From capital-capitalist to capitalism  (^)

The terms capital and capitalist came into use towards the middle of the 18th century to designate means of production and their owner/employer.
With reference to capital, Adam Smith divides the stock of goods owned by someone into two parts.

"That part which, he expects, is to afford him [this] revenue, is called his capital. The other is that which supplies his immediate consumption."
[1776, Adam Smith, Book II, chapter 1]

Smith does not employ the word capitalist, preferring either a circumlocution ("the owner of capital"; "the persons whose capitals are employed") or a concrete, specific noun (farmer, manufacturer, merchant, retailer). [1776, Adam Smith, see especially Book II, chapter 5].

David Ricardo gives the following definition of capital:

"Capital is that part of the wealth of a country which is employed in production, and consists of food, clothing, tools, raw materials, machinery, etc. necessary to give effect to labour." [1817, David Ricardo, Chapter V, On Wages]

Ricardo employs the term capitalist now and then, sparingly, using more often the concrete, specific nouns of manufacturer and farmer.

Neither Adam Smith nor David Ricardo seemed to have ever employed the term "capitalism."  A possible explanation might be that these two authors, while struck by the high productivity brought about by the new organization of labour and the introduction of new machines, did not consider the wider use of capital, the development of trade and the growth of production as something heralding a new historical period, to be qualified by a brand new name.
Adam Smith and David Ricardo were certainly aware of the advent of a larger freedom of commerce (at least in England and with respect to the strictures of the feudal and mercantilist periods) that had liberated energies and led to a more productive division of labour, technical and social.
They realized also that production had taken a new dimension and that larger amounts of capital (compared to labour) and higher business skills were required in an industrial enterprise. But this meant only that the attention should be focused on capital (fixed and circulating) and on the way it was made to work by the capitalist (e.g. division of labour).

Besides Smith and Ricardo, many other scholars like Charles Babbage (1832) and Andrew Ure (1835) applied themselves to the task of writing about the mechanical progress and the technical novelties of their times, in the service of production.

So central had the role of capital become in social life that Karl Marx titled his major work "Das Kapital"; and this shows the importance that he too (or he especially) was according to technology and production.
In "Wage Labour and Capital" Marx gave the following definition of capital:

"Capital consists of raw materials, instruments of labour and means of subsistence of all kinds, which are utilized in order to produce new raw materials, new instruments of labour and new means of subsistence." Further down he states: "Capital, also, is a social relation of production." [1849, Karl Marx]

To stress the importance attributed by Marx to capital, that is to productive technological devices, in the shaping of society, it is sufficient to refer to a famous passage in the "Misère de la philosophie":

"Social relations are closely bound up with productive forces. In acquiring new productive forces men change their mode of production; and in changing their mode of production, in changing the way of earning their living, they change all their social relations. The hand-mill gives you society with the feudal lord; the steam-mill, society with the industrial capitalist." [1847, Karl Marx]

While using extensively the terms "capital" and "capitalist," Marx does not employ the word "capitalism," preferring the expression "capitalist mode of production" or "capitalist form of production" to qualify what was taking place in the sphere of social and economic life.
It might then appear as a surprise to somebody that none of the three classic economists (Adam Smith, David Ricardo, Karl Marx) seemed to have found the need to use the specific term "capitalism" to designate a certain period of history.

The word "capitalism" came to the fore only at the beginning of the 20th century and it has been extensively employed ever since.
The merit (or demerit) of its conception and diffusion deserves to be ascribed to a different category of scholars. They were sociologists and historians, of German extraction and of, mainly, socialist or liberal tendencies.
In 1902 an influential book was published bearing the title "Der Moderne Kapitalismus" [Modern Capitalism]. In those pages, its author, Werner Sombart, traced the root of capitalism from ancient times to the modern age. He defined capitalism as

"an economic organization of exchanges, in which basically two different groups of people, the owners of the means of production … and the workers with no property, cooperate in a rational process of production, joined by the market." [1902, Werner Sombart]

In another text, "Der Bourgeois" (1913) Sombart identified the spirit of capitalism in the union of initiative and risk taking attitudes with economic acumen and reckoning. [1913, Werner Sombart]
On the subject of the spirit of capitalism the famous text by Max Weber, "Die protestantische Ethik und der Geist des Kapitalismus" had already appeared [1904-1905, Max Weber].

So, the term capitalism got well established in academic circles at the beginning of the 20th century and was then taken up by (socialist) critics of the industrial system who were, rightly, focusing their attention on some (past and present) negative aspects related to work mechanization and social deprivation, but often overlooking the new possibilities opened up by the revolution in the means and forms of production.
Throughout the 20th century the term was not only used but also overused and, quite extensively, misused in many places by many people. It is then important to identify and list the essential and original features of what is now generally known as "capitalism."

 

Capitalism: features  (^)

To single out the main traits of capitalism we refer once again to the classic writings of Smith, Ricardo and Marx.
In their writings three aspects come to the fore as the cornerstones of capitalist attitude and action, in contrast to the thinking and acting of the mercantilist period. They refer to:

- Free pursuit of self-interest (individuals)
There are two implications related to the free pursuit of personal interest:

- Firstly, it means that all restrictions of status have been put aside and the human being is free to follow what his wishes and inclinations suggest and not what is imposed by an external power (the church, the state, the family, the guild, etc.). This results in a liberation of energies of individuals (singly and in association) that were previously not only untapped but also generally obstructed by social conventions and legal constrictions.
Secondly, a lasting self-interest not only is compatible with the interest of others but is, often, the best way to foster it; following freely his inclinations and attending soundly to his occupations, each one will pay attention to finding the best possible allocation of limited resources, with the result of improving not only his but everybody's lot. [see 1776, Adam Smith]. Clearly we are referring to the self-interest of honest producers and wary consumers.

On the whole, self-interest has nothing to do with merely selfish behaviour or with benefits flowing only to a single person (or  industry or nation) to the detriment of others. Moreover, this would have nothing to do with capitalism because it would be beyond the sphere of possibilities of the capitalist who cannot control the spreading of benefits because of his circumscribed role and limited power in influencing decisions. And this introduces us to the second main aspect of industrial capitalism.

- Free international trade (relations)
The affirmation of international free trade with its twin aspects of competition (within sectors of production) and cooperation (amongst different productive sectors) represents a total break with conventional thinking and practices of the mercantilist age (state regulations and protectionism). There are two features that have been underlined by the classic economists:

Exchange leads to positive change. According to Smith, the cooperation amongst human beings, that manifests itself in the form of the division of labour, is greatly increased by the multiplication of exchanges. And this leads to changes, that is improvements, in the modes of production with a view to a higher productivity, in order to satisfy the needs of a larger number of consumers.
Exchange brings reciprocal benefits. Ricardo is the one who has best illuminated the fact that international trade brings reciprocal benefits even when the goods exchanged are produced more cheaply in one country (that is, when the absolute terms of trade are favourable to one nation), because what counts are the relative advantages derived by the division of labour. For Ricardo, unfettered trade is the surest way for everybody to gain and benefit. We could take his argument in favour of international free trade as an extension and strengthening of the self-interest thesis:

"Under a system of perfectly free commerce ... the pursuit of individual advantage is admirably connected with the universal good of the whole." [1817, David Ricardo, On foreign trade]

So, more production and cheaper consumption are the results, in the medium to long term, of a better allocation of capital deriving from the dynamics of free exchanges (competition and cooperation). And this brings us on to another aspect of industrial capitalism.

