A People's Guide to Capitalism

1. Capitalism is a recent, unnatural system built on violence and dispossession.

Capitalism, we’re told, is a natural—even eternal—expression of the human condition.

Not inherent. Contrary to popular belief, capitalism is not a timeless feature of human nature or society. For most of human history, societies were organized around meeting basic needs through collective effort, often with common ownership and egalitarian structures, like hunter-gatherer communities. Class societies, where a minority controls a surplus, arose only relatively recently with agriculture.

Violent birth. Modern industrial capitalism emerged just a few hundred years ago, primarily in Europe, through a brutal process of separating people from their means of subsistence, particularly land. The English Enclosure Movement, for example, violently confiscated common lands, forcing peasants off the soil and creating a landless population dependent on selling their labor to survive.

Global plunder. This process was accelerated and sustained by global violence, including the enslavement of millions of Africans and the genocidal dispossession of Indigenous populations in the Americas. The wealth generated from these atrocities fueled the early development of industrial capitalism, demonstrating that its origins lie in conquest and robbery, not the peaceful accumulation of diligent individuals.

2. The value of commodities is determined by the labor required to produce them.

So far no chemist has ever discovered exchange-value either in a pearl or a diamond.

Use vs. Exchange. Commodities, the building blocks of capitalist wealth, have two aspects: use-value (their utility) and exchange-value (their worth relative to other commodities on the market). While use-value is qualitative and subjective (a chair is for sitting), exchange-value is quantitative and allows different items to be compared (how many loaves of bread equal one chair?).

Labor as common measure. The only property all commodities share, allowing them to be quantitatively compared for exchange, is that they are products of human labor. Marx's Labor Theory of Value posits that the value of a commodity is determined by the amount of "socially necessary labor-time" required to produce it under average conditions for a given society.

Abstract labor. This isn't about the specific type of work (concrete labor like baking or tailoring), but the expenditure of generalized human energy (abstract labor). The market reduces all diverse forms of labor to quantities of abstract labor-time, which then "congeals" into the value of commodities, making them comparable and exchangeable through money.

3. Money is a social construct that represents and facilitates the exchange of value.

Circulation sweats money from every pore.

Universal equivalent. Money emerges from the need to simplify exchange in market-based societies. Instead of bartering every commodity against every other, one commodity (historically, often gold or silver, now paper or digital currency) becomes the universal equivalent against which all others measure their value, providing a common price tag.

Mediating exchange. Money acts as a convenient medium of exchange (C-M-C: Commodity-Money-Commodity), allowing sellers to realize the value of their goods and buyers to acquire desired use-values without needing a direct match of needs. This process is impersonal and boundless, breaking down the limitations of direct barter.

Store of value. Beyond facilitating immediate exchange, money also serves as a store of value over time. This allows individuals and, crucially, capitalists to hold wealth and deploy it later, enabling continuous circulation and accumulation, and giving money a seemingly mysterious power over economic life.

4. Capitalist profit comes from the unpaid labor of workers.

The possessor of money does find such a special commodity on the market: the capacity for labor, in other words labor-power.

Labor-power's unique property. Capitalists make profit (surplus value) not by buying cheap and selling dear, but through the production process. They purchase two types of commodities: means of production (constant capital) and labor-power (variable capital). Labor-power is unique because its use-value (the act of working) creates more value than its exchange-value (the wage paid to the worker).

Necessary vs. surplus labor. The value of labor-power is determined by the cost of the necessities required to keep the worker alive and able to work, and to reproduce the next generation of workers. Workers spend part of the day performing "necessary labor" to create value equivalent to their wage, and the rest performing "surplus labor," which creates surplus value appropriated by the capitalist.

Exploitation disguised. This extraction of unpaid labor (surplus labor) is the source of capitalist profit and constitutes exploitation. Unlike in previous class societies where surplus appropriation was explicit (e.g., serfs working on the lord's land), capitalism disguises exploitation as a "fair day's wage for a fair day's work," where the worker is paid for their time (labor-power) but not for the full value their labor creates.

5. Competition forces capitalists into relentless accumulation and innovation.

Accumulate, accumulate! That is Moses and the prophets!

Compete or die. Capitalism is driven by intense competition among individual capitalists. To survive and expand market share, firms must constantly lower the cost of production, primarily by increasing productivity through technological innovation and intensifying labor. Failure to innovate means being undersold and driven out of business.

Anarchy of production. Production is not planned collectively but is undertaken by individual firms seeking maximum profit. This leads to an "anarchy of production" where each capitalist tries to produce more and more, without knowing the true limits of the market or what competitors are doing, creating pressure to constantly expand.

Accumulation imperative. Profits (surplus value realized through sales) are not simply for the capitalist's consumption but must be reinvested (accumulated) into new, more efficient means of production and expanded operations. This imperative for accumulation is boundless, driving the system towards continuous, spiraling growth.

6. Capitalism's drive to produce leads to crises of overproduction.

In these crises, there breaks out an epidemic that in all earlier epochs would have seemed an absurdity—the epidemic of over-production.

Production outruns demand. Capitalism's inherent drive to produce without regard for the limits of the market, fueled by competition and accumulation, leads to periodic crises. These are not crises of scarcity, but of overproduction – too many goods are produced to be profitably sold at existing prices.

