by Umair Haque
July 24, 2018

from Eudaimonia Website

Capitalism is

a Social Construction.


But what does that Really Mean...?

Here's a tiny suggestion.


Capitalism is a social construction. Sorry, I don't mean that the way your college courses did.


I mean it like this:

capitalism has always been a product of socialism (not just shaped by social mores and attitudes, which is true, too). Requiring and demanding constant, huge, ongoing amounts of capital from intervening states and government to function at all.

Perhaps you find that a little bit outrageous...

And yet, of all the strange and foolish myths Americans tell each other, none strikes me as funnier and more tragic than the idea that capitalism is somehow natural.


That is, that in the absence of "intervention", capitalism springs up by itself, magically, as noble savages truck and barter - and therefore, any interference in the laissez-faire marketplace is a "government" picking "winners" and "losers."


It's a particularly funny myth because it reveals so much: how oblivious one must be to history, the world, reality, and one's own privileged place in all those, to tell it.

Let's start at the beginning, do three historical examples, and you be the judge if my little idea that capitalism is a socialist construction carries any water.

Once upon a time, at the noble dawn of capitalism, people bought and sold things.


One of the things they bought and sold was people:


Why...? Because it was perfectly legal - and very, very profitable - to do so...


But it's not as if those slaves were saying,

"Hey! Buy us and sell us! We love being slaves!!", were they?

In fact, they tried to escape, revolt, and rebel, over and over again.


They were murdered, tortured, imprisoned, beaten, whipped, starved, and lynched. By whom? By militias. Bounty hunters. Mercenaries. Police forces. Armies.


Paid by whom? Villages. Cities. Towns. Governments.

Uh oh - it's "government interference."


See how some noble "natural state" of capitalism is a myth? The government was indeed "picking winners and losers."

  • The winners? Slave-owning whites.

  • The losers? The slaves.

But slavery wasn't abolished because the government stopped interfering - but because it interfered more.


Do you see my point...?


Capitalism is always a social and political construction, not just because it's about what we can buy and sell, nor even because it's about who is allowed to have what, and for what purpose - but a system in which private ownership of capital, in this case people, requires social investment and support.

That brings me to my second example:

The birth of the American Dream...

Suburbs, highways, little cookie-cutter houses, two cars in every garage, a white picket fence, Betsy and Bobby playing catch in a finely manicured front lawn.


Capitalism? Think again...


This was all driven by state intervention, too.

  • It was the government that financed the construction of those homes - and lent people money to "buy" them.


  • The highways were built by the government.


  • The cars pouring out of Detroit were made of subsidized steel.


  • The gas was imported, on the back of war after war, fought by - wait for it - armies paid for by the government.


  • Even the water sprinkling the lawns was subsidized by utilities.

And black people, Latinos, Chinese, gays - they weren't welcome...


It was a condition of federal mortgage guarantess that loans not be made to blacks.


See what I mean by,

"capitalism is a product of socialism?"

So what we think of as some kind of modern golden age of capitalism - the era of the American Dream - was nothing of the kind.


It was yet again a state picking "winners" and "losers."

  • Who were the winners? Middle class and working class whites.


  • Who were the losers? Inner city, rural, and poor black, whites, minorities and everyone else.

They didn't receive all the subsidies, benefits, breaks, privileges - the capital. They were prevented from ever building capital.


Those who had capital received more capital. Those who didn't, didn't. Social investment and support shored up this weird, crazy deal. Are you beginning to see the rule yet?

Now at this point, you might object and say:

"you're talking groups of people! Capitalism is about not picking winning and losing companies!!"

Is it...?


Let's do my third example.

Consider the birth of high finance in the 1980s, through the 1990s, and into the 2000s. Shady "investment bankers" became even shadier "private equity investors" became even shadier "hedge fund managers."


They strip mined every industry in sight - from food, to books, to education, to media, to, today, journalism. America's about to have just a handful of news outlets left - because they've all been bought up, looted, and bankrupted.


But wait - why?

Never mind the obvious facts that at this point modern finance was subsidized heavily by public goods - the internet, the www, academia, media, information, democracy, energy grids, the rule of law, and so on.


What happened was this:

The government deregulated finance, on exactly the basis of a theory of pure, noble capitalism.


You could load up a company with debt, use it to buy itself, sell of the assets, fire everyone, skim off the cream, and dump the rest into bankruptcy.