- Free technological development (inventions)
Improvements in the means of production have appeared throughout history. Many discoveries took place in China long before the Industrial Revolution but found a political and social atmosphere that was unreceptive if not openly hostile. In England too, before and during the Industrial Revolution, inventors had a harsh reception as some episodes in the lives of William Lee (stocking-frame, 1598), John Kay (fly-shuttle, 1733) and James Hargreaves (spinning-jenny, 1765) amply demonstrate [1905, Paul Mantoux, see Second Part, chapter 1]. It is only during the19th century that technological improvements applied to the means of production became not only accepted but also encouraged and the new instruments found a show-case in the Crystal Palace Exhibition (London 1851). The freedom to experiment and to invent finally joined the freedom to act in pursuit of personal interest and to trade for the attainment of reciprocal benefits. The list of all those who applied their ingenuity and creativity to the improvement of the mechanical arts is long. Sometimes we are left only with the names of the last in the chain who perfected and patented the previous improvements of several others.
One of the best scholars and most enthusiastic advocates in portraying the capitalistic mode of production as technology dominated/driven is Karl Marx [1867, Karl Marx, see especially Book I, chapter XIII]. For Marx, what is now known as capitalism is tantamount to the incessant revolutionizing of the means of production; for this reason its distinctive mark is the technological push that destroys all previous, obsolete and backward modes of production [see 1961, Kostas Axelos].

For capitalism to emerge and consolidate, the ruling economic system, that is mercantilism [see 1931, Eli F. Heckscher], had to be critically dissected and actually displaced. This is what Adam Smith did theoretically in his major work and what the new capitalist merchants and entrepreneurs performed practically in their daily activities.
The capitalistic features previously pointed out are all anti-mercantilist stances. In particular, the continuous technological development is the one aspect that really characterizes the age of capitalism (i.e. industrialism); but its emergence is only possible on the basis of the individual freedom to act in order to satisfy personal interests and the individual freedom to trade in order to satisfy personal needs.

All these aspects are so closely linked that the disappearance or the curtailing of one of them strongly affects the survival of the others. For instance, the restriction of free trade influences negatively the opportunities for invention and the pace of introduction of new devices. As a matter of fact, the obstacles put in the way of the circulation of goods act also as obstacles to the circulation of ideas and to the expression of inventiveness. [see 1905, Paul Mantoux]

All the features characterizing capitalism (i.e. self-interest, international trade, technological development) have, as their common thread, the word "free" insofar as freedom underlies and links all the aspects of capitalist endeavours. We could say that without freedom (to act, to trade, to invent) there would have been no capitalism. At the same time, we should not identify capitalism with freedom, because freedom is a larger and deeper concept that existed in the minds and souls of individuals long before we had any notion of capitalism.

Moreover, we cannot identify capitalism with aspects like the pursuit of profit, the existence of markets, or the use of machines and the personal ownership of means of production.
With respect to (monetary) gains, Max Weber stressed a long time ago that

"the impulse to acquisition, pursuit of gain, of money, of the greatest possible amount of money, has in itself nothing to do with capitalism. This impulse exists and has existed among waiters, physicians, coachmen, artists, prostitutes, dishonest officials, soldiers, nobles, crusaders, gamblers, and beggars. One may say that is has been common to all sorts and conditions of men at all times and in all countries of the earth, wherever the objective possibility of it is or has been given." [1904-1905, Max Weber]

As for the presence of markets and exchanges, Adam Smith recognized as intrinsic to human nature

"the propensity to truck, barter and exchange one thing for another." [1776, Adam Smith, Book I, chapter 2]

A renowned historian like Fernand Braudel goes so far as to identify society with exchange (or "les jeux de l'échange") when he states:

"Money is a very old invention, if I mean with it every means that speeds up exchanges. And without exchanges we cannot talk of society." ["La monnaie est une très vieille invention, si j'entends par là tout moyen qui accélère l'échange. Et sans échange, pas de société."] [1985, Fernand Braudel]

Machines and tools have always existed, even in some sophisticated and highly ingenious forms like automata. Not all of them have become means of production but, when that has happened, they have been, almost always and everywhere, owned by specific individuals.
For this reason, to state that capitalism

"is an economic system in which the means of production are privately owned" [1998, Larry Allen]

means to cover with the term "capitalism" almost the entire course of socio-economic history.
On the basis of these considerations, it would be utterly misleading to take some common traits of human nature (pursuit of gain), some basic aspects of social life (exchange), or the personal ownership of some resources (means of production) as the marks of capitalism. Because, even the most cursory survey shows that these realities have always existed (even where they had been castigated or outlawed) and will cease to exist only when the human adventure is over.
What could be stated instead is, simply, that capitalism is:

-  the coming to pre-eminence of industrial capital (machines) with respect to other factors of production (land and labour);
-  the coming to the fore of the industrial capitalist who, playing initially the role of merchant and entrepreneur, becomes the central figure of a new form of socio-economic organization;
-  the coming to realization of the advantages to be gained by avoiding or removing all feudal and mercantilist restrictions to trade and production.

Capitalism (i.e. industrialism) is then a mode of production based on the extensive use of capital (machinery) by the capitalist (the owner and employer of capital) unfettered by status conventions or state restrictions.

 

Anti-capitalism as post-capitalism  (^)

The very features of industrial capitalism (freedom to act, freedom to trade, freedom to invent) were conducive to a continuous upheaval of all previously static situations.
Industrial capitalism is a permanent world-shaking phenomenon of market enlargements, technical developments, new personal roles and wider social relations.
The scholar who best understood and portrayed this aspect of capitalism, i.e. industrialism, is Karl Marx. He is the greatest extoller of the capitalistic mode of production and of its supposed agent, the bourgeoisie.
In his own words, the bourgeoisie becomes a mythical class with superhuman power, capable of accomplishing feats that no one has ever imagined or dared to perform before.

"The bourgeoisie, historically, has played a most revolutionary part." "It has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals; it has conducted expeditions that put in the shade all former Exoduses of nations and crusades." [1848, Karl Marx and Friedrich Engels]

For Marx and Engels, there was something worse than being exploited by the capitalistic mode of production and that was to be left outside of this permanent and unstoppable social and technological turmoil from which a new humanity and a new society would one day emerge.
Because

"the bourgeoisie cannot exist without constantly revolutionizing the instruments of production, and thereby the relations of production, and with them the whole relations of society." [1848, Karl Marx and Friedrich Engels]

For this reason, Marx and Engels see capitalism, or rather the capitalistic mode of production, as only a phase in history, an economic form that will be superseded once the productive forces (human beings, technological implements) are more fully developed. This development will bring about a break that will lead beyond the capitalistic relations of production that would have, by then, become negative factors, restricting and limiting the further development of human beings.
For Marx and Engels the features of capitalism (self-interest, world market and powerful technological development) are the foundations on which to build the post-capitalist society. They certainly do not support vested interests, national protected markets or anti-technological practices.
Marx and Engels see the full development of capitalism as the way to overcome all the existing divisions and fractures, namely that between manual and intellectual work and that between town and country. Further on, the opposition between the political state and civil society will be resolved in favour of civil society through the withering away of the state.

For all these reasons, Marx and Engels are, at the same time, the celebrators of industrial capitalism and the earthly visionaries of a new world  beyond it.
Their anti-capitalism expresses, at the same time, ultra-capitalist and post-capitalist feeling and thinking. Ultra-capitalist because they want the full implementation of the capitalistic agenda and tendencies (individual freedom, world exchanges, hyper technological development); post-capitalist because they realize that capitalism is going to reach a point of diminishing effervescence and returns in terms of progress and has to be supplanted in order for humankind to advance and the full liberation of all human beings to be accomplished.

