Heilbroner begins chapter 3 (“The Regime of Capital”) by reiterating the main points from the first two chapters. He describes capitalism as a “stratified society in which the accumulation of wealth fulfills two functions: the realization of prestige . . . and the expression of power.” The accumulation of capital is driven partly because it is the means for acquiring “preeminence and distinction” in society, and partly because it is the way in which “the dominant class expresses and renews its social control” (p. 53).
For Heilbroner, the “sublimation of the drive for power into the drive for capital” is not only what defines the nature of capitalism but it is also what shapes its logic. The logic of capitalism, its historical trajectory, displays a number of distinctive features that I shall summarize below.
Capitalism is inherently unstable. This results from the never-ending circuit of transformation of capital symbolized by the M-C-M’ formula. Money must be converted into commodities and commodities must be converted into money in a continuous spiral that has no logical end-point. Within this relentless circuit of transformation, the capitalist must seek “both the means and the motive to pursue an endless quest for aggrandizement.” This quest, according to Heilbroner, is “patently without rationality” and “perilously liable to bring psychological discontent” (p. 54).
In precapitalist societies, wealth is typically embodied in specific use-values, i.e., the worth of an object is judged according to its capacity to satisfy a particular human want or need. In contrast, capitalism reduces all forms of wealth to monetary terms, i.e., to exchange-values. Money becomes the common unit by which the value of an increasing number of goods and services is measured. As a result, a strict means-ends rationality comes to prevail over all other considerations, including sentimental and moral values. In precapitalist societies, the ownership of material wealth is ultimately limited by its sheer physical bulk; given the abstract nature of money, no such limits are believed to exist in the accumulation of capital.
Each capitalist must distribute some of his money to the public (employees, suppliers, etc.) in order to procure the materials and labor needed for transforming capital into commodities. Once the transformation has been accomplished, the capitalist must sell these commodities in order to win the money back from the public. But the money he spent in the process of manufacturing has now become part of a “common reservoir,” and there is no guarantee that the public will buy his products rather than those of a rival capitalist. This is because all capitalists have equal access to the common reservoir of money, i.e., to the purchasing power of the public at large. Consequently, capital is always “in a constant state of vulnerability as it passes through its never-ending circuits” of transformation (p. 56).
The process of “continuous dissolution and recapture” of capital exposes each capitalist “to the efforts of others to gain as much as possible of the public’s purchasing power,” making competition among the capitalists inevitable. This competition is “an element in the working of the system that directly stems from the nature of capital itself” (p. 57).
Because of the inevitable competition among capitalists, self-preservation becomes a significant motive that further intensifies the process of capital accumulation. Heilbroner points out that, among animals, the powerful instinct of “self-preservation is a response mobilized by a threat to existence,” while in the case of human societies “the threat is not that of death but of social diminution.” The strong urge to maintain one’s social and economic position provides an “additional stimulus” that “sharpens and intensifies” the energy that each capitalist must devote to the protection and accumulation of capital (p. 58).
The desire for self-preservation under conditions of intense competition requires from each capitalist “an unrelenting concentration on the successful recapture of capital-as-money from the hands of the public” (pp. 57–58). The need to survive in a cutthroat world is “the root of the acquisitive behavior of the business world” as well as “a necessary expression of the nature of capital itself.” According to Heilbroner, the acquisitive orientation has two aspects. The first refers to “the aggressive attitude of participants in the economic sphere with respect to money-making itself,” while the second has to do with “the encouragement given to protective maneuvers.” Regarding the former, Heilbroner writes that the constant need “to recapture capital from its dissolved form encourages — indeed, requires — an antagonistic stance toward the other participants in the marketplace.” This aggressive attitude is expressed, among other things, in the attempt to reduce, as much as possible, all “human contact” in business transactions, “in order to minimize the emotional entanglements that might interfere with the necessary stance of impersonal acquisitiveness.” Concerning the latter aspect of the acquisitive orientation, Heilbroner mentions “the use of all available means to gain a competitive advantage” over rival capitalists. The most effective way to gain such an advantage is through “the development of new modes of organizing the M-C-M’ circuit in its middle link,” i.e., by “changing the manner in which commodities are gathered or made” (p. 59). This imperative drives the need to increase the efficiency of the production process as well as to create entirely novel commodities or to re-design existing ones. Much of the technological progress of the modern era can therefore be seen as an outcome of “the M-C-M’ sequence itself” (p. 60).
