BOOKS BY ROBERT HEILBRONER

Behind the Veil of Economics

The Essential Adam Smith
The Nature and Logic of Capitalism
The Debt and the Deficit
(with Peter Bernstein)
Economics Explained
(with Lester C. Thurow)
Marxism: For and Against
Beyond Boom and Crash
The Economic Transformation of America
(with Aaron Singer)
Business Civilization in Decline
An Inquiry into the Human Prospect
Between Capitalism and Socialism
The Economic Problem
(with James K. Galbraith)
The Limits of American Capitalism
A Primer on Government Spending
(with Peter L. Bernstein)
The Great Ascent
The Making of Economic Society
The Future as History
The Quest for Wealth
The Worldly Philosophers
21st Century Capitalism
Teachings from the Worldly Philosophy
 Robert L. Heilbroner

The Nature and Logic of Capitalism

W · W · NORTON & COMPANY

NEW YORK · LONDON
Contents
Preface
1
On the Nature and Logic of Social Systems
2
The Drive to Amass Capital
3
The Regime of Capital
4
The Role of the State
5
The Ideology of Capital
6
The Logic of Capitalist Development
7
The Limits of Social Analysis

Bibliography

Index
Preface
TWO MATTERS of some importance must be taken up before we can proceed to the
substance of this inquiry into the nature and logic of the capitalist system. The first concerns the
relation of the argument to that of Marx and the immense body of work that follows in his tradition. I
dislike raising the question, but I do so for two reasons: first, because the answer will affect the
response of many readers, positively or negatively, by virtue of the bright nimbus or the dark cloud
that Marxism conjures up; and second, because the answer affects the level of exposition of the text.
Is this a Marxist view of capitalism? I am myself at a loss to give a
clearcut answer to the question in view of the sprawling and disorganized
state of what passes as a “Marxist” approach to social inquiry in general, or
capitalism in particular. Much therefore depends on one's knowledge of that
vast and ill-defined effort. For readers who will encounter for the first time
the overall vision of capitalism that emerges in these pages, Marx’s thought
will no doubt appear as the single most pervasive and important influence.
For others, more familiar with that thought and its elaboration within
contemporary social science and history, what is apt to be noticeable are the
distances and differences that separate my vision from that of much
Marxian scholarship today and from Marx himself.1
The issue of the degree of Marxian purity or the absence of Marxian taint
is deplorable in any case. I raise the question because the assumptions and
lexicon of Marx’s work are still unfamiliar to much of the educated
American public, as well as to considerable numbers of social scientists. I
have therefore had to spell out a number of points that will be elementary
for those at home in the world of Marxian scholarship but that are
nonetheless elemental and essential for my argument. The converse of this
is that the Marxian approach to a number of central matters is anything but
settled, so that utilizing its concepts has on more than one occasion
involved my taking sides in contested issues. To elaborate on these disputes,
or to justify my own position with regard to them, would take me far afield
of my purpose. I have decided to pursue my course as if it traversed neutral
ground, but I must inform the neophyte and admit to the scholar that I know
I am sometimes riding roughshod over uncertainly held terrain.
A second general issue concerns the level of scholarly detail and
documentation appropriate for the book. I cover a wide range of material:
classical, Marxian, and contemporary economics; anthropological
investigations into early civilization; psychoanalytically based speculations
with regard to “human nature”; various aspects of political and sociological
theory; and of course a good deal of general and sometimes quite specific
history. How much of this requires textual identification? I have come down
on the side of spareness, citing specific quotations or important references
but avoiding as much as possible long, discursive notes or a parade of well-
known sources. I have, however, tried to identify contemporary works that
have influenced me strongly, not only to pay my due respects but to
forestall any appearance of posing as the author of ideas of which I am only
an interpreter, or perhaps synthesizer.*
It is as difficult for me to know how much of the book is new as to know
how much is “my own.” Previous books of mine develop some parts of the
argument that follows; other parts, and the overall architecture, are novel, or
at least have never been put by me in quite this way before. The work as a
whole moves at a stratospheric level of abstraction, very far removed from
the rich microhistory that is the current vogue. How else could one hope to
cover so vast a terrain? I have nonetheless tried to give the argument as
much specificity as possible, without which it would not have the bite I
intend for it. The book is, of course, written mainly in the context of the
country in which I live, but the whole point of the study is to emphasize the
second word in the phrase American capitalism. I have no expectations that
this journey between heaven and earth will satisfy the dialectical angels
looking down or the empirical earthlings looking up, and no delusions that
the book will dispose of matters that have defied resolution to this date and
are likely to continue to defy it for a long time to come. With all these
acknowledgments and anticipated defeats, this is my effort to put paid to
questions that demand some kind of settlement, even if necessarily on
provisional account.
Finally, as part of the matter of settling accounts, I must give proper
thanks to a few people who have provided assistance at various stages of
this project, some with expert guidance, all with their moral support. I shall
begin by paying homage to Adolph Lowe, in his tenth decade still my
intellectual example, grand critic, and invaluable Beckmesser. Anwar
Shaikh, my colleague at the New School for Social Research, has given me
searching criticisms and indispensable encouragement, for which I am
deeply grateful. I am indebted for readings of earlier drafts and for learned
assistance to Peter L. Bernstein, Ronald Blackwell, Joseph F. X. Kaufman,
Sir Henry Lintott, and Henri Zukier, and to Laurence Malone for helpful
suggestions. I am also thankful for a Guggenheim Fellowship that greatly
facilitated the completion of the work. And as so often before, Lillian
Salzman gave her loving care to readying the manuscript.
I reserve the last words for my wife, whose belief, skepticism, criticism,
praise, impatience, endurance, and great solicitude were necessary
conditions for seeing the work through.

1. In my Marxism: For and Against (New York: W. W. Norton, 1980) I discuss these distances and
differences, as well as the underlying filiations.
*
A short bibliography at the end will indicate my main sources and references.
 1
On the Nature and Logic of Social Systems
I HAVE CHOSEN a formal, even formidable, title for my book, and my first task is therefore
to clarify what The Nature and Logic of Capitalism is about. Perhaps I can best do so by relating it to
my previous work. For a long time I have conceived of my investigations into economics as the
exploration of scenarios of development of capitalist economies. Scenario is a somewhat
melodramatic, but I think apt, term, for it implies that the developmental sequences of capitalism
depict narratives as well as impersonal processes—historical dramas that emerge most strikingly
from the pages of The Wealth of Nations and Capital but that are discoverable to some degree in the
works of most of the great economists.
Thirty years ago I presented these scenarios as the projects of the
“worldly philosophers,” and in later books I have used my own imagination
to suggest likely trajectories of the system. Gradually, however, my focus of
interest in economics has shifted. The evolution of capitalism continues to
attract my attention, but I now see the object of my inquiries as directed at a
larger question—not: What will become of capitalism? but What is
capitalism? That is the profound and perplexing problem to which this book
is addressed.
Scenarios of economic change are problem-ridden for many reasons, of
which the most obvious, although perhaps not the most fundamental, is
simply the number of variables that enter into their determination. But the
question of what capitalism “is” presents challenges of another kind. Now
the difficulty is not so much to cope with masses of material as to decide on
a few quintessential elements. This is a much more recalcitrant question.
The variables that affect the capitalist process overwhelm us in their
complexity, but it is at least imaginable that they might be coherently
ordered. No such conceptual clarity is available when it comes to
determining the irreducible elements of the system. No formal procedures,
even at the most abstract level, tell us how to specify the essence of a thing.
Therefore we are left with a task for which no sure guides and many
alternatives exist. Is the irreducible core of capitalism a distinctive
arrangement of its social arrangements of production, a view that reflects
Marx’s famous taxonomy of history into “modes of production”? Or does
its essence lie in the realm of ideas rather than material considerations, as
Weber or Schumpeter would maintain with their emphasis on the equally
famous rational bourgeois mindset? Do we mean by capitalism a single
long evolutionary Western epoch that begins with the rise of mercantile
power in the seventeenth century and continues to this day; or does
capitalism have its own discontinuities, completing a mercantile phase
without any inherent impetus into the next, then appearing in new guise as
industrial capitalism, and now in our times assuming still new forms as
“postindustrial” society, perhaps even as what we call democratic
socialism?
There is no generally accepted method of deciding such questions. Thus,
in writing about the nature and logic of capitalism, perhaps surprisingly the
most problematical word is the last. In his immense panorama of economic
life that leads from the late Middle Ages through the industrial revolution
into modern times, the doyen of French economic historians, Fernand
Braudel, mentions capitalism only in passing in his first volume, traces the
etymology of capital and capitalist but not capitalism in his second volume,
and manages to avoid an explicit definition of the term in his third, where
capitalism appears as a congeries of trading and commercial activities, but
is curiously absent in any sense of a clearly defined system or social order.1

It is easy to sympathize with Braudel’s position. Twenty years ago I was

myself so eager to avoid the difficulties of the term capitalism that I
proposed relegating it to a kind of limbo and concentrating instead on the
sharp particulars of the business system. Could we not, I asked, devote our
attention to the immediate world of industrial enterprises, of market
relationships, of commercial values and vocabularies—the specific
attributes that allow individuals from Sweden and Japan to “do business”
with one another despite the differences in their social milieus—and thereby
bypass the pitfalls of an abstract analysis by dealing with the concrete
realities of business life?2
In more recent years, I have come to the conclusion that we cannot take
this course. I no longer think it is possible to skirt the troublesome issue of
defining capitalism by resort to more concrete, less contentious terms such
as the business world or modern industrial society. Let me make the point
by reexamining business life as I now see it. Without question, the business
world represents the outward-facing reality of capitalism and is an
inextricable part of whatever capitalism is. It is the presence of business
firms and business practices, whether in the guise and habits of Dickensian
London or modern-day New York, that constitutes the capitalism of daily
life, the system in which men and women participate and by which they are
directly affected. Yet there is another aspect to this familiar world, equally
essential to its existence but not itself tangible or concrete. This is a kind of
netherworld in whose grip the activities of business are caught. That
netherworld may be called the Invisible Hand, or the laws of motion of the
system, or the market mechanism; and its influence on the business world
may be seen as propelling it in the direction of growth, involving it in
internal contradictions, or guiding it toward a position of overall balance
and stability. In every case, however, the business world itself is seen as a
mere vehicle by which larger and more encompassing principles of order
and movement are carried out.
It is, of course, precisely such an image of a world of everyday affairs,
caught in the grip of forces that impel it willy-nilly toward some destination
not of its own making, that constitutes the central fascination of capitalism
for the great economists. For Adam Smith the force is that of the Deity
working its will to direct human action into socially beneficial paths that
men could not discover for themselves with their limited capacity for reason
and foresight. To Marx the directing agency is an internal dialectic that
asserts its sway through a “fetishism” that blinds men to their real social
situation, causing them to see only iron exchanging against linen in the
marketplace, not relationships of labor and capital governing market
transactions from behind the scene. For modern economics the ordering
impulse originates in the efforts of individuals to acquire material wealth
against the counterpressures of others within the confines of the social and
physical world—a drama of drive and constraint that impels the larger
society toward a destination depicted as a “general equilibrium” of wants
and capabilities.
In every case, however, the activities of business—in so many ways the
very epitome of independently conceived and purposefully motivated action
—are perceived as obeying imperatives that originate below the surface of
daily economic life. The structuring effect that this netherworld casts over
the course of business activity is never precisely revealed in the pattern of
economic events, any more than the design produced by a magnet in the
arrangement of iron filings exactly reveals the arcs and loops of its field of
force. Yet in the one case as in the other, the persisting presence of an order-
bestowing influence is felt. A tap of history’s finger disrupts the clear
manifestation of the Invisible Hand, the laws of motion, the tendency to
general equilibrium, or whatever, but as business activities repeat
themselves day after day, the background pattern again becomes evident,
just as the force field of magnetism reveals itself most clearly when filings
are poured afresh onto one sheet of paper after the other.
This image serves as well as any to convey why I have come to see the
scenarios of the great economists as depicting more than sequences of
economic states or the dynamics of economic change. Consciously or
otherwise, their scenarios are also representations of another level of reality
—a level of “nether” pressures and processes expressed through a variety of
visible drives and institutions. From this point of view, their scenarios are
not only projections as to what capitalism may become but conceptions of
what capitalism is—that is, descriptions of a social order that manifests its
historic trajectory because it is in the thrall of specific forces or
determinative agencies. As we shall shortly see, this general description can
be applied to all “social formations,” the somewhat unfamiliar but useful
term by which Marx distinguishes the major structural epochs of history. It
is here that I take my own departure into the investigation of these
formations by describing the trajectory of these systems as their logic, and
the forces or determinative agencies as their nature, so that I shall speak of
capitalism as that social order in which a certain kind of nature gives rise to
an historically unique logic.

II
As a first approximation, then, let us take the nature of capitalism as
referring to its behavior-shaping institutions and relationships, and the logic
of capitalism as the pattern of configurational change generated and guided
by this inner core. Both nature and logic are needed to conceptualize the
historic totality of any system. Just as we have seen that a description
directed only at the business aspects of the capitalist world fails to capture
its ordered properties, so a description aimed solely at the invisible force
fields within the system would fail to convey its sense of motion, its guided
historical path.
I hope these words convey a general sense of what a logic and nature of
capitalism imply, but I am certain they raise as many questions as they
answer. I propose therefore that we proceed at once to a deeper examination
of our mode of analysis by examining the idea of the nature and logic of
social formations in general, not just those of capitalism. We shall leave
aside a definition of these formations, for the gradual clarification of our
understanding will yield as one of its results a better criterion for
periodizing history into large-scale categories of one kind or another. For
the moment I ask only that we accept the conventional distinctions among
societies that can be described as primitive, imperial, feudal, and capitalist,
with full awareness of the difficulties of drawing precise boundaries around
them and of the variations of institutions within them.
With our critical impulses temporarily held in check, let us plunge into
the argument by pursuing further the idea of the “nature” of a social
formation. The term refers to the ensemble of elements that influence the
behavior of its members, especially those kinds of behavior that drive the
system along a particular historical path. Here are, to begin, the givens of
geography, climate, and natural setting that exert their silent but continuous
pressures on the lives lived within their ambit, brilliantly illustrated, for
instance, in the opening chapters of Braudel’s work on the Mediterranean
world.3 These geographic and climatic givens are often decisive in
determining the variants of a social formation that are compatible with the
environment, or in encouraging or blocking the social organizations
characteristic of certain formations. As with all animals, humans must adapt
to their environment, although the possibility exists, as the technical powers
of society increase, for humans to adapt their environment to themselves. At
any rate, these geographic givens play only a minor role in constituting the
behavioral patterns that give to capitalism its nature, although it is obvious
that geography and resources play a very important part in delimiting the
field of opportunities against which the capitalist logic unfolds.
Far more important as an active force in the behaviorshaping core of
social systems are the drives and capacities of the human animal as a
species being. What interests us here are not the physical endowments of
the newborn child—its sensory equipment, its motor and other instincts, its
language propensities, etc.—but the psychic endowments that play critical
roles in the transformation of the neonate into the socialized adult. Among
these endowments are the universal necessity for the bestowal and receipt
of libidinal energy or affect; the capacity for conscious and unconscious
fantasy; narcissistic and aggressive impulses; Oedipal conflicts and still
other primordial and inexpungeable attributes of the psyche. This array of
powerful thrustings and receptivities is as integral to humankind as its
genetic equipment, and of much greater importance in shaping its behavior
individually and collectively.
The linkage between the energies of the individual psyche and the mass
behavior of people is much less well understood than that between the
unconscious and the individual. Nevertheless, the central theme of Freud’s
work—the persistence into adulthood of infantile dependency traits and the
idealization of parental surrogates—provides essential insights into
phenomena of history and society that are otherwise inexplicable. There
are, for instance, the universal creation of distinctions of social prestige; the
surrender of self into ceremonies and mass activities and beliefs; the
indifference to or enjoyment of cruelties inflicted on humans who are
classified as “others” rather than “brothers”; and similar manifestations and
susceptibilities of human behavior en masse.* The vulnerability of human
motive and action to the demands of the unconscious can be ignored only
by reducing all social behavior to “rational action,” or by relegating it to the
inexplicable. To my mind this general vulnerability provides the scientific
basis for what is often called “human nature,” and it is with this meaning
that I shall invoke these words in discussing the roots of social behavior in
capitalism as well as in other social systems.
In our next chapter we shall have occasion to look more carefully into
certain aspects of human nature. At this juncture we must still trace out
further aspects of the behavior-shaping social core. Now we move from the
level of physical and psychic endowments toward the surface of society,
where we find its institutions and organizations and belief systems, the
vessels of its culture. These are the social forms into which primal energies
must be poured—forms that themselves have been created in part to
respond to these very energies but that now act as channels for their social
direction.
It would be impossible to make a systematic inventory of these
institutions. Any such attempt, however, would have to give prominence to
two categories. One of these consists of the inherited technical capability of
the community, embedded in its implements of production and its stores of
knowledge—the material aspect of Marx’s “forces of production.” This
sociotechnical apparatus is itself open to change, especially under the
dynamics of capitalism, but at any moment it establishes powerful
enablements and limitations that guide the behavior of individuals, above
all in what we call “economic life.” Technology therefore plays a role not
unlike that of the natural setting itself, save that the material artifacts of the
manmade environment are much more malleable than those of climate or
geography. Thus, in considering the elements that shape behavior, in play
and war as well as in work, the tool and the machine and the general level
of material capability are as powerful as the lay of the land and its riches—
indeed more powerful in that technology can reshape the land and create
riches where there was only desert.
Of at least equal importance with the institutions that shape the economic
activities of the system are those that mold behavior and belief at the
diffuse, unspecialized level we call social life. Here, typical behavioral
ways are influenced by the pressures of indoctrination and education—
experiences that make it possible for individuals to enter their social
formations with a sense of familiarity and acceptance. These pressures
begin with the family that introduces the infant to the norms of private and
public existence; continue with the reinforcement of, and sometimes with
the challenge to, those norms by the child’s peers and teachers; and are
capped by the enticements, rewards and punishments administered by larger
social organizations, from churches to corporations to the state itself. The
latter includes, of course, the socio-legal framework that casts its powerful
compulsions over so much of social activity, establishing with the force of
law what we must do and what we may not do.
This socializing and normalizing process is by no means a completely
integrated or frictionless one. As they move through history, all societies
must make their peace with nature and with themselves, the latter
constituting the theme of domination and oppression that will play a very
large role in our analysis. Here we need only note that the institutions in
which are molded typical patterns of rule, obedience, and beliefs are
themselves molded by an inner dynamic that may take the form of class
against class, against tribe, even civilization against civilization, or at times
contests that focus on color, religion, sex.
For these reasons, at close range the socialization process is often a tense
and sometimes turbulent one. But at a sufficient historic distance, the
spectrum of socializing institutions clearly succeeds in creating typical
behavioral patterns. Primitive societies produce hunters and gatherers with
their requisite attitudes as well as skills; imperial and feudal societies
produce peasants and lords with their respective mentalities and accepted
roles; and capitalist societies create workers and capitalists who also bring
to their activities deeply ingrained conceptions of their social functions.
Were there not a high degree of dependability to this indoctrination process,
the extraordinary stability of social formations would not be the rule, and
humanity would long ago have perished or found its way to a heaven on
earth. The viscosity that is so prominent a feature of social history must
therefore be traced to the stabilizing influence of the behavior-shaping cores
of its social formations.

III
Let me turn now to an initial consideration of the idea of the “logic” of a
social formation, the consequence of the forces and institutions that give it
its nature. Need I interject that this is not an Aristotelian logic of
mathematical certitude? I use the word in a causal sense—a logic of
situations, of human outcomes. Thus the logic of a social formation refers
to the movements of and changes in the “life processes” and institutional
configurations of a society. What is “logical” about these movements is that
they express the outcome of the system’s nature, as a released spring
expresses the energy stored up within it. Wherever there is social movement
there is a matrix of shaping influences whence this movement issues.
Societies steering through uncharted waters depend as much on the
cooperation of a willing—or cowed—crew as on the force of leadership, so
that even the most daring historical journeys have their logics in the forces
and institutions without which these adventures would not be possible.
A system’s logic therefore expresses the potential energy created by its
nature. This potential energy is discharged in innumerable processes and
can be considered at many levels of complexity—in capitalism, for
instance, in terms of the operation of a single market or of a market
“mechanism.” For the time being, however, we will consider only the
“grand logic” of social formations—the logic manifested in the rise and fall
of their class structures or in the most far-reaching changes of their
institutions. These major movements are most easily discerned in the case
of capitalism, where the logic of the system takes such systemic forms as
changing profiles of material output, patterns of employment, or class
distributions of income. With earlier societies in which the economic aspect
of life played a much less independent role, there is no such strikingly
measureable aspect of the system’s logic, for their economies did not
present the ordered sequences of change that are of such importance under
capitalism.
But even under capitalism, it is clear that economic variables in
themselves comprise only a portion of the historic drama played out by the
system. The evolving sociopolitical configuration of capitalism, as it moves
from the pre-industrial landscape of Adam Smith to that of the
contemporary “post-industrial” state, certainly reflects the impact of
economic forces, but equally certainly it involves the effect of political and
ideological developments, where the role of economic elements can often
only be located in the background. And certainly in tracing the histories of
imperial kingdoms or feudal principalities or primitive communities, the
aspects of the narrative that command our attention and that most stand in
need of explanation have very little if anything to do with self-directing
economic sequences.
The logic of social formations is not therefore merely a playing-out of
economic movements that arise from their behavior-shaping nature. Rather,
the grand logic of societies embraces all large-scale and long-lasting
institutional or cultural changes that arise from whatever source. These
changes are not always easy to identify or explain—history is full of ill-
understood or ill-explained logics, such as the fall of the Roman Empire,
the decline of Mayan civilization, or for that matter the rise of capitalism.
The idea of a logic of social formations is not, then, an attempt to reduce
history’s complexities to simple causal linkages, above all economic
linkages. Rather, the idea suggests that patterned changes in history cannot
be explained or understood without reference to the nature of the social
formation that gives rise to specific behavioral and attitudinal
characteristics. Even in so modest a form, such a hypothesis is bound to
raise objections and caveats. As with the concept of the nature of a social
formation, I ask that we reserve our skepticism until the idea can be
examined in more concrete form in the chapters to follow, including at the
very end some reflections on the critical words explain and understand.
For the moment, however, let us illustrate the notion of a logic with a few
very general examples. We can commence with primitive society,
generalizing from the tattered remnants of what was once the main, perhaps
the only, form of human community. These primitive societies have been
described as having no history. By this we mean that they achieve
immortality without leaving behind a narrative “written” in terms of a
systematic evolution in their modes of subsistence, their structures of
authority, their belief systems, or even their adventures. To put the matter
more cautiously, if there are such changes or adventures, they do not reveal
an immanent directing impulse, so that these societies appear to sleepwalk
through time.
Yet such societies also display a nature and logic, although of a
completely different kind from that with which we have heretofore been
concerned. In their case it is the very changelessness of the structure of
primitive life that is the salient aspect of its logic; and as is always the case,
it is the elements that support and generate this requisite inert behavior that
comprise its nature. Without in any way intending to be exhaustive, these
inertial elements include a material relation to the environment that renders
continuous technical experimentation dangerous or unnecessary; a structure
of authority that minimizes tensions through the avoidance of exploitative
relationships; a community that creates strong social obligations through
kinship and reciprocity ties; and perhaps belief systems that discourage
skepticism or other causes of intellectual ferment.4
In similar fashion we can apply the concept of a nature and logic to the
array of empires, kingdoms, and despotisms to which Samir Amin has
given the illumining title “tributary systems.”5 These societies typically
display logics that are vastly more dynamic and complex than those of
primitive communities, with a higher degree of adventure in their narratives
and often with substantial material or political structural change. These
logics in turn are the historical consequence of social systems in which
institutions typically magnify the persona of a single person into a godlike
ruler, the society then becoming a direct extension of the person of the shah,
emperor, or king. This simple statement already gives some explanatory
insight into what otherwise appears only as a meaningless array of personal
achievements and failures, triumphs and disasters. The logic of tributary
systems must be seen as the translation into “history” of the biographies of
their central personages, the translation reflecting the vast numbers of lives
affected by the will and character of the ruler.
In turn, of course, this suggests the need to look for forces and
institutions that support such a despotic form of society. This brings us to
consider the role played by human nature in establishing and perpetuating
oppressive social relationships, a matter about which we will have more to
say in our next chapter. Suffice it here merely to comment that the trappings
of rule as well as the exercise of force revive infantile feelings of
dependency, making possible the personality cult that is a central aspect of
the nature of these societies, and the source of their biographical logics.
As one evidence of the fact that biographical histories have a logic—an
explicable, understandable sequence in their unfoldings—consider their
obsession with dynastic alliances. To someone to whom the nature of these
societies remains unclear, the ceaseless quest for appropriate marriages and
family successions seems only a tale of personal ambition. But from within
a society where personal rulership is the central order-bestowing force, the
necessity of securing a legitimate heir becomes as pressing and self-evident
as that of securing a legitimate succession to the “person” of a corporation
in the modern business world. The nature of tributary societies derives in
large part from institutions that buttress and legitimate that imperial idea.
The restless and imperative search for dynastic alliances thereby expresses
more than the idiosyncratic marital or political ambitions of their rulers. It is
a scenario fully as explicable in terms of behavioral regularities, and as
understandable in terms of empathetic considerations, as the scenarios of
societies driven by the “imperatives” of wealth.6
 IV
This brings us to capitalism, but I will postpone for the coming chapters a
consideration of what nature and logic reveal about that familiar and yet
strange social formation. Rather, let me conclude this introductory chapter
with a last remark about the property of historic logics in general. The
passage of societies through time does not take place in a vacuum, like the
free fall of an object in space. Rather, as we have noted, social logics often
generate frictions that alter the course of their trajectories in flight. The
frictions arise because the behavioral-shaping cores of social formations—
at least those beyond primitive society—are typically made up of
institutions that reproduce the antagonistic interests or beliefs of different
groups or social classes. As a consequence, a social formation is rarely able
to move changelessly through history, reproducing without end its initial
configuration of material, political, or cultural institutions and relationships
but is likely to veer from this path as the clash and struggle among
contending interests reshapes the underlying institutions themselves.
At the most obvious level, the existing behavioral forces may directly
alter the environment by the conquest of foreign territories or by the
redesign of the apparatus of production in ways that make impossible the
continued pursuit of older routines and lifeways. At a more repressed level,
the inability of a social formation to accommodate the wants of substantial
portions of the population may result in the accumulation of resentments
that lead ultimately to social concessions, perhaps to violent change. It need
hardly be said that capitalism, with the extraordinary dynamism manifested
in all spheres of its life, is par excellence the social formation in which the
logic of the system affects its nature; but to some degree this is the case
with all social systems that generate large-scale changes of any kind. That is
why I must emphasize again that neither its nature nor its logic alone will
give us an adequate grasp of what a society “is,” which must include what it
was, as well as what it might become.
Finally, let us return to a question posed in our initial section. Is there a
need for the word capitalism? The perspective of nature and logic clarifies
the question. The descriptive words by which we demarcate types of social
formations, such as primitive or tributary societies, are useful only insofar
as they bring to the forefront aspects of these formations that establish
important resemblances within each ideal type, as well as distinctions
among them. We speak of primitive society, fully aware of the differences
between Eskimo, Trobriander, and Bushman, because there are common
aspects of those societies that override these differences, knitting them into
a common family of primitive communities. The idea of a nature and logic
proposes that we establish these resemblances or differences in two
interlinked aspects: according to the different trajectories—the logics—of
the great social formations, and in the different inner natures from which
these logics emerge.
It is beyond argument that the nature and logic of those societies we
commonly call capitalist are profoundly at variance with those of primitive
or imperial or feudal societies. The nature of capitalism, evidenced not only
in its business institutions but in the general behavioral dispositions and
beliefs that make its institutions “work,” cannot be found in earlier forms of
social organization; and the logic of capitalism, with its dramatic economic
scenarios, similarly has no earlier parallel. A social formation that gives rise
to such a distinctive life history assuredly deserves an identifying label that
will call to attention the source of its unique momentum and character.

1. Fernand Braudel, Civilization and Capitalism, 3 vols. (New York: Harper & Row, 1982, 1984).
See reviews by Keith Thomas, New York Review of Books, November 22,1984 and Lawrence Stone,
The New Republic, October 1, 1984.
2. R. Hcilbroncr, The Limits of American Capitalism (New York: Harper & Row, 1966), pp. 4, 5.
3. Fernand Braudel, The Mediterranean, Vol I (New York: Harper & Row, 1972), Chs. 1–4.
4. Sec Stanley Diamond, In Search of the Primitive (New Brunswick, N.J.: Transactions Books,
1974), Ch. 4.
5. Samir Amin, Class and Nation (New York: Monthly Review Press, 1980), Ch. 3.
6. See Perry Anderson, Lineages of the Absolutist State (London: New Left Books, 1974), p,39.
*
Freud’s most direct discussion of the relation between individual psychoanalytic dynamics and
collective social action remains his Group Psychology and the Analysis of the Ego. There are also
well-known remarks in The Future of an Illusion, Civilization and its Discontents, Thoughts on War,
and elsewhere, but nothing like a systematic discussion of the problem exists in his work. I am
indebted to Dr. David Beres and to Professors Henri Zukier and Peter Gay for various psychoanalytic
references. Finally, I must call attention to a pioneering study by Harold Lasswell, “The Triple
Appeal Principle: A Contribution of Psychoanalysis to Political and Social Science,” American
Journal of Sociology, January 1932.
 2
The Drive to Amass Capital
WE MUST BEGIN by investigating the single most important element in capitalism—an
element visible in the logic enacted by the world of business but originating deep within the system
as an essential and indeed primary aspect of its behavioral orientation. This is the driving need to
extract wealth from the productive activities of society in the form of capital.
The extraction of wealth, as a flow of “surplus” production
systematically channeled from the broad working body of society into the
hands of a restricted group or class, is by no means peculiar to capitalism.
Surplus itself, in all societies, refers to the difference between the volume of
production needed to maintain the work force and the volume of production
the work force produces. It is not always easy to measure this difference
with exactitude, or to compare one surplus with another when the two are
embodied in different kinds of goods. But the general notion of a margin
over and above that required for the maintenance—the “reproduction”—of
society is a basic concept of classical political economy that offers no
stumbling block.1
We discover surplus in all societies that have made the leap from
primitive communities into civilizations, a leap that is universally
associated with the rise of some form of centralized state. Indeed, a
principal aspect of, and perhaps reason for, the formation of these states has
been precisely the facilitation of the extraction of surplus. From the greatly
enhanced organizational capacities of the state arose the colossal citadels
and monumental works of Egypt and Persia, the Incan and Mayan empires,
the dynastic kingdoms of India and China.
There is, however, a decisive difference between the character of the
surplus products of these tributary societies and that of capitalism. In
precapitalist societies surpluses assume the aspect of “wealth”—of desired
objects—because they embody specific attributes that inhere in their
physical characteristics. Wealth appears in such forms as goods or services
devoted to luxury consumption, to the maintenance and deployment of
armed force, to religious edifices, or simply to display. Wealth thereby takes
on the properties of “use values,” to use the term that Marx adopts from
Adam Smith and Aristotle, including not least the use value of expressing
the might and grandeur of rulership itself.
Conspicuously absent from these means of utilizing wealth is its
application for a purpose central to, and indeed constitutive of, capitalism.
This is the use of wealth in various concrete forms, not as an end in itself,
but as a means for gathering more wealth. The closest analogue to this, in
ancient kingdoms, is the employment of military or religious or regal
institutions and equipages, not merely as symbols of power and prestige
desired for their own sakes but as instruments for military, religious, or
dynastic expansion. We shall shortly see that there are more than superficial
resemblances between this expansive use of surplus and that of capitalism,
the common tie being the utilization of surplus to augment the power of a
dominant class. Nevertheless, in ancient civilizations wealth itself is
represented mainly by physical embodiments that are its sufficient reason
for being, its final purpose.
In contrast, in capitalism wealth inhabits material things only transiently.
Thus Braudel is not correct when he writes: “capital or capital goods, which
come to the same thing [my italics], can be divided into two categories:
fixed capital which has a long or fairly long physical life ...; and variable,
working, or circulating capital ... which is absorbed and swallowed up in
the production process: seed-corn, raw materials, semi-finished products,
the money for all the various settlements of accounts.”2 This has the ring of
easy familiarity, but it leads us away from rather than toward an
understanding of what capital is. If capital were only goods used in
production or money needed to buy materials and labor, then capital would
be as old as civilization, and there would be no purpose in singling it out as
an identifying element of one kind of society, worthy of becoming, in fact,
its historic badge. It is precisely the failure to recognize this distinctive
aspect of capital that leads Braudel to the curiously indifferent attitude to
capitalism that I have noted earlier. It is a failure shared by conventional
economics as well, which treats capital as a material category of things, or
as money, and which accords to it no special properties that would explain
why the social formation in which we live is described as the “ism” of
capital.
 What is capital, then, if it is not just production goods or money? The
initial answer, familiar to students of Marx but usually strange to others, is
that capital is either of these things when it is used to set into motion a
process of continuous transformation of capital-as-money into capital-as-
commodities, followed by a retransformation of capital-as-commodities
into capital-as-more-money. This is the famous M-C-M’ formula by which
Marx schematized the repetitive, expansive metamorphosis through which
“capital” manifests itself.
This repetitive, expansive process is, to be sure, directed at bringing
goods and services into being through the organization of trade and
production. But the physical attributes of those commodities, even when
they take the form of luxurious objects, are not prized as evidences of a
successful completion of the search for wealth, as long as they are in the
capitalist’s possession. On the contrary, their physical existence is an
obstacle that must be overcome by converting the commodities back into
money. Even then, when they are sold, the cash in turn is not regarded as
the end product of the search but only as a stage in its never-ending cycle.
Capital is therefore not a material thing but a process that uses material
things as moments in its continuously dynamic existence. It is, moreover, a
social process, not a physical one. Capital can, and indeed must, assume
physical form, but its meaning can only be grasped if we perceive these
material objects as embodying and symbolizing an expanding totality. A
human being cannot exist without flesh and blood, but the essence of
humanness is that flesh and blood are in the service of an organizing
purpose, a life force. So it is with capital. Without the organizing purpose of
expansion, capital dissolves into material building blocks that are necessary
but not sufficient to define its life purpose.
The relation of money and capital is particularly interesting in that money
is the closest that wealth comes under capitalism to finding an analogue to
the use values in which it appears in older societies. It is the way in which
we usually measure the extent of capital, especially for an individual
capitalist or firm. Yet, as we have just seen, money in itself is not capital: it
is money-in-use that is capital. Money has served this capital-like function
even before capitalism appeared, for example when merchants in antiquity
used it to hire casual hands to carry wares or to man a ship. In these cases,
too, money served as capital—that is, as an intermediary in a process whose
aim was the merchant’s capacity to carry on an M-C-M’ circuit in trade.
The only reason we do not designate these ancient societies as capitalist is
that the production or trade-guiding functions of these nuclei of capital were
minuscule compared with tradition and command, the main renewing or
directing forces within these systems. Capitalist processes in these societies
were therefore relegated to the periphery of social activity, often directing
luxury-oriented activities but never central or crucial ones.

