Open any left magazine such as The Nation or Z,
and you are likely to see an ad for some mutual fund which offers
investing of money with social consciousness thrown in, be it regarding
peace, the environment, or labor conditions. This is symptomatic
of the current left's theoretical impoverishment, especially when
it come to understanding the functioning of capital. Let us take
as an example "Money Changes Everything-Money as Freedom"
in the Dec/Jan issue of Clamor www.clamormagazine.org.
I have no doubt that the author is a sensitive, well-intentioned
person who would like to see a better world. But his recipe for
it, socially-responsible investing, shows an utter lack of understanding
of where profits on investments come from, of any understanding
of the inner workings of capitalism, vs knowing its symptoms. "Money
as freedom" would make a good addition to Orwell's glossary
To the casual observer, well-trained by the mass media and our
"education" system, investments seem to grow as if by
a force of nature, like a seed which sprouts a plant if well-treated.
"Let your money work for you" say the ads. Getting rich
is generally seen as a matter of foresight and some luck. This is
equivalent to thinking that water comes from a tap, milk comes from
the supermarket , and electricity from the wall outlet. What actually
happens is that investors get paid out of the profits of companies
their money is invested in. Even most of those who realize that
nevertheless think that each company wins its profits on its own,
and thus by choosing companies which act "responsibly"
one can invest in a politically progressive manner.
But an individual company's profit is not simply the result of
sales, of that specific company's revenues exceeding costs. Even
hard-core apostles of capitalism such as Adam Smith and David Ricardo
came to realize this around 200 years ago. Every seller is also
a buyer of something. So if all sellers were to sell at 10% above
cost, what they gain as sellers they would lose as buyers, leaving
them where they started. At best, sales can (and do) explain the
redistribution of money from some enterprises to others, but cannot
explain economic growth at the level of society as a whole.
Both Smith and Ricardo, who deemed capitalism to be simply human
nature, sensed profit had something to do with human labor, but
admitted they could not figure out exactly how. It fell to latter
critics of political economy, especially Karl Marx, to discover
that the explanation lay in the fact that, on a world-wide basis,
human beings working in the production of goods and services spend
more time working during a given time period (eg a day) than it
takes society to produce what they need to survive for that period.
This surplus worktime, embodied in money form, is the source of
a general global profit pool. Individual enterprises "drink"
out of this pool at a level based upon their market competitiveness,
by selling their product. This favors the huge companies, which
keep their unit costs down via vertical/horizontal integration,
the use of more machinery and technology vs direct human labor,
and market domination by sheer size. Also in force is the nature
of the functioning of capitalist competition, which tends to distribute
surplus to larger units.
The surplus is thus largely produced by small labor-intensive sweatshops,
but largely appropriated by corporate giants. In fact, a lot of
it is appropriated by banks and other financial institutions, which
play absolutely no role in producing wealth, but suck up ever larger
portions of it via interest payments. And a growing number of workers
are engaged not in producing wealth, but in circulating it (eg sales,
advertising, information processing) and in maintaining the structure
(eg state workers), likewise fed from the surplus pool. These workers
are wage laborers, whose work, even though unproductive of surplus,
is necessary for the system's functioning, and whose conditions
and social disempowerment are just as bad as those of production
This understanding was incorporated by the 19th Century movement
for a new post-capitalist society, by both its "communist"
and "anarchist" components (most anarchists accepted Marx's
analysis of capital, though they generally rejected his political
prescriptions). Not surprisingly, it was greeted by the powers-that-be
with sheer horror. One result was the complete abandonment of the
understandings reached by Smith and Ricardo in favor of a new "science"
called economics, which not only treated capitalism as ordained
by nature, but deemed that only market interactions between individuals
needed to be studied to fully understand the workings of the system.
Class relations were deemed irrelevant.
Thanks to domination by the capital-owning class of all social
institutions, including the media and education, the basic underlying
view implied by economics has become accepted by the vast majority
of the population, even by many who consider themselves on the political
left. The system now appears as natural as the weather. Few people
even know of the previous understandings. And thus, each company
is seen as if it alone is ultimately responsible for its profit
In fact, capitalism is not at all natural, or even the result of
a basic evolutionary process inherent in human social development.
It is a social system that was born not via evolution in Europe's
trade centers, but via imposition upon the post-feudal English countryside
starting in the late Middle Ages, a process referred to as the Enclosures,
which was not completed there till the 19th Century. Formerly unowned
land parcels (the commons) and small estates were expropriated by
large landowners. Most of the peasants living there were expelled,
and those remaining turned into wage workers. The new large estates
became competing enterprises whose aim was wealth accumulation,
the first truly capitalist entities. The expelled peasants, no longer
able to produce their survival needs, flocked to urban centers,
where they were to become the workforce of the industrial age, likewise
in the form of wage labor working for capital. (A good account of
this is furnished by The Origin of Capitalism by
Ellen Meiksins Wood, 1999.)
This process expanded out of England to encompass the whole world.
It is still proceeding quite openly in places such as Latin America,
Africa and South Asia, and in more subtle ways even in the advanced
industrial world, as even the human genetic code becomes enclosed.
This is why every day there are more people willing to sell their
labor power for a wage; they have to in order to survive. The
profitablity of every single enterprise thus depends upon the continued
operation of the global process of capital accumulation, a process
which inherently requires the vast exploitation of human labor and
the continued conversion of the natural world and all human needs
into saleable commodities. Such a system cannot fail to be destructive
to the human community and the planet's eco-system, regardless of
all the good intentions (however sincere) espoused by managers of
investment funds and companies.
But the notion that good investment decisions can lead to a better
world is wrong not only as a long-term strategy, but even as a short-term
tactic. For every dollar invested with a "socially responsible"
intent, there is a pool of a billion dollars seeking the maximum
return no matter what. Control of the vast majority of the world's
capital is concentrated in the hands of a tiny portion of the population
made up of billionaires and multi-millionaires. And companies receiving
their investments are the ones that will thrive and out-compete
rivals by being able to buy new technology, extend control of both
markets and supplies, obtain government assistance (eg military
interventions, trade pacts), and a host of other advantages.
The very idea that the market (and money) is freedom, and participation
in it, whether as a consumer or as an investor, is like political
democracy, is a crock dumped on the public by a skillful propaganda
campaign,well-documented by books such as One Market Under God
by Thomas Frank, (2000). The main effect of the notion of "socially
responsible" investment is that of supporting this propaganda,
much as participation in the two-party electoral charade legitimates
the claim of the political system to be a "democracy".
Some people lament that oh well, capitalism is here, most people
(even socially aware ones) accept it, might as well make use of
it. They may have learned a lot about the symptoms of the current
system, but little of its underlying operating principles. This
shows a major problem of the new movement, its general eschewing
of hard analysis in favor of "practical action" based
upon gut reactions to perceived injustices. I hope this article
helps initiate a debate about how we proceed.
In my opinion, we need to use our resources to promote a direct
action practice which aims to detach social life from the market,
to remove as much of life as possible from the direct control of
capital and from the control of market imperatives whose priorities
are capital accumulation and profit maximization. Think squatting,
gardens on "liberated" plots of land, rent/utility strikes,
workplace occupations... Free your imagination and then use it.
(July 7, 2001)