Capitalism: The Unsolved Problem

13042995_35b5a8b57e_o.smCapitalism produces social inequality through two general types of social process:

  • the dynamics of markets, and
  • the class relation itself.

Although their effects overlap, these two processes operate through different mechanisms, generate different problems, and call for different solutions.

The problems of market-based inequality have been solved and this solution needs only to be implemented on a global scale.

But for the problems of class inequality there is not as yet even a theoretical solution. This calls for new and innovative theoretical work.

Market Forces

Markets have a tendency to distribute goods unevenly.

If the movement of goods through markets were simply random then we would expect the distribution of goods to be unequal because the number of unequal distributions is far greater than the number of equal distributions.

In addition, we know empirically that markets exhibit certain emergent properties which include vicious cycles or positive feedback loops, in which having more enables actors to acquire still more. People with more use what they have to maintain and enhance their superiority, while people with less struggle to maintain what they have.

Of course this is not the whole story or else every market would become an absolute monopoly. Virtuous cycles (negative feedback loops) and other equalizing measures also exist and, what’s more, it is possible to construct them though purposive collective action. Historically, command economies like those of the Soviet Union and Cuba, and to a lesser extent social democracies like that of Sweden, have used state-based redistribution to very substantially reduce the inequality of distribution of economic goods.

In theoretical terms, I think we can consider the problems of market-generated inequality not only as soluble but as having been solved, at least on local and temporary bases.

The Class Relation

There is another category of inequality problems generated by capitalism which the most successful state-redistributive measures did not solve. These problems emerge from the class relation itself, not from market dynamic per se. That is, they emerge from the division of the ownership of the means of production.

There are many ways to define social class. Marx’s is highly specific: one’s class is one’s relation to the means of production. It’s important to take this as a definitional claim, not a descriptive claim. As descriptive claim, it would mean that all the phenomena which people define in terms of class – income, status, lifestyle, and so on – are reducible to the relations of production. This may or may not be demonstrably the case; at the very least it is debatable. But by making a definitional claim, Marx creates a concept, and that concept allows him, and us, to make a number of crucial observations.

Defining class in terms of relations to the means of production emphasizes the question of who owns, and hence who controls, the productive assets of society. In Marxian theory the bourgeoisie or the capitalist class is defined not by wealth or privilege but by ownership of productive assets, and the proletariat or working class is defined not by poverty or disenfranchisement but by the condition of not owning any productive assets save one’s own labour-power.

So right away we can categorize society into two broad classes (further sub-categorizations are possible of course, but I’ll leave them aside for the sake of convenience). One class directly owns and controls the aggregate social means for producing wealth, while the other does not. And of course empirically we can observe that the owning class is a small minority — really, a quite tiny minority if we focus on effective ownership — and the non-owning class is the vast majority. So right away we can see that, regardless of the degree of political democracy that obtains in a given nation-state, the social process of material production is highly undemocratic.

Marx’s theory also proposes that material production is the basis of all other human life-activity. We need things to do stuff, and those things have to be produced somehow. Even the most rarefied forms of intellectual and cultural play – philosophy, poetry, and so on – depend on material resources that have to be produced and distributed through social relations.

So the undemocratic organization of material production is not some trivial detail at the margins of our existence. It is of central importance to the kind of lives that human beings can have.


What’s more, the members of the working class are generally forced by economic necessity to sell their labour-power to the capitalist class. (Again, there are all sorts of exceptions and complications to this, such as non-market income redistribution within families or by the state, but I’ll leave those aside for convenience.)

Labour-power consists of the physical, emotional, and mental energies of a human being and the capacity to expend those energies in space and time. So the sale of labour-power is, again, of crucial importance to the structure of a person’s life. It means that a person has given control over a part of their life, a part of the finite time and energy which makes up their mortal existence, to another person. This is what Marx means by the alienation of labour-power.

On an individual level the alienation of labour-power means that a person no longer controls their own activity, that they can be compelled to work in ways that give no intrinsic satisfaction, that they become an object to others and even to themselves, that they lose a part of their humanity.

On a collective level the alienation of labour-power means that a tiny minority of human beings effectively own and control the better part of the life energies of the vast majority.


Marx further proposes that labour is the source of all value. More specifically, he proposes a concept of value defined in terms of the quantity of socially necessary labour-power invested in the production of a commodity. Using this concept he analyzes the capitalist economy as a system of the production, exchange, and consumption of value, focusing particularly on the social relations of production. And the conclusion he reaches is this: that in order for the capitalist class to exist, it must necessarily appropriate more value from the working class than it returns to them in wages. This is what Marx calls exploitation.