The analysis of capital as an expansive process is an important step in

escaping from the fetishism of capital as objects, such as machines, or as a
sum of money. It leads us to see capital as a web of social activities that
permit the continuous metamorphosis of M-C-M’ to take place. At the
center of this process is a social relationship between the owners of money
and goods, the momentary embodiments of capital, and the users of these
embodiments, who need them to carry on the activity of production on
which their own livelihoods depend. The legal crux of this relationship lies
in the right of exclusion: a central, although often ignored, meaning of
“property” is that its owners can legally refuse to allow their possessions to
be used by others. The critical aspect of money or capital goods as private
property does not lie in the right of owners to use them in any way they
wish, for such a dangerous social right has never existed, but to withhold
them from use if their owners see fit. It is this right that enables the
capitalist to dominate the sphere of trade and production in which his
authority extends, as other legal rights enable military officers or priests or
political figures to dominate the spheres in which their authority extends.
The idea of capital as a social relationship leads directly to the core of
that relationship: domination. Here we must immediately note a striking
difference between the domination exercised by owners of capital and that
belonging to “owners” of other aspects of social authority. It is that the
domination of the army, the church, and of course the state derives its
behavior-shaping powers directly from the use or threat of physical or
spiritual punishment, up to and including death or its spiritual equivalent.
That is, it is within the legal competence of these authorities to inflict pains
directly on those who fail to obey their commands. The process of
socialization may make it sufficient merely to display the symbols of
power, not to wield its might, but the capacity to utilize force or to inflict
suffering remains the essence of the capacity for domination.
The power wielded by capital differs in subtle but substantial ways. The
owner of capital is not entitled to use direct force against those who refuse
to enter into engagement with him as buyer or seller. The merchant or the
industrial employer may, of course, have recourse to the power of the state
to enforce contractual arrangements, and the state is usually—although not
always or by legal necessity—willing to lend its punitive powers to break
strikes, disband picketers, provide armed guards to protect the routes and
outposts of trade or the establishments of production. Nonetheless, the
coercive force itself belongs to the state, not to the capitalist; and when the
capitalist employs strong-arm tactics it is a usurpation, not a proper use of
power.
In a word, there is a qualitative difference between the power of an
institution to wield the knout, to brand, mutilate, deport, chain, imprison, or
execute those who defy its will, and the power of an institution to withdraw
its support, no matter how life-giving that support may be. Even if we
imagined that all capital was directed by a single capitalist, the sentence of
starvation that could be passed by his refusal to sell his commodities or to
buy labor power differs from the sentence of the king who casts his
opponents into a dungeon to starve, because the capitalist has no legal right
to forbid his victims from moving elsewhere, or from appealing to the state
or other authorities against himself.
Thus the domination of the merchant, for instance, resides in his legal
right not to sell to those who will not meet his price—a right that can
involve great social deprivation, as in the case of a famine, but that is
nonetheless entirely free of direct personal coercion: the merchant cannot
require a potential buyer to become an actual one. Similarly, the domination
of an industrial capitalist is immediately limited to his right not to offer
employment to those who will not accept his terms—again, a right that can
carry the most severe consequences but whose exercise is devoid of the
punitive confrontation of officer and soldier, priest and communicant, ruler
and subject. However harsh the domination of capital may be, it therefore
always operates at a remove, and with a degree of voluntary submission
implicit in the potential refusal of the other party to accept the capitalist’s
terms, an option generally absent from precapitalist modes of domination.
Conventional economists recoil at the unaccustomed idea of capital as a
relationship of domination, but Marxian economists too often forget that the
domination represented by capital emancipates society from harsher
previous modes of domination.
What is of importance for our present focus is that capital can exert its
organizing and disciplining influence only when social conditions make the
withholding of capital an act of critical social consequence. This obviously
entails in the first instance the rise of a capital-oriented class—originally
always the merchant class—from a subordinate position within society to a
position of leverage. This is the result of the merchants’ capture of
increasingly strategic social functions, from the financing of rulers to the
provisioning of cities. No less important, the dom. nation of capital hinges
on the appearance of a class of workers who are dependent for their
livelihood on access to the tools and land that can be legally denied to them
by their owners. Adam Smith saw this dependency: “Many workmen could
not subsist a week, few could subsist a month, and scarce any a year
without employment,” he writes. “In the long-run the workman may be as
necessary to his master as his master is to him, but the necessity is not so
immediate.”3
What Smith did not see was the point stressed by Marx: the dependency
also presupposed the dissolution of previous social relationships in which
the peasant was entitled by law and custom to retain some portion of the
crops he directly raised, and in which the urban worker owned his own
means of production in the form of a cottage loom, a potter’s wheel, and the
like. That altered relationship was the end product of a protracted
revolution, commencing in the fifteenth century or even earlier, continuing
through the nineteenth, and in some parts of the world still in progress, in
which the enclosure movement, the destruction of protected crafts and
guilds, the creation of a proletariat from the cellars of society, and the
whirlwind forces of new technologies disrupted the social relations of older
socioeconomic regimes and prepared the way for the wholly different
regime of capital.
However varied the agencies of this immense revolution, its effect was
always the same: established rights of direct access to one’s own product
were replaced by new rights by which peasants and workers were legally
excludable from access to their means of livelihood. Only by understanding
that the seemingly concrete entity of capital is in fact the representation of
this relationship of dependency between two different categories of social
existence can the significance of capital be grasped, and with it the
behavioral influence that it exerts as a central constitutive element in the
nature of the system erected in its name.

II
The relationship of domination has two poles. One of them—the social
dependency of propertyless men and women without which capital could
not exert its organizing influence—has been exhaustively studied by
historians, particularly for the period during which feudal relations give
way to capitalist ones.4 Here I want to turn to the other, less examined pole
—the restless and insatiable drive to accumulate capital.
What is the rationale of this endless process? Adam Smith found the
answer in the social approval that riches drew to their possessor: “The rich
man glories in his riches, because he feels that they naturally draw upon
him the attention of the world At the thought of this, his heart seems to
swell and dilate itself within him, and he is fonder of his wealth, upon this
account, than for all the other advantages it procures him.”5
Smith’s answer points in the direction of what seems to be a universal
element in all societies, the desire for prestige and distinction. If we inquire
more deeply into the etiology of prestige itself, we must probably look
toward the universal need for affect, the consequence of the prolonged
human nurturant experience, or to a sublimated form of the sexual drive for
preeminence that is part of the genetic endowment of all living beings.
Prestige or distinction are gained in many ways—among them, strength,
bravery, intelligence, wisdom, or the reputed possession of magical or other
special powers. These are qualitative attributes of individuals and have little
or nothing to do with the possession of goods or even of rights. It is a
general fact, however, that the distinction of prestige is associated in many
societies with a special category of “prestige goods,” such as the cattle of
the African herders, which confer distinction on their owners, regardless of
whatever personal characteristics they may have.6 It is this capacity of
inanimate things to enhance the personae of their owners that is of interest
to us in seeking the roots of the unbounded drive to amass wealth as capital.
It is uncertain whether all societies possess prestige goods, but there is no
question that all humankind possesses the capacity, rooted in infantile
narcissism, to project psychic energies and fantasies into objects that then
become extensions or embellishments of the person him or herself. As
William James noted long ago, “Between what a man calls me and he calls
mine, the line is very difficult to draw.” Marx, too, recognized this attribute
when he wrote, “The extent of the power of money is the extent of my
power. Money’s properties are my properties and essential powers—the
properties and powers of its possessor.”7
The importance of prestige goods lies in their dramatization of an
essential precondition in human nature for the existence of “wealth.” The
desire to accumulate capital has other roots, as we shall see, but prestige
and distinction are certainly prominent elements, much as Adam Smith
described them. If we have gone beyond Smith or Marx in this regard, it is
only insofar as we can link the need for preeminence to the unconscious
levels of the personality, and to the degree that we recognize the universal
human capacity to treat things as extensions of the person.
The drive for prestige, however, is only a necessary, not a sufficient
condition of the drive for wealth. For wealth differs in a crucial respect
from prestige objects, or from the possession of personal distinction.
Prestige and distinction enlarge the authority and repute of their possessors
but not necessarily their ability to force others to do their bidding. The
power of community headmen, for example, is notoriously weak,8 as is that
of many prestigious figures in modern society, such as its moral or
intellectual leaders. On occasion moral authority has huge power, but as a
rule its capacity to control social action is small.
The attribute of wealth that distinguishes it from prestige goods is that its
possession confers on its owners the ability to direct and mobilize the
activities of society, although it does not necessarily also confer the repute
or authority of distinction. Capital calls the tune, even though an individual
capitalist may be an object of contempt. Wealth therefore implies rights of a
kind that prestige objects do not have, in particular those we have
previously discussed with respect to the domination of capital—namely, the
right of denying to others access to the goods that constitute wealth. These
goods may enjoy no symbolic importance, but they have material
importance, so that control over access to them invests their owner with an
attribute that goes beyond prestige and preeminence. This is power. The
grain in the lord’s granary is not an object of prestige, as is the splinter of
the Cross in his chapel, but it is the means by which he is able to command
the labor of his slaves, which the splinter of the Cross may not.
Wealth is therefore a social category inseparable from power. In simple
egalitarian societies, where all have access to the resources needed for the
maintenance of a conventional way of life, wealth cannot exist, although
prestige objects can. Per contra, wealth can only come into existence when
the right of access of all members of society to an independent livelihood
no longer prevails, so that control over this access becomes of life-giving
importance. The corollary is that wealth cannot exist unless there also exists
a condition of scarcity—not insufficiency of resources themselves, but
insufficiency of means of access to resources. As Adam Smith put it,
“Wherever there is great property, there is great inequality. For one very
rich man, there must be at least five hundred poor, and the affluence of the
rich supposes the indigence of the many.”9

III
Unlike the simpler category of prestige goods, wealth therefore rests on
considerations of power, and the drive to accumulate wealth requires some
exploration of the drive to accumulate power.
Power is not a well-understood aspect of human society. Essentially it
refers to the ability to command or control the behavior of others; but this
general definition passes lightly over the great range of relationships
expressed in the power of the despot, the religious leader, or in the
disembodied “power” of ideas. The power of capital, as we have seen, has
the remarkable attribute of being devoid of direct punitive rights, which
seems virtually a contradiction of the very meaning of power; but none
would deny that capital has the power to enlist command and obedience on
a vast scale.
Power is not only protean in its aspects but obscure in its psychic roots.
The “pleasures” of power are usually assumed to exist but are not
explained; and the interrelation between the exercise of will as power and
the acceptance of that will as obedience is similarly left unexplored. Here,
as with prestige, it seems necessary to find some anchorage in those
psychosocial capacities of the species to which we give the name “human
nature.” It is tempting to suggest that at some elemental level this anchorage
links the phenomenon of “domination” in human society with that found in
many animal species. On second look, however, we see that the word refers
to entirely different aspects of the two worlds.10 Domination among animals
is largely sexual in nature, probably associated with survival chances for the
herd or troop or flock, and completely divorced from any division of tasks
or general subservience to the “will” of a hegemonic individual.
Domination in human society, on the other hand, is of minor evolutionary
significance, and largely devoted to the division of the social product or to
the fulfillment of the prestigeladen achievements of rulers for which the
organized labor of large numbers is necessary. Domination in human
society, in a word, entails a structured inequality of life conditions that has
no parallel in the animal world.
The only reason that filiation with animal “domination” continues to
attract attention is the need to explain why this inequality, which grossly
disadvantages the majority, has appeared in every quarter of the globe,
displacing the egalitarian social structures of communal bands that
anthropologists assume to have been the original social formation. If the
prevalence of domination in human societies cannot without gross
anthropomorphism be ascribed to residual “animal” tendencies, we must
account for this all-important historical state of affairs by resort to purely
human characteristics. Here, of course, is where human nature enters, in the
role of the generally acknowledged significance of prolonged infantile
dependency, the uniquely and universally human experience out of which
social behavior is formed.
In this experience the individual personage goes through successive rites
of passage that gradually and painfully separate it from an original psychic
fusion with its mother and immediate environment. Through these
inescapable trials the potentialities of independent behavior are created, but
so also are the encapsulizations of infantile emotional requirements and
sadomasochistic drives that recede, but are never extinguished, within the
adult person. Some individuals emerge from this childhood experience with
unappeased and unappeasable needs for affect; others with a
submissiveness acquired in coping with adult wills; and all with enough
residue of both to give rise to a widespread empathetic understanding of
domination itself, and of the needs it satisfies from above and from below.
Infancy is thus the great readying experience that prepares us for the
adult condition of sub- and superordination—an experience that appears so
“natural” that few inquire as to the origin or nature of the desire to impose
one’s will, or the pleasure that is derived from its imposition, or the
obverse, the impulse to acquiesce in, or even to identify sympathetically
with, the imposition of another’s will over oneself. Infancy is the condition
from which we must all escape, and as such, the source of the emancipatory
thrust that is also part of the human drama; but it is as well a condition to
which we all to some degree wish to return, the prototype of the existential
security that we also seek.*
These roots of the power relation in human infancy do not, however,
explain a crucial aspect of domination as an historic fact. It is that organized
power is not a universal aspect of human history but a condition that only
appeared when the first states arose from the aboriginal social formation of
humankind. Thus the elements of the unconscious from which the act of
domination draws its attraction, both for those who seek it and for those
who yield to it, supply a necessary basis for understanding the
psychological functions of power, but they do not sufficiently explain why
humankind throughout the world took the extraordinary step of abandoning
an equality of access to resources to enter into a condition in which the
great majority of individuals became more or less permanently dependent
on a small minority.
Only conjectures can fill this gap in our knowledge. Given the weakness
of the power accorded prestigious individuals in primitive societies, and the
tendency of these groups to fragment into smaller bands once the threshold
of a dangerous infringement on independence is reached, it seems
reasonable to assume that external pressures of some kind—limitations (or
unusual concentrations) of resources, or the gradual forces of population
growth, or the perceived advantages of a social division of labor—may
have pushed self-sufficient communities into social differentiations,
distinctions of rank, stratification, and finally differential access to
resources. That this process must at some stage have required force rather
than drift is evidenced by the universal “legitimation” of property rights by
military power.11
Whatever its origins, the organized state, once established, had little
difficulty in extending its dominion over unorganized communities. The
advantages of a superior class or group that could marshall the labor of the
underlying population were quickly apparent in the pursuit of war and in
the accumulation of surplus. Following a theme of German historiography,
the historian Alexander Rustow offers this plausible, if perhaps fanciful,
reconstruction of a neolithic push of horsed nomads into the territories of
sedentary cultivators, perhaps as a consequence of climatic displacement:

The rider appears on the stage of history like a new breed of man, marked
by a powerful superiority; he is over two meters in height and moves
several times faster than a pedestrian. The enormous impact that the first of
such riders must have made on peaceful stockbreeders is depicted in the
legendary form of the centaur. ...
Superincumbency brought victors and vanquished, as upper and lower
strata, into opposing social situations that would eventually produce equally
diverse effects in selection, breeding, and hereditary character traits. The
upper stratum was trained to cultivate lust for power, arrogance, pride, a
sense of superiority, toughness, cruelty, and sadism, for the more it
possessed and practiced these characteristics, the more solidly it sat in the
saddle of superstratification. The corresponding characteristics of the lower
stratum were subservience, flexibility, submissiveness, servility,
spinelessness, masochism—for the more it possessed and practiced these
characteristics the better it adapted itself to the role assigned by fate.12

Thus there is no difficulty in explaining how power, once set into place,
could expand its domain and reinforce its own structure. The aspect of
domination that requires elucidation, we repeat, appears so self-evident as
to be in danger of being left unexplained. This is the characteristic of
human nature that opens the possibility of a structure of domination in the
first place, the aggressive and passive elements in the unconscious without
which the exercise or sufferance of power could not originally appear.
As we shall see in our next chapter, there are important considerations
introduced into the mechanism of power once it is exercised through the
accumulation of capital, including the quality of insatiability that is an
inherent aspect of the drive to amass power-as-capital, whereas an
insatiable drive after power in other guises appears only as a pathology. As
Marx was to say in a somewhat different context, “while the miser is merely
a capitalist gone mad, the capitalist is a rational miser.”13 Indeed we will see
that the very absence of direct coercion in the social relationship of capital
introduces an element of necessitous expansion that is largely missing from
the exercise of power in other ways.
At the moment, however, it is enough to recognize that the drive to amass
wealth is inextricable from power, and incomprehensible except as a form
of power. The social formation of capitalism must therefore be seen in the
first instance as a regime comparable to regimes of military force, religious
conviction, imperial beliefs, and the like. Capitalism is the regime of
capital, the form of rulership we find when power takes the remarkable
aspect of the domination, by those who control access to the means of
production, of the great majority who must gain “employment”—the
capitalist substitute for the traditional entitlement of the peasant to consume
some portion of his own crop.

1. See, for example, Adam Smith, The Wealth of Nations (Oxford: Clarendon Press, 1976), p. 497.
Smith calls the surplus the “balance of the annual produce and consumption.”
2. Fernand Braudel, The Mediterranean, Volume II, 1973, p. 242.
3. Smith, Wealth of Nations, p. 84.
4. The literature of proletarianization begins with Marx’s famous chapters on “primitive
accumulation” (Capital, I, Part 8 [New York: Vintage, 1977]) but has long since lost its exclusive
Marxian character. See the classic account by Paul Mantoux, The Industrial Revolution in the 18th
Century (London: Jonathan Cape, 1952).
5. Smith, Theory of Moral Sentiments (Oxford: Clarendon Press, 1976), pp. 50–51.
6. For prestige and prestige goods, see Morton Fried, The Evolution of Political Society (New
York: Random House, 1976) and Marshall Sahlins, Stone Age Economics (Hawthorne, N.Y.: Aldine,
1972).
7. William James, Principles of Psychology, Vol. I (New York: Henry Holt, 1890), pp. 291–92;
Marx, “The Power of Money in Bourgeois Society,” in Economic and Philosophic Manuscripts of
1844 (New York: International Publishers, 1964), p. 167.
8. Fried, Evolution of Political Society, p. 68; Sahlins, Stone Age Economics, p. 98.
9. Smith, Wealth of Nations, pp. 709–710.
10. See the discussion in Sahlins, The Use and Abuse of Biology (Ann Arbor, Mich.: University of
Michigan Press, 1976), Ch. 1.
 11. Sec Fried, Evolution of Political Society, pp. 183f., 230; also H. Claessen and P. Skalnik, eds.,
The Early State, (The Hague: Mouton Publishers, 1978), esp. Ch. 2, Ronald Cohen, “State Origins: A
Reappraisal.”
12. A. Rustow, Freedom and Domination (Princeton, N.J.: Princeton University Press, trans.
1980), pp. 29, 47.
13. Karl Marx, Capital I (New York: Vintage Books, 1977) p. 254.
*
The domination by men of women, a profound shaping element in social history, undoubtedly
requires a different analysis from that of the domination of social classes. Nonetheless, the pleasures
of male superincumbency and the appeals of female submission must be explained, not explained
away by assuming that domination is intrinsically pleasurable and submission painful. I would think
the same general aspects of the human psyche would apply to the case of patriarchy as to that of class
rule.
 3
The Regime of Capital
WE HAVE COME to the point when we can describe capitalism as a stratified society in
which the accumulation of wealth fulfills two functions: the realization of prestige, with its freight of
unconscious sexual and emotional needs, and the expression of power, with its own constellation of
unconscious requirements and origins. When Marx calls capital “self-expanding value” he is
underscoring the function of capital as an embodiment of power, for the essence of capital to Marx is
its domination over labor; but when Veblen stresses the emulatory behavior to which capital gives
rise, he is explicitly stressing the resemblances between the symbolic properties of capital as wealth
and the prestige objects of primitive societies. Both aspects of capital can be seen in capitalist social
formations, where the process of accumulating capital is pursued in part because it is the manner in
which the dominant class expresses and renews its social control and in part because it is the typical
means by which preeminence and distinction is achieved in the socioeconomic world.
The sublimation of the drive for power into the drive for capital not only
demarcates the nature of the system—that is, its behavior-shaping
properties—but also affects its logic, the movement that emerges from the
social formation. We have already noted a number of such distinctive traits,
but we must now inquire more deeply into a few of them. One aspect is the
insatiability that characterizes the process of capital, endlessly converting
money into commodities and commodities into money. There is no exact
parallel for this in other manifestations of power. Megalomania and
narcissism are motivational elements in all systems, but in none is the
normal reach of power so nakedly unbounded in aim.
The “rational miser” who personifies the capitalist for Marx must
therefore find in the circuits of capital both the means and the motive to
pursue an endless quest for aggrandizement—a quest so patently without
rationality, and so perilously liable to bring psychological discontent, that
Adam Smith was forced to find its rationalization in a delusion imposed
upon us by the Deity. “Power and riches,” he wrote, “... [are] . . . enormous
and operose machines contrived to produce a few trifling conveniencies to
the body . . . which, in spite of all our care, are ready every moment to burst
into pieces, and to crush in their ruins their unfortunate possessor.” And yet,
Smith goes on, “it is well that nature imposes upon us in this manner. It is
this deception which rouses and keeps in continual motion the industry of
mankind.” There follows almost immediately the first reference to the
Invisible Hand, Smith’s immortal designation of the benign outcome
imposed on unknowing humans by a beneficent deity.1
We can find a more compelling explanation for the drive to amass capital
by looking further into the very attribute of capital to which we initially
turned our attention—namely, the generality of its wealth-form compared
with the specific use values in which wealth is embodied in pre-capitalist
systems. The result of this generalization of wealth is that comparisons and
calculations impossible in such societies become not only possible but
imperative. Capital reduces all forms of wealth, whether sought for prestige
or power, to money terms, and this common basis of measurement now
brings far-reaching changes in the behavioral dispositions of individuals
who seek wealth.
When wealth is realized in objects that directly embody prestige or
power, there is no objective means of measuring the amount of personal or
social enhancement represented by any given element of riches. But under
the regime of capital a strict calculus emerges with respect to prestige or
power—namely, the extent of money capital. Moreover, by its very abstract
nature there are no bounds imposed on the size of the wealth by which
power and prestige are symbolized, in contrast to the limitations often
imposed by the sheer physical bulk of material riches. Thus the very
abstract nature of economic life under capitalism—the severance of the
daily round from the hand of tradition and custom and its deliverance to the
aegis of economic plus and minus—serves a twofold purpose. As Max
Weber and others have emphasized, it introduces into capitalism a
prevailing “rationality” of conduct, a consideration of means and ends, a
supersession of unruly passions by calculating interests. Further, by
discovering in all objects—indeed in nearly all activities—an abstract
dimension of money equivalences, it insinuates a limitlessness into the
calculation of wealth that Aristotle was the first to perceive and fear.2
To the imagination-freeing properties of the abstract aspect of money
capital must be added a second attribute that also spurs on the endless effort
to accumulate. This arises because capital, unlike the use values that
embody prestige and power in tributary systems, exists in a constant state of
vulnerability as it passes through its never-ending circuits of M-C-M’.
 The vulnerability results from the continuous dissolution of objects into
money, which returns all embodiments of wealth to a common reservoir
accessible to all other capitalists. Objects of prestige or coercive power—
gold or arms, for instance—may be exposed to seizure or to loss for other
reasons, but they are not, as part of their intrinsic being, regularly dissolved
into another form that is available to any rival. But that is precisely what the
circuit of capital imposes on its possessors. Capital is powerful only insofar
as it continuously runs the gauntlet of circulation, each capitalist of
necessity distributing his money into the hands of the public (his workers,
his suppliers) in order to procure the labor services and materials from
which his capital will be reconstituted as a commodity. Each capitalist must
win back from the public at large the money capital he has disbursed to
various sections of it, and each capitalist is simultaneously trying to win for
himself as much as possible of the money capital of other capitalists that
has been relinquished in similar fashion.
This continuous dissolution and recapture is the essence of the process of
competition, which can now be seen as an element in the working of the
system that directly stems from the nature of capital itself. Competition
does not simply mean the vying of vendors who sell similar products in a
market, which is the way contemporary economics perceives it, but the
inescapable exposure of each capitalist to the efforts of others to gain as
much as possible of the public’s purchasing power. Competition therefore
has little to do with prestige, despite its surface aspects of vying, and it is
not directly connected with the exercise of domination, because competition
does not immediately pit capitalists against workers but capitalists against
other capitalists. Rather, competition is the instantiation in the economic
world of that “warre of each against all” that Hobbes imagined to be the
original and always latent condition of the political world. In Hobbes’s
world, protection against the threat of mutual devastation was gained by the
delegation of power to Leviathan, the state, in the form of a social contract;
but in the economic war among capitalists no such protection is possible
because, as we shall see later, the very creation of the realm of capital
requires the exclusion of Leviathan’s power from its domain. The state can
buffer competition in individual markets, but it cannot call off the “warre of
each against all” that results from the M-C-M’ circuit.
 Thus capital itself introduces a form of social war; and social war brings
a new intensity to the drive for wealth in the substratum of behavior that I
am calling human nature. That new intensity derives from the motive of
self-preservation, by popular repute the most intense and unrestrained of all
instinctual responses. In tributary societies this motive undoubtedly also
supplies some of the energy behind the accumulation of wealth, especially
in response to threats from hostile kingdoms without. But only under
capitalism does the threat exist within the kingdom itself, as the
consequence of the naked exposure of capital during its circuitous
transubstantiations.
The motive of self-preservation is therefore added to those that underpin
the desire for prestige and for power. As before, however, we must
distinguish between the animal and the human significance of the “motive”
of self-preservation. Among animals, self-preservation is a response
mobilized by a threat to existence, but in the social world—especially that
of economic competition—the threat is not that of death but of social
diminution. Competition is more likely to be a literal matter of self-
preservation when it takes place among the bottom stratum of the working
class, especially in early capitalism, than among capitalists. Thus the
additional stimulus given to the drive for wealth by its generalization as
capital does not supplant its unconscious meanings of personal preeminence
and social domination but sharpens and intensifies the energies that must be
devoted to its protection and to its accumulation.
Because of its necessitous exposure to capture, however, the defense of
capital cannot be mounted like that of a citadel. On the contrary, the only
defense available to any capitalist, large or small, is an unrelenting
concentration on the successful recapture of capital-as-money from the
hands of the public. Here is the root of the acquisitive behavior of the
business world that we can now see as a necessary expression of the nature
of capital itself.
The acquisitive orientation has two aspects. One of them is the
aggressive attitude of participants in the economic sphere with respect to
money-making itself. The need continuously to recapture capital from its
dissolved form encourages—indeed, requires—an antagonistic stance
toward the other participants in the market process. Thus arises the often-
noticed difference between the attitudes of members of market societies and
those of nonmarket societies—the former reducing human contact in order
to minimize the emotional entanglements that might interfere with the
necessary stance of impersonal acquisitiveness; the latter freely expressing
personal interaction on the local marketplace, because an unremitting
orientation toward the expansion of money wealth has not become an
integral part of the social process.
A second aspect of the acquisitive orientation involves the
encouragement given to protective maneuvers. One of these, to which we
will return in our next chapter, concerns the use of the powers of the state to
limit the dangers of the mutual encroachment of capitals. As we will see,
this has only limited possibilities. The other, of profound importance, is the
use of all available means to gain a competitive advantage over other
capitals. By far the most effective of these means is the development of new
modes of organizing the M-C-M’ circuit in its middle link. By changing the
manner in which commodities are gathered or made, it is possible to
increase the likelihood of gathering M’, whether because the new method of
dealing with the commodity link is more efficient or because the
commodity itself is novel or newly designed. In a word, each capitalist to
some extent commands control over the technology that fashions the
commodity by which M’ must be recaptured, so that the systematic
encouragement and development of technological capabilities of all kinds
become an integral consequence of the M-C-M’ sequence itself.
In turn this brings an implosive aspect to the expansion of capital, as
daily life is scanned for possibilities that can be brought within the circuit of
accumulation. The transformation of activities that bring pleasure- or use-
values into activities that also yield a profit to their organizers thus becomes
an important “interior” realm into which capital expands. The steady
movement of such tasks as laundering, cooking, cleaning, and simple health
care—not to mention recreation and entertainment—from the exclusive
concern of the private household into the world of business testifies to the
internal expansion of capital within the interstices of social life. Much of
what is called “growth” in capitalist societies consists in this
commodification of life, rather than in the augmentation of unchanged, or
even improved, outputs. The continuous emphasis on “time-saving”
inventions or the unrelenting efforts of business to induce individuals to
adopt new life styles are instances of this commodifying aspect of the self-
expanding property of capital.

II
The expansive nature of capital affects its systemic motion—its logic—in
yet one more important way. It is the source of a general disciplinary
pressure that, together with the thrust of the acquisitive impulse itself,
establishes the self-ordering tendency that is one of the general
characteristics of capitalism. That is, the configurational path traced by the
system, both in terms of its rhythms of expansion and its patterns of
organization, is in large part the consequence of the expansion and collision
of its units of business that we now perceive as an aspect of the nature of
capital.
The specific character and outcome of this interaction of expansive units
of capital hinges on many elements in the institutional structure of the
system, including its technical apparatus, its prevailing business and
cultural ethos, and its ideology of government, so that competition has
different forms and consequences for a world of small-scale capitals—to
use Adam Smith’s word—than it does for one of giant capitals. We will
look more carefully into some of these problems in Chapter 6 when we
examine the general logic of the system. But at this juncture we still need to
delve further into the disciplinary force itself—the general magnetic pull, to
revert to our metaphor, that is generated by the mutual encroachment of the
M-C-M’ circuits.
Here we can distinguish two widespread effects. The first of these is the
subordination of the capitalists’ efforts to obtain wealth to the objective
requirements of “the market”—that is, to the purchases of usually unknown
buyers. We have already noted the process of commodification by which
the capitalist seeks to widen his market. Whether created by his own efforts
or not, however, it is the needs or desires of the public, not those of the
accumulator, that must be satisfied in order to gain wealth. The drive for
wealth is thereby tied into the production of use-values—not as the
embodiment or “end” of wealth-seeking, but as the vehicle, the means, by
which it is realized. This is, of course, Smith’s invisible hand—the historic
apologia for capitalism, incontestable insofar as it emphasizes the necessity
of the system to cater to the material appetites of its population; uneasy
when asked to account for the origins or characteristics of these appetites
and their congruence with the moral development of society.3
The subordination of the search for capital to the requirements of the
market is evidenced not only in the piling up of social wealth but in the
general necessity of capitalists to abide by socially imposed limits on the
accumulation process. The level of wages or rents or interest that the
capitalist must pay, no less than the rate of profit he can expect, is also set
by “the market,” and further reflects the inability of the capitalist to coerce
his suppliers of services or his buyers of output. Thus in the idealized
representation of capitalism as “economics,” the capitalist becomes a
personage without any power whatsoever, forced to accept the costs and the
price levels imposed by market processes over which he has no control.
Apparently powerless “capitals” thereby provide the basis for the self-
correcting logic of the system. The accumulative momentum is constantly
held in check by the pressures of “the market,” and its path of productive
output constantly tracks the wants and needs of consumers. Later we shall
look more critically into this conception of economic order and growth, but
for the moment it presents accurately enough the manner in which the
system generates a disciplinary force over its own workings.
A second disciplinary force emerges as the maximizing drive of capital
becomes generalized throughout all strata of society. We have seen that the
rise of capital as a relation of domination has as its necessary precondition
the existence of a class of agricultural and urban workers who no longer
have direct rights of access to the productive equipment and resources of
society. They are thereby made dependent for their livelihoods on their
ability to survive in a market milieu where access to livelihood requires the
acceptance of prevailing rates of pay, and in which the need to secure
employment instills a competitive point of view with respect to earnings in
contrast to the traditional and customary approach of premarket societies.
This enforced competitiveness allows the same description of
“maximizing behavior” to be applied to the worker as to the capitalist,
despite the polarity of their existential positions in terms of power. As a
consequence, a similar behavioral propensity is instilled in workers and
capitalists alike, both engaged in an struggle to gain access to society’s
money wealth and both constrained by the mutual encroachment of others
engaged in the same pursuit. Not only are the two sides thereby exposed to
the dictates of the market, which forces its participants to act from the same
motives of aggressive defense, but they also begin to share motives of a
different kind. The general pressures of domination remain the prerogative
of the capitalist, but the lure of income as a means to the acquisition of
prestige becomes a force for mobilizing workers as soon as the general
wage level, or wage differentials, permit the upper tier of the work force to
purchase prestige goods. Such varied observers as Tocqueville, Veblen, and
Tawney have noted that the acquisitive attitudes at the apex of the pyramid
rapidly percolate to the bottom, where they play their role both to reinforce
the discipline of employment and to unify the social perception of the
system.
The disciplinary force of competition that guides so many aspects of the
logic of capitalism is also, then, rooted in its nature; and the relevant aspect
of its nature in this case is the replacement of the older forms of wealth as
use-values by the generalized form of wealth as capital. This is the “cash
nexus” of which Marx and Engels spoke in the Manifesto. The all-important
consequence of this diffusion of maximizing behavior is that the individual
particles of capitalist society, workers as well as capitalists, become
susceptible to the magnetic forces of the marketplace, following its price
signals as arrows indicating the appropriate movements of their behavior as
buyers or sellers. The result of this pervasive magnetization is the creation
of an economic “system” that attains its coherence and continuity not from
the influence of tradition pressing from below, or from command imposing
its will from above, but by the unintended outcome of self-guided activities
arising within.

