Worldbuilding 202: Capitalism
Greetings everyone! Once again it is time for your favourite Limax, Vivian!, to babble about stuff. This one has been requested by my dear friend Anne. She asked, and I paraphrase, “What the fuck is capitalism!?”, so here I will discuss it!
What is capitalism?
The quickest way I can answer it to her is with this sentence:
Capitalism is when the means of production of an economy is generally owned by private entities unrelated to the government.
Notice however it does not say anything about supply and demand, market prices or anything. It only addresses who OWNS the means of production.
Is capitalism the same as a free market economy?
These terms are often used interchangeably, but when it comes to strict meanings, they are very different. They fundamentally address two different things. When it comes to economics, you have two sides. The consumers that desire things with infinite want, and the producers that make things with finite resources. Check out my post Fictional Economies for details! The words ”free market” and “capitalism” address the different parts of this relationship within an economy.
Free market addresses the consumer side and is when the desires of the consumers is what dictates prices and what incentives producers have to produce. Capitalism is on the producer side and addresses WHO owns the means of production. If you listen carefully as the moon rises during the night, you can hear an Anne shout, “Seize the means of production!” (Anne: Vive la révolution!) In Capitalism, the means of production are owned by private non-state entities.
What is a free market economy?
As I discussed in my previous post that I linked above, and unlike Anne I will not repeatedly link to, There are a few questions to be solved for an economy, namely:
What to produce?
How much of it to produce?
And free market is a way to answer these questions.
Supply and demand
You have this market, which is a collection of people making individual choices on what to buy using some form of currency, and the sum total of all these small interactions will say a lot about what the market as a collective thinks should be produced. This is the demand side of supply and demand. But there is an infinite want, and not everything can be produced in the same amount.
This is because there are only so many resources you can pull out from the ground. Only so much that can be produced from said resources, and so on at every step until you reach the end products. If the entire economy has only 1 million tonnes of steel to work with, then only 1 million tonnes can be used, and all industries have to somehow decide how to allocate all the steel. This limiting factor in production is the “supply” side.
By observing what the end market wants, the middle steps of production can determine if industries should buy more of the limited resources or if they should buy less, thus they too become part of the market and affect the supplies further back. This is a multilayered process, and all the steps signal to each other if the relevant industries should ramp up production, lower production, is it worth doing it, and so on.
Command economies are, as I stated in my article, the opposite. There is a central authority that dictates how much of everything should be produced at each and every step. Even if it is as simple as “produce this much on this list of things, everything required for it is approved as well.”, which would be the best way to do a command economy but… people never learn.
How can this be combined with different systems?
Capitalism is essentially the system today, and socialism in any meaningful manner is out of fashion. Which I argue in my previous post is because they are often conflated with additional things, namely capitalism with free market vs socialism with command economy.
Historically, if we look through things, Nazi Germany was extremely anti-socialism and anti-communism, but to say they were a free market would be insane. They were a capitalistic command economy. The state decided most of the productions, and the private companies had to figure out how to meet the goals. We also have China today where they are a proclaimed communist state, but in reality, they are capitalistic and free market like everyone else.
Syndicalism was an almost-example of free market and socialism. They generally wanted to have means of production owned by workers of the place, but let the rest be decided by the market. It however quickly lost appeal when communism won in the USSR and socialism became a boogie word.
So to all American readers… SOCIALISM! 👻
Capitalism basics
Money is flowing! It is the roaring 1600s, and the wheels of economy and investment must spin! Capitalism is finally arising and is becoming the de facto standard; what does it all mean?
Bourgeoisie
The rise of the bourgeoisie is a fact now! But what are they? They are the middle class that is starting to accumulate more and more wealth. I use “middle class” here because by our modern standards, the money they possessed early on is not that much. But the thing is that due to the opportunities that these new amounts of money present to them, they start to accumulate more and more money through investments which generally becomes quite fashionable.
Means of production
With these new wealths, new ways to produce things are becoming a thing. This is because not only has technology marched forward, but the new class of bourgeoisies has money to take risks. Before this class of people, only the state had enough resources to take chances at crazy people’s claims about new devices and technology. And they were generally less interested in anything that didn’t benefit the state.
But not the bourgeoisie! They want money and are ready to take chances, and this means new machines, and all these machines can produce things. These machines, tools, or anything you use to produce are the so-called “means of production” that this entire section is about. And in the early era of capitalism, they were always owned by the bourgeoisies. These means of production are also very lucrative as more machines and means of production are invented, meaning everything increases in production. The astute of you might already now start smelling a problem that will grow; we’ll get there.
