What is Capitalism?

This post describes capitalism as: an activity, the capitalist system, the phases of capitalism through history and that there are many capitalisms. If we want to get rid of capitalism, first we need to understand what it is.

Jeremy Gilbert, in his recent book Twenty-First Century Socialism, gives a good summary of what capitalism is. Most human societies through history have not experienced capitalism, as it only developed in the last few hundred years. It then spread around the world. Gilbert describes capitalism as:

“a situation in which private individuals or corporations are allowed to use any means available to them – short of openly violent coercion – to accumulate vast profits from the sale of commodities, even if, in the process, they are paying workers very low wages, wrecking the local environment, or forcing people to change their way of life against their will.”

‘Capital’ is the wealth that is available to be invested or lent, with the aim of returning a profit in the form of more capital. A ‘capitalist’ is someone that profits from their ability to invest capital. Gilbert describes capitalism in two ways. The first is a more basic way as describes above; an activity called ‘capital accumulation,’ – which is the investing of capital with the goal of increasing their total amount of capital. The second broader way Gilbert describes capitalism is, “a whole way of ordering society, and to a set of values and beliefs about how society should be ordered.” See the next section for more on this.

Gilbert described how the problems that we face now are the same as in the 1800s: “industrial pollution, urban squalor, growing inequality, social insecurity, a widespread sense that society was falling apart and that nobody knew what to do about it, where a few were getting very rich as a result.”

Gilbert states that the obvious cause of these problems is technological change. But the way technology is used in society depends on how that society is organised – to benefit all or to benefit a few, who become rich and powerful by making and selling things for profit. For most companies and businesses to be successful, they need workers. Those running those companies cannot make significant profits if they pay their workers too much. So, “corporations and their chief executives use new technologies to try to keep down their wage bills, at their own workers’ expense.”

So that this is possible, capitalism organises society in a specific way:

“There had to be a small group of people rich enough to use the new technologies in these ways. There had to be large numbers of people around who had no choice but to work for the wages that they are offered. There had to be a whole legal system in place, and a culture, that treated the accumulation of vast profits by private individuals or corporations as legitimate, legal, and morally acceptable.”

For capitalists who pursue capital accumulation through investment,  the main aim of activities is to accumulate capital. Gilbert explains that those that run businesses but use the profits to have a luxurious lifestyle or pay their employees well, are not ‘doing capitalism’. He is clear that an essential part of capitalism and capital accumulation is the need to exploit the labour of workers and pay them the absolute minimum.

Capitalists accumulates capital by exploiting workers to produce commodities for sale. “a commodity is anything that can be bought and sold for profit.” As new commodities have been found and developed since the 1400s, we are now at a point in society where almost everything we engage with is a commodity. In the past, most things in people’s lives were made by someone they know. “Now, we live in a world in which our entire material culture is a productof capitalism.” It looks like all this stuff comes from nowhere but it actually requires a huge amount of cooperation across, “factories, in global distribution networks, in retail outlets and in packing warehouses.”

Capitalists are always looking for new commodities to sell and new people to sell them too. Gilbert describes a brief history of capitalism. In the early days it involved colonisation and imperialism – going to other countries and using violence to take resources, land and people. In Britain, peasants were forced off the land so the rich could farm them. The peasants then had to move to towns and cities to find work in the factories to buy basic commodities to keep themselves alive. In the twentieth century, workers got organised and forced employers to pay them more so their standards of living increased. For capital accumulation to grow, people had to be convinced to buy commodities that they didn’t need. The modern advertising industry developed so now we regularly experience someone trying to sell us something. The late twentieth and twenty-first century has seen the number of commodities increase, but also most parts of our social life are now for sale – healthcare, education, dating, spirituality. This is called ‘commodification’. [1]

The Capitalist Story

Gilbert describes most capitalist as not being manufacturers, instead they get their profits from “speculation on shares, currencies, derivatives and debt instruments, or from retailing, distributing and marketing things that other companies have made, or from renting out property and land”

