Understanding capitalism’s crisis

The GOP campaign and Occupy need to fully understand capitalism to address current issues.

by The Dartmouth at Dartmouth College

The current presidential campaign and the Occupy movement have many Americans discussing the character and causes of grossly unequal distributions of income, wealth and political power. But most of the dialogue I hear suffers from a faulty understanding of âÄúcapitalism.âÄù

Capitalism is not a structure or a system but a logic capable of transforming the world and itself. It is not natural but rather is a product of history, a human invention, not a set of natural laws discovered by men like Adam Smith and David Ricardo.

No society has ever organized all its human relationships and institutions according to the logic of capitalism. Therefore, thereâÄôs a great variety of capitalist societies. Canada, Norway, France, Japan and the United States are all called âÄúcapitalist societies,âÄù but they differ greatly in the extent to which capitalist logic organizes economic activity, social institutions and human relationships.

Capitalist logic is amoral. All attempts to extend the sway of capitalist logic provoke resistance from social groups who employ moral logic systems in their everyday lives. Thus, capitalists need control of governments to establish and maintain capitalist practices and to suppress groups opposed to these practices.

Historically, groups committed to religious, paternalistic, ethnic, communal and socialist logics have formed the most important resistances to capitalism. Each group has its own history. Many predate the emergence of capitalism. Most importantly, unlike the capitalist way, they all believe human beings are social beings who have moral obligations to each other.

The first principle of capitalist logic is that anything real or imagined can be turned into a commodity. Capitalist logic establishes the value of commodities in markets where sellers and buyers set prices. As capitalists see it, commodities that find no buyers have no value; production and exchange of commodities are good if profits result and bad when losses result. Here, the terms good and bad have no moral content.

Private ownership and profit maximization are also essential elements of capitalism. In capitalism, we own ourselves as property, defining human beings as individuals motivated by self-interest who are essentially alienated from each other. It turns love and affection into an investment and cost-benefit calculation.

With this thought process, true liberty means full ownership of ourselves. Yet in capitalist societies, most people must sell parts of their lives by the hour by working for wages; the alternative is starvation. These transactions make those who sell their labor power less free than those who do not have to sell parts of their lifetime to live. Since the rich possess more liberty than most people, they evoke a variety of responses among the non-rich including anger, resentment and envy.

Business history is primarily the history of changes in capitalism itself that stem from the imaginative use of capitalist logic. The invention and sale of new kinds of financial commodities creates opportunity and instability. Great financial crises occur when understanding of the implications of recently invented financial commodities lags far behind the rapid growth of the markets for these commodities. This is what happened in the 1830s, 1930s and 2007 until present.

Crises in capitalist markets and the insecurity, unemployment and poverty they create always promote resistance to capitalism. Understanding the amoral logic of todayâÄôs global capitalists, and moral logics of their current opponents in the Occupy movements and among social and religious conservatives helps to clarify whatâÄôs really at stake in the current political campaigns.