Marx and Engels were very clear in considering industrial capitalism only as a historical phase, when the inanimate productive forces (the machines) were in control of the human producers. Once the capitalistic mode of production had exhausted its revolutionary mission of enlarging production and, at the same time, developing all the productive forces, it had to be superseded. For this reason the anti-capitalism of Marx and Engels had nothing to do with nostalgia for bygone pre-capitalistic days but with the craving for the freedom and well-being that a post-capitalist society, built on the achievements of industrial capitalism, would bring, everywhere, to everybody.

 

Anti-capitalism as neo-mercantilism  (^)

The establishment and advancement of industrial capitalism was not a joyful and peaceful affair, not even when there was something to gain, in the short or long term.
For some individuals, cooperation in manufacturing production meant performing simple repetitive tasks, as in the famous example of the pin factory [1776, Adam Smith, Book I, chapter 1]. In those cases, the human being was reduced to the function of a cog in a machine.
As for industrial competition, it could signify losing one's livelihood because more effective methods or instruments of production had been introduced somewhere, making some producers no longer economically viable. Clearly, this dynamics, while advantageous for the consumers at large, was of no (immediate) solace for those who had lost their occupation (wages) or their business (profits).
Those who suffered from the transformations brought about by industrial capitalism often played a double role:
     -  they opposed capitalism, having personally experienced its harsh effects
     -  they were used as a justification for opposing capitalism as an evil system of production.
Anti-capitalist animosity and actions were directed towards the three features of industrial capitalism previously pointed out, namely:

- General interest vs. self interest
The celebration of self-interest as an expression of a society of rational, responsible individuals and leading to universal well being was in accord with a cosmopolitan outlook coming out of the enlightenment vision. However, it was neither suitable nor plausible in a world of nation states such as 19th century Europe was becoming.
The interest of individuals (self-interest) was deemed inherently selfish and had to be replaced by the general interest. This general interest was expressed and represented by an entity at a higher level. This entity was the nation state.

In the wake of Rousseau and the ideologues of the French Revolution, the general interest (or public/national interest) came to be held, under the nation state, as the acceptable objective to which the behaviour of everybody had to conform.
This was a necessary move by the ruling élites and their associates. In fact, parasitic strata cannot champion the idea of self-interest, unlike productive individuals. The interest of parasitic strata is in open opposition and collision with the genuine long-term interests of everybody. For this reason they have to use the expression "general interest" that is so generic that it can be filled with any contents.

Middle-men, especially if they obtain their means of sustenance or wealth by representing people (politicians), influencing people (journalists) or supposedly providing administrative services to people (bureaucrats), are practically obliged to speak of general or national or public interest, inventing a fictional abstraction that goes beyond the reality of single individuals made of flesh and blood [see 1852, Karl Marx, section III and section VII].  This fabricated "general" interest, dissociated from the interest of each and every one, would not stand even a moment of serious examination, if it were not for the emotional captivation of the sound of words (public, national) that seem so morally lofty and attractive but are in fact empty and deceptive.

The formation and consolidation of nation states, instead of the emergence of a world community, had another negative effect.

- National protectionism vs. international trade
The development of world trade that seemed such an irresistible and unstoppable tendency of industrial capitalism found a stumbling block in the nation states of Europe and in the federal state of America.
Certainly protectionism had stronger roots than we are led to believe from the writing of Marx and from his celebration of a world market; in this respect, reading the works of Frédéric Bastiat would be more instructive [1845-1850, Frédéric Bastiat]. Parliament in England was protectionist until 1846 (abolition of the Corn Laws that imposed duties on the import of corn). In France the government kept the protectionist barriers until 1860 when the Anglo-French Commercial Treaty was signed. The political élites in Germany, while establishing an internal free-trade area with the Zollverein (1834) upheld protectionism with regard to foreign countries, finding theoretical support in the writings of Friedrich List [1841, Friedrich List]. The USA Congress introduced a protectionist tariff in 1816 extending it to cover more goods in 1824, before lowering it in 1846 and in 1857 [1997, Bruce Bartlett].

So, it is only towards the middle of the 19th century, and especially after the Anglo-French Commercial Treaty of 1860 and the ensuing growth of international commerce, that free trade seemed to have an assured future.
But, in 1879 the German government, under pressure from big business, introduced a protectionist tariff, soon followed by the French (1881 and 1892) and Italian (1887) governments. In the United States the Congress passed the McKinley tariff in 1890. From then onwards it was the introduction, everywhere, of all sorts of further restrictions to the movement of goods (tariffs, quotas) and people (passports, quotas and immigration visas). The world was to become a series of territorial cages within which every state attributed to itself unlimited sovereignty to restrain, repel, repress everybody and everything.
The mix of competition and cooperation of industrial capitalism that was meant to transform the entire world, improving the conditions (material, cultural) of all individuals, was obliterated and in its place was put the struggle for political supremacy and world domination between nation states (imperialism, militarism). This would result in two World Wars and many other obscene state crimes and follies.
National firms, national trade unions and national politicians got united against free trade, in the name of the regulated market. Under this very appealing expression we can find, quite often, restrictive monopolistic practices introduced to favour some national producers to the detriment of all consumers.

- Stable occupation vs. technological innovation
The introduction of power-looms and other mechanical devices was opposed by those who thought (rightly or wrongly) that these machines were depriving them of their jobs and livelihood. The most famous revolt against the machines was that promoted by Ned Ludd in the districts of Nottinghamshire, Lancashire, Cheshire and Yorkshire between 1811 and 1816, with the smashing of power looms. The opponents of the new devices did not realize the benefits that their introduction would bring in no time, namely:
      -  an increase in production that would reduce the cost of goods to the advantage of a very large number of people, that is to all of them as consumers;
      -  the possibility of satisfying further needs, given the saving made in the purchase of cheaper goods; this would lead to the application of human strength and skill in other sectors of production, raising the level of employment.
This is, in any case, what has happened since the introduction of the first tool. This is also part of what constitutes the civilizing process that frees human beings from toiling incessantly just to get the bare means of subsistence and allows time for the cultivation of all sorts of enjoyable activities.
If, at a certain moment in time, we had opted for stable employment, we would still be using wax candles produced by good craftsmen, a postal service relying on messengers on horseback, and heating based on chimneys regularly cleaned by young chimneysweeps. All these occupations have been eliminated by the advancement of technology; nevertheless, more and better jobs have emerged for the satisfaction of further needs in a better way.

On the basis of these three points (general interest, national protectionism and stable occupation), anti-capitalist attitudes and behaviours have spread and taken over almost everywhere in the world. As a consequence, the features representing the inner core of capitalism (self interest, international trade, technological development) have either disappeared or have been greatly altered while only the outer shell (factories and large material production) has survived.
There would be nothing remarkable nor regrettable in this occurrence if the new reality represented progress, leading to a society beyond capitalism.
Instead, the success of this kind of anti-capitalism led straight to the re-establishment of a previous form of socio-economic organization: mercantilism. Given the fact that technology had progressed and the power of the nation states had increased with respect to the time of the original mercantilism (mid 16th to mid 18th century), this new, but not so new, system of socio-economic organization is known under the name of neo-mercantilism.

Anti-capitalism as neo-mercantilism triumphed from Russia to Italy, from Germany to the USA, and finally took root also in England, the last bastion of veritable capitalism.
The names under which neo-mercantilism established itself are different (communism, fascism, the new deal, the welfare state) as well as the symbols and institutional forms of its dominance; but all of them shared the same opposition to the core aspects of capitalism, that is the unfettered freedom to produce (laisser faire) and to trade (laisser passer), and implemented the same or similar measures (regulated market, national protectionism, etc.) with the same or similar messages (capitalism as the law of the jungle, the state as an indispensable and provident father, the defence of national interest as an absolute priority, etc.).
The year 1883, the very same in which the major exponent of anti-capitalism as post-capitalism died (Karl Marx), saw the birth of the major exponent of anti-capitalism as neo-mercantilism (John Maynard Keynes).
With Keynes modern economic thinking has been turned upside down. Adam Smith depicted a new system of wealth production based on the division of labour and the invisible hand of the free market, a system he characterized in opposition to mercantilism and that would be later defined as capitalism. Paradoxically, in the 20th century, some scholars have qualified the new mercantilism, based like the previous one on the heavy hand of the state continuously and pervasively interfering in the economy, as modern or late capitalism.