He explains that the capitalists have to have a convincing story to tell us, governments and themselves to justify the huge wealth and power they have. Gilbert states that this is the same story capitalists have been telling for four hundred years since European merchants expanded across the world:

“Human beings come into the world alone. They may collaborate with others to achieve certain goals or to protect their property, but their basic relationship with other humans is, at root, a competitive one. It is up to every individual to strive as best they can to enrich themselves, by working hard and deploying their unique talents. In a modern commercial society, governments will encourage them to do just this, in the knowledge that by pursuing riches, entrepreneurs will bring improvements to the lives of their many customers (improvements like sugar, tobacco and social media). For such a society to function smoothly, and for entrepreneurs to remain motivated to play their crucial role, the state must make the protection of private property its number one priority. Property and those who hold it must not only be protected from marauding bandits or foreign invaders; it must be protected from any claims that the wider community might try to make on it. Taxation, public spending, the regulation of corporations and markets; these may all be necessary to a degree, but they must be strictly limited if society is not to descend into tyranny. Any society that puts strict limits on the ability of individuals or corporations to enrich themselves would be a tyranny, and tyranny is the worst thing in the world. Because it is wrong to put restrictions on the economic activity of entrepreneurs, decision over things like the price of goods or the value of labour (i.e. wages) must be left up to the market; while individuals and corporations must be allowed to use any means available to them (advertising, media, propaganda, etc.) in order to pursue their commercial interests and protect them from interference by either competitors or the wider public.” [2]

This worldview can also be describe as liberalism.

The Capitalist System

Gilbert describes capitalism as a “particular set of socio-economic practices and the social relations which they engender, reproduce, and come to depend on.” Some theorists call this a ‘capitalist social formation’. He also describes the capitalist system as a social, economic, political and cultural system for the production and distribution of material goods. Marx calls this the ‘capitalist mode of production.’ The practices are important but only a part of the capitalist system. Either way it is the rich or capitalists that have the most power. [3]

Capitalism as a political system uses the power of wealth to apply pressure to governments to implement policies that are beneficial to the rich. They also spread propaganda that is favourable to them and their interests. Capitalists spend millions to lobby governments so they can control media institutions and this gives them significant influences over politics. Gilbert describes how we live in a ‘plutocracy’ – a society ruled by the rich.

Gilbert states that we need to be careful to not assume that capitalism or capitalist society is a “totally integrated and self-enclosed system, which subsumes every element of contemporary life.” Capitalism does have some effect on all of social life and blocks the achievement of many social goals, but there are many things happening that are not capitalist. This gives those in opposition to capitalism, opportunities to explore alternatives and challenge capitalism.

Capitalism can be described as an “abstract system – a kind of impersonal machine that just keeps going without anybody being in charge of it.” Gilbert explains that this is true to a point: “it is a system that would not exist without the continued efforts of capitalists to make themselves wealthy at everyone else’s expense.” New, successful capitalists, like CEO of Amazon Jeff Bezos, find ways to change how the capitalist game is played so capitalism can be extended into more parts of social life [4] – through Amazon we can order almost anything to be delivered to our home and Amazon records all our information and preferences.

The Corporate Watch publication, Capitalism, What is it and how can we destroy it? Describes the characteristics of capitalist economic and cultural systems. The key features of capitalist economic systems are:

  • “markets play a central role in making decisions
  • property rights set out who can use and trade goods, and so have economic power
  • things, animals, and people are made into commodities – objects that can be owned and traded
  • the state acts as an enforcer of the economic system, and helps it spread concentrations of wealth, of capital, to channel power into the hands of capitalist elites
  • the profit motive drives capitalists to continually expand markets
  • in modern industrial capitalism, profit very largely involves the exploitation of people who are forced to work” [5]

