A People's Guide to Capitalism
A study guide of Hadas Thier’s 2018 book ‘A People's Guide to Capitalism.’
Summary, part 1
Chapter 1: The Birth of Capital
“... we see that capitalism could only break through as a world system on the basis of conquering both humankind and the planet and subjugating both to its profit motive.” (p. 31)
Chapter one begins with Thier’s explanation of common preconceptions about the history and origins of capitalism. Often, she states, we believe that capitalism is a natural thing that is integral to our humanness—survival of the fittest, for instance. She goes on to state that capitalism is just the opposite of this:
“An exploitative system of commodity production and exchange arose over time, neither inevitably nor smoothly, appearing on the scene only recently in human history.” (p. 17)
Modern industrial capitalism only emerged a few hundred years ago, less than 0.25% of human history, and most of human history consisted of hunter-gatherers who organized based on their needs and saw little-to-no excess or surplus in their lifetimes (p. 17). However, the emergence of agriculture did eventually provide a surplus, and while people could now settle down and choose a profession other than hunting or gathering, there also became a need for control over the surplus. While this may have originally been intended to provide stability, it also brought on social stratification, where those who supervised became a separate social class above the rest of the majority.
The next step taken towards capitalism throughout history is that of feudalism, which divided monarchic lands among the local lords. Serfs, or unfree peasants, were put to work on the land, but they still had enough tools and resources to work the land and thus were not economically dependent on the lords. This meant that lords had to find other ways through force to incentivize serfs to work.
Over the course of three centuries, from the 14th century to the Industrial Revolution, feudalism began its shift towards capitalism. Under capitalism, workers were no longer incentivized by threats of violence to work, but rather by the economic necessity of producing a surplus in order to survive.
However, the transition from self-sufficiency to economic dependency was not a smooth or peaceful one. The Enclosure Movement took place over the course of centuries when common lands were violently confiscated and turned into privately-owned plots all across England, where capitalism got its foothold. Land became enclosed in fences, and since it was privatized, many commoners were forced to either work the land or move into towns to become manufacturing workers.
A new system of manufacturing in the cities emerged in the 16th and 18th centuries, where workers would congregate under one roof, were supervised in order to prevent theft, and were paid wages to complete this work. Those who bankrolled the operations of manufacturing and who reaped the rewards were nascent capitalists. Nascent capitalists, or the first capitalists, made up the bourgeoisie (capitalist) class, who own the means of production, such as factories, land, machinery, and tools, and employ laborers to do the work of production.
Under feudalism, workers were forced to pay rent and taxes in order to bind them to the feudal lords economically, but under capitalism, as Karl Marx so plainly stated it:
“Under the guise of freedom and democracy, the new landless wage laborers were ‘free’ to sell their labor-power to whomever they chose … or face starvation.” (p. 23)
It is important to note that the domination of capitalism could not have successfully adhered without the Trans-Atlantic Slave Trade, where as many as twenty million African people were enslaved (p. 26). In Britain, the wealth of trading enslaved people and the reaping of the benefits of their labor brought on England’s Industrial Revolution, and it was the basis for Britain’s banking system, propelling Britain’s capitalist systems far ahead of the rest.
Industries such as iron (supplied chains and padlocks to owners of enslaved people), firearms (traded for enslaved people), and metal (used in enslavement ship production) all experienced growth due to the trade of enslaved people, and nearly all growing towns and cities flourished due to slavery.
America’s part in this was interconnected with capitalism, as well. In America, innovations in weaving and spinning generated mass surpluses of cotton, which was cultivated through the labor of enslaved people. Additionally, the work of enslaved people was performed on stolen land of Indigenous people. In fact, plantations and colonial settlements were built on over one and a half billion acres of land that were previously inhabited by Native American tribes.
So, rather than capitalism being built up “penny by penny,” as suggested by many mainstream economists, capitalism was the result of robbery, pillaging, conquests, piracy, colonialism, and the enslavement of African people (p. 28). Western Europe also did not simply develop capital and industrial growth quicker than the rest of the world. According to Walter Rodney, “Western Europe developed economically by actively underdeveloping Africa and other parts of the world” (p. 28).
Thier also notes that capitalism has a profound impact on the land. Marx observed that under capitalism, the land became simply “an object for humankind, purely a matter of utility,” which “ceases to be recognized as a power for itself,” but is rather viewed for its capacity as “an object of consumption or as a means of production” (p. 30).
In the conclusion of this chapter, Thier reiterates that capitalism is not a set force of nature in our society—it had a beginning and therefore can also have an end. She asserts that capitalism is not simply an economic or political system, but rather a social system based on the expropriation (or state-sanctioned taking of property) of masses of people from their land.