The definition of the problem and the depiction of the situation being a very important aspect in the advancement of knowledge, we need to examine further the transformation of "capitalism" in order to ascertain if there are substantial reasons to accept the thesis of its continuing permanence in the form of late-capitalism or if it would be more profitable, for the progress of science, to refer to capitalism as a late (i.e. dead) phenomenon, that is definitively gone and passed away.

 

The transformation of capitalism  (^)

 The portrait of capitalism sketched on the basis of the classic texts of Smith, Ricardo, Marx, highlighted the following aspects:

Industrial capital, that is machines and materials employed in production, replacing land as the most important factor of production;
Free competition amongst small and medium size producers replacing restrictive and monopolistic practices, legacy of the medieval guilds;
New actors (inventors and industrialists) coming from many sectors of society and becoming promoters of new industrial plans, replacing the interventionist and dirigist mercantilist state.

Surveying and analyzing the situation towards the end of the 19th century we discover that, with respect to this classic image, almost everything was changing, and not just because of technological progress. Regarding the core aspects of capitalism, the following transformations were taking place:

Capital: from industry to finance
What is meant by "capital" is central to the entire problem of defining capitalism and assessing its existence or disappearance. According to Adam Smith, money can be considered part of the circulating capital but only insofar as it activates production and facilitates trade.

"Money, ... the great wheel of circulation, the great instrument of commerce, like all other instruments of trade ... makes no part of the revenue of the society to which it belongs." [1776, Adam Smith, Book II, Chapter 2]

This means that money (gold and silver coins) is not the foundation of the wealth of a country, but production and trade are. Spain was extremely rich in gold and silver but it was in England that the Industrial Revolution took place because it was there that the real capital emerged, that is new technological devices invented by capable and persevering individuals and put to productive use by perspicacious and determined newcomers (e.g. Richard Arkwright, the barber). This dynamics brought to life the capitalistic mode of production.
Industry produces wealth but wealth does not necessarily produce industry. As a matter of fact, the more wealth gets accumulated in a few hands, the more it is likely to be channelled towards parasitic ventures, through which money is supposed to generate further money, without even passing through the stage of production of commodities.

The shift from industry (factories) to finance (banks) is a long process started with the establishment of the Bank of England in 1694 out of the "purely political motives ... of financing the war of William of Orange with Louis XIV." [1919-1920, Max Weber]. It continued with the establishment by Napoleon of the Bank of France (1800) to facilitate the allocation of government bonds, in other words to finance the state machine.
But it is at the end of the 19th century, when the nation states of Europe promote their imperialistic adventures and set themselves up on the path that will lead to total war amongst themselves, that financial interests take the upper hand under the direction and protection of the state.

The interlocking of state and finance had already been highlighted by Marx in the middle of the 19th century with reference to the French situation:

"By the aristocracy of finance must here be understood not merely the great loan promoters and speculators in public funds, in regard to whom it is immediately obvious that their interests coincide with the interests of the state power. All modern finance, the whole of the banking business, is interwoven in the closest fashion with public credit." [1852, Karl Marx]

In 1902 John Hobson qualifies financial interests as "the governor of the imperial engine" and identifies the main reason behind imperialism in the need to find areas for financial investments. The thesis linking imperialism with the acquisition of new markets for growing industrial production is discarded on the basis of statistical data of international trade that show the very low commercial interchange between industrialized and non-industrialized countries, due to the weak purchasing power of the colonized subjects. [1902, John Hobson]

Lenin follows Hobson in his analysis of Imperialism as arising from financial interests. Imperialism, the highest stage of capitalism, is characterized as "capitalism in transition, or more precisely as moribund capitalism" [1916, Vladimir I. Lenin]. After this phase, the war amongst the capitalistic states will pave the way for the final collapse of the capitalist system.
In "State and Revolution" Lenin defines the age of imperialism as

"the period of financial capital, of gigantic capitalist monopolies, the stage when monopoly capitalism becomes State monopoly capitalism." [1917, Vladimir I. Lenin]

What seems not very clear in the analyses of these authors or, in some cases, in the popularizers of their ideas, is the fact that what they call financial capitalism or state capitalism is something that has nothing to do, for good or bad, with the original spirit and practice of capitalism. What has happened is not just a simple shift of stress but also a total change of attitudes and actors. Under the new scenario industrial producers are still operative, but in the background, subservient to so called financiers whose investments abroad are political moves dictated by state interests and are seldom profitable for the industry as a whole. In the word of an English historian, the yardstick is "Power, not Profit." [1956, A. J. P. Taylor]

At this point, the original notion of capital as industrial resources is, in actual fact, totally lost and capital is identified with money or with any other monetary support. There is no need to say that, having reached this stage, we are completely outside the economic conception of Adam Smith and we are back to the mercantilist outlook of what is the "real" wealth of a nation, identified then in the accumulation of silver and gold coins, and now in financial gains from bank deposits or loans to the state.

Market: from competition to consolidation
Capitalism has often been characterized as the existence of a permanent competition between producers, a competition so fierce and heated as to be disruptive of human relations. This image has often been more an invention of sensational journalists and unsympathetic writers than a reality. In actual fact, the tendency to control the market or, to put it more nicely, to share it in an amicable way, has always been present amongst producers. [see 1776, Adam Smith, Book I, chapter X]
Whatever the case, during the second half of the 19th century the competition amongst firms relented and was replaced, in some cases, by agreements related to the level of selling prices and to the amount of allowed production.
Within a social climate characterized by freedom, economic agreements are not so terribly worrying for three reasons:

Price fixing. These deals amongst producers are all the time subject to collapse, especially if a firm has good reasons (e.g. new technological devices, better products, cash exigencies, etc.) to believe that it can gain by a revival of competition.
Foreign competition. There are always producers that are not included in the agreement, usually "foreign" firms that can disrupt the reality based on the pact.
Potential new entrants. There is always the possibility of new entrants in the field if the agreement leads to exorbitant profits due to the fixing of high prices or of limits to production.

In any case, these pacts are always subject to change and, in actual fact, they never last for long. They produce a mix of competition and cooperation within/between producers and between producers and consumers, in a dynamic search for equilibrium.
Unfortunately, this dynamic received a deadly blow with the entrance into the economic arena of a new player, acting as a bull in a china shop: the state.