III
In the paradox of a system of power whose protagonists are mainly
conscious of their powerlessness lies one of the most mystifying attributes
of capitalism. How can the capitalist class be deemed the “ruling” class of a
system when it is itself at the mercy of market forces? At the risk of
repeating what is by now wearisomely familiar, the answer lies in
fundamental inequalities of social position, manifested primarily in the
respective capacities of different elements to supply their own livelihoods, a
contrast described by Adam Smith, we recall, with his customary
frankness.4
Because capital is the form in which power is denominated under
capitalism we must now look more carefully into the relationship between
the accumulation of capital and the exercise of this fundamental disparity of
social position. The relationship is best examined in the locus where it is of
greatest significance and of least self-evident clarity—namely, in the
manner in which profits appear in the circuit of capital.
Profits take on different forms under capitalism. Initially they arise as the
gains from trade made by merchants. This is not an exclusively capitalist
means to profit, for merchants’ gains come into being wherever the
possibility exists of buying a commodity at a lower price than one can sell it
for, a state of affairs as ancient as civilization (we have records of
mercantile dealings from the kingdom of Sumer). The possibility of trading
profits depends on unequal positions of strength, whether based on political
subjugation, or on the possession of knowledge, or on a monopoly of
buying or selling power enjoyed by the trader: if strength were equal on
both sides of the market there is no reason why a merchant should be able
to buy “cheap” or sell “dear.” This form persists to this day as an extremely
important form of profit in both capitalist and noncapitalist countries, not
least in the relationships of inequality that allow richer countries or
companies to conclude advantageous trade arrangements with poorer ones.
Of greater historical significance are the profits that arise under
capitalism from the unique relationship between capital and labor—namely,
as a surplus derived from the activity of production, not exchange. Here the
key institution—the institution that reflects the inequality of power at the
core of capitalism—is that of wage labor, the peculiar mode of allowing
workers access to resources that only comes into being after the dependency
of labor has been historically established. Under a wage labor system
workers are entirely free to enter or leave the work relationship as they
wish. They cannot be forced or dragooned into work or compelled to stay at
work if they wish to quit. In the eyes of many conservative theorists, it is
this contractual right of refusal—a right that protects both employer and
employee from the coercive use of his property (capital in the case of the
employer, the capacity to labor in that of the worker)—that constitutes the
essential political foundation of capitalism and, beyond that, its essential
justification as a moral order.
These freedoms are indeed of great importance, although as we shall see
later, they are narrow definitions of what freedom can imply. More to the
point, however, the freedom from impressment equally enjoyed by labor
and capital does not betoken an equality of their respective entitlements.
For the wage labor relationship includes a legal provision that is wholly at
odds with the equal footing on which the owners of labor and capital
apparently confront one another in the marketplace. The understanding is
that the product itself belongs to the owner of the capital resources that are
used in production, not to the owners of the labor resources who receive a
payment—their wage—and who have no legal claim to their product.
Thus the wage relationship itself becomes a manner in which the
domination of one class over another is invisibly introduced into the
workings of the system. In this regard it is enlightening to reflect on the
question of who can lay claim to the cars that roll off the General Motors
assembly line. It is not the workers or the management: no managerial
official, including the president of the company, has the legal right to claim
an automobile as his own, without paying for it. Nor is it the stockholders:
the largest stockholder in General Motors cannot take possession of a car
without payment, simply by virtue of the ownership of shares of stock.
Who, then, owns the output? The answer is that it is owned by whoever
owns the physical plant and equipment, the capital. If the company is a
proprietorship, the owner has a legal right to what is produced and may
indeed claim it for private use instead of selling it. In the case of a
corporation, the owner of the capital equipment is a fictitious personage, the
corporation. The owner of the cars coming off GM’s assembly line is
therefore General Motors, a legal creature in whom is vested the ownership
of the company’s physical assets as well as the right of hiring its work
force, from janitor to president. As the saying goes, the cars are “company
property.”
This relation between work and reward, in which the worker, including
the most skilled and highly-paid manager, is paid for services rendered but
is not entitled to lay physical or legal claim to output, comes into full-
fledged existence for the first time under capitalism. No ancient society
uses the wage labor relation as a principal means of gathering surplus. The
peasants of antiquity are never paid wages but retain a residual right to the
crops they harvest, even though a very large, often crushing fraction of
those crops is taken from them as rents, tithes, or dues. Feudal serfs directly
appropriate the output from their strips of land, although they are forced to
hand over a share as rent, or to cultivate other strips whose product belongs
entirely to the lord. Artisans have always possessed their own products,
although the terms of their sale might be strictly regulated. Only the slave
had no claim to his own production, whence Marx’s designation of the
capitalist wage relation as “wage slavery.”
Before Marx, something very like this crucial relationship had already
been described by John Locke. Discussing the nature of property in his
Second Treatise on Government in 1690, Locke wrote: “The grass my horse
has bit, the turfs my servant has cut, and the ore I have digged in any
place... become my property without the assignation or consent of
anybody.”5
Locke’s “servant” cannot be deemed a Marxian proletarian, as the servant
enters into his relationship voluntarily rather than because he has no
alternative. The illustration nonetheless makes vivid the tacit agreement to
relinquish ownership in the fruit of one’s labor that is the basis of a wage
contract. In this silent clause of the contract is hidden an essential
qualification of the freedom that plays so important a role in the
conservative vision of capitalism. What is omitted from this vision is an
explicit acknowledgment of the terms and conditions that precede the
market encounter of worker and employer, terms and conditions that in no
way diminish the legal freedom of the market bargain but that place the
transaction in a very different position from that of ordinary market
relationships.
How can a profit arise from wage labor? Obviously it can only come into
being if the employer pays the laborer less than the value of the laborer’s
product. Smith and Ricardo indeed believed that the market mechanism
established a wage for labor below the value of labor’s output, so that a
margin was made available to the capitalist: “The value which the workmen
add to the material,” wrote Smith, “... resolves itself. . . into two parts, of
which the one pays their wages, the other the profits of the employer.”6
 Thus in Smith’s view, the origin of profit lies in sharing the value created
by labor, and the capitalist’s claim to profit is his right to be recompensed
for “hazarding” his stock (his capital) in the undertaking. This resembles
the modern explanation of profit as the right of the capitalist to appropriate
any residual, after he has paid out all wages and other costs of production
including depreciation, for which he has hazarded his capital. The
difference between Smith’s view and that of contemporary economics is
that Smith locates the original source of profits in the regular appropriation
by capitalists of a share of the value of the product of labor, whereas
modern economics has no way of explaining why there should be any
persisting residual to be appropriated, assuming that competition prevents
capitalists from forming an economywide conspiracy or cartel.
Indeed, in the classical view, the residual was constantly in peril of
disappearing as the competition among employers for labor raised wages
and consequently reduced the residual. Smith and Ricardo both believed
that a margin of profits would only be maintained because rising wages
spurred population growth, and population growth in turn depressed or
retarded the increase in wages, thereby safeguarding the capitalist’s “share.”
Whether or not population growth is the safeguarding mechanism, it is
clear that the accumulation process, to be successful, requires some means
of preventing wages from rising until they absorb all profits. The manner in
which this possibility is avoided constitutes one of the most revealing
themes of the great economic scenarios. For Smith and Ricardo, as we have
just mentioned, the safeguarding mechanism is the increase in labor supply
generated by wage increases themselves—higher wages allowing the poor
to bring to working age a larger number of their children. For Marx the
mechanism is the “overpopulation” created by the accumulation process, as
capitalists not only demand more labor but also more equipment, and then
use the latter to displace the former. In either case, all the great classical
economists through John Stuart Mill saw higher wages as directly
encroaching on profits, and they further saw the accumulation process as
setting into motion the necessary social responses to ward off that
eventuality. If there were no mechanism to protect the employer’s share, he
would simply not hire workers because, as Smith explains, “He would have
no interest to employ them unless he expected from the sale of their work
something more than what was sufficient to replace his stock [capital] to
him.”7
The classical conception thus located the origin of profit in the diversion
of some part of the value created by the working members of society into
the hands of a dominant class. There was no sense of injustice in this
acknowledgment but rather the recognition of the central importance of the
function of capitalism, which was to accumulate capital. Implicit in this
conception, unfortunately, was the awkward conclusion that labor was
nonetheless deprived of the full value of its product, part of which was
appropriated by the capitalist.
Curiously, it was Marx who sought to remove the implication that profits
represented only an “unfair” division of the product, through his distinction
between labor as a process and labor as a commodity. Labor as a process
consists in the energies and intelligence of a person engaged in production.
Labor as a commodity consists of an object produced for sale—in this case,
the “labor power,” or working capacity of a laborer. The normal market
price of the commodity labor power is a wage that will permit the
commodity to be regularly produced—that is, a wage sufficient to allow the
worker who owns and sells his working capacity on the market to purchase
a conventional standard of living. In the wage-labor relationship,
competition among employers forces them to pay such a conventional
wage, but the wage relationship entitles them in return to the actual labor—
the expenditure of energy—that the laborer can perform in a normal
working day. The source of surplus then resides in the presence of a
regularly recurring margin between the market value of the commodities the
worker will produce during the working day and the wages needed to
maintain the labor power of the worker, plus the costs of whatever capital
goods or intermediate materials are used up in the process of production.
The margin is Marx’s famous “surplus value”—the unpaid labor that
accrues to the capitalist by virtue of his position of dominance in the wage
labor engagement. From this hidden source of value Marx can now expand
his M-C-M’ formula—from a money sum to a larger money sum—into the
form M-C-C-M’, to denote the critical source of profit within the
production process itself, symbolized by the increase in the value of C to C;
and from the deeper implications of surplus value he derives the scenario of
a system driven by the complex laws of motion that arise from the constant
need to create surplus value or to protect it against forces that tend to erode
it.*
Finally, we must consider a mode of profit extraction that appears with
increasing visibility in modern capitalism. This is technological innovation.
When innovation takes the form of a new product, the capitalist enjoys a
monopolistic profit, often of short-lived duration, and reaps a surplus from
society in essentially the same fashion as the trader who possesses scarce
and desired goods. When technological advance lowers costs of production,
the pioneering capitalist enjoys an advantage analogous to that of a
fortunately situated, low-cost landlord.
Conventional analysis treats these technologically derived “rents” as a
source of profit different from that of trade or production and designates
them as “Schumpeterian” profits, after their most influential expositor.8
Marxian analysis, which traces all profit from production to surplus value,
treats technological rents as Marx treated land rents, namely as a transfer of
part of the total surplus value generated within production from less
strategically placed capitalists to more strategically located ones.
We do not have to weigh the merits of the conventional and Marxian
views in this matter. What is crucial is that technological rents, like profits
obtained through trade or the direct exploitation of labor, owe their
existence to the system of property rights on which capitalism is erected.
That is, however profits may appear under capitalism—as trading gains,
sweated labor, monopolistic advantage, or differences in cost—they become
manifest as “residuals” that are deemed to belong to the owners of capital,
not to the owners of labor power. The economic category of profits is
thereby revealed to be a disguised form of the fundamental dominative
basis of the system, into whose social and psychological roots we have
already inquired.

This consideration of the nature of profits allows us to take up the crucial

idea of exploitation, a term inseparable from any discussion of wealth or
power. Exploitation carries pejorative connotations that, however justified,
may obscure an understanding of the issue. The essential meaning of
exploitation is that a surplus is seized from the working population for the
benefit of a superior class. Such a seizure will be exploitative even if the
surplus yields social benefits at large, in addition to the power or prestige
for which it was originally brought into being, as in the case of Roman
roads, Christian churches, or the factories of capitalism. It is this class
orientation of surplus that provides the analytic as well as the moral core of
the problem: “The surplus . . . whether small or great, is usually torn from
the producers, either by the government to which they are subject, or by
individuals, who by superior force, or by availing themselves of religious or
traditional feelings of subordination, have established themselves as lords
of the soil.” It is not Marx speaking but John Stuart Mill.9
To the extent that modern-day capitalist profits stem from technological
rents, the exploitation of labor becomes increasingly difficult to identify as
visibly overworked or underpaid workers. As we have seen, however,
exploitation has a characteristic of class disposition as well as class seizure.
What counts is not merely the means of extraction of some portion of social
production but the purposes to which this surplus portion is largely put.
Profit, in its various forms, represents a novel means of amassing surplus,
especially as surplus value or technological rent, but the flow of surplus into
the hands of a dominant class is unchanged, despite the use of property
rights, rather than coercion, as the means of siphoning wealth upward.
It is therefore entirely possible that the origin of surplus in the era of
capitalism has gradually moved from trade through direct wage labor
exploitation toward technological rents, and that modern-day profits consist
of combinations of all three.10 What is significant is that the allocation of
this surplus to the capitalowning class has not been affected by the
alteration in its sources. In all cases surplus moves toward the apex of
society, where capital ownership is concentrated. In various stages of
capitalism this surplus is explained as deriving from the skill of the
merchant, the risk-bearing function of capitalists, the productivity of capital
goods, or the power of technology. These explanations, however, only
describe the strategic means by which the fundamental power of capital is
applied. That fundamental power lies in the right of owners of wealth to
withhold it from use unless they are permitted to appropriate whatever
trading gains or surplus values or technological rents or risk-bearing
rewards appear when capital is placed at the disposal of society.
Thus we can see that the winning of profit in any form represents the
successful exercise of a basically political relationship. Profit is the life
blood of capitalism, not merely because it is the means by which individual
capitals obtain their wherewithal for expansion but because it is the manner
in which the relation of domination is evidenced. The continuous generation
of profits generates its euphoric atmosphere because it gives evidence that
the regime is fulfilling its political mission—namely, organizing society
according to the principles and ends for which it exists. Profits are for
capitalism the functional equivalent of the acquisition of territory or plunder
for military regimes, or an increase in the number of believers for religious
ones, or the legitimation of recognized authority for states in which a
change of rulership has taken place. They are the concrete representation of
the intangible structure of power, hierarchy, privilege, and belief that arise
from the system’s nature and that give rise to its logic. In all depictions of
the business system profits are the key economic variable, but in any
depiction of the regime of capitalism they must be the parameters of its
central historical task.

1. Adam Smith, Theory of Moral Sentiments, pp. 182–83.

2. See Max Weber, The Protestant Ethic (London: Allen and Unwin, 1976); for “interests” see
Albert Hirschmann, The Passions and the Interests (Princeton, N.J.: Princeton University Press,
1977); Aristotle, Politics, Book I.
3. There is a considerable literature on this moral contradiction, of which two influential examples
are R. H. Tawney, The Acquitisive Society (New York: Harcourt, Brace & Co., 1948) and John
Kenneth Galbraith, The Affluent Society (Boston: Houghton Mifflin, 1958).
4. See above, p. 4In. (Smith, Wealth of Nations, p. 84).
5. John Locke, Second Treatise on Government (Boston: Beacon Press, 1975), p. 18 (my italics).
See also C. B. Macpherson, The Political Theory of Possessive Individualism (New York: Oxford
University Press, 1962) and a critique by Jas. Tully, A Discourse on Property (New York: Cambridge
University Press, 1980).
6. Smith, Wealth of Nations, p. 66. (my italics).
7. Smith, Wealth of Nations, p. 66.
8. Joseph Schumpeter, The Theory of Economic Development (Cambridge, Mass.: Harvard
University Press, 1979), Ch. 4; also Business Cycles (New York: McGraw-Hill, 1939), Ch. III.
9. John Stuart Mill, Principles of Political Economy (Toronto: University of Toronto Press, 1965),
p. 13.
10. See Ernest Mandel, Late Capitalism (London: New Left Books, 1975), Ch. 3.
*
The conception of surplus value rooted in production is distinct from the labor theory of value,
which is an attempt to explain relative prices in terms of labor power. Wage labor can produce a
surplus, whatever the source of value, as long as the price of labor power plus used-up materials is
less that the price of labor's product.
 4
The Role of the State
UNTIL NOW we have spoken of capitalism mainly in terms of the elements that explain and
shape behavior in the marketplace—the imperative search for capital, the mutual encroachment of
capitals, the “maximizing” activity that is reflected in the ebb and flow of market supply and demand.
Behind these market forces lie other, sometimes even more significant, levels of change that also
emanate from the nature of the system—the constant reorganization of work skills and work
organization, of managerial structures, of technical equipment, all governed by the effort to
accumulate capital as effectively as possible. What we have called the scenarios of capitalism are the
stylized accounts of these induced movements—the ascending, undulating profile of total output, the
evolving arrangements of men and machines in typical factory and office centers, the changing size
and structure of the administrative framework that operates each unit of capital.
In Chapter 6 we will look further into some of these idealized narratives,
but we have not yet sufficiently examined the essential elements of the
socioeconomic formation itself. For capitalism cannot be understood in
terms of its structure of production alone, any more than tributary states can
be grasped exclusively in political, or primitive societies in communal,
terms. Social formations combine aspects of all these facets to create
mutually supportive (and sometimes contradictory) totalities; and an
attempt to describe the nature and logic of any formation by paying heed
only to that aspect that is most immediately visible or active risks the
distortions of reductionism, whatever the basis to which the analysis is
reduced.
At the same time, like all social formations, capitalism is not merely a
Chinese puzzle in which all elements are of equal importance in locking
together the whole. In capitalism as in other regimes, a central organizing
principle and its institutions influence all aspects of the social formation,
whether these be concerned with material life, justice and social order, or
custom and belief. In primitive societies that organizing principle is kinship
with its networks of reciprocity; in tributary societies it is the principle of
centralized rulership with its associated aristocratic or priestly hierarchies;
and in capitalism, as we have so often discussed, it is capital with its self-
expanding attributes.
 In insisting on the pervasive importance of identifying historically
specific cores within social formations, I am very much aware of the pitfalls
of reductionism, against which I have just warned the reader. These
dangers, mordantly described by E. P. Thompson, derive from a mechanical
conception of social relations in which rigid determinations force all
elements in society to respond in mechanical fashion to changes in the
foundational structure.1 As I shall attempt to demonstrate in the pages that
follow, this impoverishment of social analysis is by no means an
unavoidable consequence of the central placement of a given set of
institutions with their attendant belief systems. Rather, the sense of an
historical reference point implicit in such a central placement gets us around
the difficulties that arise from a failure to assign any hierarchy of
importance to principles, so that society does indeed take on the appearance
of a Chinese puzzle without a decisive structural element.
Let me instance this difficulty in a work in which I find much to admire,
The Cultural Contradictions of Capitalism by Daniel Bell.2 Bell, like
Braudel, avoids defining the concept of capitalism despite its prominence in
the title of his work. Instead he describes “modern society” as the product
of a “disjunction” of realms, no one of which clearly dominates the whole.
He writes:

... I find it more useful to think of contemporary society ... as three distinct
realms, each of which is obedient to a different axial principle. I divide
society, analytically, into the techno-economic structure, the polity, and the
culture. These are not congruent with one another and have different
rhythms of change; they follow different norms which legitimate different,
and even contrasting, types of behavior. It is the discordances between these
realms which are responsible for the various contradictions within society.3
Bell’s focus on distinct economic, political, and cultural realms would
seem to bring his analysis close to mine. There is, however, a sharp
difference. Take, for instance, the techno-economic structure. As Bell
describes it, this realm “frames the occupation and stratification system of
the society and involves the use of technology for instrumental ends. In
modern society the axial principle is functional rationality, and the
regulative mode is economizing.4
 But what is functional rationality? Surely the answer can only be given
by reference to some other underlying principle of the society. Under
capitalism what criteria of “functional rationality” determine the
“economizing” of labor, other than the maximization of profit? Certainly if
the frame of reference was not the accumulation of capital but the
development of functional or rational individuals in the sense of versatile or
educated men and women, the mode of economizing accepted by the
existing order would not pass muster.
In similar fashion, we discover that the principles described by Bell as
“axial” in other spheres also beg the question of the referential point. In the
political realm Bell designates “legitimacy” and “representation or
participation” as the crucial validating concepts. In the realm of culture it is
the “expression and remaking of the ’self’ in order to achieve self-
realization and fulfillment.”5 But as with the technoeconomic sphere, these
descriptions leave unasked the crucial questions: Legitimacy of what?
Participation or representation in which processes? The “self” conceived as
what manner of being?
What seems fatally missing from the analysis is that all of these questions
are normally answered within “contemporary society” in ways that are
defined by, or at least compatible with, the regime of capital. The
boundaries of the terms legitimacy, representation and participation, and
self-expression are conventionally decided in political life by the necessity
to preserve the critical wage labor institution and to continue the generation
of surplus for surplus’s sake. Is this not the principle that sets the limits to
“practical” politics, draws the line as to the agenda of national discussion,
and validates the prevailing commercial tone of culture? Thus it is not the
free contention of realms that holds the essence of capitalism, as I see it, but
their tense containment within the set of economic imperatives that I have
described.
A second objection to the multi-axial principle brings us to examine the
purpose for which it was originally intended—namely, to provide an
explanation of the corrosive, possibly fatal “contradictions” of
contemporary society. The question is this: If the realms coexist in an
unordered, equi-valent manner, how shall we distinguish the trials and
tribulations of modern capitalism from those of other societies in the throes
of their contradictions? Did not the Roman empire or late feudalism or
Ming China have their techno-economic structures, their polities and their
cultures, each with its axial principle? Were not the conflicts and
contradictions among those realms decisive in changing, perhaps even in
destroying, these societies? If that is granted, in what way are the
contradictions of modern society different from those of previous ones?
The answer—and I think it is an answer with which Bell would agree—is
that the contradictions of capitalism somehow arise from the nature and
logic of the system—that is, from the unfolding of a society under the
peculiar stresses and strains generated by its historically unique search for
generalized surplus. The contradictions of other societies arose from
different sources—sometimes economic; that is, rooted in the organization
of labor and in the wrenching of surplus from labor’s product—but equally
or more frequently from political or cultural crises, such as breakdowns in
political succession or religious convulsions. Contemporary society is not
spared these ancient sources of disruption, but it bears within itself the
seeds of another kind of endemic economic crisis for which no parallel can
be discerned in prior social entities. This unique kind of crisis does not arise
from a general disjunction of realms but from the specific tendencies of
capital itself, the distinctive aspect of the society whose nature we are trying
to understand.
Thus it seems to me that the failure to accord centrality to one principle
and its embodying institutions—not, of course, the same ones for all social
formations—robs social analysis of its clarificatory potential as gravely as
the dogmatic insistence that all attributes of any given society can be
explained as mere epiphenomena of its mode of production or of any other
organizing structure. In our own case, unless we place the regime of capital
at the center of the stage, where it dominates the play, there is no
“capitalism” whose cultural contradictions have any special character. I
repeat that domination is not rigid determination. There have been critical
moments in the history of capitalism, as in that of other societies, when
decisive blows have descended from unexpected actors, ideas, interests, or
accidents. Even then, the milieu into which these blows descend, whatever
their explosive power, is not a drama of Pirandello-like characters in search
of identities and meanings, but a society engaged in, and enthralled by the
nature, and the consequent logic, of its organizing principle.
 From this perspective it is a matter of course that capital, as the
dominating principle of the society identified by its presence, must color
and infiltrate the institutions and beliefs that lie beyond its immediate ambit
of operation. The state that carries on the formal tasks of government, or the
ideational structures that contain and convey its world views, could no more
escape being recognizable as “capitalist” than could the governing
institutions or the ideational creations of earlier formations escape being
identifiable as belonging to tributary or feudal forms of historical society.
The influence of the economic realm on its intertwined political and social
realms does not therefore involve any mechanical dependency or slavish
passivity of the latter but only their congruence with, and complementarity
to, the operating relationships of capital. Such a view is perfectly
compatible with the obvious fact that the hand of the state, although
generally exercised on behalf of the regime of capital, is also stayed by
notions of fairness and justice, as well as political expediency. By utilizing
its power to the hilt, for example, it might be possible for the state to
depress wages dramatically, thereby assisting the accumulation of capital,
but the full force of state power is normally held back by considerations of
bourgeois morality itself, or simply by the calculations of prudence.
It is therefore not only possible, but necessary, to accord to the political
and ideological realms a degree of freedom to act on behalf of motives that
antedate those of capital accumulation and that persist alongside it, although
generally subordinated to it. What is needed is no more—and of greater
importance, no less—than a recognition of the existence of general
priorities and interests without which no social formation has any historical
center of gravity.

II
I will return to the question of the permeation of the principle of capital
into the other realms of its regime, partly in this chapter, partly in the next.
First, however, we must look more carefully into the properties of the
economic and political spheres themselves, in particular those that comprise
the productive and distributive activities of the social formation, and those
that define the realm charged with governance.
 We have already referred to the familiar fact that no clear-cut division
exists between economic and political activities in precapitalist orders.
More precisely, nothing like an economic “realm” can be discovered in any
of them. Of course, the physical and social undertakings necessary for
material survival are visible in all societies, as are also the technical and
organizational problems of altering or channeling these undertakings. What
prevents these activities from constituting a “realm” is the absence of any
formal boundaries that exclude the exercise of state power over the
organization or direction of production or distribution. The economic
domain is simply of one piece with the political. To put it somewhat
differently, the crucial relationship of domination in tributary systems is
applied alike with regard to the allocation of labor or the administration of
justice, to the extraction of rents or the inflicting of punishment. There is no
essential difference between the disciplining or the marshaling of a labor
force and an army, although the former generally requires less effort
because it can rely on the inertia of tradition.
As a consequence, in all tributary systems there is but one realm, that of
the “political” order. I place the word in quotation marks because in many
of these early systems even this aspect of domination has not acquired a
distinctive association with “the state” and its apparatus, as opposed to the
mere expression of a single ruler’s will. What is important is that the
exercise of power, whether expressed by a single ruler or a state
bureaucracy, combines the enforcement of political relations of sub- and
superordination with the economic performance of various tasks. Thus the
warlord collecting his tribute, part of which will be conveyed to the
imperium, is at one and the same time manifesting a political relationship of
domination and obedience, and carrying out an economic function of
surplus collection and distribution. In the same fashion, the peasant making
his rental payments or taking part in a corvée is simultaneously evidencing
the relationship of explicit obedience on which the polity is founded and
producing the subsistence and surplus on which it lives. It is but a slight
exaggeration, if any at all, to claim that there is no activity that results in the
production or the allocation of material wealth that is not also the
embodiment of the hierarchical principle of the system.
For an economic realm to emerge, that pervasive and unchallenged
rulership must yield up some portion of its sovereignty, recognizing, so to
speak, the existence of an autonomous republic of commerce and
production within its own territory (and even stretching beyond it). As we
know, this momentous internal secession was the consequence of the
political fragmentation that followed the collapse of the Roman empire.
Beginning as early as the tenth century, the mercantile estate found the
protective shelter it needed in the rubble of fiefdoms that emerged from that
enormous collapse. Very gradually, there arose from the widening
importance of mercantile dealings, and from the increasing dependence of
all levels of society on the market mechanism, the foundations of a regime
of capital itself. On the land, surplus continued to be gathered through the
lord’s political domination over the serf, but in the towns and cities, surplus
more and more welled up in the form of profits accruing to merchant
traders, later in merchant guilds. Guildsmen who constituted briefly a kind
of open society of independent producers in the twelfth century were the
rich masters of many trades, and the dominant group in all cities, by the
sixteenth century. Thus even before capitalism emerged in full dress, the
appearance of a world of business presaged its entrance within late feudal
Europe.
As mentioned earlier, Samir Amin has coined the term “incomplete
tributary societies” to describe feudalism. The term suggests that the logic
of feudalism was to remedy its incompletion by seeking self-sufficiency
through military and dynastic struggles and alliances. Out of this unstable
milieu—there were some 500 more or less autonomous political units in
Europe in 1500—there emerged the cluster of strong military-administrative
units that would reduce the political crazy-quilt to a mere twenty-five
members by the year 1900.6 The mercantile world itself, it should be noted,
experienced the same unifying pressures that brought about the forced
agglomeration of petty fiefdoms into kingdoms, so that the petty
merchantdoms of the twelfth century grew by the fifteenth century into the
vast operations of the Bardi and Peruzzi and Medici and the merchant
bankers of Augsburg, then into the East India Companies, the Turkey
Company, and the global commercial operations of the eighteenth century.
From the viewpoint of the formation of two realms of society, we see
with increasing clarity the appearance of two interdependent and yet
rivalrous structures within this extended period. One of these structures
retained the ancient trappings and much of the military power of the
original imperium and was vested with the formal responsibility of
enforcing the will of the state, both through its monopoly of legal violence
and its position of moral authority. At a crucial point in the seventeenth and
eighteenth centuries this public realm also assumed a command function to
force modernization upon the still timid economic sphere—Colbert and
Frederick the Great as exemplars of this early dirigisme. To the economic
sphere itself, without any formal recognition of the fact, was consigned the
task of superintending the daily work of the population and of amassing the
surplus of which the state itself was a main beneficiary.
The emergence of an autonomous economic realm had two aspects. One
was the long and tortuous achievement of political rights for the
bourgeoisie. This did not run its course until the late eighteenth century,
when the full foundation was laid for a regime of capital—namely, the
recognition of clear “constitutional” constraints on the power of the state to
violate the private space of the individual or to commandeer his or her
property. This principle of de jure equality, with its closely associated right
of “private” property, formed the basis of the liberal polity. It was also this
general exclusion of state power from the workings of the marketplace and
from the accumulation process that prevented the state—and that still
prevents it—from being able to control, other than superficially, the
competitive pressures resulting from the mutual encroachment of capitals.
But this familiar story of political gain was matched by a less familiar
one of economic loss. This was the gradual loss by the state of its rights of
direct access to surplus. Save in unusual circumstances, the state lost its
command over the labor or materials, or even the money, by which it
traditionally assembled its secular, religious, or military might. Thus even
though the state retained the ultimate weaponry of rule and the authority of
awe, it became dependent on the operation of its self-created republic for
the nourishment of revenues.
The power to tax may be the power to destroy, but the ability to tax
presupposes the existence of a working economy. It is for this reason that
the regime of capital is the dominant active influence in the normal
relationship between the two realms, and it is why the state is normally its
obliging servant. Self-interest, not weakness, drives the state to support and
advance the accumulation of capital.
 III
What we find in capitalism, then, is a new form of regime in which the
central organizing economic structure is divorced from the direct access to
the means of violence that has always been the prerogative of the state. This
reflects, at the level of national power, the absence of direct coercion that is
also characteristic of capital’s power at the work surface of society. It is
hardly surprising, under these circumstances, that a tension between the
remaining apparatus of state domination and the new structure of economic
domination lies at the very heart of capitalism, vastly complicating the task
of defining the relationship of state and economy. The older form of
domination still “contains” the newer form, but imperfectly and uneasily;
and the newer form imbues the older one with its historic mission and
purpose—the accumulation of private wealth—but only partially and
subject to exception.
At the core of this tension is a conflict between two logics of power:
economic and political. We see this with particular clarity in comparing the
roles of the two in controlling the international flow of surplus. The logic of
capital is essentially one of the expansion of value which takes place,
among other means, by the formation of what Immanuel Wallerstein
describes as “chains” of commodities that link together more and more of
the separate steps involved in the production of goods, commencing with
the extraction of raw materials and ending with the sale of finished items.7
These commodity chains combine small, discrete M-C-M’ steps into longer
strides, converting many small profits into fewer, larger ones. The chains
are therefore organized according to opportunities of profit, not prerogatives
or constraints of sovereignty. Often they stretch across regional, state, or
even continental boundaries, as commodities make their ascent from their
places of origin to those of disposition, accumulating value as they move.
The logic of political power, by way of contrast, has always been concerned
primarily with considerations of boundaries, not with those of the chains of
production and distribution. It is the reach and limits of military and
administrative power, not the possibilities of profit, that have guided the
expansion of states.
 In the era of tributary empires there was some clash of economic and
political logics, insofar as the pursuits of merchants led them to ignore
imperial boundaries in search of wealth, but the primacy of the political
logic over that of economics is evident from the centripetal flow of surplus,
out of provinces and distant regions into the imperial centers. Beijing as
well as Persepolis, Rome as well as Thebes were sustained and adorned by
politically organized flows of goods, whether or not these passed through
mercantile hands. This simply followed from the absence of a societywide
market network capable of exerting so vast a control function. Thus the
basic command over the allocation of surplus was always an aspect of
imperial control, in which trade played a supportive, not independent, role.
(It is interesting, in this regard, to note that tributary states regularly used
venturing merchants as emissaries of the realm.)
The development of an increasingly autonomous, self-directing economic
realm, dominated at first by mercantile activity and then by industrial
processes, disrupted this political logic insofar as the ascending flows of
commodities, within or across national boundaries, were now subject to the
directing forces of the marketplace, in addition to those of national
sovereignty. If we examine the global flows of surplus in the epoch of
capitalism, we continue to find a transfer of wealth from outlying and weak
regions into central and powerful ones, but that which defines its
concentration points is the presence of masses of capital—above all, money
capital. These collection centers are also loci of political and, sometimes,
although by no means always, military power—Japan and Switzerland as
examples of nonmilitary nodes—but the order of priority of the two logics
is reversed. The commanding influence over the flow of surplus is now
exercised by the upward mounting chains of value-accumulating
commodities, not by the direct control of military or state power. Indeed,
the very possibility of maintaining an influential capitalist nation-state
follows from the channeling of wealth along privately controlled
commodity chains.

