CAPITALISM by MAJOR A R KAMUSAALA CAPITALISM

CAPITALISM by MAJOR A. R. KAMUSAALA

CAPITALISM INTRODUCTION 1. From the outset, when man evolved from the ape, production was for use value ie to satisfy primary needs. With the division of labour and specialization, it became inevitable to exchange. A person producing potatoes was not going to eat potatoes throughout the year. Exchange with producers of other products say meat or milk became a must. Even craftsmen and artisans who produced tools, baskets, knives etc had to exchange with the producers of food to sustain their lives. Products therefore acquired another quality – exchange value. For the first time the producer could now produce not for his own, but for the use value of others

As specialization and division of labour led to increased production and therefore a surplus, some artisans who had saved some wealth wanted to invest to get more wealth. Thus a product acquired another quality looking for ways to produce itself not for use but for profit value. The product was no longer an end in itself but a means to another end. This dispossession which was not restricted to capitalism had started to manifest itself during the era of feudalism. AIM 2. The aim of this presentation is to acquaint you with the capitalist mode of production and its contribution to human civilization.

SCOPE 3 a. b. c. d. e. f. Definition of terms Commodity production Types of capital and groups of capitalism Primitive accumulation of capitalism Stages in the development of capitalism DEFINITION OF TERMS 4 a. Capital is any value or economic asset which is used to generate more wealth or surplus value (Claude Ake 1981).

Therefore capital is self expending value, a historical accumulation of the product of labour. The word capital however has its roots from the Latin word “capitus” which means head. Concepts such as capital offence, capital city etc derive their origin from this word. b. Capitalism is an economic system in which a country’s business and industry are controlled and run for profit by private owners rather than by government. A capitalist is a person who: (i) Supports capitalism (ii) Owns or controls a lot of wealth and uses it to produce more wealth. pp 160 (Oxford Advanced Learners Dictionary 6 th Edition)

c. The Cambridge International Dictionary of English defines capitalism as “an economic, political and social system based on private ownership of property, business and industry and directed towards making the greatest possible profits for successful organizations and people (PP 192). It defines a capitalist as someone who has great wealth invested in a business or who supports capitalism PP 192. d. Capitalism is a social system under which all means of production belong to capitalist, while the workers have none at all and are compelled to sell their labour power to the capitalist to keep body and soul together. Unlike slavery and feudalism, in capitalist society exploitation is disguised. Capitalism is a social- economic system whose basic motive is private ownership of the means of production and having redundant labour power without the means of subsistence.

COMMODITY PRODUCTION 5. The capitalist mode of production is one in which capital has penetrated and taken over production. This means that production is for sale and therefore becomes commodity production. Under capitalism, producers strive for minimum input and maximum output, to buy cheap and sell dear and labour becomes a commodity. Commodity production emerged upon the disintegration of primitive communal system and existed in all pre capitalist systems. All that time however, subsistence economies predominated.

A commodity is anything produced for the purpose of exchange or sale in the market. In a commodity economy, products are made by separate producers for exchange. It is based on social division of labour where each producer specializes in some one product. The producers are isolated due to private ownership of the means of production and products of labour, thus making market exchange a necessity. Exchange of commodities becomes the sole kind of economic relationship linking the separate producers. There are two types of commodities and therefore of commodity production.

a. Simple commodity production. Refers to anything produced for the purpose of exchange but using personal labour eg a peasant producing cotton, cassava etc is engaged in simple commodity production because he exchanges products borne out his labour. Under simple commodity production therefore, small producers own the means production and are workers at the same time b. Capitalist Commodity Production. Is anything produced for the purpose of exchange but through the use of hired labour.

In order for one to become a capitalist therefore one must privately own the means of production, own and control the conditions of production, own and control the products of labour as well as the market. Under capitalist commodity production, the means of production are separated from the producers and the purpose of production is to secure profit. Distinct as they may be however simple commodity production and capitalist commodity production are basically of the same type because they both rest on the private ownership of the means of production this makes it possible to transform simple commodity production. Simple commodity production laid the building blocks of capitalism. Under capitalism, the production of commodities becomes universal as all products become commodities including the labour power of man.