With the pretext of regulating and supporting the national economy and social life, the state has intervened in each one of the aspects, previously listed, affecting producers and consumers. What ensued can be summarized as follows.
      - Price fixing. In order to stop firms from agreeing about the fixing of prices, the Sherman Act (1890) in the USA made this practice illegal. The result was the carrying out of a series of mergers and the birth of conglomerates replacing what were before many distinct firms. The new conglomerates did not require any agreement as the pricing was now, in many cases, under the full control of a single huge enterprise or was prompted by the leader in the field. All perfectly legal but also all perfectly absurd from the point of view of the interests of the consumers. In fact, monopolistic practices had been encouraged and sanctioned with the seal and blessing of the state.
      - Foreign competition. During the second half of the 19th century the formation of a world market seemed an unstoppable trend. Unfortunately it was more an aspiration by some traders and producers than a reality with strong foundations. When problems arose, instead of solving them with the application of energy and ingenuity, the members of the confederations of national industries and of the workers' trade-unions found, almost everywhere, an easy way out by demanding the protection of the state through import tariffs and import quotas. This eliminated or greatly reduced, in many cases, foreign competition and increased the monopolistic power of the big national firms, all courtesy of the nation state. The strict causal relationship between the introduction of tariffs and the growth of monopolies was so evident that the president of the American Sugar Refining Company openly admitted in front of the Industrial Commission of the American Congress that the Dingley Tariff (1897) in the USA was "the mother of all trusts." [1965, Peter d'A.Jones]
      - Potential new entrants. The factories that emerged out of the Industrial Revolution were engaged in the production of material goods. The further expansion of the economy led to attributing a relevant place to the production of so-called public services (transport, gas, electricity, etc.) and the exploitation of natural resources (especially oil). In all these cases the state intervened, arrogating to itself monopolistic ownership and administration or granting to a company exclusive rights of exploitation, and getting a cut through taxation. These undertakings have been put in the (fake) category of natural monopolies or labelled industries of national interest; for these reasons, necessarily, they had to be placed under the (supposedly) benevolent control of the nation state, with the total exclusion of potential new entrants. Not only was competition in those sectors forbidden by law but even production for self-consumption was outlawed (e.g. electricity in Italy). A further state policy encouraging consolidation to the detriment of competition can be found in the buying practices of the American Federal State which usually favoured big companies. For instance, in the course of the Second World War, ten big firms received one-third of all war orders; during the same span of time 500,000 small firms went out of business in the USA. [1965, Peter d'A.Jones]

Actors: from individuals to institutions
One of the main protagonists of the Industrial Revolution was the merchant entrepreneur who, frequently, became an industrial entrepreneur.
In order to expand the business, the entrepreneurs, very often, needed further resources to introduce new machines and to buy more raw materials.
This, amongst other factors, led to a radical change concerning those who were to play the central role in the business. After the original capitalist phase in which the industrial entrepreneur started the business with more or less limited resources and ran it directly, we pass to a second phase in which industrialists are assisted and, in some cases, replaced by managers and technicians and controlled, in their dealings, by financial institutions and big shareholders. In the third book of "Das Kapital" Marx refers to the appearance of the large joint stock companies and writes of the separation between management and ownership. This marks the decline in importance of the individual capitalist and prompts Marx to declare that it

"signifies the suppression of the capitalistic mode of production within the same capitalistic mode of production." [1894, Karl Marx]

Confirming the same trend, Thorstein Veblen, at the beginning of the 20th century, highlights the contrast, within American society, between the engineer on one side and the financial speculator on the other. [1904, Thorstein Veblen]
In Europe, the increasing importance in the economy of the state and the financial institutions (banks, stock exchange) meant that the main actions and decisions moved from the industrial centres of Manchester and Lyon, to the political and financial centres of London and Paris.
The bigger role played by the state and the state related institutions was welcomed by many scholars. For instance, the members of the American Economic Association at the time of its foundation (1885) declared:

"We regard the state as an agency whose positive assistance is one of the indispensable conditions of human progress." [1965, Peter d'A.Jones]

The first half of the 20th century, with the long World Wars and the long depression in-between, witnessed the subjugation of individuals and the coming to dominance of the institutions, especially the state. During this phase, which continued for quite a while also after the War, everything gradually came under the supervision of the state functionaries and of the bureaucratic apparatus even in the country considered the most capitalistic of all, the USA.

These aspects of financial institutions and monopolistic concentrations were feeding each other because financial institutions had a lot to gain from gigantic mergers. It has been estimated that the stock market profits of the underwriting syndicate that promoted the merger of U. S. Steel in 1901 gained the incredible figure of $62,500,000. [1965, Peter d'A. Jones]

As for the larger role played by big bodies, above all the state, it was approved or accepted by progressives and conservatives, revolutionaries and reactionaries (whatever the meaning attributed to these terms); they all saw in it either a necessary step towards socialism or the only way to oppose it.
Otto von Bismarck and Rudolf Hilferding could be seen as two of the exponents of these different perspectives, united only by the desire to attribute to the state an increasing power.
This being the situation, it is fair to say that we have come a long way from the economic environment and outlook presented by Adam Smith. In this so-called "capitalism," in which the state occupies such an important place, the sound of the machines (capital) and the voices of the entrepreneurs (capitalists) seem like a far distant tinkle. Certainly, neither the capital nor the capitalists occupy centre stage as in the writings of Smith, Ricardo and Marx.

In short, the reality has been totally changed but the vocabulary, for mysterious or mischievous reasons, has remained impermeable to change. Neo-mercantilism is called modern capitalism and liberals (in the USA) are those who advocate state intervention and oppose laisser-faire. Because of this misuse of the terms, many do not perceive the colossal shift that has taken place and that is not reflected in the common language. This would not be a problem were it not for the fact that the words we use shape and show the way we think. And improper/irrelevant terms lead straight to fallacious arguments.

 

The decline of capitalism  (^)

While all these transformations were taking place, transformations which would not only disfigure the essential features of capitalism but also dissolve it altogether, the only aspect that seemed to survive was technological change. Nevertheless, this did not have the lively pace of earlier times because capitalism had started declining even while industry was still the economic core of society.
 The decline of capitalism, prelude to its extinction, was the result of its shortcomings with respect to the dominating forces of political and financial power. These shortcomings appear as:

  -  Loss of energy
  Capitalism emerges in opposition to the strictures and regulations of the feudal world and the mercantilist practices of the state. However, paradoxically, the very success of the capitalistic enterprise is at the root of a loss of energy whose cause can be summed up with a single word: bureaucratization. Two phenomena are at the basis of the bureaucratization of the firm:

      - Size increase. The growth in dimensions up to a certain point is conducive to higher productivity; it makes it necessary to introduce better standard procedures through new working actors for managing, controlling and administering the business. It is only the continuous senseless expansion, not based on rational productive reasons, that leads to the formation of industrial pachyderms, clumsy in acting and slow in reacting.
     - State intrusion. The state which, during the period of the ascent of capitalism, kept or was kept aside from interfering (at least in England), came back with a vengeance, finding in the huge enterprises the best agent from which to drain resources (taxation) and on which to lay burdens (regulations) in order to ingratiate the people (the electorate) especially in the age of mass democracy.

The negative effects of the bureaucratization of the firms resulting from size increase and state intrusion reach their highest points in the government bailouts (state rescue) or buy-out (state acquisition) that would not even be contemplated if we were indeed living in a capitalist society.
Each further growth in size, while giving the appearance of strength, in actual fact weakens the original animal spirit of the capitalistic entrepreneurs to the point that they have no more energy to rebel against state interference and the state imposition of burdens, useless or senseless as they might be. And this is at the basis of another loss.

  -  Loss of hope
  The loss of energy results in a loss of hope and confidence that anything could ever be achieved not only against the state but also without the state.
 When this conviction takes hold of the mind of people (entrepreneurs, workers) there is an inevitable run for shelter and security, which means putting each and every company under the protective wings of the state. The early capitalists, who had once (1751) replied Colbert's inquiry about what the state could do for them, "laissez-nous faire," had, in the course of time, lost more and more the hope of being capable of acting without the assistance of the state. They were no longer alarmed or even annoyed by state intervention; they demanded it in the form of protection from foreign competition (tariffs), of aid to production (easy credit), of assistance to employees (redundancy funds) and so on and so forth.
This tendency to call for the help of the state has been present and alive all the time, especially in some countries where the spirit of industrial capitalism and liberalism has never been very strong (e.g. France, Italy). But, when it even affected England during the 20th century, it was a very powerful sign that an era had come to a close.
The decline of capitalism, manifested in a loss of energy and hope, could have been stopped if it had not been compounded by a further loss.