The commanding place that economic logic assumes with respect to the
gathering and disposition of surplus introduces a characteristic tension into
the political nature of capitalism. For neither state nor economy can exist by
itself, and each is capable, by its faulty operation, of endangering the
successful operation of the other. As we have said, the economic sphere is
normally the source of the energy that suffuses and moves the entire
formation, but the awesome potential of the means of violence that remains
in the hands of the state is a permanent reminder that power is not
denominated solely in terms of capital. In an age that has seen the rise of
weaponry that puts to shame the workshop of Vulcan and the creation of a
capacity for surveillance that dwarfs the wildest fantasies of Bentham’s
Pantopticon—his circular prison whose centrally located warden could spy
on the doings of all its inmates—it would be the height of folly to claim that
the regime of capital had freed itself entirely from the ancient prerogatives
of government, in which, as Hobbes put it, “when nothing else is turned up,
clubs are trumps.”8
At the same time, under normal conditions in which the hand of the state
is not forced on grounds of sovereignty or national existence, the realm of
capital obeys a logic that often brings it into conflict with, or beyond the
effective control of, the state. The chains of commodities, linked by
transactions, follow a rationale over which the state is able to exert only a
weak and generally ineffective guidance. This is because the creation of a
realm of economics has as its basis the exclusion of state power from the
M-C-M’ process that is its engine of growth. The state can, of course,
intervene to protect its domestic capitals from the incursion of foreign
competition, but it cannot easily defend itself from the movement of its own
capitals abroad or from the development of chains of commodity flows that
bypass its national terrain.
Thus capital, which arises within the state and which exists originally
only at the pleasure of the state, becomes increasingly capable of defying,
or of existing “above,” the state. A network of commodity flows cuts
through the boundaries of national sovereignty to form a “system” that
operates according to the dictates of its own logic, with less and less regard
for those of politics. Such a world system came into existence originally
with the rise of integrated market flows of broad dimensions in the
sixteenth century—what Wallerstein has called a “world-economy”9—but
in recent years its presence has become dramatically apparent in the
emergence of supranational corporations and pools of money seemingly
capable of eluding all constraints of political boundaries. In its most
extreme form this has taken the shape of movements of capital to foreign
locations, often in the semi-capitalist periphery, where the capital (in the
form of mining or manufacturing units or repositories for money) serves not
only as a link in the logic of commodity chains but as an affront to the logic
of national power, which is unable to cope effectively with the goods or
currency flows that are launched against it from these foreign bases of its
“own” capitals.
It is pointless to attempt to reduce this opposition of logics to a simple
determination. Rather, it is the nature of the regime of capital that it exists
in a condition of mixed independence from and dependence on the older
regime of state power, perhaps marked by swings of centralized hegemony
and rivalry.10 That does not prevent the central organizing institution of
capital from constituting the dominant force in the social formation as a
whole. The full powers of the state, above all its ability to mobilize the
latent energies of the unconscious in support of its parental persona, remain
largely in the background, save for periods of overt internal disruption or
external war, so that the forces of capital exert the preponderant active
influence in normal times. During these periods, the state advances the
interests of capital as a natural response to the appeals of capital, as well as
in a calculating fashion to promote its own peacetime strength. Thus the
general ideologies and basic interests of capital usually exert their sway
without opposition, giving coherence to the social formation of capitalism
as a regime of capital, first and foremost. But that is not the same thing as
claiming that these interests always prevail in what Engels called the “last
instance.” In the schism of realms, it is enough to establish the primacy of
capital, not its dictatorship.

V
We turn now to an aspect of the political nature of capitalism to which we
have not yet paid attention. This is an unnoticed masking of functions that
have been bifurcated between two realms, so that the business world quite
unwittingly carries out a primary task of government, and the state tacitly
discharges a central task of economic provisioning.
What is the basic function of government? Its activities are as diverse as
the provision of laws and sanctions, the conduct of military affairs, the
celebration of secular and religious occasions; the building of public works
and monuments; the gathering of information; the establishment of social
well-being. In and of themselves, these tasks are technical and
organizational. What makes them “political” is that they are carried out on
behalf of ruling personages or classes. The military adventures, the laws
and sanctions, the celebrations and monuments—even the administration of
welfare—reflect the aims and purposes of the dominant class about whose
character I will speak in the next chapter. As such, the state’s political
function is partly defensive and partly promotive, depending on whether it
is justifying or enforcing the raisons d’être of this class or advancing its
interests through projects that mobilize and inspire the energies and
imagination of the populace. Thus the political function is by no means the
exclusive prerogative of the state. Indeed, all activities, including the
normal operations of the army, the church, the educational apparatus, and of
course the activities of production and distribution, take on a political
aspect insofar as they legitimate the existing structure of privilege, or
express the interest of the ruling element.
Like the tasks of government, the direct activities of the economic realm
are also technical and organizational. The core economic function consists
in the provision of the requisite flows of goods and labor power needed to
sustain a desired stream of output. From this point of view, economics is a
form of “social engineering,” as distant from political considerations as the
specifications of materials needed to sustain a given load for a bridge.
The political aspect of economic activity enters because the engineer is in
the service of some dominant group, capitalist, imperial, or whatever. As
such, the engineer who supervises the “functional” organization of
production is guided by the prevailing interest-system, which not only
designates the ends for which he must plan his means but which also
establishes the calculus—and beneath the calculus, the concepts—by which
the rationality of the means themselves are established. We have already
seen that capitalism imposes such a calculus in the form of profit
considerations, and mutatis mutandis, so it is with the economic
calculations that express the interests of slave economies, serfdoms,
aristocracies, and the like.
 This general discussion is enough to indicate that of necessity the
political and economic realms interpenetrate in all societies—or more
accurately, that considerations of an “economizing” kind, although with
differing criteria, are to be found in all activities of rulership, and that
decisions of a political kind, although with differing interests at stake, are
inherent in all systems of material production. This is not yet, however, the
masking of functions that becomes a distinctive attribute of capitalism and
an important element in shaping its nature. The masking refers to the fact
that under capitalism, where a realm of economic affairs has been separated
from the matrix of the body politic, the distribution of “economic” and
“political” functions takes place in a manner that, like in so many instances
in capitalism, conceals and disguises the actual processes at work.
Here it is useful to begin by reflecting again on the matter of coercion,
the indispensable means by which the surplus is obtained under tributary
systems. In the capitalist era, as we know, the coercive rights of the ruling
class disappear, to be replaced by the generalized pressure of market forces
bearing down on a work force that has been separated from the means of
production, which are owned as private capital. As we have already
discussed, this means that power can no longer be exerted from master to
man, or from lord to serf. All that remains is the “free” market relation
between capital-owning and capital-needing classes. Yet, despite the
disappearance of coercion and exaction, surplus continues to be generated
by the system and to flow upward from the producing to the dominant
levels, whether composed of merchants, corporate capitalists, state officials,
or combinations of these. Thus, in a manner that we have already examined,
the unconstrained interplay of the activities of workers and capitalists
produces an upward-flowing stream of profits that yields the same political
benefits to the dominant class as under tributary regimes, although the
proportions between top and bottom incomes are likely to be much less
lopsided under capitalism.
Still more significant, because still more concealed, is a second manner
in which political power is exercised within the economic realm. This is the
delegation of the power to command labor—quite literally to direct its
disposition, as did the Pharaohs when they gathered their gangs for the
construction of the pyramids. Under capitalism, the direct allocation of
labor is virtually surrendered by the state, with the exception of its military
forces. Instead, the tasks of labor discipline and command are placed in the
hands of employers, who carry on this essentially political task with
virtually no awareness that in doing so they are not only furthering their
private interests but discharging a function that, stripped of its market
aspects, would be instantly recognizable as that of the commanders of labor
gangs, peasants, or slaves.
As we already know, the function carried on in this condition of total
unawareness is that of exploiting a labor force—a political act that is
unmistakable when a lord wrests his share from a serfs crops but that
becomes invisible when the same diversion of output is carried out by the
market mechanism. To make this statement is by no means to deny that the
worker’s lot is immeasurably freer under the dispensation of the market
than under that of the direct coercive oversight. The conservative defenders
of capitalism do not misstate the case when they emphasize the difference
between free and forced labor. It is, however, precisely because the worker
under capitalism is free to quit and to appeal at law if the wage contract has
been abrogated that the continuing exploitative diversion of surplus remains
unnoticed.
So, too, does the continuation of another aspect of the political function
—the disciplining of labor—so readily observable in nonwage
relationships. This disciplinary function, as political in its way as the
extraction of surplus, includes the right of capital—although not without
limitations—to determine the physical requirements of the task, the tools
and equipment with which it is conducted, the pace of work, the purpose
and geographical locations of the endeavor, and the right to discontinue
employment. It is these aspects, more than the wage that is “set” by market
forces, where the political authority formerly vested in bailiffs and
overseers appears as the prerogative of the capitalist. As R. H. Tawney has
written:

. . . [T]he man who employs, governs, to the extent of the number of men
employed. He has jurisdiction over them. He occupies what is really a
public office. He has power, not of pit and gallows ... but of overtime and
short time, full bellies and empty bellies, health and sickness. ... 11
 Tawney emphasizes this governing power in terms of the capacity of
employers to affect the well-being of their employees. What even he does
not see is that the exercise of the very right to organize production itself—to
choose both its means and its ends—is an exercise of political power, an
instance of domination. The deployment of the legal authority of the
capitalist within the confines of his business enterprise thus constitutes an
unrecognized transfer of political power from the state into private hands.
As Ellen Meiksins Wood has put it, capitalism represents “the ultimate
’privatization’ of politics, to the extent that functions formerly associated
with coercive political power ... are now firmly lodged in the private sphere.
... ”12
The other side of the coin—the incorporation of economic functions
within the political arm of the capitalist state—takes several forms. There is
the immediate use of state power for the protection of activities within the
economic realm, above all in the provision of the law and order essential for
the preservation of the system of material provisioning and surplus
generation. As all theorists from Hobbes and Locke and Smith agree, a
primary duty of the government is to insure the rights of property: “The
acquisition of valuable and extensive property,” writes Smith in The Wealth
of Nations, “necessarily requires the establishment of civil government.13
Less fully understood is the function of the state in undertaking the tasks
needed to sustain the economic realm. This function is described by Smith
and others as the duty of “erecting and maintaining those public institutions
and those public works which . . . may be in the highest degree
advantageous to a great society . . . [but] could never repay the expense to
any individual or small number of individuals. . . . “14
What seems to be only a “public” duty of government has, however,
another masked aspect. It is the manner in which inputs needed for the
accumulation of capital, but unprofitable to produce within the market
framework, can be provided to the economic realm. From this viewpoint the
state does not merely add “public” works to private ones. Rather, it accepts
from the economic realm whatever necessary undertakings cannot remain in
it. In these cases, the state foists upon the public the costs of those activities
that would result in monetary “losses” if they were carried out by the
economic sphere, while recognizing as inviolable the right of private
enterprise to benefit from its profitable undertakings. This socialization of
losses applies to much of the network of canals, railways, highways, and
airways that have played an indispensable part in capitalist growth, as well
as the provision of literate and socialized work forces through public
education programs, the protection of public health, and the like. All these
are examples of “public works,” behind whose manifest usefulness for the
citizenry at large lies the latent economic function of providing necessary
inputs for the operations of the M-C-M’ circuit, and the political function of
strengthening the regime of the dominant class.
I do not wish to lose my point by overstatement, as if a genuine public
interest were not also a part of democratic capitalist policies. But in the
great majority of programs, what appear to be purely neutral or benevolent
functions of the state become, on close scrutiny, assumptions of necessary
undertakings whose drain on private surplus would be too great to bear and
which are therefore borne by the public realm—transportation networks as
the classic case. Such an assumption of necessary support is not limited to
capitalism by any means—the Romans had their dole, their circuses, their
public works—but the openly avowed purpose of these interventions was to
maintain the existing imperial framework. Under the masking of functions
characteristic of a capitalist system this open declaration of purpose gives
way to the elaborate pretense of a private realm operating without any—or
with only a minimal—support from the state, and of a state only marginally
responsible for the successful operation of the economic sphere.

Last, there is the direct use of state power, diplomatic and military, to
encourage or protect economic activity. Here we have only to recall the use
of naval power in the seventeenth and eighteenth centuries by the Dutch,
French, English, and American governments to secure and protect their
commercial markets; the waging of wars in the nineteenth and twentieth
centuries for mineral and other rights to be exploited by the economic
sector; and the general sensitivity of the governing arm of society to threats,
foreign or domestic, against its economic “way of life.”
Thus there are vital economic functions exercised by the governing
branch of capitalism just as there are powerful political ones exercised by
its economic branch. It is here, indeed, that the political key to the system
lies, not merely in the creation of a world of business, with its realm of
contractual freedom distinct from that of politics, but in the mystifying
diffusion of political and economic powers and functions within both
worlds. From this ill-understood and camouflaged partitioning of the
unitary powers of the precapitalist state stems a great deal of the general
misperception that surrounds the nature of capitalism with its presumed
public and private “sectors,” a confusion shared by the members of its
governing and business echelons, as well as by the public at large.15
It is therefore a profound mistake to conceive of capitalism as being in
essence a “private” economic system. It is unquestionably an historic mark
of identification of capitalism that it relies on the activities of formally
uncoordinated units of production and distribution both to assure its
continuance and to give rise to its surplus. It is here, without doubt, that the
source of its dynamic energies and technological inventiveness must be
sought. At the same time, it must be evident that not all the necessary inputs
for such a society can be provided by the economic realm. Passing over
such conventional exceptions as the means of external and internal military
force, the normal operation of the market system would be unsustainable
without the socializing, protecting, and stimulating state activities that
further the regime of capital. These services are of sufficient importance for
the working of the system so that they are provided at or below cost to
assure their general availability: were they not so important, many of them
could be provided by business at a high enough price. Thus the division
between state and economy is not one of extrinsic function—the political
realm concerned with “public” needs, the economic realm with “private”
ones. The essential difference is rather one of the possibility of the
recapture of expenditure in the marketplace. What the economic realm can
do, the government is generally enjoined from doing. That which business
cannot do, but which requires to be done, becomes the business of the
public sector.
It is equally evident that the designation of capitalism as “self-ordering,”
while unmistakably the case in comparison to tributary systems, must also
be understood in a qualified sense. The term implies that all essential
activities connected with the material process can be, at least in principle,
consigned to the market. We have seen that this is untrue, not alone in the
case of such goods as defense, for which no marketing system seems
imaginable, but in the broad historical reality of capitalism as a self-
reproducing social formation. Here the state, both as defender and promoter
of the economic realm, has played so prominent a role that even the most
abstract scenarios of the system unwittingly assign it a central and
indispensable place when they take as their unit of conceptual analysis the
state. Remove the regime of capital and the state would remain, although it
might change dramatically; remove the state and the regime of capital
would not last a day. In this sense politics is prior to economics in that
domination must precede exploitation. Thus once again we encounter the
tense relation of realms characteristic of the social formation in which
capital calls the tune by which the state normally dances but takes for
granted that the state will provide the theater within which the performance
takes place.
All this mocks the conventional economic view that the public realm is
somehow secondary or ancillary to the private realm, and that a market
system can be adequately represented and even studied in models that omit
the lossabsorbing, momentum-imparting political domain, with its curiously
concealed economic functions. But it is precisely this concealment—the
consequence of the fissioning of unitary empires into state and economy—
that is another instance of the capacity of capitalism to enthrall and becloud
the understanding of its members, in many respects the most powerful of
the ways in which the nature of the system affects behavior and belief.

1. See E. P. Thompson, The Poverty of Theoryx (New York: Monthly Review Press, 1978), Ch. 1.
2. Daniel Bell, The Cultural Contradictions of Capitalism (New York: Basic Books, 1976). See
also his The Winding Passage (Cambridge, Mass.: Abt Books, 1980), pp. xiv-xv.
3. Bell, Cultural Contradictions, p. 10 (his italics).
4. Ibid., p. 11.
5. Bell, Cultural Contradictions, pp. 12, 13.
6. Cited in Anthony Giddens, A Contemporary Critique of Historical Materialism (Berkeley,
Calif.: University of California Press, 1981), p. 187.
7. Immanuel Wallerstein, Historical Capitalism (London: Verso, 1983), p. 30.
8. For surveillance, see Giddens, Historical Materialism, p. 169f.; Hobbes, A Dialogue of The
Common Laws, cited in Leviathan (London: Oxford University Press, 1967), p. xvii.
9. Immanuel Wallerstein, The Modern World-System (New York: Academic Press, 1974 and 1980).
There is now a large literature on this subject, of which I shall cite only two essays: Theda Skocpol,
“Wallerstein’s World Capitalist System: A Theoretical and Historical Critique,” American Journal of
Sociology 82 (1977): 1075–91 and Peter Worsley, “One World or Three? A Critique of the World-
System Theory of Immanuel Wallerstein,” Socialist Register, 1980, pp. 298–337.
 10. See Albert Bergeson, ed., Studies of the Modern World-System (New York: Academic Press,
1980), esp. Ch. 10.
11. Taken from “R. H. Tawney’s Commonplace Book,” Dissent, Fall 1981, p. 490.
12. Ellen Meiksins Wood, “The Separation of the Economic and the Politi-
13. Smith, Wealth of Nations, p. 710. In his (transcribed) Lectures on Jurisprudence (1762–63),
Smith is quoted as being even more out-spoken: “Laws and government may be considered in this
and indeed in every case as a combination of the rich to oppress the poor, and preserve to themselves
the inequality of goods which would otherwise soon be destroyed by the attacks of the poor, who if
not hindered by government would soon reduce the others to an equality with themselves by open
violence” (Oxford: Clarendon Press, 1978, p. 208).
14. Smith, Wealth of Nations, p. 681.
15. In Multinational Companies and Nation States (1975) Robin Murray provides a useful
categorization of some of these res publico, which I condense as follows: 1) the guaranteeing of
property rights, backed by force; 2) economic liberalization in the abolition of restrictions on the
movement of economic agents or commodities within the national territory; 3) economic
orchestration, such as planning or mitigation of crises; 4) provision of infrastructure, such as a trained
labor supply; 5) intervention for social consensus in mitigating disruptive Affects of accumulation;
and 6) the management of external relations, including war, trade, financial arrangements, etc. I have
sketched in some of these major activities in Chapter 6. Reference from A. G. Frank, Crisis: In The
Third World (New York: Holmes & Meiers, 1980), pp. 231–32.
 5
The Ideology of Capital
THE ISSUE OF BELIEF takes us to ideology—the deeply and unselfconsciously held views of
the dominant class in any social order. Here it is important to begin by distinguishing these beliefs
from views held in a more pietistic or even cynical fashion, to manipulate or form the opinions of
those who are not members of the ruling class. Unlike such propaganda, ideologies are systems of
thought and belief by which dominant classes explain to themselves how their social system operates
and what principles it exemplifies. Ideological systems therefore exist not as fictions but as
“truths”—and not only evidential truths but moral truths.1
Capitalist ideology has exactly the same explanatory function as does
that of feudal or tributary systems of belief. But as with other aspects of
capitalism, it differs in decisive ways from earlier belief systems. Samir
Amin has pointed out that the ideologies of earlier social formations were
typically “world” religions—Hinduism, Confucianism, Islam, the divine
rulerships of early Mesoamerican and Near Eastern kingdoms, Christianity.
As such, these ideologies further expressed the essential unity of tributary
societies. The full authority of a priesthood sanctioned the exercise of
worldly rule, including its use for the collection of surplus; and this surplus
was used, in turn, to support religious institutions. A single legitimating
view, sacred in origin, thereby fortified the existing regime. Even when
disputes broke out between priestly orders and secular authorities, the
struggles continued the tradition of state religion, with one monolithic
conception striving to oust another—Buddhism competing against
Hinduism, Taoism against Confucianism, Protestantism against the Catholic
church.2
The ideological aspect of capitalism differs fundamentally from this
imperial form. It is not sacred but secular, not monolithic but many-faceted.
Its emplacement therefore requires more than a palace coup in which one
absolute belief displaces another. The installation of the ideology of
capitalism rather resembles a popular revolution, not only calling on new
forms of social explanation but seeking a new source—in actuality, new
sources—of legitimacy powerful enough to challenge the authority of a
universal church.

II
Historically, the development of bourgeois self-clarification proceeded
along several fronts. One of these was the forging of a new attitude toward
the central activity of the capitalist socioeconomic system—the search for
profit. In every pre-capitalist society we find acquisitive activity disliked or
despised—in part as a projection of aristocratic attitudes (true aristocrats do
not “need” money); in part as an expression of popular revulsion against
money lenders and exploitative local traders; in part perhaps as a deep-
rooted protest against the depersonalization of monetary dealings. Nowhere
was this distaste more pronounced than within Christianity, where the
taking of ordinary interest was declared to be an excommunicable offense
as late as the Council of Vienne in 1311, and where three centuries later a
disapproving view of wealth-seeking continued to inform Protestant as well
as Catholic religious sentiments, even after both churches had made their
formal truce with profits and interest.
This low estimation of acquisitiveness does not disappear with the rise in
the power and influence of the bourgeois class. “In the numerous treatises
on the passions that appeared in the seventeenth century,” writes Albert
Hirschman in The Passions and the Interests, “no change whatever can be
found in the assessment of avarice as ’the foulest of them all’ or in its
position as the deadliest Deadly Sin that it had come to occupy toward the
end of the Middle Ages.”3 Even in the worldly eighteenth century, it is very
much in the spirit of the age that Adam Smith regards acquisitiveness, in
both the Theory of Moral Sentiments and The Wealth of Nations, as a useful
but never admirable characteristic, leading to the pursuit of things that,
viewed with philosophic detachment, appear “contemptible and trifling,” or
simply “vulgar.”4
That which did change, making it possible by the seventeenth or
eighteenth century to create an acceptable belief system around activities
that only a few centuries earlier would have been regarded as anathema and
that continued to be denigrated, was the appraisal of the consequences of
acquisitive behavior. Here we see two separate movements. One of them,
analyzed by Hirschman, involved the reinterpretation of avarice or love of
lucre, not as a disruptive “passion” but as a steadying “interest.” As such,
the drive for wealth was perceived as a calming influence compared with
the unruly disposition over which no similar rational, calculating attribute
exerted its restraints. In the guise of commerce, acquisitiveness is thus seen
to exert a civilizing effect—le doux commerce— a point of view we find
expressed again in Adam Smith, who writes that “probity and punctuality”
are virtues that invariably accompany the introduction of commercial
relations into society.5
The second movement toward the rationalization of acquisitive behavior
lies in the development of a “science” of acquisition. This is, of course, the
discipline of political economy, later economics, that emerges in the
seventeenth, and achieves its full-fledged expression in the eighteenth,
century. The very possibility of such a science itself implies that acquisitive
behavior has lost its connection with the unruly passions and has come to be
regarded as a steady principle of human “motion,” capable of measurement
and restraint. The ideological aspect of the new science emerges, however,
when we inquire into the purpose of political economy or economics. As we
have already had ample occasion to see, it is an explanation of how the
commercial or nascent industrial system works, from the point of view of
the ruling class. This does not imply a willful distortion of the collective
effects of acquisitiveness but rather a presentation that takes into its
purview certain aspects of the process, while excluding others.
We have already looked into one crucial aspect of this ideological view
of the economic process in our discussion of the fetishism of commodities
—the extraordinary spell cast by the commodity form of labor (and its
precondition, capital). It is this fetishism that still causes economists to
perceive the process of production as carried on by M. le Capital and Mme.
la Terre (in Marx’s words), as well as by the “factor of production” called
labor. It is largely as a consequence of this unconscious attitude that
modern-day economics has no concept of any “surplus” that is
systematically transferred into the hands of a dominant class. It is worth
repeating that economics explains the flows of interest and dividends and
rent, of trading gains, industrial profits, or technological advantage as the
“earnings” of capital. It thereby confuses the incomes that accrue to the
owners of capital because they have agreed not to withhold their property
from use with the actual physical contribution these resources create when
placed in use. It follows that economics has no explanation for the origin of
profits other than the “imperfections” (such as monopoly or transient
technological rents) that separate the real world from the state of general
static equilibrium that is presumed to represent the logic of the system.
Thus the very category of economic life that more than any other
distinguishes the regime of capital from all others disappears from sight.

Rather than belabor this aspect of economics as ideology, I wish to call

attention to a less commonly remarked aspect of the “science,” exemplified
in Locke’s Second Treatise on Government, whose explication of the wage
labor relation we have noted earlier. In his famous Chapter V, “Of
Property,” Locke sets out to demonstrate that unlimited private acquisition,
for centuries the target of the most scathing religious and philosophic
criticism, was in fact compatible with both the dictates of Scripture and the
promptings of right reason.
The objections to unlimited acquisition, Locke points out, are two: that
acquisitiveness may impoverish others, and that it may waste goods that
could be used by others. Thus the injunctions imposed on acquisition by
Scripture and reason are that “enough and as good” must be left behind for
all, and that “Nothing was made by God for man to spoil or destroy.” These
injunctions would seem to constrain the scale of private accumulation to
that of petty proprietorships. But Locke shows that no such inhibitions need
in fact obtain. For an accumulator who encloses land and cultivates it
increases its yield, so that the act of acquiring land creates more wealth,
which is presumably available to others. And the possibility of holding
one’s wealth in the form of gold, which neither spoils nor goes to waste,
evades the spoilage that would prohibit the accumulation of perishable
commodities.
Thus Locke disposes of a question that had almost monopolized the
attention of social critics of the past, namely the moral significance of
acquisition. By dwelling on the capacity of acquisitiveness to increase the
amount of wealth, Locke changes the generation of surplus from a zero sum
game, where every gain is someone’s loss, into a positive sum process in
which every person’s enrichment is at least potentially the occasion for the
enrichment of all. The ideological—as contrasted with the analytic—
contribution of this argument does not lie in the empirical validity of
Locke’s claim which passes too easily over the question of how widely the
gains from accumulation will be shared). The ideological breakthrough
concerns a reinterpretation of an aspect of the acquisitive process that had
formerly exerted a steady negative influence, often ignored in fact but never
forgotten in principle. This was the morally destructive impact of the
accumulation of wealth on the gatherer himself. The legend of Midas
speaks volumes here, for Midas’s curse has nothing to do with any
impoverishment that his passion for gold would impose on others. It was to
this ancient threat of self-destruction that Locke applies the remedy of an
assurance that the accumulation of wealth violated neither the canons of
right reason nor the Scriptures, so that the question of moral unease could in
good conscience be set to one side.
Adam Smith’s position on this issue is interesting because Smith was by
no means oblivious to the moral costs of acquisitiveness. In his Glasgow
lectures, delivered more than ten years before the publication of The Wealth
of Nations, he balanced his praise of commerce for bringing probity and
punctuality by pointing out that it also “sinks the courage of mankind, and
tends to extinguish martial spirit. ... By having their minds constantly
employed on the arts of luxury [the people] grow effeminate and
dastardly.”6 Later, in the Wealth, Smith often lashes out at the motives of
merchants and deplores the ignorance and apathy into which the working
classes fall as a direct consequence of their exposure to the accumulation
process, with its use of the mechanical division of labor. Yet despite these
strictures, as outspoken as any that Marx was to offer, Smith’s estimation of
the positive effects of accumulation clearly outweighs his assessment of
their costs. For all its balance, the Wealth is a book dedicated to the
legitimation of an acquisitive, capital-amassing society, and that final
balance could not be struck if the moral costs of such a society were not, in
Smith’s mind, overbalanced by its material benefits.
In Smith’s hands the interplay of material progress and moral decline
takes the form of a subtle dialectic that invests his work with its remarkable
depths. In the hands of his successors the dialectic disappears, and the
evaluation of economic growth emphasizes its material aspects without any
concern as to untoward moral consequences, in terms of either motives or
social outcomes. This deemphasis on the moral aspect of economic life
takes a final and decisive turn in the early nineteenth century with the
advent of Bentham’s utilitarian philosophy. Now any last lingering doubts
about greed and rapacity, as well as exploitation and luxury, are removed by
the demonstration that the happiness of all can be achieved—in fact, can
only be achieved—by the self-regarding pursuit of the happiness of each. If
the accumulation of wealth yields happiness for the individual, it follows
that it will provide it for the society.
This is not the place to analyze the premises of utilitarianism, except to
mention that it achieved its brilliant analytic results by ruling out of bounds
the very question to be answered: namely, whether ancient canons of
“virtue” and “justice”—canons that were always founded on a scrutiny of
motives and an “external” assessment of social results—could in fact be
replaced by a system that declared these canons to be arbitrary, and
therefore null and void.7 What is significant for our purposes is that the
utilitarian framework provided the final resolution of the moral dilemmas of
the economic process by its assertion that whatever served the individual
served society. By logical analogy, whatever created a profit (and thereby
served the individual capitalist) also served society, so that a blanket moral
exemption was, so to speak, extended over the entire range of activity that
passed the profit-and-loss test of the marketplace.*
The consequences of this ideological clarification were, and continue to
be, far greater than is commonly understood. The de-moralization of
economic activity not only removed any need to justify the logic of
capitalism, provided that it did not directly violate the law or outrage the
deepest moral standards of society, but it made meaningless such questions
as: Which of two equally profitable undertakings is the better? Can one call
wasteful any undertaking that returns a satisfactory profit? Is it possible to
condemn on moral grounds legal and profitable actions, such as the
decision to relocate a plant at the cost of community disruption? Thus a
kind of moral pardon is applied to all licit activities of the capital-
accumulating sector, although in the so-called public sector, where the
absorption of losses rather than the accumulation of capital takes place, no
such justification is available, so that moral obloquy and standards are
constantly brought to bear.
 As a result there is a further widening of the schism of realms: one
“private,” profitable, and above intrinsic reproach; the other public,
unprofitable, and without the presumptive innocence of the private sector.
The ideology of economics plays an indispensable part in holding apart
activities that, from our perspective, can be seen to intermingle, and in
determining what criteria are regarded as appropriate for the assessment of
each.
Here I must add once again that the purpose of an ideology is not to
mystify but to clarify; not to mislead the lower classes but to enlighten all
classes, in particular, the ruling class. Economics does not “legitimate”
activities that in fact the ruling class knows in its heart of hearts to be
wrong. It succeeds, rather, in offering definitions of right and wrong that
exonerate the activities and results of market activity. This is accomplished
in part because the motives of acquisitiveness are reclassified as interests
and not passions; in part because the benefits of material gain are judged to
outweigh any deterioration in the moral quality of society; and last and
most important because the term “goodness” is equated with private
happiness, absolving all licit activity from any need to justify itself on other
grounds. These powerful prescriptions, ground into the lenses through
which the ruling class observes its own actions, provide the moral self-
assurance without which it could not carry on its historic mission with such
dedicated conviction.
A second, equally fraught consequence of the ideology of economics
concerns the widely recognized phenomenon of the “commercialization” of
life. From one capitalist nation to the next, the thresholds and boundaries
over which economic activity is allowed to step may vary, but looking
backward for a generation or two, it is clear that in all capitalist nations
more and more of “private,” that is, self-determined, life in fact becomes
public life, insofar as it is determined by the regime of capital. Thus to take
two familiar instances, athletic prowess, one of the oldest and proudest
activities of private individuals, has everywhere become a matter of
commercial “sport,” and the self-determination of life patterns, the most
private of all activities, is everywhere deliberately subjected to the influence
of “advertising,” the purpose of which is to induce individuals, without
knowing anything of them, to change their mode of living. These instances
of a relentless commercialization, perhaps the single most self-destructive
process of modern capitalist civilization, could be multiplied manifold.
What is needed is to understand the process as part of the nature of the
system. Commercialization is a consequence of commodification—the
continuous search of business for areas of social activity that can be
subsumed within the capital-generating circuit. We are familiar with this
process from our previous examination of the roots of capital’s self-
expansion. To this understanding we can now add a dimension of ideology.
The expansion of capital is aided and abetted by the declaration that moral
and aesthetic criteria—the only dikes that might hold back the floodtide of
capital’s expansion—are without relevance within the realm of economic
activity. To turn the coin over, we might say that the images of consumption
projected by advertising are a kind of “capitalist realism,” the analogue to
the pictures of collectivized contentment featured in the poster art of
“socialist realism.”8 This is the crucial element of understanding that
ideology brings to capitalism.