Specifically, each working person requires a certain bundle of goods to reproduce their own labour-power on an ongoing basis, and this bundle of goods has a definite value. Furthermore, the production process consumes a raw materials, produces wear and tear on machinery, and so on. Marx calls these two types of inputs – human labour and nonhuman materials – ‘variable capital’ and ‘constant capital’ respectively. A definite amount of labour is required to reproduce the ongoing costs of these two types of capital, to maintain the life of the human worker and the productive capacity of the nonhuman means of production. Marx calls this amount of labour ‘necessary labour’. Labour performed in excess of this amount Marx calls ‘surplus labour’. The value produced by surplus labour is called ‘surplus value’.

Surplus value is important because it is the source of at least three crucial social goods:

  • investment in expanding the means of production, whether through the building of new production facilities or through research and development of new production techniques;
  • investment in improving the quality of life of working people, through higher wages, better health care, better environmental protections, community life, and so on; and
  • profit for capitalists.

Also, it is also the only sustainable source of revenue for the state.

So really every human opportunity to change the future for the better, individually and collectively, draws on surplus value.

Class Contradiction, Part 1

Now, through the alienation of labour-power the worker has sold all the value they produce to the capitalist, including all the surplus-value.

All other things being equal, the rationally self-interested capitalist will pay their constant capital costs, return the value of the variable capital costs to their workforce as wages, and keep the rest, the surplus value.

The rationally self-interested worker will desire to appropriate as much as possible of the surplus value for themselves. This can take place directly as increased wages (wages in excess of the variable capital costs). It can also take place indirectly indirectly through the state via taxation and socially redistributive expenditures and/or the regulation of business practice in workers’ favour.

The capitalist can also reappropriate surplus value back from workers through the state via the taxation of workers’ income to pay for capital costs and so on. And of course the capitalist will argue it is in the workers’ interest not to take back the surplus value for themselves, for it is out of that surplus value that the capitalist makes investments in expanding their business, which they must do to compete with other capitalists or else be driven out of business. And so on.

Selection Effects (“Pull” Causality)

Despite these complications, however, we can perceive that the division of ownership creates a class antagonism between capitalists and workers, an antagonism that can be mitigated but never superceded as long as ownership remains divided in this way.

What’s more, the fact of competition among capitalists guarantees that the capitalist class as a whole will direct its efforts towards maximizing both the alienation and the exploitation of the working class. This is where the “pull” epistemology that I described in my last post comes into play. The ongoing class struggle among capitalists generates an evolutionary process that selects in favour of exploitative practices, regardless of the values and preferences of individual capitalists.

Consider the humane capitalist who wishes to see working people enjoy a decent standard of living. That person will feel a desire to raise wages, implement costly measures to improve working conditions in their businesses, and so on. But if these measure cut into profits, the competitiveness of the business is compromised. Ultimately the humane capitalist can be run out of business by other, more ruthless competitors. Their compassionate values cease to matter because they have been thrown out of the capitalist class.

Alternatively, the humane capitalist may compromise their personal values for the company — which is to say, for the good of the capital which they own. They may pay a competitive wage, implement only the normal or legally required measures regarding working conditions, and so on, while fulfilling their values by donating some of their personal income to charity. Again, a more egalitarian practice has been selected out of the capitalist system, via the capitalist’s foreknowledge of the consequence of such practices.

We can say that the opportunity for profit “pulls” or “draws” actors into actions that will increase capital. If, for instance, there is an opportunity for profit from mining coal and burning it for energy, even though this pollutes the local ecosystem, adds to global warming, and destroys the bodies of the workers who toil in the mines, then we can confidently predict that even if some capitalists refuse to invest in this production out of personal scruple, others will step forward to take advantage of this opportunity.

Conducting a biographical examination of the individual capitalist who invests in a socially destructive enterprise makes sense in terms of a “push” epistemology, but misses the point that that particular capitalist was disposable. In event-centered terms, as opposed to actor-centered terms, what matters is that the event happened, not who made it happen. (One can even go so far as to say that in a “pull” epistemology, causality runs backwards through time, as certain possible events call forth their own conditions of actualization. But I expect to get vociferous objections to this way of thinking.)

In these terms, we can perceive how capital itself controls the actions of the capitalist, rather than the other way around. Marx’s analysis implies that capital, a nonhuman entity created through human social relations, becomes an autonomous force which controls not only the actions of the working class but those of the capitalist class. This is not a pathological symptom of anomie or what have you; this is the normal and functional (in the sense of self-reproducing) condition of capitalism.