Disproportionality. Overproduction often begins in specific industries due to uneven development or miscalculations of market capacity. Because industries are interconnected, a glut in one key sector (like housing or oil) can cascade through the economy, leading to generalized overproduction.

Poverty amid plenty. The absurdity of capitalist crisis is that it occurs not because people's needs are met, but because goods cannot be profitably sold. Workers' wages are constrained by exploitation, limiting their ability to consume the growing mass of products they create, contributing to the gap between production capacity and effective demand.

7. The system has a long-term tendency towards falling profitability.

The true barrier of capitalist production, is capital itself.

Rising organic composition. As capitalists invest more in machinery and technology (constant capital) relative to labor (variable capital) to increase productivity and lower costs, the "organic composition of capital" rises. Since only labor creates new value, the portion of total investment that generates surplus value shrinks.

Rate of profit falls. This leads to a "tendency for the rate of profit to fall" over the long term. While individual capitalists gain temporary superprofits by innovating first, competition eventually spreads the technology, lowering the socially necessary labor-time and thus the value (and price) of goods, reducing the average rate of profit across the economy.

Counteracting forces. This tendency is not absolute and is counteracted by forces like increased exploitation (speedups, wage cuts), cheapening of constant capital (machines become cheaper to produce), and expansion into new markets. However, these counter-tendencies do not eliminate the underlying pressure, making the system prone to instability and crisis over time.

8. Credit and finance accelerate accumulation but intensify instability.

If the credit system appears as the principal lever of over-production and excessive speculation in commerce, this is simply because the reproduction process, which is elastic by nature, is now forced to its most extreme limit.

Fueling expansion. Credit is essential to modern capitalism, allowing capitalists to invest beyond their immediate cash reserves and consumers to purchase goods they couldn't otherwise afford. It speeds up the circuit of capital and enables accumulation on a larger scale, facilitating projects like railways that would be impossible through individual savings.

Fictitious capital. The financial system creates "fictitious capital" – claims on future value, like loans, stocks, and bonds. These assets derive their value from the expectation of future profits and repayments. Banks centralize money capital and distribute it, acting as intermediaries and guaranteeing loans, but their own liquidity is based on a fraction of actual deposits.

Exacerbating contradictions. While credit greases the wheels, it also allows production and consumption to expand beyond sustainable limits, masking underlying overproduction and disproportionality for a time. This forces the "elastic" reproduction process to its extreme, making the eventual crisis more violent when the fictitious value of assets collapses.

9. Financialization creates fictitious capital and exacerbates crises.

The greater part of this “money-capital” is purely fictitious.

Ascendancy of finance. In recent decades, financial markets and institutions have grown enormously in size and influence ("financialization"). Deregulation and innovation have led to complex financial instruments and the "securitization" of debt, turning mortgages, student loans, and other debts into tradable assets.

Gambling on debt. Instruments like Collateralized Debt Obligations (CDOs) and Credit Default Swaps (CDSs) package and trade risk, creating layers of fictitious capital increasingly detached from the underlying productive economy. This fuels speculation, where profits are sought from asset price fluctuations rather than value creation through labor.

Magnifying collapse. When the underlying assets (like subprime mortgages) fail, the interconnected web of fictitious capital collapses. The value of securities evaporates, credit dries up, and the financial system, which had enabled the boom, intensifies the bust by hoarding cash and refusing to lend, turning a crisis of overproduction into a full-blown financial meltdown.

10. Crises are resolved by devaluing capital and intensifying exploitation.

In a depression, assets return to their rightful owners.

Destruction of capital. Capitalist crises, while devastating to human lives, function to "resolve" the system's contradictions by devaluing and destroying capital. This includes physical destruction (idle factories, unsold goods) and devaluation (assets sold at fire-sale prices). This process is uneven, with larger capitalists often acquiring assets from failed smaller ones cheaply.

Restoring profitability. The crisis clears out excess capacity and lowers the cost of constant capital (machinery, materials) and variable capital (labor, due to high unemployment). This cheapening of inputs allows surviving capitalists to restore profitability, laying the basis for a new round of accumulation and expansion, restarting the boom-bust cycle.

Austerity and bailouts. States intervene during crises, not to protect the population, but to manage the "common affairs of the whole bourgeoisie." This often involves massive bailouts of financial institutions and large corporations, socializing losses while privatizing gains. The cost is then passed onto the working class through austerity measures, cuts to public services, and intensified exploitation.

11. Capitalism creates the conditions and the class capable of overthrowing it.

The knell of capitalist private property sounds. The expropriators are expropriated.

Capitalism's gravediggers. While capitalism creates immense wealth and productive capacity, it does so through exploitation, inequality, and crisis, ultimately becoming a fetter on further human development. However, the system also concentrates workers together in large workplaces and urban centers, creating a class with the collective power to challenge it.

Strategic power. The working class, dependent on selling its labor-power, is uniquely positioned to halt the system by withdrawing its labor. Without labor, no new value or surplus value is created, and capital accumulation stops. This collective power, though often obscured by divisions like racism and nationalism, is the potential force for revolutionary change.

Beyond profit. A socialist society, organized around meeting human needs (use-value) rather than generating profit (exchange-value), could utilize the productive forces developed under capitalism to eliminate poverty, inequality, and environmental destruction. The working class, as the majority and the producers of wealth, has the interest and capacity to build such a system.

Last updated: May 16, 2025