III
We have already had ample occasion to note that the relation between
business and state becomes a central political problem for capitalism as the
consequence of the appearance of two distinct realms within the regime of
capital. It is not surprising, then, that the explanation of the proper relation
of these two realms becomes a central question, even an obsession, for
political thought under capitalism.
The indispensable requirement for the effective exercise of political
authority is legitimacy. In tributary systems this issue arises when claimants
to the imperium contend, but the intrinsic nature of rule itself is never a
point at issue. This is because rulership is viewed as the secular aspect of
the religious essence of such societies. Rulers derive their authority from
the godhead; and whereas the genealogy or conduct of a particular ruler
may be questionable, the inherent legitimacy of government itself—of the
right to rulership to exist—is beyond question.
Bourgeois thought represents the polar opposite of this imperial
presupposition. Government is no longer considered to be a natural,
timeless attribute of all social collectivities but is seen as the creation of
“individuals” who band together for their mutual safety and protection.
Nothing symbolizes this more vividly than the original frontispiece of
Hobbes’s Leviathan—itself a charter document in the formulation of such a
social covenant—with its great figure of a sovereign looming like a giant
over the horizon, a sovereign whose armor, on close inspection, reveals
itself to be composed of the tiny figures of a multitude of individuals.
Such a view of government is founded on a wholly new view of the
relation between the social whole and its constituent members. Whereas in
all previous systems one individual alone is considered to be no more than
the dust of a shattered social organism, in bourgeois societies he or she is
imagined to be a self-sufficient cell from which a living social organism is
constructed. That which is ideological about this political conception is not
just its Active history but the assumptions about the nature of the
“individuals” who meet to form governments. These are not persons
perceived as individuated members of an existing, aboriginal social
organization. They are imagined as isolated personages existing without any
social ties—self-supporting yet mutually dependent hermits, coexisting in a
state of latent hostility and suspicion: Hobbes’s “time of Warre, where every
man is Enemy to every man.” Familial contacts aside, they interact at arm’s
length, through market exchanges and contractual obligations.
The concept of this monadic individual is foundational for many aspects
of bourgeois ideology. It rapidly becomes the premise of its economics. As
we have seen, it is a necessary assumption for a utilitarian approach to
social welfare, where the outcome is entirely dependent on the requirement
that individuals consult only their own states of contentment and act
accordingly. Most important of all, it becomes the basis for the “liberal”
view of government.
There are many definitions of classical political liberalism, but all agree
that its central conception is a constriction of political authority, to create
the largest possible space for the self-determined action of “individuals.”
Political liberalism accordingly envisages a main function of government as
a self-inhibitory discipline, withdrawing from areas previously occupied by
state authority and creating legal barriers to secure those liberated territories
for their inhabitants’ unfettered use.
 The particular kind of use uppermost in the minds of the intellectual
fathers of liberalism was the economic act of participating in the market
bargain—the main binding act of a society in which the order-bestowing
functions of government have been curtailed. Although the individual
worker’s need to be freed from all forms of legally enforceable
subservience was always a central tenet of liberalism, the prototypical
economic actor for whose purposes this liberal design was intended was the
merchant or nascent industrial capitalist, for his social effectiveness
required the right to conduct his affairs as he wished and to be quit of
government-enforced obligations beyond those explicitly included within
his contractual agreements.
Thus the ideological element in political liberalism, like that in
economics, resides not so much in any apologetics—although those were
often enough found in the arguments built on their premises—but in the
explication of the appropriate functions of the two realms for the
enlightenment of the ruling class itself. Economics, as we know, explains
the positive effects of a generalized search for capital and “explains away”
any inhibitory reservations with respect to the moral consequences of
unleashing the acquisitive drive through society. Political liberalism
explains the appropriate activities of the governing branch as the partner of
a society that has already accepted and legitimated individual accumulation.
As Locke puts it, echoing the sentiments of Hobbes and anticipating those
of Smith, “The great and chief end ... of men’s uniting into commonwealths
and putting themselves under government is the preservation of their
property.”9
In no way does this negate, or even denigrate, the broader concern of
political liberalism with freedom and with the protection of personal,
political, and intellectual rights against government intervention. The initial
struggles of liberalism, such as the Glorious Revolution of 1688, antedate
the advent of capitalism and involve political and social more than
economic rights. But with the solidification of these rights, the issue of
economic freedom comes to the fore among other freedoms, and with the
assured protection of private property, the issue of economic freedom comes
to the fore among the prerogatives of property.
Given the bifurcation of functions between the economic and political
spheres characteristic of the new order, it is not surprising that the central
issue then becomes the relation of “government” to the freedoms of the
economic realm. The resolution of this issue takes the form of the policy of
laissez faire, the distinctive economic stance of political liberalism. Laissez
faire was never intended to signify that there was to be no “interference” by
government within the economic realm. Adam Smith, whose delineation of
government power was extremely pragmatic, gave his blessing to the
provision of national defense, the establishment of justice, and the provision
of necessary public works—allocations of authority sufficient to establish a
very considerable and influential government presence. Fifty years after
Smith, John Stuart Mill defended laissez faire as “the general rule,” “every
departure from [which] unless required by some great good, is a certain
evil.” Nonetheless, he declared, “in the particular circumstances of a given
age or nation, there is scarcely anything really important to the general
interest, which it may not be desirable, or even necessary, that the
government should take upon itself.”10
That which endows this perception of government with its ideological
character lies in the manner in which the issue is conceived, not that in
which it is resolved. Like the unwitting depiction of the individual as
possessing the attributes and requirements of an active participant in a
market system, the conception of laissez faire, and of the political liberalism
of which it is an expression, is that “the economy” is a realm not unlike that
of “the government,” save that it possesses no territory of its own. The
ideological problem for capitalism thus arises from the need to explicate
rulership in a society where two structures of authority occupy the same
space, engage the activities and command the obedience of the same
persons, but fail to recognize their complementary coexistence.
The outcome is that government treats with the economy, and to some
extent the economy treats with government, much as do two foreign
nations. Emissaries are exchanged as personnel move from one sphere to
the other; treaties are negotiated as laws; spheres of influence are defined
and recognized as policy. This process of accommodation is rendered
difficult by virtue of the frequently conflicting relations between the two
spheres—business mainly desiring encouragement and protection in its task
of seeking surplus; government charged with the necessity to reconcile,
adjudicate, and on occasion to restrain or redirect this process through its
law-making power. This inherently difficult problem is made more complex
as internal and external developments alter the relative importance of the
two branches; and the entire process is rendered still more complicated by
virtue of the misperceived nature of the division of functions that exists
under capitalism.
Last and by no means least is the tension that arises because of the
differently construed boundaries of each realm, that of capital limited by the
extent of the market, that of the political sphere by formal territorial
demarcations. Each of these boundaries is, in fact, ambiguous. Capital
exerts its magnetic influence across national boundaries as effectively as
within them but lacks the protective presence of “its own” political sphere
when it operates abroad. Thus, as we have seen in our last chapter, the
regime of capital has an intrinsic dependency on the enforcement power
that resides in the political sphere, just as the state has an intrinsic
dependency on the fortunes of the regime of capital, including its
international activities, as the precondition for its own political success. The
ambiguity of boundaries and the mutual dependencies of realms have
gained special prominence in our own day but can be discerned far back in
earlier stages of capitalism, with its long history of indecisive capital-
government relationships in mercantile policy, tariff and trade regulation,
and in the often strained exercise of military and economic imperialism.
I must not neglect, although I do not intend to dwell on, one last aspect of
the ideology of political power—the relationship of liberalism, with its
central preoccupation with the separation of political from economic life,
and democracy in the broad sense of political freedom. I shall be brief; not
from any failure to recognize the importance of the problem, but because I
wish to consider the manner in which this burning question is understood—
that is, its ideological aspect—rather than the manner in which it is
answered in history.
The difference between the two is very great. The historical relationship
between capitalism and democracy is complex. Milton Friedman, a staunch
advocate of the view that political freedom can only be attained within a
framework of capitalist relations, is forthright in acknowledging that
capitalism is not in itself a guarantor of freedom. “It is clearly possible to
have economic arrangements that are fundamentally capitalist and political
arrangements that are not free,” he writes, citing the instances of Tsarist
Russia, Fascist Spain and Italy, Japan between the two World Wars, and
Nazi Germany, to which we could add the cases of the United States, until
the mid-twentieth century, and of the Union of South Africa up to this
moment, with respect to their black populations.11
Given this uncertainty, it is not surprising that there exists no overarching
explanation of the circumstances in which political freedom is preserved or
destroyed within a capitalist setting. Rather, from one case to the next we
explain the course of events by referring to the effects of differing political
institutions, national traditions, cultural patterns, charismatic leaders,
military or economic reverses, and so on. That is only to admit that we
possess no general theory as to why democracy triumphs in one capitalist
nation and fails in another.
There is nevertheless one striking generalization that can be extracted
from the otherwise indeterminate history of democracy. It is that political
freedom in modern times—we leave aside the “democracy” of ancient
Greece or the participatory life of primitive societies—has only appeared in
capitalist states. To put the generalization in its more powerful negative
form, democratic liberties have not yet appeared, except fleetingly, in any
nation that has declared itself to be fundamentally anticapitalist, which is to
say within the self-styled “Marxist” socialist ambit. The tendency in all
these nations has been toward restrictive, usually repressive governments
that have systematically compressed or extinguished political and civil
liberties. Thus despite our inability to generalize about the conditions for
the success of democracy within capitalism, there is powerful evidence in
modern history to suggest some “logic” for its failure to succeed in
anticapitalist milieus.
Here the central argument of political liberalism is that the separation of
realms creates the essential conditions for political freedom because the
state cannot enforce its will through economic sanctions, such as denying
work to political dissidents. The argument gains its cogency because it is
grounded in the structural division of realms that is an intrinsic aspect of the
regime of capital. Private property may be an inherently exploitative
institution, but it is also potentially a protective one.* Other means of
enforcing subservience exist than that of crude economic force—Anthony
Giddens stresses the surveillance capabilities of the modern state—but it
seems fair to suggest that some kind of relatively inviolable nonstate
employment sector is a condition for political freedom as we know it.12
 For all its persuasiveness, it is still necessary to subject this central
contention of political liberalism to scrutiny for its ideological elements—
that is, for the preconceptions of a regime of capital that are unknowingly
insinuated into the terms of the argument. Here a critical examination must
begin from the fact that capital itself has no inherent dependence on or
affinity to political freedom. Capital is a process oriented to the creation of
profit, not to the attainment of freedom. Political goals of any kind,
conservative or liberal, enter into the considerations of capital only insofar
as they affect the M-C-M’ circuit. The normal relation of capital to state
power is therefore pragmatic, gladly accepting the use of military,
bureaucratic, legislative, or other state interventions when they favor
accumulation, resisting them when they do not. To put it differently,
capitalists have no interests as capitalists in promoting the cause of
freedom. They are indeed more likely to have opposed interests, insofar as
freedom may create subversive attitudes toward the regime of capital,
although it needs to be said that on occasion capitalists have espoused
liberties even when these threatened their economic interests.*
The same weak linkage between the nature of capital and the defense of
freedom is to be found when we consider the kinds of dangers against
which the ramparts of property presumably protect the individual. These
dangers are described as the pressures of state-imposed conformity that
destroy the individual’s capacity for independence and self-development.
Yet it could surely be argued that the pressures of the marketplace and of
the ethos of capitalism also erode these capacities profoundly—perhaps
even as profoundly—although not so dramatically or coercively as the
interventions of the state. With regard to these economic pressures, the
presence of a separate economic realm is a port of entry rather than a
defensive barrier. As we have seen, however, disciplinary forces arising
within the economic sphere are not considered to be “political” in their
function. They thereby escape the critical gaze of political liberalism that
perceives the presence of one kind of freedom under capitalism and is blind
to the absence of another kind.
One last instance of the ideological interpretation of the problem is
afforded by sharp differences in the idea of the “rights” that apply to each
realm. It is universally considered to be an infringement on the rights of
citizens if they cannot cast a vote on the determination of national or local
affairs. No such infringement is felt, however, when these same citizens are
denied the opportunity to cast a vote on the determination of the affairs of
the company that employs them. So too, it is an elemental proposition of
democracy that every voting citizen has the right to cast but one vote,
whereas it is an equally elemental proposition of capitalism that every
market participant may rightly cast as many votes as his or her wealth
permits. The latter vote taking place in the economy, it is once again
excused from the judgment of the polity.
None of this is meant as a carping critique of the ideology of political
liberalism, much less of the freedoms whose affinity for capitalism it seeks
to explain. The partial freedoms of capitalism represent a political
attainment that far exceeds that of precapitalist civilizations, as well as of
existing self-proclaimed Marxist socialisms. Political and intellectual
liberties are perhaps the greatest bourgeois civilizational triumphs.
Nevertheless they are bourgeois triumphs; and the ideology that tends to
depict them in absolute terms becomes evident when we reflect not only on
the limitations but the definitions of the freedoms that have been won.

A final matter deserves to be raised under the general rubric of the

ideology of politics in a regime of capital. It concerns the nature of
rulership itself, perhaps the foundational concept of political life. Within
capitalism—at least in principle—the state retains the means of violence,
and the economy must content itself with the persuasions of economic
pressure. How is it possible, then, to speak of the capitalist class as “ruling,”
when it lacks the historic prerequisite for rulership?
In this much-debated issue, I find useful Immanuel Wallerstein’s
conception of a “universal” class.13 In stratified societies, Wallerstein
argues, there is normally one, and only one group that is aware of itself as a
class. This does not mean it has an awareness of any oppressive,
exploitative, or “domineering,” role vis-à-vis other “classes.” It means,
rather, that one group alone feels itself to be the embodiment of the spirit
and mission of the society that in fact it dominates. This “universal” class,
embracing within its self-conception the whole of society, is the ruling
class. In Hegel’s terms, it is the only class that exists not merely “an
sich”—by virtue of objective cumstances—but “für sich”—by virtue of its
shared sense of place and mission.
 It is precisely the presence or absence of such a sense of deeply-felt and
universal authority—an authority that needs neither apology nor defense—
that separates the idea of class from that of estates, elites, power groups,
and the like. This applies with particular cogency to the case of capitalism’s
ruling class. We have just noted that this class does not itself possess the
means of violence as it does those of production, and it is a familiar fact
that in the fissured and bifurcated realms of the capitalist system the top
class is subdivided into estate-like subgroups. Thus Branko Horvat, the
distinguished Yugoslav economist, describes the uppermost stratum of
capitalism as follows:

[In] capitalism four different and separate functional groups have been
established. One of them is involved in business, while the remaining three
manage state affairs. They are: business executives, politicians, public
administrators, characteristically called public servants; and military
personnel. Within each group a small elite exercises control. . . . Thus, in
modern capitalist societies four functional elites—top businessmen,
political leaders, high-level civil servants, and military commanders—
comprise the ruling class. ... 14

What this acute description lacks is an explanation of how or why these

contending groups, in Horvat’s own words, comprise a “ruling class.” The
answer is the same as that which normally bound the rivalrous estates of
seventeenth- and eighteenth-century absolutist society to a single principle
of what a universal class should represent. In the second case the principle
was that of a monarchy wielding traditional and inherent rights of blood and
lineage. In the case of Horvat’s contending elites, it is the principle of a
regime wielding the rights of capital.
Needless to say, the rights and privileges of all ruling classes can be
amended by the intrusion of other allied, but differently oriented, factions,
and on occasion can be suspended, as by a coup d’état. Usually the regime
is resumed under new management; very rarely, one ruling class will be
displaced by another embodying a wholly different conception of its role as
the universal class—the two major instances in modern history being the
victory of the bourgeoisie itself during the eighteenth and nineteenth
centuries, and the dramatic overthrow of the Tsarist bourgeoisie in the
Russian Revolution. But such coups and revolutions are easily compatible
with Wallerstein’s conception of a single universal class as the norm. In this
regard it is surely striking that not one of Horvat’s contending groups—not
the military, not the civil service, and not the politicians—would propose
the advancement of its own interest—military force, bureaucratic
entrenchment, or simply “politics”—as constituting the fundamental
purpose of capitalist society. On the other hand, the capital-owning class,
with the concurrence of all, asserts the encouragement of “economic
growth” or “private enterprise” or “freedom”—meaning the bounded
freedoms of capitalism—to be precisely that. It is in this sense that the
capital-owning class is the universal class of capitalism, ruling by historic
authority, for which weapons are not ordinarily a necessity.

IV
A third general aspect of capitalist ideology remains to be examined.
This is its “culture,” that portmanteau word covering the diffuse values, the
styles of art and thought, unconscious customs, and general outlook of the
system, apart from those aspects we have singled out for examination under
the rubrics of economics and political liberalism. From the beginning,
bourgeois culture has been extraordinarily rich, brilliant, and diverse, not to
be reduced to a single strand. Of all aspects of life in a capitalist society it is
the least dependent on the regime of capital, the least directly traceable in
its origins to economic life in general. This flowering culture has not been
itself the direct product of the capitalist class but has rather arisen partly
under its patronage or that of the state, and partly as an expression of
opposition to the dominating role of capital. Nonetheless, no previous
regime in history has stirred up or tolerated so rich, diverse, or critical a
range of artistic and intellectual creativity. There are, of course, aspects of
this “bourgeois” culture that bespeak their milieu, including most
egregiously the commercialization of daily life of which I have spoken. But
to compress the influence of capital on its culture to this aspect is to fail to
appreciate the subtlety of the relationship of these two realms.
Hence I shall stress here another, more often overlooked element, before
returning at the end to one last consideration of the direct imprint of the
business world on the world of thought. The neglected side I wish to
emphasize has to do with the bourgeois attitude toward nature. One aspect
of the culture of most past civilizations strikes everyone who examines
these extraordinarily diverse societies. This is their sacred view of the
world. Whether in China or India, in Greece or Rome, the Americas or
Africa, the earth is seen by earlier civilizations as peopled with spirits and
living presences, suffused with an animism that inhabits every rock as well
as every living thing. The world is endowed with the capacity for suffering
and rejoicing, for vengeance and for beneficence. It exists to be cajoled,
propitiated, rewarded, and thanked, not to be abused, invaded, violated, or
ignored.15
There is a striking departure from this animistic view in the Judeo-
Christian tradition, which from Genesis on, bids man to seize and shape,
appropriate and subdue nature for human purposes alone. Nature is
therefore desacralized and objectified, making it possible, in Lynn White’s
words, to exploit nature in a “mood of indifference to the feelings of natural
objects.”16 This reification of the natural world long predates the rise of
capitalism, but it provides a milieu that encouraged the rational view
characteristic of the capitalist universal calculus. In turn the nascent strands
of capitalist relationships and beliefs strengthened the depersonalization of
the natural environment. Max Weber has pointed to the “disenchanted”
frame of mind essential for the operation of a capitalist system, where all
elements of the situation are reduced, as far as possible, to the purely
abstract considerations of income statements and balance sheets.17
Perhaps the most striking aspect of this desacralization affects the
conception of labor itself, wrenched free of its traditional social and
psychological meanings and reduced to general capacities for motion and
performance that enable it to be utilized exactly as if it were a versatile, but
sometimes balky, machine. There are, of course, immediate motives of self-
interest that press capital to ignore every aspect of a work force except its
latent labor power, but these motives receive support from, and lend support
to, a view that reduces the objects in the material world to atoms and
particles, propelled or held in place by “forces” capable of being described
by mathematics but no longer by art or imagery.
Science thus becomes an ideology—that is, an explanatory view of the
world. Despite its vaunted “positivist” approach and its shunning of truth by
revelation, it nonetheless fills a social requirement indistinguishable from
religion. Science is not ideological in the sense of an avowal of social
values, or an overt partisanship for social interests. Its ideological aspect
lies rather in the function played by its deepest conception—an indifferent
and inert matter as the ultimate stuff of reality. It thus provides a world view
compatible with, and needed by, that required for the limitless invasion of
the world for the purpose of surplus accumulation. Capitalism would be
impossible in a sacralized world to which men would relate with awe and
veneration, just as such attitudes cannot arise in a society in which
exchange value has reduced to a common denominator all use-values.
Capitalism requires and engenders a belief in the indifference of “nature” to
the operations performed on it by man, a point of view epitomized by the
scientific outlook. The culture of capitalism thus expresses a voracious,
even rapacious, attitude toward the material world—a point of view that
would be impossible if that world were portrayed as “mother” Nature. The
ideological function of science is to delegitimize this animistic view,
replacing it with the much more powerful view of nature as object, the
obedient servant and uncomplaining treasury of man.
I must make clear, as with the matter of economics, that the usefulness of
science as an ideology for capitalism does not imply that it could not serve
another master. It is not the sober procedures of science that have their
unique affinity for the regime of capital, any more than the matter-of-fact
realities of economics to which all efforts to improve modern material
existence must have recourse. The aspect of science that capitalism seizes
upon is the reduction of the universe to an array of units of energy that can
be legitimately used for any purpose whatsoever. The purpose for which the
regime of capital uses them is a source of inexhaustible surplus to be
gathered by the perpetual motion of M-C-M’. Marshall Berman has
projected vividly the image of a world in which this perpetual motion
machine runs without inhibition:

If we look behind the sober scenes that the members of our bourgeoisie
create, and see the way they really work and act, we see that these solid
citizens would tear down the world if it paid.
Even as they frighten everyone with fantasies of proletarian rapacity and
revenge, they themselves, through their inexhaustible dealing and
developing, hurtle masses of men, materials and money up and down the
earth, and erode or explode the foundations of everyone’s lives as they go.
Their secret—a secret they have managed to keep even from themselves—
is that, behind their façades, they are the most violently destructive ruling
class in history. . . .18

As Berman points out, it is Marx himself who first perceives this

whirlwind energy with its threat of self-annihilation: in the Manifesto he
and Engels describe modern bourgeois society as having “conjured up such
mighty means of production and exchange” that it is “like the sorcerer who
can no longer control the powers of the underworld that he had called up by
his spirits.” What Marx does not remark, however, and Berman does not
explore, is that the forces of production alone were not enough to allow
capitalism to achieve its material triumphs. It needed also the “permission”
of nature itself, a permission that could only be achieved by draining nature
of its vast animistic sensibility, leaving behind an uncomplaining grid of
space and time.

One further issue requires our attention before leaving the immense
subject of “culture” as ideology. This brings us back to the problem of the
impact of the regime of capital on the commodification of life—the
systematic search for aspects of daily existence that can be incorporated
within the M-C-M’ circuit. This aspect of capitalist culture has been so
widely noted and deplored that it seems unnecessary to add to the many
critical words that have already written.19 I would note instead another
consequence of commodification that affects the culture of capitalism in
ways that are more benign, though perhaps ultimately more destructive.
This is the tendency of the regime of capital to regard ideas as
commodities, so that it becomes a characteristic of bourgeois culture that
the most outrageous—indeed, even overtly subversive—books, games,
motion pictures, art, or even style can quickly become absorbed (“coopted”)
by the system.
There is, of course, a countertrend to this commercially motivated
acquiescence in, or indifference to, ideas. A general suspicion of, or self-
imposed censorship of, anti-capitalist views provides a considerable degree
of protection for the system, the power of capital serving as the same
indirect source of discipline in the ideological world as it does in the
allocation of scarce resources. Nonetheless, no social formation is without
its means of self-defense against hostile or subversive ideas. What is
striking about capitalism is the willingness to accept potentially subversive
influences once they are denatured by becoming commodities. Thus anti-
capitalist or anti-bourgeois books become “best sellers”; essentially critical
games such as Monopoly or even Class Struggle are sold with much the
same indifference to their content as Parcheesi; anti-establishment motion
pictures are promoted with the same zest as films of economic piety,
providing they have box-office appeal; anti-bourgeois art or styles—the fad
for working-men’s clothes, for instance—are eagerly embraced as
successful items for merchandising without the smallest awareness of, or
concern for, their symbolic rejection of the values of the larger culture.
All this, of course, is part of the extraordinary richness and creativity of
capitalist culture. At the same time it is necessary to comment on two
aspects of this cultural face of capitalism. The first is that the extraordinary
tolerance for heretical, skeptical, or disconcerting thought and cultural
activity is a direct consequence of the desacralization we have emphasized
as the central characteristic of capitalist ideology. It should be noted, for
instance, that in general the tolerance for subversive thought is much
greater within the sphere of capital itself than in the realm of government.
Lèse majesté remains a legal offense, but lèse capitale has not yet become
one.
Second, it is only because ideas are commodities that they can be so
lightly and indifferently regarded. A culture based on sacred beliefs would
have great difficulty in tolerating continuous threats to the validity and
sanctity of its world view. As I have written elsewhere, this poses serious
challenges for those who believe that “socialism” will be naturally
compatible with the intellectual freedom that is capitalism’s remarkable
achievement—an achievement whose basis is, I think, a devotion not to
John Stuart Mill’s faith in liberty but rather to the all-too-revealing
depiction of the contest of thoughts as a marketplace of ideas. I do not wish
to ally myself with those who equate capitalism with enlightenment, or
socialism in whatever form as inseparable from intellectual repression: the
realities are more complicated than that. But it is important to reflect on the
cushioning protection afforded to intellectual life under capitalism precisely
because it is in its nature that it develops a complex ideological system; and
it is necessary as well to ponder the form in which a more ideologically
unified society would cope with intellectual dissent.20
This absorptive capacity of capitalism is, however, also a weakness for
the system. The ceaseless outpouring of commodified culture, the
cacaphony of ten thousand books, magazines, and television impressions is
in the end a recipe for confusion rather than enlightenment. Where Whirl is
king, anarchy is ruler. Capitalism’s view of its own existence, unlike that of
all other social formations, lacks the basis of a religious certainty, the
granite in which other world views are imprisoned but on which they can
build with utter confidence. If science is capitalism’s closest substitute for a
religious underpinning for its historic life history, it is also the fact that
science is at its core only a general method, itself in a constant state of flux.
The ideological aspect of the culture of capitalism, then, is not merely the
imprint that the imperatives of capital leave on its productions. Rather, in
parallel to the narrowness of the capitalist economic vision, and of its
political conceptions, what is notable about its cultural outlook is the
compression of the realm of culture itself. It is part of the nature of
capitalism that the circuit of capital has no intrinsic moral dimension, no
vision of art or idea aside from the commodity form in which it is
embodied. In this setting, ideas thrive but morality languishes, and the
regime of capital becomes the breeding ground for an explosion of
ideational and esthetic creations that conceal beneath their brilliance the
absence of an organizing moral force.

1. See Goran Therborn, What Does the Ruling Class Do When It Rules? (London: Verso, 1978),
pp. 171–73; also Joyce Oldham Appleby, Economic Thought and Ideology in Seventeenth-Century
England (Princeton, N.J.: Princeton University Press, 1978 pp. 5–6.
2. Amin, Class and Nation, p. 52. There was no world religion as such for the social formation of
feudalism. Rather, the tenets of Christianity and those of secular vassalage combined to form a
framework of divided authority—the “two swords”—within a system of shared values. See Georges
Duby, The Three Orders (Chicago: University of Chicago Press, 1982).
 3. Albert Hirschman, The Passions and the Interests (Princeton, N.J.: Princeton University Press,
1977), p. 41.
4. Adam Smith, Theory of Moral Sentiments, p. 183; Wealth of Nations, p. 342.
5. Hirschman, Passions and Interests, p. 41; Smith, Lectures on Jurisprudence, p. 538. (“Doux
commerce” is to be translated as “gentle,” not “sweet,” commerce.)
6. Smith, Lectures, p. 540.
7. Sec Alisdair Maclntyre, After Virtue (Notre Dame, Indiana: University of Notre Dame Press,
1981).
8. See Michael Schudson, Advertising: The Uneasy Persuasion (New York: Basic Books, 1984),
Ch. 7.
9. John Locke, The Second Treatise of Government, p. 71. Locke’s concept of property extends
beyond chattels into a view of personhood, but it is nonetheless unimaginable without chattels or
personal wealth.
10. Mill, Principles of Political Economy, pp. 944–45, 970.
11. Milton Friedman, Capitalism and Freedom (Chicago: University oC Chicago Press, 1962), p.
10.
12. Giddens, Historical Materialism. For a bold attempt to describe a socialist structure that would
provide such bulwarks to liberty see Branko Horvat, The Political Economy of Socialism (Armonk,
N.Y.: M. E. Sharpe, Inc., 1982).
13. Immanuel Wallerstein, The Modem World-System, Vol. I, pp. 351–52.
14. Horvat, Political Economy of Socialism, p. 68.
15. Sec, for example, Fustel de Coulanges, The Ancient City (New York: Doubleday, n.d.), Book I.
16. Lynn White, Machina Ex Deo: Essays in the Dynamics of Western Civilization (Cambridge,
Mass.: M.I.T. Press, 1968), p. 86.
17. Max Weber, Economy and Society (New York: Oxford University Press, 1947), p. 158f.
18. Marshall Berman, All That Is Solid Melts into Air (New York: Simon & Schuster, 1982), p.
100.
19. I refer, nevertheless, to a few commentaries of unusual value. Anthony Giddens discusses the
commodification of time (following Mumford) as a penetration by capital of crucial and neglected
importance (Historical Materialism, Ch. 6). Erich Kahler (citing copiously from Fromm) gives a
stinging analysis of the commodification of perceptions in The Tower and the Abyss (New York:
Braziller, 1976), p. 93f. Finally, I mention again Michael Schudson’s Advertising: The Uneasy
Persuasion for a penetrating analysis of a consumer society.
20. Sec my Marxism: For and Against, pp. 167–69. For a description of the manner in which a
unified ideology is formed in a religious society that bears many resemblances to a communitarian
form of socialism, see Gertrude Enders Huntington, “Children of the Hutterites,” Natural History,
February 1981.
*
I cannot resist adding an example of the modern use of economics as a system of clarificatory
belief. Thomas Schelling writes: “. . . [T]he free market may not do much, or anything, to distribute
opportunities and resources among people the way you and I might like them distributed . . . ; it may
encourage individualistic rather than group values. It may lead to assymetrical personal relationships
between employee and employer. . . . The market may even perform disastrously when inflation and
depression are concerned. Still, within these serious limitations, it does remarkably well in
coordinating or harmonizing or integrating the effects of... individuals and organizations”
(Micromotives and Macrobehavior [New York: W.W. Norton, 1978]), p. 23. Schelling is by no means
a bland “apologist” for the market system. Note, however, that the market is given its ultimate
blessing on terms that excuse a maldistribution of opportunities and resources, unsocial values,
unequal bargaining power, and perhaps “disastrous” performance during inflation or depression. One
is tempted to ask by what criteria the system would be deemed a failure.
*
One must note “potentially.” Capitalist governments can also apply direct coercive power and
have done so on many occasions, as during national emergencies, crippling strikes, etc.
*
I believe it also needs to be said that many of those who have argued on behalf of capitalism
because of its connection with freedom have shown scant interest when free speech, academic liberty,
or racial or sexual discrimination are under attack.
 6
The Logic of Capitalist Development
UP TO NOW we have spoken mainly of the nature of capitalism—the institutions and
beliefs that endow the social formation with its magnetic character. In considering this nature we
have been at pains to emphasize one primary consideration. It is that the social formation of
capitalism, like that of all others save only primitive society, is at bottom a system of class
domination and mass acquiescence. That which distinguishes capitalism from other social formations
is not the fact of its hierarchical character but its unique form, in which the drive for power and
domination becomes sublimated into the desire to accumulate capital, and in which the expression of
subordinate status is manifested through the acceptance of market and property relations. The
regimes of capital display a great variety of forms, from the enlightened countries of northern Europe
to the repressive Union of South Africa, but all—even those that speak of themselves as “socialist”—
still maintain the institution of capital as the dominating element in their social structures. However
hedged about or surrounded by advanced political and ideological ways and views, the accumulation
of capital remains the life force of these nations, the center not only of their economic but of their
social and political life.
It follows, then, that at the deepest level the logic of capitalism must also
express the imperatives of accumulation. The fundamental force that drives
the system through history is its search for profit—a search on whose
outcome hinges the historical fate of the social formation as a whole. This
relentless and insatiable process, into whose genesis and ramifications we
have inquired at length, therefore sets into motion the central tendencies of
the system. The capitalist path takes different turnings at different periods
of history, and the paths of capitalist nations by no means run along exactly
parallel tracks; and yet in all its variations, the trajectory of capitalism is
immediately recognizable as a movement guided by the imperious need for
profit—indeed, as a movement incomprehensible without an awareness of
this central element of its nature.
As I said at the outset, the dynamics of this logic have been the main
research objective of all the great economists. The works of Smith and Mill
and Marx and Keynes and Schumpeter describe the outcome of a grand
drama of accumulation that all recognize as constitutive of, and inseparable
from, the innermost principle of being of the system they are studying. That
these scenarios reflect differing empirical observations and conceptual
perspectives is obvious enough. Less noticed is that the scenarios also
embrace a common framework of basic assumptions. From Smith to
Schumpeter, the great works of political economy recognize that the vital
accumulation process hinges on the ability of a capitalist class to extract
profit from the system. All further understand that this ability depends on
the legitimacy of property rights in the means of production. All also
understand that these rights require a mutually supportive division of
functions between the realm of business and that of the state—a division of
functions that takes for granted the priority of accumulation as a necessary
condition for a stable social order. These universally recognized
preconditions for accumulation constitute a tacit delineation of what we
have called the “regime” of capital—that is, the depiction of capitalism as a
social formation in which the accumulation of capital becomes the
organizing basis for sociopolitical life.
In addition, all the major scenarios are dramas of social as well as
material evolution. Growth and change lie at their hearts. In particular, the
great economists emphasize that the accumulation process is an agency for
social, not just economic, change and that one of its main effects is to alter,
for better or worse, the fortunes of the social classes of the system.
Finally, all the great scenarios envisage the regime as having a bounded
future. Its span of life cannot be precisely predicted, but its eventual demise
or supersession by another social order is universally foreseen. Adam Smith
describes the system as reaching a plateau, when the accumulation of riches
will be “complete,” bringing about a deep and lengthy decline. John Stuart
Mill expects the momentary arrival of a “stationary state,” when
accumulation will cease and capitalism will become the staging ground for
a kind of associationist socialism. Marx anticipates a sequence of worsening
crises produced by the internal contradictions of accumulation—each crisis
clearing away the obstacles of the moment but hastening the day when the
system will no longer be able to manage its self-generated tensions. Keynes
thought the future would require a “somewhat comprehensive socialization
of investment”; Schumpeter thought it would evolve into managerial
socialism.1
This broad theme unquestionably raises the crucial aspect of the logic of
capital, namely its capacity to survive in the face of the obstacles and
difficulties that accumulation creates. Despite their general consensus with
respect to the long-term future, however, the generalized narratives of the
worldly philosophers have little to tell us about the present or the
foreseeable future. Nothing like a timetable exists for the expected life span
of the system—Schumpeter, who predicts the system’s passing, cautions
that “in these things, a century is a ’short run.’ “2 There is no agreement on
the proper measure of the vitality of the system. Perhaps most striking of
all, a hundred years after Marx’s enunciation of a “law” of the falling
tendency of the rate of profit, no conclusive evidence exists as to whether
the rate of profit has shown a secular decline or not.3
Thus an attempt to investigate the logic of the system in terms of its life
expectancy yields no more than an anticipation of its eventual decline, an
expectation of little use in understanding the present or the near-term future
—indeed, an expectation that may cause grave mischief if plans are laid for
the system’s quick demise without heed to the possibility that Schumpeter’s
calculations with respect to the “short run” might prove to be correct.
There is, however, another aspect of the logic of the system, also present
although less prominent in the work of the great economists. This is the
effect of accumulation in bringing about structural changes within the
system—changes that alter the manner in which capital pursues its
unchanging goal. This logic will not come directly to grips with the
question of how long profits can be won, a matter that must ultimately be
decided by the changing balance of class power—Marx’s “class struggle”;
by the ebb and flow of technological opportunity; by the fortunes of war
and conquest; and other such largely imponderable factors. The logic of
structural change will nonetheless shed some light on the evolving shape
and form of the social formation—the changes in flesh and bone, so to
speak, that are forced on the body social by the inner metabolism of M-C-
M’. From these changes we may yet learn something that bears on the
larger logic of the capitalist prospect itself.