  -  Loss of ideas
 Especially during the 20th century, research and development of new devices and new products has been concentrated in the centres and laboratories of big industrial firms; but, despite huge investments there, the truly revolutionary, profit-making discoveries (from an economic and social point of view) have been the result of single individuals detached from big business, sometimes working from home. This could appear astonishing for those brought up to believe in large organizations as highly productive and creative entities.
  In actual fact, the industrial business community of the 20th century not only is not behind (stimulating, financing) many major discoveries but, sometimes, is not even aware that a major technological breakthrough has been achieved and that it could have a very profitable use.
  This happened, for instance, with the photocopier for which no businessman seemed to envisage any possible use. It happened again with the computer for which the major producer (IBM) did not see any possible personal use. And so the computer revolution was promoted and led by individuals tinkering in their garages or assembling components in their homes. The union of computer and communication has been the product of students willing to solve the problem of sending information (as in the case of the modem) or lone individuals in search of better ways to share knowledge (Tim Berners-Lee and the birth of the World Wide Web) [1999, Tim Berners-Lee]. An exemplary case of lack of ideas is represented again by what was once the biggest manufacturer of computers in the world, asking a drop out student for an operating system for its machines.  And we can continue with the Linux operating system, used nowadays by most servers in the world, whose origin has nothing to do whatsoever with big business; or the MP3 revolution (sharing music files on a peer-to-peer basis), started by a teenager, that has taken the whole music industry totally by surprise. The strange fact is not that these things have happened but that many still consider the big "capitalistic" firms as the centre of creativity and the engine of progress as it was the case in the heyday of the Industrial Revolution. This has not been the case for quite a while and so it is quite strange to keep calling them capitalistic firms.

All the discussion so far leads to the simple remark that to define this desert of energies, hopes, and ideas as capitalism is a nonsense on a par with the characterization of the horror of Stalinism as socialism. They are both wicked deceptions that cannot be accepted by any well-informed rational human being, and certainly not by the scientific community.
During the course of the 20th century the original capitalistic entrepreneurs not only adapted to the bureaucratic mentality but they adopted it in the conduct of their business, mixing trade and business with politics, intermingling with the state power and lobbying it for protection and favours.
The capitalistic spirit was no more.

 

The overcoming of capitalism  (^)

The visible scenario in front of us is still, in large part, that of industries, markets and technological change, as in the times of capitalism.
But, just as the vision of a vast plain should not lead us to the belief that the earth is flat, so the existence of industries, markets and machines should not be taken as proof that capitalism is still alive and well.
In fact, if we delve deeper in our analysis, we find that, for most of the 20th century, the economic scenario presented the following realities:

Industries: state owned, state controlled, state regulated industries. State dirigism appears in the form of the New Deal (USA), the Commissariat général du Plan (France), the National Economic Development Council (United Kingdom), the Ministero del Bilancio e della Programmazione Economica (Italy), just to name a few episodes and entities.
Markets: national markets, protected markets, regulated markets. The idea of a free world market is on no one's agenda, whatever their political label (conservative, old liberal, social democrat, etc.).
Technology: development of technology for military purposes; stringent protection of new inventions through patents; the relatively slow pace of the introduction and diffusion of new technological improvements during the first half of the 20th century.

Even in the presence of these transformations, there are intellectuals, politicians, journalists, opinion makers who keep using the term capitalism as if nothing substantial has happened; or have added a series of qualifications to make it still acceptable. Paradoxical definitions like "state capitalism" or "monopoly capitalism" have been introduced, and this shows how strong might be the power of familiar words and long cherished beliefs.

Deep-rooted ideas die hard, as Keynes remarked in one of his most quoted phrases: "Practical men, who believe themselves to be quite exempt from intellectual influences, are usually the slaves of some defunct economist." [1936, John Maynard Keynes]
Presently, many (if not most) people are still the slaves of the ideas of some extinct economist (most likely Keynes' ideas). For instance, many still believe that Keynes economic recipes, providing theoretical justification for state intervention, saved capitalism from certain ruin. It would be more correct and appropriate to say that Keynes put the last nail in the coffin of capitalism and gave respectability to an economic system that, for lack of a better and more original name, has been called neo-mercantilism.
However, there have also been some scholars who realized that important changes had taken place and that we were moving towards a social and economic system substantially different from the previous one.
John Maynard Keynes himself, in 1926 wrote an essay with the revealing title: "The end of laissez-faire" [1926, John Maynard Keynes] in which, after describing the ascent and decline of the concept and the practice of "laissez-faire", declared himself to be in favour of the regulating intervention of institutions above the individual. In another essay titled "National self-sufficiency" he plainly advocated a move towards national autarchy and economic isolationism, and so basically against "laissez-passer" [1933, John Maynard Keynes].
These two factors (laissez-faire, laissez-passer) being the qualifying traits differentiating capitalism from mercantilism, it is then not very clear how their disappearance could be combined with the survival of capitalism. This did not worry Keynes because, for him,

“the decadent international but individualistic capitalism in the hands of which we found ourselves after the War is not a success. It is not intelligent, it is not beautiful, it is not just, it is not virtuous - and it doesn’t deliver the goods. In short, we dislike it and we are beginning to despise it." [1933, John Maynard Keynes]

So, it is not surprising that, with these mental attitudes he suggested recommendations that contributed so much to the extinction of capitalism.
In-between the two World Wars, when in many countries, both advanced and backward, the state had taken over the economy, some observers tried to define the new reality by using terms such as "bureaucratic collectivism" [1939, Bruno Rizzi] or  "managerial society" [1941, James Burnham] to designate a society dominated by the state and by the new class of managers and bureaucrats.
After the war, other analyses emerged that used the terms of "industrial society" [1962, Raymond Aron] and "industrial state" [1967, John Kenneth Galbraith] to describe the form of production and social organization of advanced societies.

There have also been essays and articles presenting or predicting a convergence between so called socialist and capitalist economies under the benevolent power of a regulating state.
Some other analyses have been critical of the role of the state, denouncing the appearance of a New Class of privileged strata using state power in order to exploit the masses and to keep them in a position of subordination [1957, Milovan Djilas]; or warning about the increasing role played by the military-industrial complex within the state, seeing in it a menace to the system of political accountability. [1961, Dwight D. Eisenhower]
What all these texts do, in various ways, is to highlight the importance assumed by the state as producer, employer, distributor and destroyer of resources. [1966, Paul A. Baran and Paul M. Sweezy; 1967, Report from Iron Mountain]

The modern state, in the words of Marx and Engels " is but a committee for managing the common affairs of the whole bourgeoisie." [1848, Karl Marx and Friedrich Engels]
This might have been the case in the middle of the 19th century, but the reality of the 20th century does not offer many reasons to confirm this belief.
Since the time of the Communist Manifesto the state has become, more and more, an entity of its own, subordinate to none, running its own affairs, undoubtedly aware of the existence of other powerful actors but certainly not at the beck and call of any (internal) power or (national) exigency other than its own survival. To this aim, prices have been fixed or left floating, tariffs have been introduced or abolished, firms have been nationalized or de-nationalized, all in the interest of the state and the state coffers, i.e. the ruling political élite and the associated strata.

