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Karl Marx (right) and Friedrich Engels (left), two of the leading political economists of the 19th century that analyzed and critiqued capitalism and socialism.

What is Capitalism? – Socialism 101

Introduction

Capitalism sucks! We all know that. But to critique and challenge a system, you need to know how that system works! So what the hell is capitalism, anyway? Welcome to the first chapter of Socialism 101, a series of posts where members of the Sonoma County Democratic Socialists of America break down Marxist theory into simple terms.

Political economists define capitalism as “a commodity economy wherein the means of production are privately owned and labor is commodified.” Now, that’s a whole lot of jargon, so let’s go through it all step by step.

The Commodity Economy

The first defining trait of capitalism is a commodity economy.

A commodity is any item or service produced for a market, meaning that you’re making it just to sell it. If you bake a cake to enjoy by yourself or with friends and family, it’s just a cake. But if you bake a cake to sell, it becomes a commodity.

Under capitalism, almost every good or service is commodified, from household electronics to children’s toys to clothing to food to housing to healthcare. There is still some non-commodified production, like all that bread you baked during the COVID lockdowns, but these are exceptions.

But capitalism is more than just a commodity economy! There existed commodity economies before the development of capitalism, so what else defines capitalism?

Private Ownership of the Means of Production

The second defining trait of capitalism is the private ownership of the means of production.

The means of production are anything that can be used to produce goods or services. Prime examples of this would be tools, machines, computers, or even land. Under capitalism, the means of production are privately owned, meaning they are the property of individuals – small business owners, CEOs, boards of directors, etc. But not everyone can own a part of the means of production. You probably don’t! Why not?

Because a commodity economy ensures competition, as the market can only sustain a limited number of makers of a single good or service. Imagine if everyone employed by Heinz was making their own brand of ketchup instead! In a competition, there will inevitably be winners and losers. Much of this happened long before we were born; the losers went out of business and were forced to sell their means of production to the winners.

And so a small group of people came to own almost all of the means of production. But what about us?

The Commodification of Labor

The third defining trait of capitalism is that labor is commodified through wage labor.

A very small group owns all the means of production. But even with advances in automation, they simply can’t use all the land, machines, and computers they own. That’s where we, the working class, come in.

Because even the bare essentials of living are commodified, we need money to live. We need money, and the owning class needs labor. So they hire us, paying us not for what we produce for them, but for the labor that we provide them. This is wage labor; if you work in a kitchen, your boss pays you for the time you spend working there, not the amount of food that you cook.

Wage labor is the commodification of labor. You sell your labor and the capitalists buy it. But of course we don’t really have a choice. We have to sell our labor to someone if we don’t want to starve or become homeless. And of course, it’s not really a fair trade; to make a profit, your boss has to buy your labor for less than the value of the things you produce. In the kitchen example, you may produce $500 worth of food in an hour, but your boss is only paying you $20 for that time.

Conclusion

So there you have it, you now know the key traits of capitalism. With this in mind, to build socialism we must challenge each of these traits. To truly escape capitalism, socialism must challenge private ownership with social ownership and challenge commodified production with production for the sake of human wants and needs.

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