The financial industry boomed - and the rest of the economy quickly shrank, plunging the country into stagnation.


Raid that pension fund! Why should it be protected? Isn't that "picking winners and losers"? What did the financiers do with all their loot? They bet it, creating a huge bubble, which imploded, and needed a huge bailout.


Bang! Capitalism is a product of socialism in a way we know all too well by now.

Let's sharpen all that.


Capitalism is produced by socialism. It socializes losses. It privatizes gains. It needs social investment and support to keep doing both, in fact.

  • Why?

  • And why do we let it?

  • Why does capitalism always seem to need capital from society to plow on, and losses to socialize right back - which also means that a noble laissez faire state of capitalist nature is an old wives' tale?

  • Whether it's armies to enforce slaves, bailouts for banks, or loans for the American Dream (no blacks allowed, please)?

"Capitalism" is really just a way to say that,

"governments support private ownership of things."

Sometimes, those things are factories, sometimes they're bonds, and sometimes, quite terribly, they're even other people.


But note the wrinkle. The job of a "government", as far as "capitalism" is concerned, is to keep privately owned things running, going, operating - and yet that alone says that capital can't really exist by itself.

  • Who'll do the work of quelling the slave rebellion?

  • Of funding the frontier?

  • Of bailing out the hedge funds?

  • Who'll pipe that house and pave those roads?

Yet without those, capitalism would have ceased to function in the blink of an eye, time after time.


Without social investment and support, capitalism would stop overnight - even in America. Imagine if the skies turned black, or the phone lines went down, or the internet became gobbledygook, or the trees attacked us, instead of stood there pleasantly, giving us air to breathe.

That means that "capitalism" is a system of a very specific kind. One where those who have the least capital are always subsidizing those who already have the most of it - and hoping for a little bit in return.


And that means that those already who have the most capital will always win. Imagine that you have a hundred times more money than me.


Won't you have the power to demand all kinds of concessions from me? Imagine you have a hundred times more social capital than me. Won't that make your power over me even greater? And so on.


And yet here I am, not just begging you for a job - but subsidizing you while I'm doing it, paying for that bailout, paying back that extortionate interest, paying for the democracy which keep your contracts worth a dime while you wreck it, and so forth.

The problem, then, is a kind of paradox.


"Capitalism" means the job of a government is that society supports and nurtures, protects and subsidizes, the capitalist, not vice versa. But the capitalist is the one who already owns the most, by definition. He has the least to lose.


He has the most information. He can buy up all your alternatives.


So this idea of governance itself means the capitalist always wins - because the government is enforcing his rule now: those who have the most capital receive the most capital, and those who have none receive none.

That is why the history of capitalism seem always to be those who already have the most capital amassing the most, and those who have the least amassing the least.


Not any specific individual - but certainly amongst social groups.


It's not a coincidence that American billionaires are mostly white men - and white men were slave-owners, not slaves. Whites amassed so much capital thanks to slavery that they still hold ten times more, on average, than blacks. So of course it's vastly more likely that whites will be billionaires, or even millionaires.


Capitalism is a construction of socialism - a system in which society subsidizes those who own the most, not vice-versa.

Isn't that what's happened in America today?

  • Late on your bills? We'll hunt you down.

  • Bad credit? Kiss a home goodbye.

  • Can't afford your deductible? Too bad, I guess the cancer's going to get you.

The government is enforcing the capitalist's rule - whomever has the most capital receives most, and whomever has the least loses the most, or at best, wins the least.

  • Slaves making plantation owners rich.

  • The American Dream being financed by those who weren't allowed to be part of it.

  • Hedge funds raiding the pensions of those who then bailed them out.

Capitalism is a product of socialism, again and again and again.


And yet capitalism isn't the only kind of economy that we can construct, as social and political beings.


Instead of creating systems where the job of a government is to enforce the capitalists' rule - the most capital to the one who already has the most, nothing for the one who has the least - we can create very different ones.

Ones, for example, where everyone receives healthcare, insurance, income, savings, education, and so on.


Those economies aren't "capitalist" in the pure sense above. They operate on a very different rule.

  • Those with no capital should always have some bare minimum.

  • Those with too much capital to be used well, or at all, don't need so much.

Where the role of a government isn't to protect those with the most capital - but those with the least.


You might even call all that, if you're American, "socialism", or "social democracy". Me and the rest of the civilized world?


We just call it common sense...