TYPES OF CAPITAL AND GROUPS OF CAPITALIST 6. There are three forms of capital corresponding to the three stages in the circuit of capital a. b. c. Money (Loan) Capital Merchant (Trade) Capital Industrial and Agricultural Capital There arose Loan capitalists (Bankers) merchant capitalists and Industrial/Agrarian Capitalists (Manufacturers). As capitalism developed, these three types of capitalists became increasingly more isolated and more pronounced.

7. The function of Loan capitalists became wider from lending out money on interest to determining how and where the money should be invested. The Loan Capitalist gets his share on loans called interest. The formation of the industrial capitalists consists of ensuring that capital penetrates the production of material wealth by buying or hiring the means of production ie labour, land premises and other raw materials required. The industrial capitalist directly appropriates the surplus labour of the working people to get industrial profits. Merchant capitalists have the function of purchasing and selling of commodity between two unknown partners. He transforms commodity into money capital and takes his share in the form of commercial profit.

8. The loan capitalist overtime concentrate all the money reserves into their hands and distribute these money deposits to whoever is capable of paying interest in these loans. It should be noted that bankers accept deposits from anybody – poor, black, rich white etc – but only give loans on a discriminative basis to the so called “credit working” individuals who can guarantee repayment of the loans with interest by providing collateral security. As a result of fierce competition among capitalists to acquire cheap means of production (labour technology, power, market etc) some level of control must be established. This control resulted into the merger

between industrial capital and bank capital which constitute finance capital. At this level the bank assume the role of not merely lending out money but having a say in investment (what type, how much, where), and how to appropriate the proceeds. For this purpose, the bank sends a team of supervisors on the management team or board of an industry and also seeks powers to determine who the shareholders shall be. This development started from the late stages of feudalism up to the formation of finance capital i. e. mid sixteenth century till 1890 s and is known as the era of Premonopoly capitalism.

PRIMITIVE ACCUMULATION OF CAPITAL AND CONDITIONS FOR EMERGENCE OF CAPITALISM 9. The history of the emergence of capitalists and working classes and an unfair distribution of material wealth is often said to have existed from time immemorial. A state became regulatory mechanism, an apparatus, a tool, machinery that sets and enforces certain standards of behavior (owned by the capitalists) and the worker divorced from the means of subsistence but with only his labour power to sell like a commodity. During the feudal era, with the development of commodity production, there occurred stratification of small scale producers.

The development of capitalism was accelerated by the most flagrant coercion on the part of land owners, the emerging bourgeoisie and state authorities against the broad section of the population 10. Primitive accumulation of capital was a historical process of developing the producer from the means of production. It its typical form, primitive accumulation took place in England where landlords seized peasants’ communal land drove them out and even in their homes through a process known as the Enclosure, movement.

The land that was expropriated from the peasants was turned into pasture land for sheep or was rented out to tenant farmers because of high demand for flamingo wool and food due to the growing textile industry. The emerging bourgeoisie also used coercion to appropriate crown lands and plundered church property more especially of the Catholic Church. Masses of people deprived of their means of subsistence therefore become vagabonds, vagrants, beggars and villains. The government responded by passing harsh laws against the people. In England, these laws were called the bloody legislation.

The robbed people were then forced by torture, flogging imprisonment and/or branding, into capitalists enterprises. These peasants were now said to be free but in a double sense. Free of the means of production and free to choose their exploiter. 11. The second type of primitive accumulation of capital was the confiscation of property of all smiths and craftsmen by the emerging bourgeoisie who were establishing manufactories. This made it possible to assess and appropriate their labour and its products.

Thirdly in all emerging capitalist countries, a crude tax system was established on farming travel, trade and even consumption pattern such as salt tax in France, road tolls in England hut and gun tax in Africa. Primitive accumulation of capital also manifested itself in the form of colonial system of plunder loot, and enslavement of native people of America, the opium companies of Asia and commodity crop republics of Africa. 12. The most decisive development of capitalism was the period between 1750 and 1870 during which a lot of scientific discoveries were made especially in transport, communication, industrial machinery, processing preservation of industrial raw materials.