II
The logic of structural transformation comes about as the direct outcome
of the manner in which capital is generally amassed once the transition to
an industrial capitalism has been made. This takes the form of the building
up of “fixed” capital—machines and equipment, factories and buildings,
transportation and power networks, and in our own day, research facilities.
Capital seeks to amass these fixed investments for several reasons.4 One
is that they strengthen the hand of capital against labor because machinery
greatly increases the productivity of labor, as exemplified by the assembly
line. This enables individual capitals to increase their profitability, at least
for a time, because the cost of labor per unit of output declines. A second
reason is associated with the same increase in productivity. The ability to
cut costs is a primary means by which firms seek to invade the markets of
their competitors or to stave off competition from others. Third, fixed
capital is usually necessary in order to bring new products on line, where
they can seek the “rents” of scarcity.
The structural logic of accumulation therefore begins from the powerful
tendency of capital to develop its productive forces—a tendency we are
familiar with as an integral aspect of the M-C-M’ circuit. With this
enhanced ability, however, come two associated effects that undermine and
disrupt that self-same circuit. The first arises from the effect of additional
fixed capital in “crowding out” labor. From a Marxian analytic viewpoint
this progressively erodes the basis from which surplus value can be
extracted, thereby setting into motion the famous tendency of the falling
rate of profit. Even from a conventional view, which does not recognize the
existence of surplus value, the crowding out of labor by machinery
introduces difficulties in the form of a threat of technological
unemployment.
Second, and no less important from both a Marxist and a non-Marxist
perspective, is the effect of fixed capital in augmenting the physical
capacity of individual industries without any coherent plan for dovetailing
their outputs. In Marx’s terminology the ensuing tendency for a mismatch
of supply and demand aggravates the “anarchy” of a capitalist economy. For
other economists, it is the source of those recurrent saturations of individual
markets that can bring enormous economic damage when the markets are of
major importance, such as the overbuilding of the railways at the end of the
nineteenth century.
Thus accumulation becomes the cause of a clash between enhanced
productive capacity on the one hand, and the limited adaptive capacities of
the market mechanism on the other. The logic embodies a conflict between
what Marx calls the “unconditional development” of society’s productive
genius and the “limited purpose” of capital as a vehicle for the attainment of
that productive genius, the limitation being that capital is a process oriented
to profit, not to social well-being. This is the final contradiction to which
we turn in Capital After tracing the labyrinthine path of the circuit of
accumulation in great detail, Marx writes in Volume III, “The true barrier
of capital accumulation is capital itself,” a succinct if cryptic description of
the inherent tensions in what I am calling the structural logic of the system.5
Shortly we must attempt to trace the developmental logic of capitalism in
greater detail, moving from the abstract, timeless representation of a
contradiction between productive expansion and social restriction to a
depiction of this tension in the actual configurations and patterns of
historical capitalism. In doing so, however, we encounter a new problem. It
is that the developmental logic of the system does not unfold in a single
uninterrupted flow but rather takes place in distinct stages or periods. At our
level of Olympian observation these long-lasting stages might be likened, at
least metaphorically, to the youth, young adulthood, maturity, and old age
into which the early historians divided the chronology of past kingdoms.
I have set out these stages (without such tendentious titles) on the chart
on pages 150–52. The chart is segmented into sections that highlight
aspects of the political and ideological as well as the economic realms,
some of which I will explore in some detail, others of which I include only
to round out the general character of the periods into which the array is
subdivided. For what is crucial in this presentation are not the elements that
we trace from one stage to the next—elements that are highly compressed
and unavoidably arbitrary to a degree—but rather the guiding principle by
which periodization itself is determined.
Here I follow the works of Ernest Mandel and of David Gordon, theorists
of “long waves” in capitalism. These are roughly twenty-five-year-long
periods of buoyant expansion, followed by equally protracted periods of
sluggish growth, that reveal their stimulating or retarding presence in many
aspects of capitalist performance, most importantly in the relative length of
boom years versus slump years in the “normal” seven-to-eleven-year
business cycles over which the long waves extend.
From Mandel I take the conception of these long swings as the
expression of deep-rooted changes in the contest of forces that determine
the prevailing profitability of the system—in short, the “class struggle” that
regulates the division of the social product into the share going to capital
and that going to labor. This approach has the virtue of historic specificity,
since Mandel emphasizes that political and technological configurations
will vary from one long boom to the next. What it lacks, however, is the
ability to account for the long duration of the swells and falls themselves.
Here Gordon’s analysis provides a useful supplement by emphasizing the
influence of the “social structure” of accumulation, the overall milieu
within which accumulation takes place. Gordon places particular stress on
the mode of deploying labor within industrial enterprise, but he recognizes
also the importance of competitive strategies, business/government
relationships, and the like. The extended long wave can then be envisaged
as the effect of a given social structure on the ability to amass capital.
Typically a structure will encourage investment until the opportunities for
expansion within a given framework of social and institutional constraints
are exhausted. Thereupon pressure accumulates to create a new set of
arrangements—labor deployment, market organization, government
regulation, etc.—better able to foster the profitable engagement of labor. It
is therefore a periodicity whose timing reflects the inertia of adjustment—a
“generational” explanation of the duration of long swings.6

A HISTORICAL SCHEMA OF THE LOGIC OF CAPITALIST

DEVELOPMENT
 This means that each period within the chart must be conceived as a
snapshot of processes, caught in an instant of time—processes that are
impelling the entire system in the direction of a general impasse indicated at
the conclusion of the developmental logic in each period. The individual
features within periods are therefore typically more representative of its
physiognomy at the end of the period than at the beginning. I have divided
the historic canvas into four periods as to whose distinctive character there
is little controversy. What is controversial, I repeat, is the assumption that
each period is defined and climaxed by its terminal crisis. The idea of a
historic accumulation process, manifesting itself at first in a burst of newly
released energy and gradually encountering the limitations of its social
structure, will nonetheless provide the basis on which our discussion will
proceed,
I will not therefore spend any time on the statistics that demonstrate the
length or amplitude of these rhythmic surges, nor refer, except in passing, to
the specific industries or commodities that play crucial roles in leading each
upward movement. My interest, rather, is in revealing a characteristic
structure within which capitalist growth takes place in each of its periods.
The chart is therefore a heuristic more than an analytic device. It does not
purport to show how the system is catapulted from the terminal crisis of one
period to the fresh configuration of the next. It aims to present no more than
the setting within which we shall attempt to find a logic of accumulation
that changes its manifestations but not its fundamental nature from one
period to the next.

III
We begin with the period of nascent industrial capitalism, the era already
sufficiently well formed so that Adam Smith could delineate its features in
The Wealth of Nations. I shall not recapitulate here the features of that
social structure of accumulation, leaving to the reader to reconstruct its
portrait from the first column of the matrix. The underlying logic is, of
course, set into motion in the activities where the accumulation process is
outlined, and it is there that we accordingly direct our attention first.
It is Smith himself who gives us the Ariadne’s thread into that process
when, in the opening pages of the Wealth, he introduces us to a “small” pin
manufactory where ten men, “indifferently” equipped with machinery, are
able to produce forty-eight thousand pins a day, whereas (Smith tells us)
each man, if he had “wrought separately and independently . . . certainly
could not . . . have made twenty, perhaps not one pin in a day.”7 This is the
famous principle of the division of labor, the driving force of the
accumulation process in Smith’s scenario, whose power depends partly on
the militarylike pace and discipline of the work force, partly on the increase
in individual dexterity that is the result of specialized and repetitive tasks,
and most of all on the supplementation of human strength and precision by
the use of machinery in the production process. If we generalize the
extraordinary leverage imparted to production by its mechanization, we
discover immediately the source of the impetus to which we commonly
give the name the “Industrial” Revolution—in fact, the first of a succession
of technological revolutions.
Looking back on this initial period with the benefit of hindsight, what
strikes us is not merely the encouragement given to production by the early
mechanization and division of labor but the equally important function
played by the existing economic structure in moderating its disruptive
force. This was the consequence of two aspects of the period: one
technological, one social. The technological aspect was the product of the
still undeveloped character of its technology and application. The Watt
steam engine and the Arkwright waterframe were essentially hand-built
mechanisms, without standardized and interchangeable parts or
subcomponents. The staggering increase in productivity of Smith’s
manufactory, from a few pins to 4,800 pins per man per day, was not
realized in a single bound from artisanate to manufactory but came as the
result of a process of expansion that proceeded one man and one machine at
a time: in the 1830s, more than a half-century after the introduction of the
textile mill, two-thirds of the mills in England still employed less than fifty
workers, and in the United States, according to the Census of Manufactures
of 1869, the average number of workers in “manufacturing” establishments
was still less than ten.8
Thus the potentially disruptive impact of expanding capital was held in
check by the primitive character of its equipment and organization. Equally
important was a social attribute of the period—namely, the existence of a
large precapitalist sector against which the output from the new
manufactories could be directed. Handicrafts became the target of the mills,
with the well-known result of their virtual elimination, first in England in
the early decades of the nineteenth century, later in India. The same
destruction also occurred, although with much less harmful social results, in
the United States, where the output of homespuns in New York State fell
from almost ten yards per capita in 1825 to barely more than a quarter of a
yard thirty years later.9
 As a result, competition for the nascent capitalist firms assumed the form
of a mild disciplinary force—the source, Smith writes, of “good
management”10—bringing about a uniform rate of profit and a flexible
adaptation of outputs to demand but minimizing the violent consequences
that would figure so importantly in later periods of the system. For a
considerable time, the new power of the forces of production was therefore
able to exert its effect on output with relatively small adverse effects on the
values of existing capitals.

Far more dramatic was the impact of the emerging industrial mode of
production on another social aspect of the system, the newly recruited
“proletarianized” work force of unemployed or dispossessed men and
women forced to accept the dreaded work of the mills for survival’s sake.
Smith believed that industrial employment would have a two-sided effect
on working persons. He thought it would improve their material lot but
injure their moral and intellectual well-being. Material conditions would
improve, he argued, because the accumulation process would maintain a
steady upward gradient, with real wages rising fast enough to better the
workers’ lot, but not so fast as to jeopardize profitability. Their moral fiber
and intellectual acumen, on the other hand, would undergo a severe
deterioration from an exposure to the same mechanized division of labor
that was responsible for their more “liberal” wages. As Smith put it:
... The understandings of the greater part of men are necessarily formed by
their ordinary employments. The man whose whole life is spent in
performing a few simple operations . . . has no occasion to exert his
understanding, or to exercise his invention in finding out expedients for
removing difficulties which never occur. He naturally loses, therefore, the
habit of such exertion, and generally becomes as stupid and ignorant as it is
possible for a human creature to become. ... 11
Smith was incorrect on both accounts, and his error is of interest insofar
as it helps define aspects of the social framework of his period. He was
incorrect in anticipating a rise in the material well-being of the working
class because he did not foresee the catastrophic effect of the
proletarianization of the working force, with its ragged pauper apprentices,
its Irish immigrants, displaced artisans, and dispossessed agricultural
laborers. Wages did not rise in the tempered fashion that Smith expected but
gradually declined from 1780 until about 1820, in some cases falling
precipitously: Manchester weavers, who had enjoyed earnings of 15s to 20s
per week in the 1790s, were reduced to 5s and 6s per week by 1800. The
decline in wages was worsened by the near-collapse of urban living
standards in the mill towns. Continental and English visitors were as
appalled by Manchester as Frederick Engels: “Civilization works its
miracles and civilized man is turned back almost into a savage,” wrote
Tocqueville on visiting the city.12
Smith’s second and more significant error was his expectation that the
working class would lose its “martial spirit” as well as its acumen, and
would be reduced to a state of apathetic ignorance. That was not in fact the
outcome. It was not apathy but anger that grew within the proletariat,
evidenced at first in movements of religious dissent, then in episodes of
machine breaking and factory burning and finally in mass protests and
minor “revolts.”
A central aspect of this reorganization was a marked change in the
deployment of labor within the factory. As David Landes and others
economic historians have noted, the use of labor in early capitalism,
although often harshly repressive, was not particularly efficient. In the iron
foundries, mines, machine shops, and of course in agriculture, the pace of
labor was still set by men, not by machines. Periods of intensive activity
were followed by periods of waiting around. The work itself resembled a
congeries of craftlike tasks where simple mechanization assisted the
workman, rather than a work flow where traditional barriers of craft played
little or no role.14
This casual organization of labor was not compatible with mass
production, which required that work effort be continuous and subject to
much more management-directed discipline. The craftlike organization of
tasks had therefore to be replaced by a “homogenized” labor force before
the rhythms and speeds of mass-production technology could be fully
applied. As Gordon, Edwards, and Reich have pointed out, the dramatic
shift in the forces of production that played so crucial a role in defining the
structure of accumulation in the middle periods of the system would not
have been feasible without appropriate changes in the mode of labor
deployment. This entailed the break-up of the semi-autonomous gang
system, with its bosslike labor contractors, and the assertion of direct
managerial prerogatives over the hours and conditions of labor. From this
change in the position of the worker emerged the homogenization of a
previously variegated labor force; and from the homogenization of labor
came the “drive system”—the fast pacing, routinization, and “scientific”
management that were given their most articulate expression in the work of
Frederick Taylor. The international acclaim given to Taylorism attests to its
importance in changing the possibilities of the accumulation circuit. Even
Lenin was an enthusiast for scientific management.15
The homogenization of labor enormously magnified the mutual impact of
expanding capitals. Drive system labor forces and enormous assemblages of
machinery hurled torrents of output against other capitals, transforming the
process of mutual encroachment from a disciplinary to a destructive
interaction. National corporations, with large sums invested in plant and
equipment, had to “run full” (as Andrew Carnegie put it) to cover their
heavy fixed costs, which, in the case of American railroads, amounted to as
much as two-thirds of running costs.16 Running full reduced unit costs for
each firm, but the consequence of all firms running full was the continuous
outbreak of unmanageable “cut-throat” competition, with rate wars among
railroads and price wars among oil refineries and steel mills. With the
gradual saturation of the market for rail lines, steel, and other mass
commodities, competition—the stimulating source of “good management”
lauded by Smith—became the source of the internecine war described by
Marx. In 1873 lagging growth set off an irregular twenty-year decline, at
the end of which prices had fallen by two-thirds and the business failure
rate had approximately doubled. Looking over the wreckage at the end of
1893, Bradstreet judged the crisis to have been the worst in eighty years.17

The enhanced productive powers of technology therefore greatly

increased its disruptive powers. The immediately linked result was to be
found in the measures of defense by which capitals sought to protect
themselves against the onslaught. In the early period of limited mutual
encroachment, there was essentially no effective means of defense, short-
lived collusions aside. But the intensification of pressures during the era we
are considering provoked increasingly effective reflexes. In Europe the
main barrier to the destructive expansion of capitals became the open
formation of cartels, common by the turn of the century, and a turning
toward international protectionism. In the United States the defensive effort
at first took the form of pools and agreements against price cutting—almost
entirely ineffective; then of vertical integrations that sought to exclude
market forces by maintaining the passage of commodities from raw to
finished states within the firm; finally of trusts and mergers, culminating in
the great merger wave at the turn of the century.18
The working-out of the structural logic is therefore easy to discover. The
interplay of the forces of production and the reflexes of defense had as its
outcome the centralization and concentration of capital. To take an
illustrative case, in 1870, before the blows of the initial depression, there
were 808 iron and steel mills in the United States. Thirty years later, when
the storm had passed, there were 669 mills and the average capital per firm
had increased from $150,000 to $383,000. On a broader basis we can note
that whereas in 1897 there had been only 20 trusts, the Census of 1900
listed 185 “consolidations” with a total capitalization of $1.4 billion, and
four years later the number had grown to 445, with a capitalization of over
$20 billion.19
Thus an enormous change in scale dominates the period culminating in
the 1890s, in part the result of unprecedented advances in technology, in
part the consequence of defensive efforts to protect capitals against the very
productive efficiency they had created. In the initial decades of the next
period, this underlying logic now continued its effects in the setting of the
massive industrial structure that emerged from the previous era. In this
restructured setting, the economy came less and less to resemble a
honeycomb of small enterprises, each relatively weak but collectively
flexible, and more and more took on the attributes of a massive
concatenation of beams and girder, each very strong but collectively rigid
and interlocked.
The effect of this change was soon evident. The girdered structure
became a means of transmitting disruptions throughout the system far more
powerfully than the honeycomb. Mismatches of supply and demand, poor
sectoral interlocks, or decelerations of accumulation from saturated markets
transmitted their shocks as from earthquake epicenters. In addition, the
productivity effect of fixed capital now began to cut sharply into the
employment base as fewer workers were required per ton or yard of output.
From 1900 to 1929 output in the manufacturing industries tripled while
employment only doubled.20 Marx would undoubtedly have characterized
the movement from the crisis period of the 1870s and 1880s to that of the
1930s as a shift from disproportionality—the poor dovetailing of outputs—
to underconsumption—a disproportionality of income payments. From both
causes, the common result was a growing tendency for systemwide
breakdowns to appear in the M-C-M’ circuit. In place of a disorganization
of markets there was a disorganization of large economic flows, until in the
gigantic collapse of the 1930s real industrial growth was zero or negative
for ten consecutive years. The same catastrophic effects were visible on the
Continent (where the devastation of World War I must bear a portion of the
blame), as well as in England, less physically damaged by the war, where
unemployment exceeded 10 percent in every year but one from 1919 to
1939.
The late nineteenth-century destabilizations of price warfare had been
countered, as we have seen, by trustification and merger, and later by the
“price leadership” of oligopolistic industries and by government regulatory
intervention. However effective these public and private efforts to mitigate
the ferocity of price competition, they were without effect against failures
that required the revitalization of the entire system, not just the repair of
localized or partial failures. Such a revitalization necessitated the injection
of purchasing power into the economy across all markets, and during the
1930s governments as different as the Popular Front in France, the Nazi and
Fascist regimes in Germany and Italy, and the New Deal in America all
sought to restore the accumulation process by using such measures under
various ideological guises.
That which distinguished the response to the two periods of crisis was
therefore the roles of the private and public realms in providing a
mechanism of rescue for the system. The crisis of the late nineteenth
century was resolved mainly by the spontaneous initiatives of the business
community itself, symbolized in the efforts of Carnegie, Morgan,
Rockefeller, and others to stabilize their industries through business
amalgamations of one kind or another. The crisis of the 1930s was attacked
quite differently. Business leaders were unable to mount an effective
defense against a disruption of such magnitude, and the initiatives
accordingly passed to government leaders and their advisors. It was this
forced partial reunification of the realms of business and government that
gave to the scenario of the third period its essential point of structural
difference from the second. The defining climax of the period ending in the
crisis of the end of the nineteenth century was the initial trustification of
capitalism; that of the period ending in the 1930s was the initial statification
of the system.

We cannot leave the middle periods of the system without some

consideration of the political confrontations that were also part of their
developmental logics. This is all the more important in that the polarization
of classes that bulked so large in Marx’s conception of capitalist dynamics
now encountered an aspect of the accumulation process to which Marx
paid, in retrospect, far too little attention. This was the ability of the regime
of capital to win allegiance by conjuring up a source of “patriotism” from
the accumulation process itself. The patriotism is that of economic
affluence—the gratitude, or at least the support, of the retainer for a
generous patron.
The economic patriotism of the periods in question followed
considerably different paths in America and Europe. In the United States,
where the initial experience of factory and urban life never plumbed
English and European depths, the allegiance of the working class was at no
time seriously in question. Despite the harsh manner in which homogenized
labor was used in the steel mills and auto plants, despite terrible slums and
continuous racial and ethnic oppressions, the momentum of American
growth early won the basic adherence of its masses, and never lost it. As
Werner Sombart put it, “All socialist Utopias came to nothing on roast beef
and apple pie.”21 The basis of American “exceptionalism”—its unique
failure to develop an anticapitalist political consciousness—was the product
not merely of an absence of the embittering European experience but the
presence of a widening stream of mass consumption goods that soon took
on the powerful psychological appeal of prestige goods: fancy inexpensive
clothes, mass-produced furniture, small home appliances, eventually even
the symbolic automobile. Thus the political and ideological logic of
American capitalism reflected its successful economic logic, and the
economic logic in turn was able to draw support from the allegiance of its
working classes. In this way, the advent of the “department” store, of
“installment” buying, and of the enticements of advertising served as
recuitment agencies for the regime.22 What is remarkable is that the desire
for “prestige goods” proved as effective in driving the system as the need
for survival on which the power of property originally depended.
Things were considerably different in Europe. Engels complained toward
the end of his life about the “embourgeoisement” of the English working
class, but the revolutionary spirit of the 1840s, however chastened or
ineffective, never ceased to be a lurking threat to the regime. The Paris
Commune, the working-class uprisings in post-World War I Germany, the
English General Strike of 1926, and, of deepest impact, the communist
revolution in Russia in 1917, all presented incontrovertible evidence that
socialist systems of belief posed a direct challenge to the very principle of
the regime of capital. This doubtless played its part in shaping the attitudes
of the Europe bourgeoisie with respect to labor—at first openly viewed as a
“dangerous class” to be put down, later grudgingly admitted to political
participation but still regarded as harboring subversive sentiments. These
attitudes contrasted sharply with those of American capitalists, who always
believed the working class to be bourgeois at heart.
Yet, for all its turmoil and socialist rhetoric, the working class in Europe
never in fact overthrew the regime of capital. No doubt this speaks in the
first place for the sheer power of the state, usually massed on the side of
capital, but it testifies as well to the success of a process of political
accommodation in conjuring up some degree of working-class economic
patriotism. Measures to underpin working-class consumption, such as
pensions, health insurance, unemployment benefits, and family allowances,
were already beginning to appear in Europe in the 1930s (and even earlier).
Although these were not sufficient to generate a positive allegiance to the
system comparable to that which it enjoyed in America, they served at least
to reduce the level of antagonism to one that the regime could tolerate.
Thus on both sides of the Atlantic the middle periods ended with the
terms of the class struggle unresolved but clarified. American capitalism
based its success not alone on the strong economic momentum developed
by the accumulation process but also on a climate of economic patriotism
that effectively eliminated any direct challenge to the regime of capital
itself. The great depression thereby struck at the very basis of domination
by removing the buoyancy of rising consumption on which American
capitalism rested its economic politics. In Europe a somewhat different
challenge faced the regime. What the European economies required for
their successful assertion of domination was an economic impetus that
would duplicate that of the United States.
Political and economic logics in this way converged to a remarkable
degree. An altered social structure of accumulation was needed both to
counteract the massive breakdowns in the economic circuit and to engender
or reinforce a climate of social approval of capital. That which is necessary
in history is not always that which history brings, but at least we can see the
rationale for the changes that were to shape the next period of capitalism,
the period that extends into the present.

V
As before, let us begin with a few stylized facts. All periods of boom
require the stimulus of untrammeled investment possibilities, usually
marked out by some major technical advance. The postwar period is no
exception: I use the present tense because the period is still, so to speak,
under our feet. Its technology is differentiated from that of the past by the
application of laboratory science to the production process—the jet plane,
plastics, the nuclear furnace, and above everything else, the enormous range
of devices and equipment covered by “electronics,” all bespeak an advance
in the command over nature even more striking than that of machinofacture
over the simple mechanized division of labor. It is an advance based on the
integration of science and capital.
Once again a new level of technical capability has brought new
possibilities and imperatives for the circuit of accumulation. Profits depend
heavily on scientific breakthroughs that give rise to temporary monopoly
rents. Science further affects the organization of the firm by changing the
character of the labor force on which it depends. Less reliance is placed on
a homogenized mass of semiskilled operatives working on a mechanized
assembly line, and more on a tiered structure of labor in which a
professional or technically trained upper echelon designs and maintains the
delicate, incomprehensible apparatus of production, while a lower tier
performs the light, repetitive, and essentially monitoring tasks required to
run it. Thus “high” technology can be profitably combined with low labor
skills—one does not have to understand equipment whose output the
worker “tests” but cannot directly alter or control.
Finally, the scale of capital has again expanded. The possibility of
dispatching technical or managerial personnel around the world virtually
overnight; of maintaining continuous contact with flows of production
taking place in distant plants; of sending or receiving funds as easily as one
can send or receive voice communication, have all combined to give wings
to capital. Centers of advanced production arise in localities that were no
more than coolie labor entrepots during the last long wave. The label “Made
in Hong Kong,” stamped on commodities that embody the most remarkable
capabilities of scientific production, becomes a symbol of the ability of
capital to move wherever low labor costs or strategic sites for distribution
offer competitive advantages.
An associated aspect of the internationalization of capital has been the
rise of global finance, as the same technological advances give rise to
international lending and capital-moving capabilities on a previously
unknown scale. Paralleling the Hong Kongs of industry are the Caribbean
centers of finance, key points of operation for flows of finance that move
from nation to nation as interest rates or business expectations warrant. For
the first time the social formation of capitalism has succeeded in bringing
into being a realm of capital seemingly beyond all political control.
Thus the multinational industrial or financial corporation becomes the
representative firm in this period, IBM or Citibank playing the paradigmatic
roles of the pin factory in Smith’s time and of U.S. Steel in the age of
machinofacture. By the end of the 1970s, according to the Brandt
Commission, such world-straddling industrial capitals accounted for one-
quarter to one-third of the world’s industrial production; comparable figures
do not exist for banking, but they would certainly show an even larger
degree of international size and concentration.23
Like previous periods, the present is also decisively marked by a change
in the social structure within which accumulation occurs. The essential
aspect of this change, as we already know, has been the vast enlargement of
the economic role of the state. The military necessities of World War II,
followed by the political necessities of the postwar era, provided the
rationale—indeed, the imperative—first to enlarge, then to entrench a new
level of government activity. Flows of government spending that had
averaged only 10 percent of total output in the 1920s rose by the 1960s to
approach 30 percent and by the 1980s to exceed 50 percent of the total
domestic expenditure of various nations. Throughout the capitalist world,
governments undertook the management of demand through fiscal and
monetary measures intended not only to avoid the disasters of the 1873–
1893 period and the terrible depression of the 1930s but to maintain a high
enough level of household spending to assure general prosperity. Growth
became a central political preoccupation and gross national product a
household phrase for the first time in history.

Thus the postwar period has witnessed an unmistakable change in the

social structure of accumulation, as well as a decisive change in
technological capability. Both brought positive effects at first. The new
technology, buttressed by the state support of consumption, ushered in the
longest-lasting and most powerful of all the long waves of expansion. In
two decades Germany and Japan were transformed from war victims into
economic “miracles.” In the United States the severity of the business cycle
was reduced to half that of the period 1900 to 1927 and to a quarter of its
amplitude between 1900 and 1948.24 In addition, the deliberate attempt to
modernize and unify European capital laid the basis for a vast boom of
commodification led by the automobile, which provided the long-sought
replication of the American basis for economic patriotism. In the two
centuries since Adam Smith’s death the volume of world industrial
production increased by over 500 times. Two-thirds of this increase
occurred in the years between 1948 and 1971.25
But the enlargement of the physical capacities of production also brought
unintended and undesired effects. As before, these were most immediately
apparent in the sphere of competition. In the first years of the postwar boom
the expansion of American capital abroad almost wiped out the European
computer industry, and this was soon repaid by a devastating
counterinvasion of foreign capital into the once-impregnable American
steel and automobile markets. The movement of capital to the Hong Kongs
of the world built up manufacturing capacity in these advanced outposts to
20 to 30 percent of their total outputs, a level not far removed from that of
the industrialized world. However, the manufacturing capability of the
newly industrializing nations was not mainly directed at satisfying the
demands of their own markets but at invading the markets of other
countries, including those of their own economic fatherlands. In similar
fashion the internationalization of finance opened the way to the growth of
a huge volume of international lending that was exceedingly profitable in its
early stages and nearly disastrous when the postwar boom came to an end.
Not least, the workings of postwar capitalism soon gave rise to an
endemic inflationary propensity that steadily gathered force until it
threatened to annul the validity of the boom itself. It is not difficult to
explain how capitalism became inflation-prone. The gradual widening and
deepening of the intervention of the government into the workings of the
economy, both as regards households and many sectors of business,
radically changed the climate of expectations within which the
accumulation process took place. Labor and business entered their market
relationships with the secure knowledge that the hardships and risks of the
past would not again be “permitted” to disrupt the process of growth. The
presence of a large flow of government expenditure, by vastly reducing the
likelihood of a cumulative fall of income for households and firms, tilted
the direction in which labile expectations were expressed, from falling
prices that anticipated deflation to rising prices that sought to guard against
inflation. Without the threat of an actual or imminent recession, in the first
decades of the boom there was no curb on the racheting movement of
wages and corporate prices—the first outracing productivity, the second
relatively indifferent to the normal constraints of demand—because
businessmen were convinced that whatever buying power was needed
would be provided by the fiscal and monetary powers of the state.
From this perspective the inflationary bias revealed the manner in which
the accumulation process worked in a setting stripped of its traditional
economic insecurity. For a while, as we have seen, the new setting
encouraged strong real economic growth. But as the inflationary
momentum began to feed upon itself, rising in the main capitalist countries
from about 2 percent a year in the early 1960s to 10 percent by the end of
the 1970s, the self-feeding process became a source of anxiety about
potential self-destruction, not a reassuring testimony of underlying strength.
Strictly speaking the malfunction of inflation must be viewed as a
political ailment—an aspect of the class struggle over shares—rather than
as a direct expression of the logic of accumulation. For there was always an
infallible means of bringing the malfunction to a halt. This was to limit the
volume of income payments within a nation to the value of its output at
unchanging prices. Any policy that capped the total payments of wages,
rents, and profits (and that exerted a corresponding restraint on credit) could
be counted upon to keep the price level stable. The difficulty, however, was
that such a solution required the acquiescence of all classes or important
interest groups. A few nations, such as Austria and Japan, and to a lesser
extent Sweden, Switzerland, and West Germany, were able to approximate
the requisite political consensus. The majority of nations, with the leading
example of the United States, were not. As a consequence, the authorities in
the inflationary nations were forced to pursue the only course open to them.
This was deliberately to initiate a recession through restrictive monetary
measures. First undertaken in Europe, then pursued with a vengeance in the
United States, these policies did indeed reduce the rate of inflation by half
in the early 1980s. The cost to the Western capitalist nations was, however,
thirty million unemployed.
Thus we can see that inflation did not arise, as did depression, from a
breakdown in the M-C-M’ circuit. It arose as the consequence of moving
the insecurity that previously kept the system under disciplinary pressure.
The pressure gone, the system revealed its susceptibility to monetary
disarray. In this way the measures introduced to mitigate the deflationary
instability of an unsupported accumulation process succeeded in their
purpose, only to create the conditions for another kind of instability called
inflation.

VI
It is for these reasons that I have called the mounting difficulties of the
late 1970s and early 1980s a crisis of intervention. The term refers not
merely to the operational problems injected into the system because of its
mixed, welfare character but also to the restrictions placed on state
intervention as a means of resolving these problems. The crisis of
intervention calls attention to the critical situation of our current
sociopolitical dilemma, one not unlike that which preceded the merger
wave at the beginning of the twentieth century. Today as then, evidence of a
deep structural challenge can be discerned within the system, but the
challenge is more feared and misunderstood than accepted and welcomed,
and has progressed only far enough to reveal the limitations of the older
structure, not far enough to force a solution for its problems. This applies
not only to the crude measures with which inflation has been met but to the
uncertain response to threats more directly connected with the accumulation
process, such as the dislocations arising from the internationalization of
capital, or to the menacing prospect of technological unemployment from
robotization, or to the exercise of effective social control over the ecological
side effects of production itself.26
In our coming chapter I will turn again to the response of modern
capitalism to its current blockages and endangerments. But it is already
clear that the logic of accumulation has returned us to the central concern of
the worldly philosophers, for the capacity of capitalism to adapt to its self-
generated strains and stresses is certainly a necessary condition for its
historic continuance. Our survey of adaptational changes in the past has not
yielded a line of sight into the future, but it has powerfully suggested that
periodic institutional reorganizations are an integral part of the
accumulation process, both emerging from its accumulated difficulties and
pointing toward a new configuration capable of superseding these
difficulties. This parallels the conclusions in Marx’s work, where the central
theme of his laws of motion—the outlook for capitalism itself—is left
indeterminate, while subsidiary themes, such as the concentration of capital,
assume sharp and precise importance. Thus the logic of accumulation can
be expected to present its demands, although no one can say whether or not
they will be adequately met.
Not surprisingly, then, our inquiry into what capitalism “is” turns in the
direction of speculations about what capitalism may become or what may
become of it. Having reached this point, however, I do not intend to make
projections of the kind that the greatest economists have not succeeded in
doing with any great cogency. I do not believe that we can predict the life
span of capitalism. We can, however, take up one last question that may
clarify, even if it does not resolve, that central issue. This last question asks
to what degree we can hope to understand the nature and logic of any social
order and of capitalism in particular—how completely we can expect to
explain the workings of social formations and with what confidence we can
undertake the prediction of the social future in general. For the answers we
can hope to gain from these Delphic inquiries surely depend on our right to
pose such questions in the first place.

