Robert L. Heilbroner (1919−2005) was a historian of economic thought and a professor at the New School for Social Research. He wrote about 20 books, one of the most important of which is titled The Nature and Logic of Capitalism (1985). In writing these blog posts, my immediate purpose is to summarize/paraphrase that book, and, in the process, try to come to terms with what its author is saying. My larger purpose is to understand capitalism.
In chapter 1 (“On the Nature and Logic of Capitalism”), Heilbroner starts by asking a deceptively simple question: What is capitalism? The book consists of his attempt to answer that question. Heilbroner notes that since capitalism is hard to define, economic thinkers have often avoided answering that question altogether; they have focused, instead, on describing more concrete phenomena, such as the “business world” or the “modern industrial society.” These phenomena represent the “outward-facing reality of capitalism,” and, for this reason, are part and parcel what capitalism means. Yet, there is much more to capitalism than what appears in the day-to-day activities of business, finance, and industry. In fact, these activities are the results of forces that originate in a hidden underworld, a world that’s neither tangible nor concrete but is essential to the reality of capitalism. How do we know that such forces actually exist if we cannot observe them? We know them by their effects on the empirical world. Heilbroner uses the metaphor of a magnetic force field. When a magnet is brought close to a heap of iron filings, the later move in particular ways to form a new pattern, indicating the presence of the force field. It is true that the design produced by the magnet does not reveal all the intricacies of its invisible force field; yet, the “order-bestowing influence” of the force field is nevertheless indisputable. In the same way, Heilbroner argues, the intangible aspect of capitalism makes itself known in how it shapes and influences the design and arrangement of the observable phenomena in society.
Heilbroner accepts the conventional view that there have been four major types of “social formations” (Marx’s term) in human history, viz., primitive, imperial, feudal, and capitalist. Each of these social formations can be approached through an analysis of its peculiar “nature” and the resulting “logic.” The “nature” of a social formation “refers to the ensemble of elements that influence the behavior of its members” (p. 20). These include: (1) geography and climate, (2) drives and capacities of the human animal as a species being, and (3) institutions, organizations, and belief systems. The “logic” of a social formation can be understood as its historical path, i.e., the movements and changes that occur in the society’s various processes and configurations over time, as the outward expressions of the “potential energy created by its nature” (p. 25).
Heilbroner seems to be saying that every social formation has a particular “nature,” which, just like a magnet’s force field, is invisible and intangible. We can’t see it directly, but we always know that it’s there. Furthermore, we can begin to feel the curves and contours of this hidden underworld by examining its effects or consequences over time. This is because the “nature” of a social formation necessarily gives rise to particular tendencies or tensions that, in turn, produce “large-scale and long-lasting” changes — both institutional and cultural — in the course of history. The pattern of such changes constitutes the “logic” of the social formation. We cannot understand such “patterned changes in history” without referring to the underlying “nature” of the social formation in question (p. 26).
In chapter 2 (“The Drive to Amass Capital”), Heilbroner focuses on the nature of capitalism. To understand the social formation called capitalism, he argues, we must start by looking at its”single most important element,” i.e., its nature, which is also “the primary aspect” of its “behavioral orientation.” The nature of capitalism, Heilbroner informs his readers at the outset, “is the driving need to extract wealth from the productive activities of society in the form of capital” (p. 33).
With the exception of primitive societies that function at a subsistence level, the productive activities of any social formation will necessarily give rise to something called “surplus,” usually defined as anything produced by a society that is “over and above that required for the maintenance” of that society. Adam Smith defined surplus as the “balance of the annual produce and consumption.” Heilbroner defines it as “the difference between the volume of production needed to maintain the work force and the volume of production the work force produces” (p. 33). The production of surplus, he emphasizes, is not unique to capitalism. The difference is this: In a non-capitalist society, the surplus becomes “wealth,” and wealth is typically used by the elite to acquire “goods and services devoted to luxury consumption” as well as to gain additional political power. In the capitalist social formation, the wealth resulting from surplus is not treated as desirable for its own sake; rather, it is treated “as a means for gathering more wealth” (p. 35). This is why, Heilbroner argues, the wealth produced by the great ancient civilizations was mainly represented in “physical embodiments,” such as palaces and temples, and that these were considered “its sufficient reason for being, its final purpose.” In sharp contrast, wealth under capitalism is never acquired as an end but always as a means for its own expansion. As a result, “in capitalism wealth inhabits material things only transiently” (p. 35).