Chapter 2: The Labor Theory of Value
“If there is a dollar to be made, capitalism will find a way to package it up and sell it.” (p. 50)
Chapter two begins with Thier’s examination of the fundamental components of capitalism, the first of which is the commodity. Commodities are defined by Marx as goods for sale on the market. Commodities are goods produced through human labor that are made to be exchanged. For instance, a loaf of bread made to be eaten by the baker is a good, but a loaf of bread made to be sold by the baker is a commodity. Human beings have always labored to make things, but the commodification of these things is somewhat new and only emerged in feudal and capitalist societies. Commodities’ values are determined based on their uses to other people.
Thier also notes the two attributes that Marx attributed to goods, which have important distinctions in the world of capitalism: use-values and exchange-values.
A good’s use-value is determined by how useful it is to the person who produced it. Use-values still have value even if one does not exchange them. For instance, bread’s use-value is the fact that someone can eat it. A good’s exchange-value is determined by the quantity with which one commodity exchanges for another commodity. Items with an exchange-value must satisfy a human want and must be able to be exchanged.
According to Thier, between the two of these values, one is clearly more important to the capitalist:
“While you or I are primarily concerned with the use-value of items, whether we can sit on a chair or on a loaf of bread, a capitalist does not care what an item’s use is, so long as it will make him money.” (p. 36)
This is the reason why big companies continue unsustainable methods of production, despite its catastrophic environmental effects: capitalists are only concerned with what will make a profit, not what is useful or will be good for people.
Thier goes on to speak about an important concept that was created by Marx, the Labor Theory of Value. The Labor Theory of Value states that commodities can be exchanged based on the relative amount of labor-time it took to produce them. Thier also discusses the inverse theory which mainstream economists use to argue against the Labor Theory of Value: Marginalism. Marginalism assumes that a commodity’s worth is defined by the laws of supply and demand, and this neoclassical theory is the reigning explanation of value in mainstream economics.
Marginalism, according to Thier, is a theory rife with faults and inconsistencies. The most important of these inconsistencies is the assumption that values are not determined by labor-time, but rather by subjective desires and individual choices. It reduces capitalism down to the desires and choices of the individual which supposedly determine supply and demand, and it infers that labor is the sole source of wealth. This equation does not account for the robbery and exploitation that takes place under capitalism, and it reduces consumers to binary supply/demand charts, thus making it, as Thier refers to it, “A Marginally Useless Theory” (p. 38).
According to Marx’s view, labor is the common denominator among all goods and commodities. He asserts that we do not labor to attain wealth (the things we need to live, survive, and thrive), but rather to attain value (a societal construct present in the market that was created by humans). Our labor’s value is not determined by what kind of work we are doing, but rather by how much. We perform, as Marx termed it, Human Labor in the Abstract, meaning that we perform generalized abstract labor on an hour-by-hour basis. In simple terms, Marx’s theory about Human Labor in the Abstract states that we are not paid by the worth of our labor, only by how long we perform that labor. This generalized abstract labor does not take into account the intricacies or different processes of different types of labor and reduces our labor solely to the hours that went into our work.
This theory is proven by the fact that doctors and engineers are paid more than people doing “unskilled” labor. According to Marx, those who perform “skilled” labor are paid more because of the labor-time it took to train them (the hours that teachers spent educating them, the time they spent learning a trade, etc.).
Modern mainstream economists avoid this theory (and are therefore called neoclassical economists) because it makes laborers the producers of wealth and does not shift all of the credit to the bosses.
Marx, however, as a more classical economist, continued to develop his Labor Theory of Value and developed the theory of Socially Necessary Labor-Time, which is the average time taken to produce a commodity under the normal production conditions as determined historically and societally. In other words, it is the value of one’s labor-time as determined by the society in which one lives, what the society says their work is worth, and what that society’s historical context says that work is worth.
The value of an item is not solely determined by the amount of labor time that went into it, however. According to Thier, every component of production, including both living and dead labor, is measured by socially necessary labor-time. Living labor is human labor that goes into the production of a commodity in the present, but dead labor is just as important in the production process. Dead labor, or the labor of previous generations that carries past value into production in the present, consists of things such as raw materials, machinery, factories, and more.
Every component of production is measured by socially necessary labor time, including the rent of the factory it’s produced in, the cost of equipment used to produce it, and the cost of components that help build it. Our understanding of past generations of labor is important because it helps us to remember that the workers create value, “...not—as mainstream economics asserts—a combination of capitalist ingenuity, technology, and (perhaps) a nod to the workers manning that technology” (p. 47).