21st-century capitalism

Capitalism is just one particular way of – a system for – organizing the production and distribution of goods and services. It differs from other systems such as slavery and feudalism but also shares some similarities with them. Capitalism, like slavery and feudalism, divides those engaged with the production and distribution of goods and services into two groups, one small and the other large. Slavery had masters (few) and enslaved people (many), while feudalism divided the groups into lords (few) and serfs (many). Employers are capitalism’s smaller group. They control, direct, and oversee the economic system. The employers use production and distribution to grow their wealth. Capital is wealth engaged in self-expansion. As the systemic agents who are socially positioned to perform that expansion, employers are capitalists.

Capitalism’s much larger group comprises the employees (or workers). As the majority in the system’s workplaces, they do most of the work. Employees are divided into two groups. One group, often called “productive workers,” are those directly involved in producing goods or services. In a company that produces chairs, for example, they are the makers of the chairs (people directly transforming wood into chairs). The second group of employees, often called ‘unproductive workers’, are not directly involved in contributing to the workplace’s output. Rather, unproductive workers provide the conditions and the context that enable the productive workers to directly produce the output. Examples of unproductive workers in a workplace include clerks who keep records and sales and purchasing departments’ employees who secure inputs and market outputs.

Capitalist employers alone decide the mix of productive and unproductive workers they hire, what each of them does, what technologies each deploys, where their work is done, and what happens to the fruits of their labor. While productive and unproductive workers are excluded from participating in those decisions, they live with the consequences of these decisions.

Productive workers use tools, equipment, and buildings that are paid for and provided by the employers who hire them. Productive workers transform raw materials likewise purchased and provided by their employers. These “means of production” (tools, equipment, facilities, and raw materials) bought by employers contain a certain value that carries over into the finished product. The productive workers add more value by expending their transformative labor and utilizing those means of production provided to them by the employers. Thus, the finished output of each capitalist workplace contains the values of the used-up tools, equipment, and raw materials, plus the value added by the productive workers.

The key point to grasp here is that the value added by the productive workers is significantly more than the value of the wages paid to them by their employer.

Excerpted: ‘Explaining 21st-Century Capitalism in a Way Everyone Can Understand’

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