Wealth, in the form of material things or in the form of money, is not identical with capital. Wealth becomes capital only when it is part of a process that transforms money into commodities and commodities into more money. Under capitalism, the “search for wealth” does not come to an end with the acquisition of money or the acquisition of material things. Commodities must be sold in exchange for money, and money must be reinvested to produce more commodities. Karl Marx identified the “never-ending cycle” of capitalism in his famous M-C-M’ formula. This is clearly a case of what is called a “positive feedback loop,” which is also the source of the incredible dynamism of the capitalist social formation. Heilbroner writes: “Capital is therefore not a material thing but a process that uses material things as moments in its continuously dynamic existence” (pp. 36-37).
Capital is not a concrete entity; it is the representation of a particular kind of social process. Capital represents a “web of social activities that permit the continuous metamorphosis of M-C-M’ to take place.” For Heilbroner, the central relationship in this web is between two main parties: “the owners of money and goods, [which are] 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 ownership enjoyed by one party ensures that the relationship will always be grossly unequal. This is because legal ownership of property involves the “right to exclusion,” which means that “owners can legally refuse to allow their possessions to be used by others.” According to Heilbroner: “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 . . . but to withhold them from use if their owners see fit.” It is this legal right of preventing others from having access to one’s property that defines the nature of the social process that is represented in capital. In other words, the core of the social relationship that brings capital into existence is domination of one group by another (p. 38), a relationship that rests on unequal power.
Heilbroner emphasizes that the power enjoyed by the owner of capital is qualitatively different from the power enjoyed by the political or religious authorities. The owners of capital do not have the power to imprison, execute, fine, or excommunicate. “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” (p. 39). The domination of the merchant results from “his legal right not to sell to those who will not meet his price,” and the domination of an industrial capitalist results from “his right not to offer employment to those who will not accept his terms.” Regardless of how severe the consequences of this domination may be, Heilbroner notes, “it . . . always operates at a remove, and with a degree of voluntary submission” that is absent from precapitalist modes of domination. The distinction is important because of the following reason: “capital can exert its organizing and disciplining influence only when social conditions make the withholding of capital an act of critical social consequences” (p. 40). Put differently, the domination of capital hinges on the appearance of two distinct classes: the capitalists and the workers. The former emerges when the merchant class rises “from a subordinate position within society to a position of leverage,” by way of capturing “increasingly strategic social functions from the financing of rulers to the provisions of cities.” The latter appears when a large number of people are deprived of access to the tools and lands on which their livelihood had previously depended. In precapitalist society, “the peasant was entitled . . . to retain some portion of the crops he directly raised,” and the artisan “owned his own means of production” in the form of a cottage loom, a potter’s wheel, etc. This social arrangement had to dissolve before a worker class could emerge. The dependency relationship between the two classes results from the fact that the workers’ access to their means of livelihood could now be legally denied to them by the owners of capital. Heilbroner writes:
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. (pp. 41-42)
Regardless of which forces were involved, the end result was always the same, that is, “established rights of direct access to one’s own product were replaced by new rights by which peasants and workers were legally excluded from access to their means of livelihood” (p. 42).
Next, Heilbroner notes that the relationship of domination that is represented in capital has two poles: (1) the dependency of the worker class on the capitalist class, and (2) the never-ending drive to accumulate capital. Since the former has already received a significant amount of attention from other scholars, Heilbroner says that he would focus on the later, less examined pole. He then asks the obvious question: why does this “restless and insatiable drive to accumulate capital” exists in the first place? Adam Smith had answered this question by referring to the “desire for prestige and distinction.” We have a desire to accumulate capital because it gives us prestige in our society. Heilbroner finds this answer to be relevant but insufficient. He points out that there are two main ways through which people acquire prestige: (1) through owning certain objects that are perceived to be special in a given culture, and (2) through personal qualities such as strength, courage, wisdom, and charisma. The objects in the first category could be virtually anything, depending on the culture in question. In all human cultures we find that certain inanimate things are perceived to have the capacity “to enhance the personae of their owners,” i.e., to endow them with prestige and distinction (p. 43). The drive to accumulate capital, however, can be explained only partially be appealing to the desire for prestige. It is a necessary condition, but not a sufficient one. This is because, Heilbroner argues, “wealth differs in a crucial respect” from the two sources of prestige, i.e., ownership of prestige objects and possession of special qualities. The difference is as follows: “Prestige and distinction enlarge the authority and repute of their possessors but not necessarily their ability to force others to do their bidding” (pp. 44-45). In other words, wealth provides something extremely valuable to its owners that mere prestige ordinarily cannot, and that is power. In fact, my wealth gives me power over other people, i.e., I can make them follow my will, regardless of whether they like or respect me. When it comes to commanding obedience, power trumps prestige.