1. Smith, Wealth of Nations, p. 111; Mill, Principles of Political Economy, pp. 738,752f.; Karl
Marx, Capital, III, Part 3; John Maynard Keynes, The General Theory of Employment, interest and
Money (New York: Harcourt Brace & Co., 1936), Ch. 24, p. 378; Joseph Schumpeter, Capitalism,
Socialism, and Democracy (New York: Harper & Row, 1946), Chs. 12, 13.
2. Schumpeter, Capitalism, p. 163.
3. See the discussion in the Cambridge Journal of Economics, June 1978 and March 1980.
4. Sec “Economic Crises” by Anwar Shaikh, in Bottomore, ed., A Dictionary of Marxist Thought
(Cambridge, Mass.: Harvard University Press, 1983), pp. 138–143.
5. Marx Capiraf, III, p.358. See also Wood, “Marxism and the Course of History,” New Left
Review, September/October 1984, esp. pp. 102–3
6. Ernest Mandel, Late Capitalism (London: New Left Books), Ch. 4 and Long Waves of Capitalist
Development (New York: Cambridge University Press, 1980); David Gordon, Up and Down the
Long Roller Coaster,” in U.S. Capitalism in Crisis (New York: Union for Radical Political
Economics, 1978) and Gordon, Richard Edwards, and Michael Reich, Segmented Work, Divided
Workers (New York: Cambridge University Press, 1982), Ch 2. They are not responsible for the
“generational” interpretation of their thesis.
7. Smith, Wealth of Nations, pp. 14–15.
8. David Landes, The Unbound Prometheus (New York: Cambridge University Press, 1969) p.
120; Historical Statistics of the United States (Washington, D.C., Bureau of Census, 1975) Series P
1, 4, 5.
9. George Taylor, The Transportation Revolution (New York: Holt, Rinehart & Winston, 1962), p.
213.
10. Smith, Wealth of Nations, pp. 163–164
11. Smith, Wealth of Nations, pp. 781–82.
12. Wages from Phyllis Deane, The First Industriai Revolution (Cambridge: Cambridge University
Press, 1965), pp. 146, 244. Tocqueville quote from Eric Hobsbawm, Industry and Empire (New
York: Pantheon, 1968), pp. 67–68.
14. Landes, Unbound Prometheus, p. 121
15. See Gordon, Edwards, and Reich, Segmented Work, p. 100f.; also Harry Braverman, Labor and
Monopoly Capital (New York: Monthly Review Press, 1974), p. 12 and Ch. 4.
16. Alfred Chandler, Jr., The Railroads (New York: Harcourt, Brace & World 1965), p. 159.
17. Charles Hoffman, “The Depression of the ’90s,” Journal of Economic History, June 1956.
18. See Alfred Chandler, The Visible Hand (Cambridge, Mass.: Harvard University Press, 1977),
esp. pp. 285f.
19. Census Reports, 12th Census, 1900 (Washington, D.C.: U.S. Census Office, 1902), Vol. X,
Table i, p. 4; Harold Faulkner. The Decline of LaissezFaire (New York: Holt, Rinehart & Winston,
1962), p. 25.1 am indebted to Laurence Malone for correcting Faulkner’s figure for capitalization in
1900.
 20. Historical Statistics of the United States (Washington, D.C.: Bureau of the Census, 1972), p.
668, Series P 40 and p. 137, Series D 130.
21. Werner Sombart, Why Is There No Socialism In The United States? (White Plains, N.Y.:
International Arts and Sciences Press, 1976), pp. 109–110.
22. See Stuart and Elizabeth Ewen, Channels of Desire (New York: McGraw-Hill, 1982).
23. Brandt Commission, North-South: A Program for Survival (Cambridge, Mass.: M.I.T. Press,
1980), p. 187; Richard Barnet and Ronald Mueller, Global Reach (New York: Simon & Schuster,
1974), pp. 28–29, 270–271.
24. From Walter Salant, “The American Economy in Transition,” Journal of Economic Literature,
June 1982, p. 568.
25. From W. W. Rostow, The World Economy (Austin, Tex.: University of Texas Press, 1980), p.
662.
26. What I am calling a crisis of intervention has been explored from various angles by a number
of writers, among them James O’Connor, The Fiscal Crisis of the State (New York: St. Martin’s
Press, 1973); Jürgen Habermas, Legitimation Crisis (Boston: Beacon Press, 1973); Robert Reich and
Ira Magaziner, Minding Americas Business (New York: Harcourt Brace Jovanovich, 1982).
 7
The Limits of Social Analysis
IT IS HELPFUL to approach this daunting task by reminding ourselves that understanding,
explanation, and prediction are universal attributes of human experience, not achievements of social
science—never complete, but rarely completely inadequate. They are attained in varying degrees in
differing social circumstances. Thus the problem for our consideration is not whether we can
understand, explain, or predict at all the nature and logic of capitalism but the limits of our capacity
to do so.
Let us begin with the matter of understanding, the bedrock on which all
other functions stand. By understanding I refer to the fact that we create
conceptual order out of the plenum of stimuli that impinge from without
and arise within. Perhaps it is more accurate to describe understanding as
the manner in which we impose order on this plenum, creating unities and
patterns of perception in a universe that reason tells us is only a “buzzing,
blooming confusion.”
Our present interest does not lie in probing the mysterious capacity of
understanding at its most elemental level of cognition but in stressing the
critical role it plays in the analysis of society.1 That critical role is to project
meanings into webs of relationships among persons. We “understand”
individuals in terms of their motives and intentions—as buyers, sellers,
workers, capitalists; and we perceive behind their observed behaviors the
presence of invisible structures such as property or markets. In turn, these
structures can also be understood in different ways: a market can be seen as
a locus of supply and demand, an instrument for advancing the circuit of
capital, an arena of economic freedom, and in still other ways.
Thus to understand a society is to endow it with meaningful categories
and relationships. Some of these come effortlessly and intuitively, because
they have been taught to us in earliest childhood. Other elements of
understanding arrive later, as the result of extended socialization processes
through which we come to understand the “reality,” and perhaps the
“inevitability” or “lightness,” of social attributes such as class differences.
And some aspects of understanding are gained only at the expense of long
study that finally leads us to “see” the presence of formerly unsuspected
deep structures behind the façade of daily life.
The difficulty in reaching a general understanding of society is, of
course, that the range of conceptual possibilities is much greater than when
we seek to understand nature, although nature too can be perceived and
understood in many ways.2 These alternative possibilities arise from many
sources, of which the most significant is probably our position within the
social formation: our private interest, influenced by material and moral
considerations, is a powerful influence in forming our social perceptions.
Beyond this unavoidable source of divergence, however, lie objective
difficulties peculiar to capitalism. One of these is that the formation itself
displays a wide range of temporal variations (and intraperiod national
differences), which requires that understandings must begin at a high level
of abstraction, always a source of imprecision. In writing and in reading a
study such as this one, one must constantly battle against the assumption
that the configurations and institutions typical of capitalism in one’s own
country are depicted at a sufficient level of generalization to apply to those
of all countries. This is an almost unavoidable source of error for assertions
about the nature or logic of the system, many of which turn out to apply
only to one nation, sometimes only to sections of that nation.
Second, we have stressed that in its essential nature, capitalism in all
periods and national instantiations harbors multiple ideologies rather than
monolithic world views. Although these ideologies normally reinforce (or
are at least compatible with) the acceptance of the regime of capital itself,
the very existence of separated belief systems robs the formation of that
unchallenged unity of views it would otherwise enjoy. Unlike previous
social formations, capitalism can be comprehensively viewed from more
than one perspective: as a social formation in which relations of production
and distribution constitute the essential nature of the system; as a formation
whose central organizing characteristic is the limitation of political power;
as a society given its distinctive attributes by its prevailing rational-
bourgeois mindset; as a civilization dominated by its technical apparatus;
and in still other ways. Similarly, on a smaller scale the workings of the
market mechanism can be perceived in what I have called the
“decontaminated” form of individuals seeking to maximize their utilities, or
as the manner in which the drive for prestige and power is sublimated in a
milieu in which market relations have come to be imbued with significance
far beyond the use-values that commodities confer.
Finally, there remains the elusive problem of the concept of capital itself,
the central element of understanding around which this book is organized. It
seems hardly necessary to state again the inherent complexity of the idea of
capital. Marx’s vast opus is an exhaustive exploration of the concept that is
its title, and yet at its end, the idea of capital remains protean and elusive—
not because of a failure of Marx’s analytic powers but because those very
powers have revealed the inherent dialectical aspects that render capital
resistive to precise empirical formulations of a conventional kind.
It follows that the understanding of capitalism can never attain the clarity
and precision of social formations in which there is only one angle of
incidence of social vision, or where the central order-bestowing concept,
such as kinship or kingship, is not intrinsically difficult to specify. This
introduces an element of indeterminacy into our analysis at its very
beginning point—an indeterminacy that will be incorporated in the
explanations and predictions characteristic of the system. As we have been
at some pains to insist, capitalism cannot be reduced to a determinist model
—in part for reasons we already know but will explore further in the pages
to come, at bottom because of the fundamental and inherent incompatibility
of its nature with single-focused, sharply defined, and completely
specifiable properties.

Such an inherently imprecise, subjectively vulnerable, and “unscientific”

description of the manner in which we can understand capitalism collides
head-on with the “positive” approach that prevails in contemporary
mainstream economics. A positive approach means that we scrutinize
society much as scientists examine nature, seeking to describe the social
system in impersonal statements as if it were a part of physical reality. At its
most ambitious, economics tries to depict capitalism as a system whose
elements—“individuals” or “firms”—are treated as objects, and whose
movements can be understood as the working-out of the generalized force
of “maximizing utility” or “profit seeking.” What is lacking in this
description is any attempt to examine the manner in which these objects are
themselves conceptualized in their social matrix. The individuals are
presumed to create, or simply to harbor, the various desires and capabilities
that form their utility goals; firms are mere shells that house largely
unexamined activities of production in an unexplained pursuit of profit; the
state has been reduced to a presence whose major function is to guarantee
“private property” and “freedom of contract”; ideology has been banished;
and a universal mentality of calculation, not belief, presumably gives the
system coherence.
This is obviously a very incomplete, not to say unrealistic, specification
of the nature of capitalism—that is, a highly restricted basis from which to
understand the system. When this contrast between the real world and the
model of that world is pointed out, the rejoinder of modern economics is
that the purpose of social analysis lies in prediction, not in “understanding,”
and that prediction is interested only in whether premises yield confirmable
results, not in whether they appear to be “realistic.” Milton Friedman, the
most influential exponent of this view, even holds that “in general, the more
significant the theory, the more unrealistic the assumptions.”3
The difficulty with this bold formulation is that it does not distinguish
between the “unrealism” and the “abstractness” of assumptions on which
theory is built. As Friedman recognizes, abstraction is necessary for all
reasoned argument, and in general the power of argument increases with the
degree that it sets aside the extraneous details of the “real world” to lay bare
the causal or conceptual relationships beneath the surface. But this
purifying procedure cannot be regarded as indifferent to the relation
between the phenomena from which it begins and the abstractions at which
it arrives. On the contrary, the search for abstraction seeks to discover the
abiding behind the ephemeral, the essence within the appearance. This
effort cannot be described as “unrealistic,” any more than manifestly
unrealistic descriptions can be described as abstractions.
But what criteria can guide us in discovering abstractions or assumptions
that will preserve the essential features of our social formation, when we
have already stressed that capitalism is inherently susceptible to multiple
interpretations? As we noted at the very outset, there is no method for
guiding, or winnowing, the process of abstraction comparable to that which
separates good hypotheses from bad ones on the basis of the predictions
they yield. The conceptions that emerge from our understandings of society
are always open to challenge and plagued by some degree of unclarity.
They can neither be clearly “validated” nor falsified by history because we
can never identify and allow for the effects of incidental or accidental
elements that distort the workings of the assumptions whose consequences
are presumably to be tested. There is no manner of identifying or
calculating the resistance offered by society to the laws of motion of any
element in it, as we can identify and measure the effect of air resistance to
the descent of a feather.
All that can be said on behalf of the uncertain understandings on which
we base, our analysis of capitalism, or of any other social formation, is that
our understanding selects the problems to be examined, explained, and
predicted, and that the test of the “realism” of those understandings is the
clarification they generate. By clarification I mean a sense of historical
placement, social and psychological penetration, and moral stability. This
may seem a frail basis on which to rest our analytic efforts, but I believe it
is the only one that is available to us, however wrong or blind one
civilization’s clarification may appear to another.
These considerations have an obvious bearing on the conception of
capitalism as a social formation that we can understand, at least in part, by
considering its nature and logic. It must by now be apparent that both
“nature” and “logic” are heuristic and suggestive terms rather than
empirically precise and definitive ones. Nevertheless I believe they enable
us to understand the system—that is, to give it historical placement, social
values, and psychological depth—in a manner that would not be attainable
with more rigorously defined scientific or “positivist” approaches. The
explanations and predictions that follow from these understandings will
never have the clarity of those that follow from our conceptions of the
natural world. But at least we will know that they represent, however
imperfectly, a genuine confrontation with the problems of history, past and
present, not mere intellectual conveniences or worse, playthings.

II
Explanation is the effort to present a reasoned account of the
interconnection of things.4 There is one principal manner in which we
accomplish this. It is to include that which is to be explained within a
broader category of ideas or of events. If the category is one of ideas, the
explanation is conceptual. We give reasoned accounts of concepts by
describing them in general terms—for example, when we explain the social
formation of capitalism by describing the various aspects of its nature.
The second kind of explanation is causal. Here the reasoned accounts
follow mainly from assumptions with respect to the presumed regularity of
certain sequences of occurrence—causes and effects. Thus we explain the
logic of capitalism in terms of the manner in which actions of a given kind
give rise to consequences of a given kind. These causal chains may be very
simple, as when we postulate that the collective attempt to buy more of a
commodity will raise its price, or they may be long and complex, as in the
stimulus-response patterns that lead from the process of capital
accumulation to the advent of some kind of crisis in the circuit of capital.
Conceptual explanation is obviously dependent on the understandings
with which we grasp the totality of capitalism. I have spent enough time
rehearsing the difficulties that attend this underlying process so that I need
only add a word as to the way in which our understandings affect the
specific conceptual explanations we proffer with respect to capitalism. To
take a familiar example, the explanation of why we do or do not recognize
capitalism as a social formation distinct from that of feudal society hinges
directly on how we choose to understand the nature of each system. In the
contemporary world the same criterion determines the explanations we
adduce as to why modern-day “socialisms,” in their northern or eastern
European forms, are or are not variants of capitalism. Everything hinges
here on how we conceptualize such terms as capital, or how we perceive the
nature of hierarchy, the autonomy of belief systems, and the like. As I have
just been at pains to argue, there are no hard and fast rules with respect to
these elemental concepts, so that disagreements can rage over matters that
are, in the last analysis, beyond irrefutable demonstration.
It is causal explanation that requires to be more deeply examined. Causal
explanation in the natural sciences usually rests on two assumptions. The
first, as we have already noted, is that the event to be explained, such as the
rate of descent of an apple or a feather, can be isolated or insulated from the
effects of its surroundings. There is no way of determining the effect of a
presumed cause, such as gravitation, on the rate of descent of objects unless
we can wrench the event from its immersion in nature by conducting
experiments in which, to complete the example, air has been completely
removed from a tube so that feathers fall like stones. At best, such
experiments are never perfect and the causal nexus retains some trace of
uncertainty from contamination, and at worst the attempt to isolate and test
the causal sequence is impossible or inapplicable.
Society is such a worst case. There is no way of observing social cause
and effect in a pure environment, so a residue of indeterminacy obscures all
causal generalizations—not because the causal nexus itself remains
uncertain (that is the case, too, with natural events) but because the problem
of identifying the elements to be included in that nexus is inherently
indeterminate. That is one reason why presumed causal linkages in society,
such as that between the dynamics of capitalism and war, do not explain—
much less predict—events: Too much has been left out of the initial
situation, or too much has been put in.
It is evident that our understandings directly affect this aspect of our
explanatory difficulties. The elements of the historical situation that are left
out or put in, and the way we describe these elements, depend on how we
understand the situation to be explained. The relation of capitalism to war,
for example, depends on whether we perceive capital as essentially an
instrument for increasing productivity or for organizing labor power within
the circuit of accumulation; on whether we see the state as an apparatus
independent of, superior to, or in the thrall of the regime of capital; on our
view of the mindset of the bourgeoisie and of the officials of the state: and
so on. These are conceptual questions that establish the a problem to be
explained as well as the cogency of the explanations that will be offered,
since none can be “tested” as we test the explanations offered about the
natural world. The reason that history remains always opaque to some
degree—or perhaps more accurately, the reason that it remains a crystal
with many facets—is precisely that it is capable of being understood from
many vantage points, each of which raises for explanation its own
questions, and each explanation of which is attended by the difficulty of
specifying the elements that belong in its causal nexus.

This inherent indeterminacy of explanation is not unique to capitalism.

There are different ways of explaining the fall of the Roman Empire,
depending on the manner in which we understand that empire. What invests
causal explanation with special interest for capitalism is that its specific
behavioral attributes give to the system a resemblance to natural processes.
The laws of nature of the real world are those invariable characteristics or
sequences that establish the orderliness of that world, ranging from the
properties of subatomic particles and forces through molecular chemical
valence and physical structure to large-scale regularities of celestial
mechanics, or of random processes in general. To a degree that we often fail
to appreciate, there are analogues of such regularities in society. These too
begin at the “subatomic” level in presumably universal properties of
cognition and other propensities, and build into “molecular” equivalents
such as pair bonding and familial relationships, and into still larger
structures of stable social organizations. The repeated demonstration of
statistical patterns within human societies, applying to such diverse aspects
as the size distributions of cities and organizations, the stubborn viscosity of
income distributions, the “pendulum swings” of political sentiment, and the
like, strongly suggest the presence of lawlike regulatory elements within
human behavior, however unclearly these have been described.5
These lawlike aspects of behavior impart dependability to social
formations—for example, the “routine” that is an indispensable order-
bestowing aspect of all social systems. As Alfred Schütz and others have
pointed out, these routines are the source of the predictable orderliness on
which we depend when we drop a letter in the mailbox. They rest on the
exercise of trust and belief, reciprocity and duty, without which the social
process itself would not exist, and for which there is no analogue in the
natural world.6
Capitalism adds only one new element to this source of order, but a new
element of extreme importance. This is the generalized imperative of
“rational” wealth seeking to which we have earlier paid heed. It is on the
basis of this acquisitive drive that economics is able to build its remarkable
explanations of social movements; the complex “scenarios” that can be
constructed for capitalism exist only because it harbors and reflects this
unique and powerful force. Regardless of the failure of modern-day
economics to explain social evolution in the large, it is able to advance
highly persuasive and partially testable explanations of social movements in
the small, such as the dynamics of market prices, the response of production
to these prices, the multiplicative possibilities of bank credit, the
dependency of consumers’ expenditures on the level of national income, the
etiology and course of various kinds of crises; and a great deal more.
Indeed, the existence of this powerful behavior-orienting force leads to
the possibility of viewing the social regulating properties as dominated by
the “maximizing” impulse. At one end of the spectrum of these
understandings is the reductionism of vulgar Marxism, where all social
evolution is seen as proceeding in a mechanical fashion from the self-
expansion of capital; at the other end of the spectrum is the vulgar
reductionism of modern theoretical economics, which perceives capitalism
merely as a neutral field of property rights in which monadic individuals
pursue their private utility-maximizing ends in the social vacuum that we
have earlier described. It is often forgotten that the explanations that follow
from this neoclassical mode of understanding embody a determinism as
rigorous and ironclad as that of the most simplistic Marxism; and that
economics itself becomes reduced to the “study of the formal implications
of. . . relationships of means and ends on various assumptions concerning
the nature of the ultimate data.”7
Thus the indeterminacy that hampers causal explanations of capitalism
because of the complexity and ambiguity of its nature is offset to some
degree by the determinacy that guides its logic. In fact, however, the
determinacy is considerably less than that of reductionist Marxist or
neoclassical thinking. The behavior of the units of social analysis, taken as
individuals, organizations, or social groups, departs in two important ways
from the behavior of the units of the natural world. The first is that
knowledge and intention are integral parts of the social universe, so that all
behavior carries a volitional element, however submerged this may
normally be. We discover this when social routines fail because the mail
carriers go on strike, or when capitalists decide to take—or not to take—
risks, or to form political allegiances with liberal or conservative wings of
government.
No less important is the indeterminacy that weakens the laws of behavior
because of changes in social pressures that bear on, or direct, the
maximizing impulse. Adolph Lowe has pointed out that the degree of
determinism of behavior was probably far greater under early capitalism
with its imperative need for work, its singleminded dedication to
accumulation, and its small-scale units of capital than in modern capitalism,
with its “discretionary” levels of income, imprecise strategic objectives for
big companies, and huge commitments of unmovable investment. It is
entirely possible that we live, as Lowe suggests, in a period when
maximizing is losing its coercive force from below and its unequivocal
guidance from above.8
What degree of causal explanation is then possible within capitalism?
The preceding chapter illustrates the kinds of reasoned accounts we can
give for some of its historical movements. Our analysis suggests that it is
possible to explain many subprocesses and some important large-scale
movements of the social formation, provided that we remain within the
general framework of a given social structure of accumulation; but that
crucial processes that alter the framework of accumulation may escape our
anticipations and perhaps even our retrospective analysis.
Thus the explanatory schemas of the great economists are typically
mixtures of success and failure. Smith and Marx both provide remarkable
explanations of certain sequences within the historical movement of the
system—for example, how the process of accumulation threatens to block
itself by bidding up the wages of labor; and both further offer explanations
of the manner in which the spontaneous “maximizing” responses of the
participants avert this outcome. It is interesting to note that their
explanations differ, depending on their understandings of the system.
Smith’s low estimation of working-class intelligence and his lack of interest
in technological change lead him to rely on a restoration of profits through
blind population effects. Marx, with his faith in the working class and his
emphasis on technological change as part of the inherent tendency of
capital, averts the crisis not by the self-defeating population reflex of the
working class but through the actions of employers who introduce labor-
saving techniques, thereby cutting their own labor costs and creating by
their collective actions the manmade equivalent of a population increase.
Each account throws an explanatory light over ways in which the system
“worked” during the period in which they wrote, but the illuminations must
be set against larger failures, in particular Smith’s lack of awareness of the
potential for industrial development or class strife, and Marx’s incapacity to
foresee its potential use of state intervention. These too stem from
conceptual limitation of understanding, with respect both to the ideological
and political nature of the system and to its specific technical and
organizational adaptability.
Smith, for example, failed to see that in a regime of capital the life
energies of its guiding participants are of necessity devoted to the discovery
of ways of expanding capital, so that a thousand economic generals are
constantly planning maneuvers to occupy high technological ground—not
to mention the ten thousand soldiers with field marshals’ batons in their
knapsacks, the Arkwrights and Watts and Whitneys of all capitalist nations.
Marx surely intended some such recognition when he wrote that “no social
order ever perishes before all the productive forces for which there is room
in it have developed,”9 but even he did not sufficiently appreciate that the
capacity for invention goes far beyond technical means to enfold the most
seemingly incompatible institutions—national planning, nationalized
enterprise, even the vocabulary and some of the techniques of socialism—
into the service of the generation of capital. The laws of motion of
capitalism as a social formation are not solely determined by the law of the
tendency of the falling rate of profit or the law of the rising organic
composition of capital or the expansive but self-regulating thrust of a
society of perfect liberty. Rather, they reflect the interaction of these self-
generated logics with other logics, above all those of political or ideological
processes, that alter the ballistical properties of the social formation itself.
Against this sobering recognition of the limitations of causal explanation
we must however pose a critical question: to what extent can we explain
noncapitalist social formations? Anthropologists tell us there is much to
understand, and therefore many reasoned accounts to offer, with respect to
the nature of primitive societies. But what is there to explain with respect to
their sleepwalking logic? Or what of tributary societies? There is again a
vast field for understanding with regard to the nature of imperial rulership
in its many forms, but the trajectories of these formations can only be
explained insofar as we can extend the motives of rulership into logics of
power, not of impersonal, systemic movement. At one extreme the
explanations of tributary systems are thus coterminous with those of
biography; at the other, they are limited by our ability to understand class
behaviors of “irrational” kinds, such as the fear and greed that drove the
Roman upper classes to squeeze the middle and lower classes to the point of
social collapse.10
 Only within the social formation of capitalism can we still discover
order-bestowing regularities that make it possible to analyze tendencies of
the system without regard either to the inertias of primitive life or the
biographical or “irrational” motives of tributary society; and to the extent
that the state wrenches itself free of the regime of capital, or that modern
affluent behavior obeys noneconomic motives, capitalism itself begins to
lose its remarkable capacity for self-direction. As long as the circuit of
accumulation remains the armature of the system, however, its tortuous
sequences of M-C, C-C’, and C’-M’ will lend themselves to explanations
that contain lawlike, calculable interactions that resemble those of the
natural world.
It is therefore wrong to depict the limited reach of explanation as a failure
of our analytic capabilities. It is rather an accurate reflection of the bounded
domain within which explicable behaviors are at work, as well as of the
residual inexplicability that applies to behavior in general and to capitalist
behavior in particular. The inadequacy of the reach of explanation is a
measure of the degree to which capitalism still manifests the logics of older
social formations or the growing presence of new ones; and the fact that
explanation of a “scientific” kind is possible at all testifies once more to the
inescapable necessity to regard capitalism as a social formation different
from all others, not only by virtue of its nature but also by its logic.
What is remarkable, from this perspective, is not how little, but how
much understanding can be conveyed with respect to capitalism by
pursuing even its simple logic of accumulation. This logic, with its thrust
and parry of productive forces and properties response, does not merely
illumine the trajectory at some great distance but enters into its course with
such immediacy that the development of the system would be robbed of all
meaning without it. It would be difficult to write extensively about a logic
of primitive societies or imperial kingdoms if the narrative were stripped of
the particularities of this tribe or that kingdom, but it is of the essence of the
grand logic of capitalism that it knows no national boundaries. The
disruptive workings of a logic of accumulation, intertwined like the famous
double helix with the unfolding of the struggle for political power and
ideological clarity, apply to the developmental sequences of the United
States as well as to those of England or Japan, a fact that surely testifies to
the ability of the nature of capitalism to exert its persistent magnetic
influence, not merely over the tapping of history’s finger but over the
pounding of its fist.

III
Is it possible to predict the future of capitalism? Let us first distinguish
between prediction and expectation. Prediction is the extension of
explanation into the future. As such it relies on the presence of lawlike
casual sequences whose operation is presumed to exert the same effects in
times to come as in times past. Expectation is a much weaker kind of
statement. It forms probabilistic conceptions of outcomes, drawing on
generalizations and understandings, most of which do not embody formal
causal propositions. It is the manner in which we make most of our plans
with respect to the future, ranging from those made with near certainty on
which we stake a great deal, even life itself, to those made tentatively, on
which we act in guarded fashion. Our expectations end in uncertainty, the
most psychologically difficult of all states, in which we can form no plans
regarding the future and must act on the basis of blind faith, chance, or
surrender to events.
It is clear that “scientific” predictions about the future of capitalism are
impossible. The limitations of our causal explanations are too great.
Prognosis with respect to the resolution of problems of the contemporary
social structure of accumulation, and speculations with regard to possible
configurations of the next structure, must be based to a very large degree on
an amorphous amalgam of personal experience, political, social, and
economic generalization, respect for contingency, and faith in human
intelligence and will. For all the sophistication of economic theory and
measurement and of social and historical inquiry in general, the intellectual
and emotional basis on which we appraise the future is little more than such
a loosely knit tissue of frail wisdom, imperfect knowledge, and variable
hope.
Are there, despite these severe limitations, general expectations that can
be held with respect to the future of capitalism? I think there are, and that
they are indicated by the general implications of our investigation into the
nature and logic of capitalism. Here the first consideration is the centrality
of capital itself as the material and moral basis on which the social
formation is erected. To speak about the future of capitalism is to speak
about the future of capital. This means the continuation, through whatever
technical and organizational means can be adapted for the purpose, of the
process of M-C-M’, the perpetual-motion machine that is the driving force
of the system as well as its historic badge of identity.
To gauge the likelihood that the circuit of capital can continue requires
that we make estimates of “imponderables” of varying degrees of
unknowability. Perhaps the least difficult of these concerns the availability
of new avenues for investment to be opened up by the progress of science.
There seems little doubt that we have entered an era of unprecedented
penetration into nature’s workings, and that the scientific basis for an
expansion of capital will not be lacking. It is less certain, of course, that we
have also entered a new era of profitable penetration into nature, for many
of the discoveries of science may not lend themselves to commodification
for a long time, if indeed ever. Nevertheless, insofar as a continuation of the
M-C-M’ circuit depends on an expanding technological capability, there is
every reason to expect that the outlook for accumulation should be
propitious.
A near-corollary follows from this prospect. It is that an advance in the
productive forces of society seems likely to generate both material and
social consequences of increasing disruptive magnitude. I do not have to
review the contrast between the physical and social impacts of the pin
factory, the steel mill, and the nuclear plant. What is important is that this
widening impact of technology appears to require a corresponding widening
of the defensive capability of society. As we have seen, this defensive
capability is more and more exercised through the countervailing force of
government, essentially the only means of protecting society from the
undesirable side effects of accumulation, while also protecting the regime
of capital from the consequences of the social damage that the accumulation
process brings in its wake.