Two classic examples of the supremacy of political power with respect to economic exigencies and influences can be taken from the history of the steel industry in the USA.
On April 6, 1962, the U.S. Steel Company decided to raise base steel prices about 3.5 per cent. President John Fitzgerald Kennedy (Democratic Party) thought differently and opposed the move, perhaps because he had to repay the Trade Unions for their support in his election. A week later, the top executives of the U.S. Steel Company cancelled the price increase.
Forty years later, in March 2002, another American President, George W. Bush jr, belonging to a different party (Republican Party), decided to raise protective tariffs (up to 30%) concerning the same sector of industry (steel). To a casual observer it might appear that everything has changed, that business is again in command, but it would be a superficial reading of the event. In actual fact, the new ruler needs to curry favour with the electorate in key states. The election to the Congress of representatives of his party and his future re-election chances take absolute precedence over decisions based on rational long-term productive improvements and technological developments. The eye is on the electoral conundrum and not on the economic doldrums. The economy as a whole is, once again, subservient to politics.
The fallacious belief that the state is nothing else than the "comité d'affaires" of the capitalistic bourgeoisie has been shattered by real occurrences over and over again. Unfortunately, fallacies have a life of their own, independent of actual events, especially if they are supported and propagated by strong vested interests. And nothing is so strong as the interest of the state in making people assume that they live in a free society with a free market, that every economic perturbation and unpleasant event derives from the ubiquitous and ever present capitalism and that is the reason why the state must exist in order to protect everybody.

Nevertheless, not everybody has been misled about the survival of capitalism.
Schumpeter, writing in 1946 with reference to the growing antagonism between the Soviet Union and the USA, forecasting in a way what will be called the "cold war" stresses that

"it is a war between a supposedly socialist and a supposedly capitalist country." [1947, J. A. Schumpeter]

In 1951 there appeared a book in which is sketched the economic and political history of England since 1880, bearing the revealing title "The Decline and Fall of British Capitalism" [1951, Keith Hutchinson].
In 1959 Adolf A. Berle, who knew about capitalism from having produced in 1932 a classic book on the reality of the modern corporation, wrote in a large circulation magazine:

"In America it [capitalism] stopped existing somewhere between 1920 and 1930." [Adolf Berle in 1975, Richard T. Gill]

If this is the case, and many experiences and data incline us to believe so, we should draw some lessons helping us to take a clear position concerning attitudes and actions in the pro-capitalism - anti-capitalism controversy.

 

Beyond capitalism and anti-capitalism  (^)

As previously pointed out, capitalism is a word invented at the beginning of the 20th century to designate a society characterized by two main aspects:
      - the dominance of capital (in the form of mechanical productive instruments)
      - the dominance of capitalists (in the role of individual entrepreneurs).
It would have been possible to do without the term capitalism as more appropriate words could have been used to qualify that period as, for instance, industrialism, industrial system, industrial society, age of mechanization [1948, Siegfried Giedion].

Later on, when both these dominating aspects declined and politics, by means of the state, took over, a new label should have been thought up to designate the new period.
In fact, after mercantilism was replaced by capitalism (industrialism), it happened that, especially in the course of the 20th century, capitalism was superseded by an updated version of mercantilism characterized by:

Financialism : the state replaces the wealthy individuals as the main provider of liquidity for starting or expanding a business. This happens through the control of credit via national financial institutions subordinated to a state central bank.
Dirigism: the state shapes (or tries to shape) the decisions of producers and consumers, owning and managing directly large chunks of industry and deciding how and where to allocate resources.
Welfarism: the state fills the role played by the Church as the benevolent, compassionate father whom everybody asks for protection, assistance, favours.

These and other transformations have altered capitalism so deeply and widely that, with reference to the reality of the 20th century, we should drop the use of the term capitalism because it is no longer serviceable, no matter how many qualifications we add beyond that of industrial capitalism (e.g. financial capitalism, state capitalism, monopolistic capitalism, etc.). In actual fact, while industrial and capitalism are two terms that might complement each other, all the others are in stark contradiction with it, at least if we take the classic writings of Smith, Ricardo and Marx as our benchmark. If we consider capital, i.e. the means of production in the form of machines (fixed capital) and raw materials (circulating capital), as a core factor of the capitalistic mode of production, it is then quite odd to use the same word capital, as in the expression "financial capital," to qualify, for instance, purely speculative ventures where no production is involved; the expression is then a perversion in the use of the language because it gives the idea that we are still within the area of capitalism (i.e. industrialism), only of a different nature. Besides that, this so called financial capitalism is, intrinsically, so full of state regulations and so dominated by monopolistic political cliques as to make a mockery of the freedom and competition proper to capitalism.

Maybe it is our destiny to be able to qualify an age only in retrospect, when it has elapsed or is on the way out; our time is no exception, contrary to what some might think. [see 1970, Daniel Bell and Irving Kristol editors, Introduction]
However, given the fact that, throughout the 20th century, the main actor on the social and economic scene was the state, it seems appropriate to call that period the age of statism.
Statism is a socio-economic system characterized by:

      -  state power. The state advocates and concentrates the power of intervention in all spheres of life;
      - state income. The state absorbs a consistently large chunk of resources. In many European countries tax revenues are up to 40 - 50% of gross domestic product [source: OECD 2002].
      - state employment. The state fixes and supervises the rules governing work and becomes (in itself and through related sectors) the biggest single employer.

Those in favour and those against capitalism seem not to have realized, or to want to realize, that a more powerful entity, the state, has replaced the capitalistic entrepreneur and so the capitalistic system of relations.
It is then evident that advocates and adversaries of capitalism are both labouring under a misapprehension because they support or fight something that is not there any longer.
Let us point out briefly why their contention is mistimed and misplaced.

     - Advocates of capitalism: missing the point
    To the supporters of capitalism it should be pointed out that
          -  the era of mechanical production has given way to automatic production performed by electronic devices;
          -  the provision of services has become relatively more important than the production of goods and this reduces the importance of the capitalist class (the traders-entrepreneurs).
  In other words, the time in which machinery (i.e. industrial capital) dominated, with the captain of industry at the control, is gone. This does not mean that we no longer have industrial goods or industrial entrepreneurs; it means only that they are not any longer the main features of the current age. [see 1973, Daniel Bell; 1980, Alvin Toffler]
  As for freedom and competition (exchange, enterprise, risk-taking, etc.), they are elements common to all ages and to all people in various measures; it is neither appropriate nor accurate to characterize them as exclusively capitalistic features. They are not likely to disappear as long as there is hope and the will to advance the human adventure.

     - Adversaries of capitalism: missing the target
    The opponents of capitalism similarly refer to realities that were central a long time ago, for good or ill. For instance:
          -  the importance (at least in theory) still attributed to the ownership of the material means of production reveals a view that does not take into consideration the profound legal and social changes affecting workers, managers, shareholders [1932, Adolf A. Berle jr. and Gardiner C. Means].
          -  the importance attributed to a physically strong workforce, as in the factory organized according to the precepts of Taylorism, discounts the role played in the modern economy by information and knowledge, and the profound changes in the relations of production brought about by the necessity of a generalized use of information and mastery of appropriate knowledge [1988, Shoshana Zuboff]. This reduces progressively the role and weight of the industrial working class and puts an end to its function of social regeneration as the largest and most relevant component of society.

Those in favour and those against capitalism are then stuck in a very uncomfortable and un-scientific position. They do not want to say good-bye to the capitalist class and to the working class but this is what has happened in the most advanced social experiences. They do not see the decline in importance that has affected both the "capital" and the "economy." This trend is likely to continue once production is everywhere performed by automatic devices, poverty is reduced and cultural/ecological issues (i.e. healthy living in a healthy environment) become everywhere more important and pressing than material/economic matters (i.e. the provision of the means of sustenance).

History is characterized by the appearance of new realities and for this reason historians invent labels to define periods with a specific way of life and thinking. The fact that for the last one hundred years we got stuck with the word capitalism while statism was coming to full dominance, means only that historians are either out of touch with reality (lack of perception) or low on ideas (lack of vision). And this has very negative effects as far as personal and social progress is concerned.