Allow me to quote Heilbroner at length:
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 a rights of a kind that prestige objects do not have, in particular . . . 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 owners with an attribute that goes beyond prestige and preeminence. This is power. (p. 45)
In a subsistence society, everyone has equal access to the means of survival, i.e., food, water, shelter, and safety. In such a society, there is prestige but no wealth. Thus, a skilled hunter or a shaman is likely to enjoy considerable prestige because of their personal qualities, but no one is able to own any wealth simply because the “right to exclusion” doesn’t exist. The spear or the fishing net does not belong to any one person, who could then exclude others from using them. In sharp contrast, wealth comes 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.” This also means that “wealth cannot exist unless there also exists a condition of scarcity.” Here, scarcity does not refer to an “insufficiency of resources” but to an “insufficiency of means of access to resources” (p. 46). Without the “right to exclusion,” there can be no wealth; without poverty there can be no affluence.
The drive to accumulate capital is therefore inseparable from the drive to accumulate power. But why do we desire power in the first place? Heilbroner points out that the drive for power among other animals is of a different character than that found in human societies. “Domination among animals is largely sexual in nature” and is related to natural selection; it has nothing to do with “any division of tasks or general subservience to the ‘will’ of a hegemonic individual.” In contrast, domination in human societies “entails a structured inequality of life conditions that has no parallel in the animal world” (p. 47). He argues that domination in human societies is completely unlike the hierarchies we observe in the animal kingdom, since in human societies domination involves a gross disparity of power that results in a great deal of misery and disadvantage for the majority.
What is it in human nature that can explain this state of affairs? Heilbroner finds the answer in the “prolonged infantile dependency, the uniquely and universally human experience out of which social behavior is formed” (p. 48). The human individual starts out in a state of undifferentiated fusion with the safe and nurturing maternal environment, and then develops gradually and painfully to acquire a separate and independent existence over an extended childhood. This universal human experience plays a decisive role in forming our nature and personality; it is also the source of our need to dominate as well as our need to submit.
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 satisfied from above and from below. (p. 48)
For Heilbroner, the roots of domination in human societies are therefore found deep within our psyches.
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. (p. 49)
The pleasure we experience in imposing our will on others has its origin in our desire to overcome our infantile dependency, just as the pleasure of submission and obedience results from our desire to return to the same primordial state.
Heilbroner acknowledges that the above explanation for the origin of domination in human societies is incomplete and inadequate. It answers part of the question, but fails to settle it conclusively; in other words, it provides the necessary condition for domination, but not the sufficient condition. Heilbroner notes that the psychological explanation does not tell us why domination was not present from the very beginning, and why did it only emerge at a certain point in human history. Thus, even if we accept that domination is attractive, both “for those who seek it” as well as “for those who yield to it,” primarily due to the unconscious forces rooted in the experience of infantile dependency, we still have to solve the mystery as to “why humankind throughout the world took the extraordinary step of abandoning an equality of access to resources” and why did it “enter into a condition in which the great majority of individuals became more or less permanently dependent on a small minority” (p. 49). The psychological answer does not explain the emergence of inequality as a historic fact. Unfortunately, Heilbroner does not provide a satisfactory answer to this question. He suggests that, perhaps, some kind of “external factor” was responsible for pushing “self-sufficient communities into social differentiations, distinctions of rank, stratification, and finally differential access to resources.” He does note that the use of force (violence) must have played an important role in this development, as evidenced by “the universal ‘legitimation’ of property rights by military power” (p. 50).
Other scholars have done extensive work on explaining the development and expansion of domination in human societies; what they have neglected, however, is the way in which human nature itself allows for this possibility. It is human nature, characterized by the opposing elements of aggression and submissiveness in the unconscious that makes it possible for a “structure of domination” to emerge in the first place.