In all likelihood, then—although of course not with the assurance with

which we can predict the outcome of a chemical reaction—the trend of
capitalist society lies in the increased marshaling and deployment of the
powers of the state, initially in support of the existing general structure of
accumulation, later possibly as the vehicle by which the first tentative
efforts may be made to go beyond that regime into another.
What other? That changes our focus from the relatively “logical”
consequences of accumulation to the much less clearly defined question of
the leap from one structure to another. Here there is no solid ground on
which to rest expectations, comparable to the near-certainty with which we
can anticipate a continued advance in the productive forces with their trains
of social consequences. The movement beyond the confines of a given
social configuration does not extend the logic of the preceding period but
rather transcends it by moving into a new set of institutional boundaries and
capabilities.
This does not always happen. The Dutch, poised at the very lip of
becoming the first industrial capitalism, turned back from that risky course
to enjoy the profits of trade and the leisured ways of an aristocratic culture,
leaving the way open for England to seize the unoccupied terrain. At the
middle of the nineteenth century, the English in turn lost their industrial
hegemony when they were unable to abandon the restrained forms of
British competition for the aggressive methods of corporate capitalism
appearing in America.
In similar fashion, the United States today may turn away from, or find it
cannot match, the organizational strategies of European and Japanese
capitalisms that make increasing use of the state as a direct source of
corporate capital and a means of penetrating foreign markets. So too the
United States may continue to go against the tide that has steadily widened
and deepened the social underpinnings of most advanced European
capitalisms.11 Thus despite the general drift toward an interpenetration of
economy and state and a “socialization” of consumption, we cannot rule out
the possibility that the United States will persevere in its efforts to
disengage government from the economy and to shrink back its supportive
functions. It is impossible to foresee what effects such a policy might have
on the pace and strength of accumulation, but even if growth flourishes, the
structural logic powerfully suggests that accumulation will continue to
bring economic and social tensions and an encounter with the limits of the
social framework—not because the process of amassing capital has faltered,
but because it has succeeded.
 Over the longer run, then, it still seems probable that the more successful
capitalisms of tomorrow will be those that address the difficulties of the
present period—its helplessness against the internationalization of capital,
its propensity to inflation, its extreme social and ecological vulnerability to
technological disruption—by new structures that utilize the state in various
ways to cope with these problems as best they can be managed within a
regime of capital. This raises the possibility that the most politically
advanced capitalisms could become staging areas in which some of the
institutions of capital, such as the market mechanism and autonomous
enterprises, might be adapted to social control as part of a new, more
“constitutional” regime of democratic socialism.12 It is, alas, also the
unhappy possibility that the very effort to create such a radical change
would mobilize a resistance that would plunge the laboratory nations into
chaos. As Perry Anderson has observed, “No class in history immediately
comprehends the logic of its own historical situation, in epochs of
transition: a long period of disorientation and confusion may be necessary
for it to learn the necessary rules of sovereignty.”13 These words, written
about the advent of the Absolutist States of the seventeenth century, apply
with equal cogency to the transitional period in which we live.
Thus the overall logic of the system—its historic destination—remains
indeterminate because it hinges so largely on those opaque processes we
mentioned at the beginning of our previous chapter—the confused struggle
between the classes, the ebb and flow of technological advance, the
adventures and misadventures of war. We have said what little can be
ventured with regard to the outlook for investment. Nothing at all can be
said as to the likelihood or the consequences of nuclear or ecological
miscalculation other than that we are all hostages of a combination of
premature technological virtuosity and persisting sociopolitical primitivism.
Perhaps the most elusive of these imponderable elements concerns the
estimation of the regime of capital itself in the minds of the population at
large. There has been a dramatic long-term trend toward social democratic
governments.14 At the same time there has been a widespread substitution of
the state for capital as the target for a welfare system, the state is regarded
as having “created” both, rather than as superintending at their births. As a
result, the state becomes saddled with failures that arise not merely from
inept administration and political bad judgment but from the unavoidable
limitations that constrain the exercise of government within a regime of
capital. The very real burdens of bureaucracy tend as a result to overshadow
the problems of accumulation to which bureaucracy directs its attention, so
that more animus is aroused by the failures of government remedies than by
the malfunctions against which the remedies are directed, and more unrest
is stirred by measures of taxation or environmental or other controls than by
the shortcomings of the system from which arise the need for measures of
redress. In this regard it is surely significant that the tenor of the political
and ideological opposition in so many advanced capitalist nations is
“antiestablishment” rather than “anticapitalist.” In this way critical
sentiments that might concentrate on the regime of capital are focused
elsewhere, and the unchallenged domination of capital is fortified to a
considerable degree—the United States as a case in point.
There is, in other words, no solid basis on which to rest expectations
concerning the strength and stability of the central pillar of the social
formation—namely, continued public acquiescence in the principle of
capital itself. This critical area of blindness, robbing us of all sense of
historical orientation where it is most needed, is itself in some measure the
consequence of the political and ideological character of modern capitalism.
The stabilizing influence of high culture has been largely drowned under
the directionless flux of mass culture; impatience with the state has bred
disrespect for government; cynicism is the only permanent residue from the
floodtides of advertising. Thus the class struggle veers toward
enlightenment at one moment and nihilism the next. Finally, and perhaps
most important of all, there is the awareness brought home by the wild
irrationalities of our time, many of them committed in the name of
“Marxism-Leninism,” that politics does not only move Left and Right, but
also Up and Down, Forward and Back. And so we form our expectations as
to the future, as I have just said, on the loosely-knit ties of frail wisdom,
imperfect knowledge, and variable hope.*

These considerations are not intended to conclude our study in a miasma

of uncertainty but rather to give a cutting edge to the expectations that are
part of everyone’s existence, at whatever level of abstraction or precise
consideration. The cutting edge is supplied by the admonition that
speculations about the future must begin with the nature and logic of the
system as the observer understands them. I do not mean by this to insist on
the cogency of my own conceptions of capitalism’s nature and logic, but I
am prepared to stake everything on an insistence that all future-oriented
statements must begin with some such effort.
With respect to socialism in particular—that faded but still powerful
lodestar—estimates about the future are worthless unless they consider the
underlying substratum of human nature from which socialism, like all social
formations, will have to draw its energy; unless they describe the main
institutional means by which these energies will be shaped and channeled;
unless heed is paid to the manner in which surplus is to be extracted and
allocated, to the relation between economic and political functions, and to
the content of belief systems. This is a task whose full achievement may lie
beyond our grasp. But unless the task is attempted, the future of socialism
can be only visionary or wishful, and the attempt to create a society that
embodies its aspirations is likely to founder, as so often in the past, from a
failure to appreciate the difference between making history and changing it.
Here I shall draw the line. The temptation is immense to present my own
expectations as to the resilience and adaptability of capitalism as a social
formation and of alternative historical formations that are imaginable or
probable. But I shall resist. To show my own hand not only would instantly
change the whole focus of this book but by revealing, as no doubt it would,
the frailty of my judgments, would cast a shadow over the purpose to which
these pages have been devoted. That purpose is the necessity to think
through what capitalism is, prior to thinking about what it might become or
what might become of it. I am prepared for the failures of analysis that
these pages must inevitably contain, but my wager is that the mode of
analysis itself is not a mistake. On that wager I must conclude these
thoughts, at the very brink of the subject to which they naturally lead, and
for which I hope they will be of use to others who follow them.

1. See Alfred Schütz, “Concept and Theory Formation in the Social Sciences,” in Maurice
Natanson, ed., Philosophy and the Social Sciences (New York: Random House, 1963), p. 23If. and
Peter Berger and Thomas Luckman, The Social Construction of Reality. (Garden City, N. Y.:
Doubleday, 1966).
 2. Sec Paul Feyerabend, Against Method (London: Verso, 1975), Ch. 17.
3. Milton Friedman, “The Methodology of Positive Economics,” in Essays in Positive Economics
(Chicago: University of Chicago Press, 1953), p. 14.
4. There are many ways of stating the problem of explanation. See Robert Nozick, Philosophical
Explanations (Cambridge, Mass.: Harvard University Press, 1981), pp. 116–21; Carl Hempel, “The
Covering Laws Analysis in Scientific Explanation,” in I. Krimmerman, ed., The Nature and Scope of
Social Science (New York: Meredith, 1969); Daniel Dennett, Brainstorms (Montgomery, Vt.:
Radford Books, 1978), pp. 234–36; Norwood Hanson, Patterns of Discovery (New York: Cambridge
University Press, 1975), pp. 54, 94–98.
5. See Albert Hirschman, Shifting Involvements (Princeton, N.J.: Princeton University Press, 1983)
and Jan Pen, Income Distribution (New York: Praeger, 1971), p. 254f.
6. Alfred Schutz, “Common Sense and Scientific Interpretation of Human Action” in Philosophy
of the Social Sciences, ed. M. Natanson (New York: Random House, 1963), pp. 324–25. See also
Giddens, Historical Materialism, p. 154 and, from a different perspective, Fred Hirsch, The Social
Limits to Growth (Cambridge: Harvard University Press, 1976), Ch. 10.
7. Lionel Robbins, An Essay on the Nature and Significance of Economic Science (London:
Macmillan, 1932, 1972), p. 38. Classical economics also has its deterministic aspects, but these are
leavened by the classical placement of the economic process within a class framework, inherently
infusing the scenario with some degree of historic implication.
8. Adolph Lowe, On Economic Knowledge (New York: Harper & Row, 1965; White Plains, N.Y.:
M. E. Sharpe, 1977), Ch. 3.
9. Marx, “A Contribution to the Critique of Political Economy,” in Robert C. Tucker, The Marx-
Engels Reader (New York: W. W. Norton, 1978), p. 5.
10. Sec G.E.M. Ste. Croix, The Class Struggle in the Ancient Greek World (London: Oxford
University Press, 1983).
11. See Joseph Monsen and Keith Walters, Nationalized Companies (New York: McGraw-Hill,
1983) and Robert Kuttner, The Economic Illusion (Boston: Houghton Mifflin, 1984).
12. Alex Nove, The Economics of Feasible Socialism (London: Allen & Unwin, 1983).
13. Perry Anderson, Lineages of the Absolutist State (London: New Left Books, 1974), p. 55.
14. Goran Therborn, “The Prospects of Labour and The Transformation of Advanced Capitalism,”
New Left Review, May/June 1984.
* My friend, the distinguished anthropologist Rudolpho Stavenhagen, talking about the blood
spilled between Hindu and Moslem, Moslem and Jew, Protestant and Catholic, white and black, tribe
and tribe; and the passions aroused by women's’ rights and by eschatological views, once ruefully
remarked to me, “And we thought this was going to be the century of clarification!”
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Arrighi, G., Frank, A., & Wallerstein, Immanuel. Dynamics of the Global Crisis. New York: Monthly
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Barnet, Richard & Mueller, Ronald. Global Reach. New York: Simon & Schuster, 1974.
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1966.
Bergeson, Albert, ed. Studies of the Modern World-System. New York: Academic Press, 1980.
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1980.
Braudel, Fernand. Capitalism and Civilization. New York: Harper & Row, 1981, 1982, 1984.
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Braverman, Harry. Labor and Monopoly Capital. New York: Monthly Review Press, 1974.
Chandler, Alfred. The Railroads. New York: Harcourt, Brace & World, 1965.
________The Visible Hand. Cambridge, Mass.: Harvard University Press, 1977.
________Cohen, G. A. Karl Marx’s Theory of History: A Defense. Princeton, N.J.: Princeton
University Press, 1978.
Coulanges, Fustel de. The Ancient City. Garden City, N.Y.: Doubleday/Anchor, n.d.
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Deane, Phyllis & Cole, W. British Economic Growth. Cambridge: Cambridge University Press, 1969.
Diamond, Stanley. In Search of the Primitive. New Brunswick, N.J.: Transactions Books, 1974.
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Ewan, Stuart and Elizabeth. Channels of Desire. New York: Mc-Graw Hill, 1982.
Feyerabend, Paul. Against Method. London: Verso, 1975.
________Science in a Free Society. London: Verso, 1978.
Faulkner, Harold. The Decline of Laissez Faire. New York: Holt, Rinehart & Winston, 1962.
Frank, A. G. Crisis: In the Third World. New York: Holmes & Meiers, 1980.
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Freud, Sigmund. Civilization and Its Discontents (1930). In Strachey, J., tr. and ed., The Complete
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________Group Psychology and the Analysis of the Ego (1921). In Strachey, J., tr. and ed., The
Complete Psychological Works, vol. XIX. New York: W. W. Norton, 1976.
• Fried, Morton. The Evolution of Political Society. New York: Random House, 1967.
Friedman, Milton. Capitalism and Freedom. Chicago: University of Chicago Press, 1962.
________“The Methodology of Positive Economics,” in Essays in Positive Economics. Chicago:
University of Chicago Press, 1953.
Galbraith, John Kenneth. The Affluent Society. Boston: Houghton Mifflin, 1958.
________The New Industrial State. Boston: Houghton Mifflin, 1967.
• Giddens, Anthony. A Contemporary Critique of Historical Materialism. Berkeley, Calif.: University
of California Press, 1981.
Gordon, David. “Up and Down the Long Roller Coaster,” in U.S. Captalism in Crisis. New York:
Union for Radical Political Economics, 1978.
• Gordon, David, Edwards, Richard, & Reich, Michael. Segmented Work, Divided Workers. New
York: Cambridge University Press, 1982.
Habermas, Jürgen. Legitimation Crisis. Boston: Beacon Press, 1973.
Hanson, Norwood. Patterns of Discovery. New York: Cambridge University Press, 1958.
Hayek, Friedrich. The Constitution of Liberty. Chicago: University of Chicago Press, 1960.
Heilbroner, Robert. The Limits of American Capitalism. New York: Harper & Row, 1966.
________Marxism: For and Against. New York: W. W. Norton, 1980.
________The Worldly Philosophers. New York: Simon & Schuster, 1980.
Hempel, Carl, “The Covering Law Explanation in Scientific Explanation,” in Immanuel Krimmerman,
ed., The Nature and Scope of Social Science. New York: Meredith, 1969.
• Hirsch, Fred. Social Limits to Growth. Cambridge, Mass.: Harvard University Press, 1976.
• Hirschman, Albert. The Passions and Interests. Princeton, N.J.: Princeton University Press, 1977.
________Shifting Involvements. Princeton, N.J.: Princeton University Press, 1980.
Hobbes, Thomas. Leviathan. Oxford: Clarendon Press, 1967.
Horvat, Branko. The Political Economy of Socialism. Armonk, N.Y.: M. E. Sharpe, 1982.
Hobsbawm, Eric. Industry and Empire. New York: Pantheon, 1968.
Huntington, Gertrude Enders. “Children of the Hutterites,” Natural History, February 1981.
Kahler, Erich. The Tower and the Abyss. New York: Braziller, 1957.
Keynes, John Maynard. The General Theory of Employment, Interest & Money New York: Harcourt,
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Kuttner, Robert. The Economic Illusion. Boston: Houghton Mifflin, 1984.
Kondratieff, Nikolai. The Long Wave Cycle. New York: Richardson & Snyder, 1984.
• Lowe, Adolph. On Economic Knowledge. White Plains, N.Y,: M. E. Sharpe, 1977.
Locke, John. The Second Treatise of Government. Indianapolis: Bobbs Merrill, 1952.
Landes, David. The Unbound Prometheus. Cambridge: Cambridge University Press, 1969.
Lasswell, Harold. “The Triple-Appeal Principle: A Contribution of Psychoanalysis to Political and
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Macpherson, C. B. The Theory of Possessive Individualism. New York: Oxford University Press,
1962.
Maclntyre, Alisdair. After Virtue. Notre Dame, Ind.: Notre Dame University Press, 1981.
Marx, Karl. Capital. New York: Vintage, 1977, 1981.
________Grundrisse. Middlesex: Penguin, 1973.
________Economic and Philosophical Manuscripts of 1844. New York: International Publishers,
1964.
________Pre-Capitalist Economic Formations. New York: International Publishers, 1964.
• Mandel, Ernest. Late Capitalism. London: New Left Books, 1975.
________Long Waves of Capitalist Development. New York: Cambridge University Press, 1980.
Mantoux, Paul, The Industrial Revolution in the 18th Century. London: Jonathan Capr, 1952.
Miliband, Ralph. The State in Capitalist Society. New York: Basic Books, 1969.
Mill, John Stuart. Principles of Political Economy. Toronto: University of Toronto Press, 1965.
Monsen, Joseph & Walters, Keith. Nationalized Companies. New York: Mc-Graw Hill, 1983.
Nove, Alex. The Economics of Feasible Socialism. London: Allen & Unwin, 1983.
Noble, David. America by Design. New York: Knopf, 1977.
Nozick, Robert. Philosophical Explanations. Cambridge, Mass.: Harvard University Press, 1981.
O’Connor, James. Fiscal Crisis. New York: St. Martin’s Press, 1973.
Oilman, Berteli. Alienation: Marx’s Conception of Man in Capitalist Society. Cambridge: Cambridge
University Press, 1971.
Piore, Michael & Sabel, Charles. The Second Industrial Divide. New York: Basic Books, 1984.
Pen, Jan. Income Distribution. New York: Praeger, 1971.
Reich, Robert and Magaziner, Ira. Minding America’s Business. New York: Harcourt Brace
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1982.
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• Sahlins, Marshall. Stone Age Economics. Hawthorne, N.Y.: Aldine, 1972.
________The Use and Misure of Biology. Ann Arbor, Mich.: University of Michigan Press, 1976.
Ste. Croix, G.E.M. The Class Struggle in the Ancient Greek World. Ithaca, N.Y.: Cornell University
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• Shaikh, Anwar. “Economic Crises,” in Tom Bottomore, ed., A Dictionary of Marxist Thought.
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________Crisis Theories in Economic Thought. London: Thames Polytechnic, 1977.
• Schütz, Alfred. “Common Sense and Scientific Interpretation of Human Action” and “Concept and
Theory Formation in the Social Science”, in Maurice Natanson, Philosophy and the Social
Sciences. New York: Random House, 1963.
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Schelling, Thomas. Micromotives and Macrobehavior. New York: W. W. Norton, 1978.
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1982.
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________Lectures on Jurisprudence. Oxford: Clarendon Press, 1978.
________Theory of Moral Sentiments. Oxford: Clarendon Press, 1976.
________Sombart, Werner. Why Is There No Socialism in the United States? (White Plains, N.Y.:
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“The Prospects of Labour and the Transformation of Advanced Capitalism,” New Left Review,
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Thompson, E. P. The Making of the English Working Class. New York: Random House, 1974.
________The Poverty of Theory. New York: Monthly Review Press, 1978.
• Wallerstein, Immanuel. Historical Capitalism. London: Verso, 1983.
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________General Economic History. Glencoe, 111.: Free Press, 1950.
White, Lynn. Machina Ex Deo: Essays in the Dynamics of Western Civilization. Cambridge, Mass.:
M.I.T. Press, 1968.
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________“Marxism and the Course of History,” New Left Review, September-/October 1984.
Wright, Erik Olin. Class, Crisis and the State. London: Verso, 1979.
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Index
accumulation of capital
and abstractness of money capital
class dominance and
commodification aspect of
division of labor in
“economic patriotism” and
fixed capital
individual achievement and
inputs for
logic of, see capitalism, logic of imperatives of
mechanization and
necessity of
power and
preconditions for
and production of use-values
profits and
self-preservation and
social restraints on
social structure of
state support of
structural changes in capitalism from
acquisitive behavior:
aggressive aspect of
Christianity and
consequences of
in ideology of capitalism
as le doux commerce
moral significance of
nature of capital and
protection of capital and
science of
Acquisitive Society, The (Tawney)
advertising
Advertising: The Uneasy Persuasion (Schudson)
Affluent Society, The (Galbraith)
After Virtue (Maclntyre)
Against Method (Feyerabend)
Amin, Samir
Ancient City, The (Coulanges)
Anderson, Perry
Appleby, Joyce Oldham
Aristotle
on limitlessness of wealth
Arkwright waterframe

behavior, human:
determinacy of
maximizing
self-preservation in
volitional element in
see also acquisitive behavior; domination
Bell, Daniel
Bentham, Jeremy
Beres, David
Berger, Peter
Bergeson, Albert
Berman, Marshall
Bradstreet,
Brainstorms (Dennett)
Brandt Commission
Braudel, Fernand
Braverman, Harry
Briggs, Asa
business life

capital
abstract
as central organizing principle of capitalism. See also regime of
concentration of
continuous transformation of
defensive tactics of
defined
dependency and
dissolution and recapture of
international movement of
as material things
money
organization of
political freedom and
power of
regime of
size of
as social process
tradition and command vs.
vulnerability of
see also accumulation of capital; fixed capital; ideology of capital; M-C-M’ formula for capital;
protection, of capital
Capital (Marx)
capitalism, see also capitalist development
capital as central organizing principle of
causal explanation in
 competition and, see competition configurations of
contradictions of
definition of
determinacy of
and domination
energy of
expansion of
as explained by economics
fetishism in
and ideology, see ideology of capital
logic of
masking of functions in
mercantile
multiple perspectives on
nature of
power and, see power
predictions for future of
and privatization of politics
profit in
rationality in
as regime of capital
self-ordering tendency of
capitalist development
chart of
class struggle and
crises in
in Europe vs. U.S.
intervention and
long waves in
productive expansion vs. social restriction in
capitalist development, first period (1760–1848) (nascent industrial capitalism)
competition as disciplinary force in
division of labor in
labor deployment in
precapitalist sector in
productivity in
social aspect of
capitalist development, second period (1848–1893)
capital concentration in
cartels, trusts, and mergers in
changes of scale in
crisis in
economic patriotism in
intensification of competition in
labor deployment and homogenization in
market saturation in
organizational changes in production and
political confrontations in
 response to crisis in
capitalist development, third period (1893–1941)
crisis in
economic patriotism in
labor and fixed capital in
political confrontations in
price competition and
response to crisis in
revitalization in
capitalist development, fourth period (1941–) (postwar period)
changes in social structure during
crisis in
expansion of scale of capital in
global finance in
inflation in
international lending in
and state
technology in
capitalists:
and dissolution and recapture of capital
market processes and
maximizing behavior of
misers vs.
and self-preservation
state power and
as universal class
Carnegie, Andrew
cartels
cash nexus
Census of Manufactures (1869)
Chandler, Alfred
Channels of Desire (Ewen and Ewen)
“Children of the Hutterites” (Huntington)
Christianity, and acquisition of wealth
Civilization and Capitalism (Braudel)
Civilization and its Discontents (Freud)
Claessen, H.
class:
bourgeoisie as
ruling
struggle
universal
working
Class and Nation (Amin)
Class Struggle in the Ancient World, The (Ste. Croix)
coercion. See also domination
Cohen, Ronald
Colbert, Jean Baptiste
commerce, as civilizing, no commercialization
commodification
of ideas
commodities:
fetishism of
ideas as
commodity chains
Communist Manifesto
competition:
defined
development of
as disciplinary force
and dissolution and recapture of capital
human nature and
residual profit and
self-preservation and
“Concept and Theory Formation in the Social Sciences” (Schütz)
concentration of capital
corporations:
fixed costs of
supranational
Coulanges, Fustel de
Council of Vienne
“Covering Laws Analysis in Scientific Explanation, The” (Hempel)
crisis of intervention
Cultural Contradictions of Capitalism, The (Bell)
cultural realm
and commodification
ideas as commodities in
natural world as seen in

democracy, liberalism and

democratic socialism
Dennett, Daniel
dependency
infantile
social relationships and
Depression, Great
Dialogue of the Common Laws, A (Hobbes)
Diamond, Stanley
Discourse on Property, A (Tully)
discipline see also economic patriotism
distinction, see prestige
distribution, see also wages, profits
division of labor
domination, see also coercion in animals vs. humans
capital accumulation and
and capitalism
 infantile dependency and
by merchants
in primitive society
state vs. economic
as structured inequality
in tributary systems
universal class and
of women, by men
Duby, Georges

Early State, The (Claessen and Skalnik)

East India Companies
economic calculation
“Economic Crises” (Shaikh)
Economic Illusion, The (Kuttner)
economic patriotism
economic realm:
activities of
boundaries of
emergence of
function of
government and
and ideology of capitalism
labor allocation in
political aspect of
political realm and
power in
rights in
state’s maintenance of
in tributary systems
economics
capitalism as explained by
development of
and fetishism of commodities
on origin of profits
positivist approach in
rational wealth seeking and
reductionism of
social analysis and
as social engineering
surplus ignored in
Economic Thought and Ideology in Seventeenth-Century England (Appleby)
Edwards, Richard
Engels, Frederick
equality, de jure
equilibrium, general economic
Europe:
economic patriotism
 inflation in
logic of capitalist development in
Evolution of Political Society, The (Fried)
Ewen, Stuart and Elizabeth
expansion of capitalism
explanation
causal
conceptual
indeterminacy and
limitations of
understanding and
exploitation of labor

feudalism
Feyerabend, Paul
finance, global
Fiscal Crisis of the State, The (O’Connor)
fixed capital
vs. variable
Frederick II (the Great), King of Prussia
freedom:
capital and
economic
intellectual
political
Freud, Sigmund
Fried, Morton
Friedman, Milton
Future of an Illusion, The (Freud)

Galbraith, John Kenneth

Gay, Peter
Giddens, Anthony
Glorious Revolution (1688)
goods and services
Gordon, David
government: see also state
bourgeois view of
economic realm and
expansion in postwar period
individuals and
laissez faire and
legitimacy of
liberal view of
popular views of modern
property rights and
regulatory intervention by
social democratic
government spending: increases in
inflation and
Group Psychology and the Analysis of the Ego (Freud)

Habermas, Jurgen
Hanson, Norwood
Hegel, Georg Wilhelm Friedrich
Hempel, Carl
Hirsch, Fred
Hirschman, Albert
Historical Materialism (Giddens)
Hobbes, Thomas
on competition
homogenization of labor
horsed nomads
Horvat, Branko
human nature:
competition and
oppressive social relationships and
social systems shaped by
Huntington, Gertrude Enders

ideas:
as commodities
ideologies: see also cultural realm
defined
developmental view of
explanatory function of
multiple, under capitalism
as ruling class explanation
science as
surplus and
as “world” religions
ideology of capital
acquisitiveness in
commercialization and
individuals in
natural world as seen in
political freedom and
and private vs. public sectors
protective complexity of
and relationship of government to economy
and relationship of liberalism and democracy
rulership in
science in
Income Distribution (Pen)
incomplete tributary societies
individuals:
 conformity and
government and
in ideology of capitalism
unconscious and
indoctrination, social
industrial capitalism, see capitalist development
Industrial Revolution
Industrial Revolution in the 18th Century, The (Mantoux)
inequality:
profits and
wage labor and
infantile dependency
inflation
government spending and
as political ailment
innovation, technological
inputs, for accumulation of capital
insatiability
In Search of the Primitive (Diamond)

James, William
Japan

Kahler, Erich
Keynes, John Maynard
Kuttner, Robert

labor:
allocation of
deployment of
developmental view of
discipline and command of
division of
in early capitalism
exploitation of
fixed capital and
high technology and
homogenization of
industrial employment for
liberal view of
as process vs. commodity
and reification of natural world
relationship of capital to
surplus value of
wage
Labor and Monopoly Capital (Braverman)
laissez faire
Landes, David
Lasswell, Harold
Late Capitalism (Mandel)
Lectures on Jurisprudence (Smith)
legitimacy, political
Legitimation Crisis (Habermas)
lending, international
Lenin, V. I.
Leviathan (Hobbes)
liberalism
democracy and
labor as seen by
laissez faire and
Lineages of the Absolutist State (Anderson)
livelihood, access to
Locke, John
on purpose of government
on unlimited acquisition
logic: see also capitalism, logic of of economic vs. political power
of primitive societies
of social systems
of tributary societies
long waves
Lowe, Adolph
Luckman, Thomas

machines:
hand-built
machine-made
Maclntyre, Alisdair
Macpherson, C. B.
Magaziner, Ira
Making of the English Working Class, The (Thompson)
management, specialization of
Manchester weavers
Mandel, Ernest
Mantoux, Paul
market, system
emergence of
human contact reduced in
labor exploitation in
in liberalism
multiple perspectives on
regulatory functions of
requirements of
Marx, Karl
on evolution of capitalism
historical sequences explained by
on labor as process vs. commodity
 limitations in theories of
on power of money
on primitive accumulation
on profits
on wage slavery
Marxism:
capital accumulation in
cash nexus in
dependency in
domination in
fixed capital in
M-C-M’ formula in, see M-C-M’ formula for capital
political freedom in
reductionism of
social formations in
surplus value of labor in
technological rents in
“Marxism and the Course of History” (Wood)
Marxism: For and Against (Heilbroner)
mass production
maximizing behavior
M-C-M’ formula for capital
breakdowns in
commodities enhanced in
competition and
development of
disciplinary force generated by
fixed capital
identification of
profits and
scientific breakthroughs and
state power and
vulnerability of capital in
mechanization
Mediterranean, The (Braudel)
mercantile capitalism
merchants:
domination by
emergence of
power of
profits of
mergers
Micromotives and Macrobehavior (Schelling)
military power
economic activity encouraged and protected by
property rights “legitimized” by
Mill, John Stuart
on exploitation of labor
 on laissez faire
on profits
on “stationary state” of capitalism
Minding America’s Business (Reich and Magaziner)
misers
money:
as abstract
as basis of measurement of prestige
as intermediary in trade
power of
money capital
Monsen, Joseph
morality, state power restrained by
multi-axial principle
Multinational Companies and Nation States (Murray)

Nationalized Companies (Monsen and Walters)

nature
in Judeo-Christian tradition
reification of
Nozick, Robert
O’Connor, James
“One World or Three?” (Worsley)

Paris Commune
Passions and the Interests, The (Hirschman)
patriotism, economic
Patterns of Discovery (Hanson)
peasants
Pen, Jan
Philosophical Explanations (Nozick)
political economy
Political Economy of Socialism (Horvat)
political power
in economic realm
logic of
production and
political realm
boundaries of
and constitutional constraints on state
economic functions in
economic realm and
and ideology of capitalism
labor discipline and
labor exploitation and
rights in
in tributary systems
Political Theory of Possessive Individualism, The (Macpherson)
Politics (Aristotle)
population growth and wages
postindustrial society
Poverty of Theory, The (Thompson)
power
of capital
capital accumulation and
defined
expansion of
insatiability and
of institutions
legitimation of
military
of money
political vs. economic
prestige vs.
in private vs. public spheres
psychic roots of
self-preservation and
of taxation
wealth and
see also domination; political power; state power
predictions
expectations vs.
for future of capitalism
for socialism
prestige:
desire for
money as basis for measurement of
power vs.
self-preservation and
wealth and
prestige goods
in U.S.
wealth vs.
workers and
price agreements
price competition
price leadership
“primitive accumulation,”
primitive societies
kinship in
prestige in
private property
ownership of
as potentially protective
state and
technological rents and
production
organizational changes in
political power and
surplus in
of use-values
wage labor and
productivity:
fixed capital and
growth of, in industrial period
social and material disruption from increases in
profits
accumulation process and
capital-labor relationship and
commodity chains and
decline in rate of
as driving force of capitalism
economics and
exploitation and
inequality and
and logic of capitalism
M-C-M’ formula and
as merchants’ gains
political benefits from
population growth and
as residuals
Schumpeterian
as successful exercise of political relationship
as surplus value
technological rents and
technology and
from trade
as value added
wage labor and
proletarianization
property, see private property
protection, of capital
protectionism
Protestant Ethic, The (Weber)
public works

railroads, fixed costs of

reductionism:
dangers of
of economics
of Marxism
regime of capital
Reich, Michael
Reich, Robert
religion, science vs.
representation and participation
Ricardo, David
right of refusal
Roman empire, collapse of
ruling class, see also domination
Russian Revolution
Rustow, Alexander

Sahlins, Marshall
Ste. Croix, G. E. M.
scarcity, wealth and
Schelling, Thomas
Schudson, Michael
Schumpeter, Joseph
on evolution of capitalism
Schumpeterian profits
Schutz, Alfred
science
as ideology
role of, in capital accumulation
see also technology
scientific management
Second Treatise on Government (Locke)
Segmented Work, Divided Workers (Gordon, Edwards and Reich)
Shaikh, Anwar
Shifting Involvements (Hirschmann)
Skalnik, P.
Skocpol, Theda
Smith, Adam
on acquisitiveness
on competition
on Deity
on dependency of workers
on government power
historical sequences explained by
on industrial employment
on inequality
on life span of capitalism
limitations in theories of
on moral costs of wealth accumulation
on profit
on pursuit of capital
on social approval of wealth
social analysis
abstraction in
causal explanation in
clarification as test for
 conceptual explanation in
economics and
indeterminacy of
natural world and
positive approach to
reductionism and
and regime of capital
understanding in
unrealism in
validation as impossible for
Social Construction of Reality, The (Berger and Luckman)
social formations
central organizing principle of
conflict between groups in
contradictions of
human unconscious and
levels of complexity in
logic of
nature of
noncapitalist, explanation in
orderliness of
primitive
socialization process in
surplus and
tradition and command vs. capital in
tributary
usefulness of descriptions of
social indoctrination
socialism:
democratic
intellectual freedom and
managerial
predictions for
socialization process
Social Limits to Growth, The (Hirsch)
social position
and accumulation of capital
exploitation and
see also class; dependency
Sombart, Werner
sports, commercialization of
state:
accumulation of capital supported by
activities of
constitutional constraints on
economic function of
economic power ceded by
emergence of
 as influenced by capitalism
in modern capitalism
political function of
private property and
and public works
role of
in scenarios of capitalism
unprofitable economic necessities provided by
war and
see also government
state power:
capitalists and
domination and
economic power vs.
evolution of
over international commodity chains
marshaling and deployment of
M-C-M’ formula and
morality as restraint on
Stavenhagen, Rudolpho
Stone, Lawrence
Stone Age Economics (Sahlins)
Studies of the Modern World-System (Bergeson, ed.)
surplus
allocation of, to capital-owning class
economic vs. political power and
exploitation and
in feudalism
ideology and
origins of
in tributary societies vs. capitalism
use of, to augment power
see also profits
surplus value, see also profits

Tawney, R. H.
taxation, power of
Taylor, Frederick, and Taylorism
technological rents:
profits and
property rights and
technological unemployment
technology:
development of
labor and
in postwar period
production as force of
profitability of
 technoeconomic structure
social systems and
temporary monopoly rents from
Theory of Moral Sentiments (Smith)
Therborn, Goran
Thomas, Keith
Thompson, E. P.
Thoughts on War (Freud)
Three Orders, The (Duby)
Tocqueville, Alexis de
Tower and the Abyss, The (Kahler)
trade
money as intermediary in
profits from.
tributary societies
centralized rulership in
domination in
economic domain in
feudalism and
hierarchies in
ideologies in
incomplete
legitimacy of government in
logic of
political realm of
political vs. economic logic in
self-preservation in
surplus in
“Triple Appeal Principle, The” (Lasswell)
trusts
Tully, Jas.

underdeveloped countries
understanding
conceptual explanation and
defined
role of, in social analysis
unemployment, technological
United States
economic success in
inflation in
logic of capitalist development in
mass consumption goods in
predictions for capitalism in
working class allegiance in
universal class
Use and Abuse of Biology, The (Sahlins)
use-values
utilitarian philosophy

Veblen, Thorstein
vertical integration
Visible Hand, The (Chandler)

wage contracts
wage labor
wages:
and employment
population growth and
profit and
wage slavery
Wallerstein, Immanuel
“Wallerstein’s World Capitalist System” (Skocpol)
Walters, Keith
war:
capitalism and
organized states and
Watt steam engine
wealth
and access to livelihood
as capital
conditions necessary for existence of
extraction of, from productive society
individual’s pursuit of
as limitless
market requirements and
power and
prestige goods vs.
and prestige or distinction
scarcity and
social approval of
surplus as
use-values of
Wealth of Nations, The (Smith)
Weber, Max
What Does the Ruling Class Do When It Rules? (Therborn)
White, Lynn
Winding Passage, The (Bell)
Wood, Ellen Meiksins
workers:
dependency of
enforced competitiveness and
maximizing behavior of
prestige goods and
self-preservation and
wage labor and
working class:
in Europe
in U.S.
“world-economy,”
World War II
Worsley, Peter

Zukier, Henri
Copyright © 1985 by Robert L. Heilbroner.
All rights reserved.
Printed in the United States of America.

First published as a Norton paperback 1986

Library of Congress Cataloging in Publication Data

Heilbroner, Robert L.
The nature and logic of capitalism.
Includes index.
1. Capitalism. I. Title.
HB501.H398 1985 330.12′2 85-5656

ISBN 978-0-393-95529-3

ISBN 978-0-393-24259-1 (e-book)

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