Commodification of Life
In capitalist societies, a great deal of what is called “economic growth” actually results from the commodification of traditionally non-commercial goods and services. Capitalism expands internally, so to speak, as more and more elements of family or community life — activities such as cooking, cleaning, recreation, and childcare — are increasingly brought under the reign of capital.
The drive to expand is an integral part of the nature of capitalism; this is true not only of capitalism as a whole but also of its individual units, i.e., individual businesses. As the units of capitalism expand, they inevitably come into contact with each other, giving rise to friction and collision. Heilbroner writes that this “mutual encroachment of the M-C-M’ circuits” generates a “general magnetic pull” that exerts “disciplinary pressure” on both the capitalists and the workers. In the case of the capitalist class, Heilbroner mentions “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.” The capitalist cannot acquire money except through satisfying, in one way or another, “the needs or desires of the public” (p. 61–62). In other words, the capitalist must offer some sort of use-value to the customers, or they won’t buy his products. However, the capitalist is not interested in the production of use-value as an end itself, but only as a means for acquiring wealth. Yet, the capitalist has no choice but to “abide by socially imposed limits on the accumulation process.” At least according to the idealized textbook version, the capitalist is completely subordinated to market forces. “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” (p. 62).
How does the disciplinary pressure affect the worker class? Heilbroner contends that the “maximizing drive of capital” has a tendency to become “generalized throughout all strata of society.” Under capitalism, workers are forced to “survive in a market milieu where access to livelihood requires the acceptance of prevailing rates of pay.” In such a milieu, “the need to secure employment instills a competitive point of view with respect to earnings.” This leads the workers to exhibit the same kind of “maximizing behavior” as the capitalists, “both engaged in a struggle to gain access to society’s money-wealth and both constrained by the mutual encroachment of others in the same pursuit” (p. 63). It is interesting to note that the market basically forces both classes to behave in similar ways, despite the disparity in power. As soon as the wages rise beyond a certain level, “the lure of income as a means to the acquisition of prestige becomes a force for mobilizing workers” (p. 64).
Heilbroner identifies profit as the “life blood of capitalism.” This is so not only because profit is “the means by which individual capitals obtain their wherewithal for expansion” but also — and more importantly — because profit is “the manner in which the relation of domination is evidenced” (p. 76). The most significant way in which profit is generated under capitalism is through extraction of the “surplus derived from the activity of production.” The “key institution” that makes this extraction possible is wage labor, which is also the institution that most clearly “reflects the inequality of power at the core of capitalism.” Under capitalism, “workers are entirely free to enter or leave the work relationship as they wish” (p. 66). This creates an illusion of freedom. In order to remove this illusion, one only needs to notice the particular legal provision underlying the relationship between capital and labor that maintains its basic inequality, i.e., the assumption 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.” Under capitalism, the owner of the capital is the owner of the product, while those who contribute their time, skill, and energy in the production process have no right to claim ownership on the fruit of their labor. The wage relationship can therefore be seen as the “manner in which the domination of one class over another is invisibly introduced into the workings of the system” (p. 67). Heilbroner points out that this is an absolutely unique feature of capitalist social formations, since “no ancient society uses the wage labor relation as a principal means of gathering surplus” (p. 68).
How is profit generated through the domination of capital over labor? In this arrangement, it should be obvious that profit “can only come into being if the employer pays the laborer less than the value of the laborer’s product” (p. 60). In effect, “a surplus is seized from the working population for the benefit of a superior class” (p. 74). This feature of capitalism was well recognized by Adam Smith, David Ricardo, and John Stuart Mill, and was subsequently given particular emphasis by Karl Marx. For Heilbroner, it is perfectly clear that capitalism is based on a system of property rights, which is why profits — whether they are obtained through trading gains, exploited labor, or technological rent — are always “deemed to belong to the owners of capital, not to the owners of labor power” (p. 74).