During this era, the European middle class merchants travelled to Americas where they established large mines and plantations through the red Indians slave labour. In the mid 19 th century Europe, the development of productive forces was advanced in the iron and steel industry. New methods were discovered which enabled mass production of steel. With abundant steel, major inventions were made like: a. b. c. d. e. f. g. Dynamo machine 1870 Internal combustion engine 1837 Steam engine 1803 Trams 1879 invented to collect coal. Cars 1885 Diesel engine 1882 Aeroplane 1902

These advanced created high possibility for production because there was increased mobility in the factors and process of production. This intensified the contradiction within capitalism in the form of economic crisis of overproduction flooded markets exhaustion of raw materials and increase in unemployment. This occasioned wars between and among capitalist states, which brought untold suffering to the ordinary people in Europe and Asia (e. g. Franco- Prussian war). It also intensified the economic and political struggle between working class and the bourgeoisie.

PRODUCTION PROCESS UNDER CAPITALISM 13. There are two main class under capitalism ie the capitalist who owns the means of production and deploys his capital to get profit, and the worker who owns nothing but his labour. Under capitalism labour power become a means of production like electric power, thermo power etc. But unlike other sources of power, labour power needs to eat, clothe, get treatment and to reproduce itself. For above to be fulfilled, the worker must be paid a wage so that the working day of workers is divided into two parts. Part of time he works for the capitalist.

It is this time which the capitalist appropriates first to recover his return on investment, sustain the machines and meet other necessities. While the interest of the labourer remains focused on wage, that of the capitalist is on how to reduce production cost and increasing the working hours through introduction of shifts (Lejaleja) or introducing machines and thus producing more in a shorter time. Later, automation becomes the focus and this explains why a lot of money is spent on research, which sets in competition.

COMPETITION UNDER CAPITALISM 14. Capitalists compete for profits as they try to outdo each other whether engaged in the same field of production or not. For that matter, a lot of money is deployed in ventures which on the surface don’t look to be directly related to production such as: a. Advertising b. Packaging c. Branding d. Offering of bonuses e. Discounts f. Sponsorship of celebrities g. Corporate social responsibility etc.

This is done to attract customers and undercut other capitalist. This creates economic crises as resources are invested in less worthy but profitable ventures. The end result is hoarding (goods and knowledge) and unemployment as capitalists try to cut costs by laying off workers. Yet prices are often pushed up because of the above unnecessary overhead costs which become prohibitive to the working class who constitute the market for those products. What follows is a slump. Cases of corn or rice poured in the ocean to buy fresh harvest from farmers have been reported in US and Canada.

Inflation, booms followed by severe and extensive recessions often afflict capitalist economies. The recent global economic downturn famously known as credit crunch is a case in point. Competition for raw materials, markets, cheap labour and areas for investment intensifies. CONCLUSION 15. Capitalism brought immense benefits to mankind as it rationalized production and introduced efficient methods of production. Most modern methods of accounting such as the balance sheet, ledger, profit and loss account, cash flow analysis etc were developed as capitalism was growing. It is its unfair distribution of social wealth that led some people to advocate and propose a system that would lead to social justice and equitable distribution of wealth.

SOCIALISM INTRODUCTION 1. Despite having witnessed great advances in science and technology which led to unprecedented standard of living, capitalism had its pitfalls. Poverty and unemployment etc prevailed and this led some people to question free market enterprise as the panacea for social ills. Socialism was tried in a number of countries in the last century beginning with socialist revolution of October 1917 in Russia which spread to encompass all smaller surrounding republics to form the former Union of Soviet Socialist Republics (USSR).

After the Second World War, other countries in Eastern Europe (East Germany, Bulgaria Czech, Slovakia, Romania, Poland, and Yugoslavia) China, and North Korea in Asia and Cuba in the Caribbean also became socialist. The high degree of socialization of labour during, capitalism and individual appropriation of the results of labour by the capitalists plus enlightenment and scientific advancement drives the exploited and oppressed workers to unite with the unemployed to eventually revolt and confiscate the means of production which they control and direct for their benefit.

