A Capitalist Revolution

I recently had the pleasure of being welcomed into the home of a card-carrying communist. As an exceedingly progressive young liberal, I had hoped I might be able to glean some insights into what it is to be truly on the far left. Unfortunately, I left with only disappointment and reaffirmation in my capitalist ways.

As an introduction, let us first run through a quick summary of Marxist ideology. Karl Marx was one of the first prolific thinkers to look seriously at the growing correlation between social class and wellbeing. He witnessed the development of the working class, a phenomenon of the Industrial Revolution, and the growing divide between the workers (the proletariat) and the business owners (the bourgeoisie). He correctly identified the weakness of capitalist pursuit that required the continued growth and expansion of markets to sustain viability. Of course, to do this required an increase in productivity. When technological advancement was still slow, productivity and demand on the laborers was tightly linked. The bourgeoisie would continue to demand more of the proletariat until the subjugated laborers had had enough. Eventually, they would revolt and overthrow their bourgeois oppressors, creating a new society in which the workers owned what they produced. This new society would not connect money and livelihood. It would operate on the principle that all would give what they could and take what they needed. The October Revolution of 1917 saw perhaps the closest large-scale manifestation of this in what would become the Soviet Union. But then, Stalin. Marx’s ideas are noble and beautiful, but he overlooked a fatal flaw in the whole plan: this system required people to operate within it, and people are not so noble.

People are selfish. They look out for their own. Even the most generous preference their own need and those closest to them when forced to choose. I won’t pass a value judgment here. It’s human nature. The capitalist economy rests on this principle. As the father of capitalist thought, Adam Smith, wrote, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” In our pursuits to make a living for ourselves, we provide to society what it needs. Our income is then linked to the value we provide to society. As we sell more goods that society wants, we take a larger income. The more valuable our products, the higher price we can charge. If a vendor charges too much, another can compete and force the first to lower prices, a net benefit for all. In its simplest form, it seems ideal.

However, capitalism too is not without its problems. If a vendor gains a monopoly of a necessary product, they can extort the people, demanding excessive costs. Vendors can work together to achieve this aim and rob the masses. Without regulation, business owners can abuse and exploit their workers. If they can subvert the legislative process, they can get regulations to work for them, reducing competition and harming workers and consumers alike. This is the situation that has manifested in the United States. Business leaders now have a highly disproportionate amount of the attention of elected representatives, who in turn pass legislation that protects business leaders and disadvantages the laborer. Those with deep pockets can buy influence through massive campaign finance to elect “pro-business” candidates or through the informing and even writing of bills that legislators will vote on. This process made headlines last year when Citibank lobbyists wrote a provision of a bill that that rolled back some of the key provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act designed to protect average Americans from another stock market crisis like the one in late 2008. This effect is compounded by the fact that a modern industrialized economy preferences capital gains over labor. French economist Tomas Picketty has gained world attention with his dense volume Capital in the Twenty-First Century which shows how capital investment now provides returns on investment on the order of 10% per year while increases in labor wages have largely stagnated over the past few decades. The result of all of this is that the rich get richer and more powerful while the rest of us suffer weakening power and declining potential for upward mobility.

As a staunchly capitalist nation, the United States expectedly is experiencing this problem the worst. Apparently, though, even the social welfare haven of Sweden is moving that direction as well. Opposing this movement is the current aim of Sweden’s Communist Party. It is, however, far easier to criticize than it is to solve the problem. Interested in their ideas, I began to probe.

The stated goal of this particular communist is a revolution that will lead to the utopian society that Marx predicted. The revolution will overthrow the capitalist leaders and instate a system in which the workers own what they produce. There will be no official “state.” The people will govern themselves. They will make what they need without needing to depend on the meager wages of the capitalist overlords. They will trade with each other fairly and equitably, assigning a reasonable value to the goods they produce. A centrally planned economy will make what the people need efficiently.

How exactly are the people going to do all of this?

Unfortunately, I don’t have a good answer for you. When I began to pose specific questions about how the communist society will determine how much of each product people need, I received only further attacks on the current capitalist system, vague ideological ideals, and even a confession that the system that will arise out of the revolution is unknowable. Apparently these Communists will just plunge headlong into revolution with no specific plan for what lay on the other side. Somehow a utopian society will magically arise from the ashes of anarchy. It seems these people haven’t exactly thought this through. So, let’s do a little thought experiment.

Ideally, the people will come to own what they produce. However, one person can’t produce everything he or she needs. Especially in Sweden where growing crops can be very difficult and many resources are limited, people will need to trade for food and other necessities. Indeed, the Agricultural Revolution that took place ten millennia ago saw the specialization of labor, which led to technological innovation leading humanity out of its meager animalistic existence. Surely a utopian communist society won’t regress beyond that point. Particularly important for those in academic pursuits, a system of trade will necessarily arise. Given that farmers probably won’t value a lecture on philosophy as highly as new farm equipment, it would be difficult for philosophers to make a living. It would be better if they had a system of standardizing the value of labor to make trade more equitable. Perhaps people would trade small, easily transportable objects that have an assigned value. Of course, there would need to be someone trustworthy to distribute these objects. It is inevitable that some people would try to fake these objects, being dishonest about the value of their labor. Because the society would be too large for everyone to know and trust each other, a recognized regulatory body would emerge. There is certainly historical precedent for this. For many centuries societies have used small discs of precious metals, stamped with the seal of some verified authority. Today we call them coins. That regulatory body is the government. The value of those coins is called capital. The process of trading labor for coins and coins for goods is called capitalism.

So, what is on the other side of a communist revolution? Capitalism.

As discussed, capitalism is not without its faults, but it is the natural result of a society with specialized labor. The solution to these problems is not to overthrow the government; the solution is to reform it. Government cannot be the director of an economy to ensure fairness. The plight of the Soviet Union ought to act as stark example of the difficulty of a planned economy. There is simply too much information for any one organization to optimize the distribution of goods of a nation-state’s economy. The amount of time it takes any one person to process that kind of information is simply too long. Small isolated communes show that it is possible on a small scale, but beyond a couple hundred people (the size of a prehistoric hominid tribe) it is simply unsustainable. The solution is to decentralize, giving the individual control over his/her purchasing decisions.

I will discuss the issue of unequal influence in a later post, but a capitalist economy can in fact work fairly for the laborer and the owner alike. As long as the government plays the role of a just and effective referee, we need not vilify capitalism.

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