs, that we become humanbeings. This is why class analysis is in favor of overturningcapitalism's class divisions and replacing them with a classless societythat could lead to the creation of a social order where humans wouldbecome free to democratically control themselves in all areas of theirlives. This is a truly revolutionary goal, for never before in humanhistory have humans created a society in which all are free to fullydevelop themselves.

Why Is Capitalism Not Understood or Paid Attention To?

Most people do not understand capitalism as the arrangement thatunderlies and influences our daily lives. Both Frances Fitzgeraldand James Loewen, in their studies of textbooks, found out that oureducational system ignores class and the economy. In addition,Michael Zweig, an economist and author, being interviewed on theprogram Class Dismissed, pointed out that PBS would not broadcastlabor-funded films, because they considered them to be propaganda,but they would put on Wall Street in Review, funded by MerrillLynch, since that show was judged as news. Zweig stated that thecorporate funders behind PBS would not allow the terms "capitalism"or "capitalist class" on their broadcasts, although they would allowtalk about the corporate elite or the "free" market. And if by somechance capitalism were talked about in the mass media, it wouldbe presented from the mainstream perspective as a structure thatignores or minimizes the struggles of the workforce and maximizesthe joy of consumerism and the values of individualism (I can "makeit" by pulling myself up by my bootstraps).

Because of the public reaction to the 2008 crisis, the term"capitalism" has begun to enter the public conversation, especiallyamong the traditionally critical alternative organizations. Generally,the mainstream discussions ignored the term. Frank Luntz, one ofthe Republican Party's chief messaging strategists, advocated at aRepublican governor's association not to say "capitalism," becausethe American public thinks of it as an immoral arrangement. Heproposed it be replaced by terms like "free market" or "economicfreedom." Still, as our economic crisis lengthens and deepens morepeople are looking up capitalism and socialism in the dictionary.

What is it about the term "capitalism" that those in power arekeeping from us? The best way for the capitalists to hide all of thesefacts is to hide the first one—that we live in a capitalist society,which implies the following:

1. Capitalism (as defined by class analysis) reveals how oursociety works and who benefits and who suffers.

2. The rulers of our society own the means of production,distribution, and exchange, and they get the majority of thesurplus created by the working class.

3. The government usually serves the capitalists' interests, dueto the enormous lobbying and financial contributions thatbuy politicians.

4. The purpose of capitalism is to make profits. In doing this,capitalists must give up as little of the surplus to the workingclass that actually generated it as possible. They do this bycreating ways to replace workers with machines, technology,robots, and cheaper labor from other countries.

5. The conditions of life for the workforce are bad and gettingworse. The rich are getting richer, and the poor are gettingpoorer.

6. Those who benefit from the present order of society have usedtheir power and influence to cover up the above points.

The importance of capitalism dates from mercantilism and the eraof European colonialism to the Industrial Revolution that began inthe eighteenth century, when bankers, merchants, and industrialistsbegan to displace landowners in political, economic, and socialimportance. Since those days, capitalism has taken numerous forms:monopoly, corporate, and global, reflecting technical and socialdevelopment. The principles stated in the working-class definition arethe same, but the actors may take different forms—proletarian, bluecollar, white collar, pink collar, precariat, professionals, managers,and technicians versus individual owners, corporate CEOs, venturecapitalists, finance capitalists, and so on.

Currently, there is much discussion about corporations, probablybecause of the one hundred largest economies in the world, fifty-oneare corporations, and they are easier and more concrete targetsthan capitalism. Nearly everyone has some reason to dislike ordistrust corporations—we've all been hurt by them as competitors,employees, investors, or consumers. Some groups focus their energyon corporate reform. Such an approach often forgets that corporationsare an expression of capitalism. All the key difficulties that thecorporate critics point out—authoritarianism, constant expansion,exploitation of the workforce, the exclusive focus on profits, andturning everything and everyone into a commodity—are foundin capitalism. The working-class analysis argues that the problemis not merely corporations but the system they are embedded in—capitalism.

Capitalism from the Working-Class Perspective: A Summary

Class analysis recognizes capitalism as a historically developingsystem where society's material needs are satisfied primarily throughexchange in the market. In that practice, the working class turns itselfinto a commodity by selling its labor power to the capitalist class thatowns the factories, businesses, and corporations. These owners givethe workers back a portion of the value they create through wagesand use the rest, the surplus, to grow their holdings, for if they don'tgrow, competing owners will swallow them up. The major struggle isbetween the working class (including the "shrinking middle class,"for they also work) and the capitalist class, and it is invisible for thereason that the wage system gives the illusion that employees are paidthe full equivalent of the value they produce; therefore, they have norights to the control and use of the surplus. Production is measuredin a quantifiable form—money. Reproduction, nurturance, andthe historic superexploitation of women and people of color andcurrently unpopular ethnic groups are ignored or used to weaken theworkforce by pitting one part of the working class against another.So, by selling their labor power to the capitalists, employees becomeexploited robots, incapable of fulfilling themselves as social beingswith inherent worth, while the capitalists gain wealth and powerthrough the control of the surplus.

The goal of class analysis is to better understand the pitfallsof our current socioeconomy and to create a new system basedon different, more humane values. This new arrangement wouldovercome the division within capitalism and create a classlesssociety where everyone could fully realize himself or herself. Byuncovering the invisible class struggle, we can have access to a newunderstanding of capitalism, and with this understanding, we canpropose an alternative.