Class Contradiction, Part 2

Marx’s analysis makes a distinctive point that does not appear as strongly in liberal analyses of market-based inequalities. Liberal analyses like Weber’s show inequality and class antagonism arising from people’s different positions in relation to markets and so, in a sense, from the ways in which people are disconnected from each other. Marx’s analysis shows inequality and class antagonism arising from the class relation itself and hence from the way in which people are connected to each other. This is what Marx means by the ‘contradiction’ of class.

Redistributing resources is not enough to resolve the problem. The very structure of the relation must be changed. This means that the division of ownership has to be abolished, and the means of production must be owned collectively by all human beings.

The Unsolved Problem

So finally I can declare the unsolved theoretical problem. We do not know what kinds of social relations, institutional structures, and so on would actually establish the collective ownership of the means of production and abolish the class relation as Marx defined it.

It seems to me that the Soviet Union and its offshoots did not accomplish this. Here I am far from an expert, but my perception is this: that in the Soviet Union, the means of production were controlled by a state bureaucracy, and this bureaucracy was not meaningfully accountable to its subjects. Thus very substantial equality of access to the means of consumption was established through state redistribution without achieving equality of ownership of the means of production. The class relation was not abolished, only modified. Market capitalism was replaced with state monopoly capitalism; workers were still alienated and exploited.

There are many examples of the socialization of the means of production on a small scale, around the world and throughout modern history, some with avowedly socialist intentions and some without. One can even find very circumscribed forms worker self-management within some capitalist enterprises. These efforts do not eliminate all forms of inequality but in a limited way (sometimes very limited) they abolish class contradiction as Marx defined it, and at least suggest the possibility of a more thoroughgoing abolition of class.

The main obvious limitation of these projects is that they seem limited in scale. On the one hand, in order to supplant capitalism as a mode of production, worker-owned production needs to grow at an exponential rate. Socialist practice needs to go viral, and at present that doesn’t seem to happening. On the other hands, experience indicates that it is difficult for worker-owned enterprises to maintain their radically democratic and egalitarian character as they grow in size, as their initial membership of ideologically committed individuals is replaced by cohorts who are there for more contingent or opportunistic reasons, and as interpersonal conflicts generate status hierarchies (conspicuously, of gender, but also in other forms) among the workers.

Dealing With Difference

Fundamentally, the problem of abolishing class, the problem of implementing a truly democratic and egalitarian collective ownership of the means of production, is a political problem. It is a problem of collective decision-making, of the flow and the exercise of power, a problem of how differences are dealt with.

Marx could not solve this problem because, as I have argued, he never developed a systematic social theory of politics. This failure is not uniquely his. To my knowledge nobody has solved this problem, even in theoretical terms.

It is not the case that we know what to do and merely have to implement the solution. We must, as a species, figure out how to do things we have never done before. There is important, interesting, path-breaking theoretical work here, waiting to be done.

3 thoughts on “Capitalism: The Unsolved Problem

  1. Many people in the middle class have Registered Retirement Savings Accounts, Registered Pension Plans and Tax Free Savings Accounts. A core investment of these accounts are equity investments such as the shares of public corporations. While an individual worker can rarely influence the actions (means of production) of a corporation, a group of individual shareholders, by banding together sometimes do affect corporate action.

    While it is in the interest of an individual labourer to maximize his wages, it is often the case that it is also in the individuals interest to minimize the wages of everybody else. This is the case where a corporation can fail if collective wage demands are excessive but also if an individual worker has equity investments in their retirement accounts.


    • Yes, as working people acquire capital of their own they acquire an interest in maximizing profitability, which in Marx’s terms means maximizing the rate of exploitation, which requires that wages be kept low and productivity kept high. (And of course, within capitalism workers also have an interest in profitability for the sake of their own jobs, and because rapid growth can entail a rise in real wages.)

      In the terms of Marx’s theory, the working person with RRSPs occupies a mixed or contradictory class position, in which they are both workers and capitalists at the same time, although to uneven degrees. There’s a similar situation for the small-time entrepreneur whose livelihood depends on a business they have created; in Marx’s terms that person is simultaneously a capitalist and worker, which means they simultaneously exploit and are exploited by themselves. Managers, too, are in a contradictory class position: they sell their labour-power like workers, but get to control other people’s labour like capitalists.

      But more generally, if we aspire to a condition in which all human beings have a good and roughly equal standard of living, how do we deal with situations where one group of people has something to gain from another’s immiseration? This is one of the big unsolved problems implicit in the project of socializing the means of production.


  2. Pingback: Marxism and Genocide | The Practical Theorist

What thoughts do you have?

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s