The Corporate Watch publication explains that capitalism is a culture: “a complex web of desires, values, norms, conscious and unconscious rules, practices, behaviours, attitudes, that are shared and spread in the social groups in which we are born, raised, and live our lives.” Capitalism would not be able to function unless everyone learns:

  • “the rules of markets, how to act as buyers and sellers
  • to respect property
  • to see animals, the natural world, other people, and even ourselves, as ‘objects’ to be bought and sold, owned and managed
  • to respect and fear the state, its laws, police, judges and teachers
  • to accept gross inequalities of power and wealth
  • to believe that accumulating ‘stuff ’ is the key to happiness
  • to base our lives around work” [6]

Phases of capitalism

There have been a number of phases of capitalism through time. This is a brief overview of the phases of capitalism. I’ll go into more detail about the phases in futures posts.

  1. Mercantile Capitalism, 14th-18th centuries

Capitalism was, at that time, a system of trading goods at local markets to increase profits for traders. Early forms of the corporation were developed, and  the first stock exchanges and banks were created.

  1. Classical/Industrial Capitalism, 19th century

This came about because of an enormous reorganization of society was taking place. “The bourgeoisie class, owners of the means of production, rose to power within newly formed nation-states, and a vast class of workers left rural lives to staff the factories that were now producing goods in a mechanized way.” [7]

  1. Keynesianism or New Deal Capitalism, 20th century

The stock market crash of 1929 resulted in the core principles of free-market ideology being abandoned by governments, banks and corporations. Governments responded by intervening in the economy to protect national industries from foreign competition.  The expansion of national corporations was encouraged by investing in social welfare programs and infrastructure. [8]

There are two further phases.

  1. Finance Capitalism/Neoliberalism, late 20th century

‘Finance capitalism,’ or ‘financial capitalism’ is the subordination of processes of production to the accumulation of money profits in a financial system. Neoliberalism is the 20th-century resurgence of 19th-century ideas associated with laissez-faire economic liberalism and free market capitalism.

  1. Twenty-first Century Capitalism

This is the current phase we are in, and it started with the economic crisis of 2008, which delegitimised capitalism and neoliberalism.  It has a number of the characteristics of Finance Capitalism and Neoliberalism. It also includes government austerity programs in many countries to reduce government budget deficits by implementing spending cuts on public services and social welfare programs. It has seen the election of authoritarian governments and huge government spending since the start of Covid 19 crisis. This phase is still evolving, so its form is not yet clear.

Many Capitalisms

The Corporate Watch publication points out that there are many types or forms of capitalisms at any one time. Capitalism also varies in different places. There is no correct definition of capitalism:

“Capitalism is not an all-powerful ‘monolith’. Capitalist systems co-exist, incorporate, work with or fight against other systems, cultures and forms of life. For example, with older feudal or tribal institutions, or with movements to create different ways of living.

In whatever form it takes, capitalism is not ‘natural’ or eternal. It is constantly changing, being re-made by human beings, and by the bigger worlds around them. The history of capitalism is a history of invention and creativity, and of destruction, exploitation, domination, bloodshed and terror. And also of resistance and rebellion and struggles for freedom.” [9]


  1. Twenty-First Century Socialism, Jeremy Gilbert, 2020, page 5-17
  2. Twenty-First Century Socialism, page 24-5
  3. Twenty-First Century Socialism, page 17-18 and Anticapitalism and Culture: Radical Theory and Popular Politics, Jeremy Gilbert, 2008 page 76-7
  4. Twenty-First Century Socialism, page 17-22
  5. Capitalism, What is it and how can we destroy it? page 4 https://corporatewatch.org/product/capitalism-what-is-it-and-how-can-we-destroy-it/
  6. Capitalism, What is it and how can we destroy it? page 5
  7. https://www.thoughtco.com/historic-phases-of-capitalism-3026093
  8. https://www.thoughtco.com/historic-phases-of-capitalism-3026093, https://en.wikipedia.org/wiki/History_of_capitalism
  9. Capitalism, What is it and how can we destroy it? page 3/4