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Markets have existed for millennia. Capitalism has existed for millennia. The Romans had markets and capitalism; the Greeks did; the Assyrians did, and so on.
(This is Part Two of a series. Read Part One: Will Capitalism and Democracy Survive?)
But none of these societies, despite having capitalism and markets, were capitalist societies.
Capitalist societies use capitalism as their primary method for controlling economic activity.
Weber called this “rational capitalism.” What he meant was that capitalism transformed, according to its reason, other relationships so that they became capitalistic.
A capitalistic relationship is one that is determined by money. It is traditional to say it is controlled by price and the profit motive, but that’s not quite true.
Uber is losing money. A lot of money. It might never be profitable. Elon Musk’s companies do not make money, though they may in the future. The banks and brokerages of the 2000s went bankrupt.
In a capitalist society, people do what gets them the most money.
What is important about this is that in capitalist society, money equals power, much more so than in other societies.
In a capitalist society, money buys people and their time. It buys virtually everyone. It allows you to decide what those people do. (Read: The Tyranny of Money.)
What is important about this is that it means that people who do what the system requires are the people who get power.
If you don’t respond to monetary incentives in a capitalist society, you usually don’t get power. Not only that, you are generally deprived of power.
So a capitalist society ensures its continuation by making sure those with power are those who do what a capitalist society requires: Pursue money.
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It’s hard for us moderns to really grasp this. In the Dark and Middle Ages, most societies were not capitalist societies. Most people were tied to the land. They did not work primarily for money, they worked for their lords for X days a year, or during a call up for war. But the rest of the time, they worked for themselves or their families.
You could buy some people with money, but you couldn’t control most people with money. What mattered was a system of allegiance, and military force.
Power got you money more than money got you power. People who forgot that lost both.
This is generally true in most agricultural societies for most of history, though it’s not an absolute.
In the Roman Republic, most rich men were rich because they were aristocrats with land or because they were successful generals who had looted their wealth. Only one of the great men competing to be Empire and end the Republic, Crassus, had most of his power due to wealth and he did not win.
The extent to which a society is capitalist can be determined by how many people you can buy, and how much of them you can buy. A peasant may do letting out labour in the evenings or odd jobs, but you can’t buy most of his or her labour. A nobleman may do some things for money, but not most, and the official ethos of nobility was that to engage in manual labor or mercantile activity was to de-grade yourself and lose your noble status.
In our society, you can buy virtually everyone, including the most powerful politicians. (For all that people deny it, much of Obama’s policies could be predicted by “wants to be rich after office”–I said that long ago, and its predictive utility was high.)
Your ability to do that to high nobles was often limited: If they got upset enough at their bankers they would just kill them or exile them, and seize their assets. This happened over and over again. At best you rented kings and high nobility: Lending to them was a privilege, you did not own them, and if you thought you did, that worked out badly for you pretty often, though, of course, this was not the case in all places and times.
A social system perpetuates itself when it gives power to people who act as the social system thinks is correct. Capitalism perpetuates itself as long as power goes to those who pursue money first. Feudal societies were about the ability control fealty, especially of militarily capable men. And so on, you can analyze most societies this way.
This breaks down in three circumstances: when the society selects people who don’t respond how they are supposed to (late Communist leaders not believing in Communism); where leaders are incapable of running the society even if in power, or; if the basis of power changes (if military power is no longer based primarily on fealty relationships, for example).
This can, and should, be applied to capitalism.
(Read Part 1: Will Capitalism and Democracy Survive?)
The next part of this essay series will look at the question of system flaws: What systems, in particular capitalism, do badly, and which must be managed lest those flaws bring the system down.
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