PRODUCTIVE FORCES 2. There is large scale production in all sectors of the national economy based on the most advanced. As a result, there is also a steady development of science and technology and arise in cultural and technical level of the working people. There is advanced organization of production and on this basis on increase in the productivity of social labour. CHARACTERISTICS OF SOCIALISM 3 a. The guiding principle is from each according to his ability and to each according to his contribution.

b. The ownership of the means of production varies from state property, co-operative, private and personal. i The state owns central economic sectors (banks, construction companies, roads, railways, telecommunications, iron and steel industries etc). ii Co-operative property includes large farms. Small scale industries marketing and producer co-operatives etc iii Private property includes small enterprises eg retail shops, passenger vehicles etc. iv Personal property includes houses, personal cars, clothes furniture.

c. Production relations are non antagonistic (friendly) since producers control the means of production. d. Exploitation of man by fellow man could be eliminated and social justice established by turning the means of production into property of the whole society. e. There is great effort to minimize social differentiation since emphasis is on satisfying human needs instead of profit maximization.

f. In socialism there is both micro and macro planning as a result of high degree of specialization. g. Socialism believes in compulsory state welfare in which the surplus is returned to those who produce it. This is done through free or subsidized medication, free and compulsory education, subsidized transport and housing. h. There is also emphasis on recreation ( sporting activities) since it is argued that a healthy mind resides in a healthy body.

i. Socialism believes in both popular and participatory democracy where workers play their roles all various levels of governance. WHY SOCIALISM COLLAPSED IN FORMER USSR AND EASTERN EUROPE 4. Socialism in USSR and Eastern Europe started developing cracks in the latter half of 1980 s. Some of the major events were the destruction of the Berlin wall in Germany in 1989, the overthrow of Ioni Cescescue of Romania in 1990 then collapse of USSR in 1991.

The following are some of the reasons advanced as factors that contributed to socialism’s fall. a. Whereas the scientific analysis was correct, the actors did not devote themselves to the practice so as to bring about real change. Members of communist parties became exclusivist and so remained few. b. When socialist changes swept the world, capitalism was alarmed, saw its downfall as imminent and went on the offensive. The new and young socialist countries were diverted into the arms race instead of concentrating on economic development.

Victory over Germany was quickly followed by the onset of the Cold War between East and West in which most people soon learnt to see the world in terms of two opposing ideologies and economic systems each conspiring to bring about the downfall of the other. They embarked on manufacturing war materials (Planes, Tanks, artillery pieces ICBMs, Atomic plus Nuclear weapons etc), an enterprise in which billion of dollars were spent. We should not forget President Ronald Reagan’s SDI (Star wars Programme). Also the SALT I and II talks and START This contributed little to the welfare of the ordinary citizen yet the west had accumulated enormous wealth having colonized the world.

c. Consequently, the two reasons above led to the building of bureaucracy instead of a democracy where the state and party officials became detached from the people. State and party officials led higher standards than the rest of it in effort alienated them. When problems arose, the people just looked on or sometimes even participated in its downfall like in Romania in 1990. d. Some people have argued that human are by nature selfish so to call upon them to work for the betterment of may not be possible now. A middle road that takes into account the selfish nature of humanity may suffice for the moment. We need to note however that social development takes a long time (even centuries), so what may seem as wrong may in later centuries be proved to be correct.

COMMUNISM 5. This is an anticipated stage of human society whose main goal is to restore the dignity of humanity. Socialism is seen as a transition stage as society moves to its final stage of communism. Because of the level of science and technology that is still wanting, socialism cannot answer all the needs of man. Communism is considered the highest developed social economic system. It is considered that due to the high standard of science and technology attained previously, machines will have replaced labour power in the production process.

Production will have gone back to its original purpose- use value, not just for profit. Robots and computers will do the work at the touch of a button. Because exploitation and oppression will have been eliminated, there would be no need for the state (it would wither). Under communism, the guiding principle is from each according to his ability, and to everyone according to his needs. Human society reverts to the stateless status like primitive communalism, only that this time, man commands science and technology and the quality of life is better.

CONCLUSION 6. Socialism despite its shortcomings brought to the fore man’s quest for establishing a just society free of exploitation of man by fellow man. It is also noteworthy to recognize that it is former socialist countries that supported anti - colonial liberation movements in the third world.

Thank you for listening Q&A