In fact, and here we come to the central point of this essay, it is in favour or against statism that the debate and the action should have focused. And it should be focused on it especially now that statism also is on the wane and new phenomena are appearing that transcend the limited horizon imposed by the state. It is time to start the debate now, leaving behind those who are still stubbornly refusing to let their brain function and are still formulating obsolete ideas using obsolete words.

Amongst the many short stories O. Henry wrote, there is one about two individuals divided by a total enmity because something has recently happened between them, or at least this is what we are led to think. At the end of the tale we discover that the reason for the dispute was something that had taken place many years earlier, but the two individuals were living as if the clock had stopped at that moment and all their ideas and actions were still geared towards that event.

Maybe the same has happened to capitalist and anti-capitalist alike. They live in a world of their own, long disappeared, fabricating plots that have neither actual relevance to nor positive repercussion upon current reality.
We should leave dead ideas buried with the dead.
We have, each day, a new life to build.

 


 

References

Note   The reading of this text is certainly not a substitute for the reading of all or most of the books listed on which this essay is based. In fact, one of the aims of this essay is to stimulate the reading (or re-reading) of some classic texts and less known documents, with a fresh and open mind.

[1776] Adam Smith,  An Inquiry into the Nature and Causes of the Wealth of Nations, The University of Chicago, Chicago, 1990

[1817] David Ricardo,  Principles of Political Economy and Taxation, Penguin, Harmondsworth, 1971

[1832]  Charles Babbage,  On the Economy of Machinery and Manufactures [Sull'economia delle macchine e delle manifatture, Utet, Torino, 1863]

[1835]  Andrew Ure,  The Philosophy of Manufactures, [Filosofia delle manifatture, Utet, Torino, 1863]

[1841] Friedrich List, Das nationale System der politischen Oekonomie [Il sistema nazionale dell'economia politica, Utet, Torino, 1936]

[1845] Karl Marx,  Misère de la philosophie, Réponse à la philosophie de la misère de M. Proudhon [Miseria della filosofia, Editori Riuniti, Roma, 1971]

[1845-1847] Frédéric Bastiat,  Sophismes économiques, Paris

[1848] Karl Marx and Friedrich Engels, Manifest der kommunistichen Partei [The communist manifesto, Penguin, Harmondsworth, 1968]

[1849] Karl Marx,  Wage Labour and Capital, Lawrence and Wishart, London, 1977

[1850] Frédéric Bastiat,  Harmonies économiques, Paris [Armonie economiche, Utet, Torino, 1945]

[1852] Karl Marx, The Eighteenth Brumaire of Louis Bonaparte, Lawrence and Wishart, London, 1977

[1867] Karl Marx,  Das Kapital, erster Band [Il capitale, Libro I, Editori Riuniti, Roma, 1972]

[1894] Karl Marx,  Das Kapital, dritter Band [Il capitale, Libro III, Editori Riuniti, Roma, 1972]

[1902] John Hobson,  Imperialism. A study, Allen & Unwin, London, 1905 [Imperialismo, Isedi, Milano, 1976]

[1902] Werner Sombart,  Der Moderne Kapitalismus [Il capitalismo moderno, Utet, Torino, 1967]

[1904] Thorstein Veblen,  The Theory of Business Enterprise, The New American Library, New York, 1932

[1904-1905] Max Weber,  Die protestantische Ethik und der Geist des Kapitalismus [L'etica protestante e lo spirito del capitalismo, Sansoni, Firenze, 1965]

[1905] Paul Mantoux,  La révolution industrielle au siècle XVIII [La rivoluzione industriale, Editori Riuniti, Roma, 1977]

[1906] John Hobson,  The Evolution of Modern Capitalism, The Walter Scott Publishing, London, new and revised edition 1916

[1910] Rudolf Hilferding,  Das Finanzkapital [Il capitale finanziario, Feltrinelli, Milano, 1976]

[1913] Sombart, Werner  Der Bourgeois [Il Borghese, Longanesi, Milano, 1978]

[1916] Vladimir I. Lenin,  Imperialism

[1917] Vladimir I. Lenin,  The State and Revolution, Penguin, Harmondsworth, 1992

[1919-1920] Max Weber, General Economic History, Collier Books, New York, 1961

[1926] John Maynard Keynes,  The end of laissez-faire
http://www.panarchy.org/keynes/laissezfaire.1926.html

[1931] Eli F. Heckscher, Merkantilismen, Stockolm [Il Mercantilismo, Utet, Torino, 1936]

[1932] Adolf A. Berle jr. and Gardiner C. Means,  The Modern Corporation and Private Property

[1933] John Maynard Keynes,  National self-sufficiency 
http://www.polyarchy.org/enough/texts/keynes.1933.html

[1936] John Maynard Keynes,  The General Theory of Employment, Interest and Money,  Macmillan, London, 1946

[1939] Bruno Rizzi,  La bureaucratisation du monde, Paris [Il collettivismo burocratico, Sugarco edizioni, Milano, 1977]

[1941] James Burnham,  The Managerial Revolution, Penguin, Harmondsworth, 1945 [La rivoluzione dei tecnici, Mondadori, Milano, 1947]

[1947] Joseph. A. Schumpeter, Capitalism Socialism and Democracy, Unwin University Books, London, 1966

[1948] Siegfried Giedion,  Mechanization takes command, W.W.Norton & Co., New York and London, 1969

[1954] Joseph A. Schumpeter,  History of Economic Analysis,  Allen & Unwin, London, 1982

[1951] Keith Hutchinson,  The Decline & Fall of British Capitalism, Jonathan Cape, London

[1952] A. J. P. Taylor,  Economic Imperialism
http://www.panarchy.org/taylor/imperialism.1952.html

[1957] Milovan Djilas,  The New Class, Thames & Hudson, London, 1958

[1959] Adolf A. Berle in Richard T. Gill,  Economics. A text with readings, Goodyear Publishing Company, California, second edition, 1975

[1961] Kostas Axelos,  Marx penseur de la technique, Les Éditions De Minuit, Paris

[1961] Dwight D. Eisenhower, Farewell Address, Washington, 17 January 1961

[1962] Raymond Aron,  Dix-huit leçons sur la société industrielle, Gallimard, Paris

[1965] Andrew Shonfield,  Modern Capitalism. The changing balance of public & private power, Oxford University Press, Oxford, 1969

[1965] Peter d'Alroy Jones,  The Consumer Society. A History of American Capitalism, Penguin, Harmondsworth, 1967

[1966] Paul A. Baran and Paul M. Sweezy,  Monopoly capital. An Essay on the American Economic and Social Order [Il capitale monopolistico, Einaudi, Torino, 1968]

[1967] John Kenneth Galbraith,  The New Industrial State, Houghton Mifflin Company, Boston

[1967] Report from Iron Mountain on the Possibility and Desirability of Peace, Penguin Books, Harmondsworth, 1968

[1970] Daniel Bell and Irving Kristol eds.,  Capitalism Today, Basic Books, New York, 1971

[1970] Alvin Toffler,  Future Shock,  The Bodley Head, London, 1972

[1971] Jean Baechler,  Les origines du capitalisme [Le origini del capitalismo, Feltrinelli, Milano, 1977]

[1985] Fernand Braudel,  La dynamique du capitalisme, Flammarion, Paris

[1988] Shoshana Zuboff,  In the Age of the Smart Machine. The future of work and power, Heinemann, London, 1988

[1997] Bruce Bartlett,  The truth about trade in history, Cato papers
http://www.cato.org/pub_display.php?pub_id=10983

[1998] Larry Allen,  The Companion to Capitalism, ABC-Clio, Santa Barbara, California

[1999] Tim Berners-Lee,  Weaving the Web, Texere, London, 2000