Impact on society
There are many ways this privatisation of the means of production will impact society. A big one is that the power which used to reside with nobility-like classes, or even with the people in the early democracies, starts shifting toward the emerging and growing bourgeoisie class. The state and nobilities will have to go to them to get things produced, and this can severely disrupt power structures. Many nobles took out personal loans from the bourgeoisie as that is where the money came to be. And a nobleman owing you money is one you can easily manipulate using the loan as leverage.
As this is happening, urbanisation is starting to increase. Only slightly at first, but as more industrial machines are made and production increases, more people are needed for jobs, and when the machines come to agriculture, this will speed up even more. The centuries old tradition of most needing to work the land is disrupted, and jobs are in the cities now, increasing urbanisation even more. This huge influx of people and the bourgeoisie controlling essentially all meaningful jobs means there is a huge discrepancy in power between workers and bourgeoisie. That smell is really starting to stink now. (Anne: Revolution? 🤞) NOT YET!
One thing that many may not know is that in these early stages, the general person's relationship with the government may change very little. They had no real relation other than a tax man coming occasionally, and this changes very little, even if the bourgeoisie’s relationship to the state is starting to significantly change.
What combinations can there be?
So we have discussed what it is and how it historically affects things. How can we combine capitalism in more interesting ways than just the free market? Can we even? Well, anyone who knows me knows the answer is, yes!
Capitalism and economy type
Remember the job of an economy? It is to solve the problem of infinite wants and finite resources. Capitalism answers the question of “Who does the producing?”, but there are other questions that needs to be answered:
How is the production distributed to the people?
Which producers will be allowed?
What decides what is produced and the quantity?
How do we bridge the distances between those who receive and the production spot?
…just to name a few. Depending on how you answer these, you get different economies. Mercantilism, for example, answers the question of “who may produce” slightly differently. Capitalism is anyone who is private may own means of production; mercantilism says “Anyone may produce, as long as they are domestic”. So here you have a capitalism that focuses on domestic production. So you can really mix and match here. Maybe only the state is allowed to transport, but capitalism is still around for the actual production. You can have command economies, where the answer to who decides what is produced and quantity is “the state”, but then divide it up to the capitalists.
Capitalism and socialism
Remember from my economics post? Socialism is not a command economy! It can be, but it isn’t! Socialism is only that the workers own the means of production. Not a bourgeoisie class of people who have never worked a single day in their life! So naturally, you cannot have these at the same time because they are different answers to the same questions. In the making of an economic system, you can have any combination that has answers to different questions, but not different answers to the same question. (Anne: …no revolution?) Baps nose
Capitalism and various government structures
As I spoke about in my Government post, government structures are ways to order society and how to do things collectively. Economics is how to divide up researchers and answer the questions above. Some kinds of governments are more prone to different forms of economies, but capitalism can work with essentially any form of government that doesn’t advocate non-private ownership of the means of production. I have it with most of my governments for this reason.
When capitalism goes bad
Capitalism has given us so much! So what are the bad parts? As I have told you a few times, the ones that pay attention to details would have picked up on the issues. So here they are!
Unrestricted Capitalism
It essentially boils down to this: when capitalism is entirely unrestricted, and there is nothing to rein it in. For example, remember the power imbalance between workers and the bourgeoisie? When the workers have little to no power and are as easily replaced as a cog in a machine, what incentive do capitalists and bourgeoisie have to deal with safety? It sounds like a you-problem if it happens! Keep working or you’re replaced! So a more powerful entity has to step in and help the workers… I wonder what… Oh well! (Anne: Clearly you’re referring to revolution here! Wait, you’re not?) Not yet!
Another issue that starts to occur, and I am certain many see today also, is that money breeds money. The more money the bourgeoisie has, the more they can get, and they start buying out all competition. If they are a monopoly, they rule the supply and can demand anything they want! Muhahahaha! And remember what I said before about free markets? That is not a good thing if you are trying to have a free market! If it is more of a command economy, this is probably not an issue.
These are some of the issues that can arise without restrictions on capitalists and economic forces related to them. An additional issue that arises is that if money can influence those in power, especially in democratic nations, this is a self-perpetuating thing. The more the bourgeoisie gets in terms of money, the more power they get in politics, the more they can tear down any protections the state gives, which gives them more money, and the wheel is spinning down the drain. There are some current examples of this that I won’t go into, but someone somewhere there keeps wanting a revolution…
This however does not mean capitalism is inherently bad, only that it needs to reigned in hard. An example of where it works in the world are the Nordic countries. They have strong worker protections, strong anti-trust laws, strong laws that prevent corruption, and more. In Sweden, for example, there is always some poor miserable sod’s job at all the newspapers, news channels, all news related, to sit and go through all taxes, all transactions, everything, related to political parties, politicians themselves, and so on (within certain limits as to not violate certain privacy laws). All this data is public record, and they go through this just to see if there is any discrepancy, and if there is… I wouldn’t want to be that politician, but that miserable sod just got the score of his journalistic career.
Speculative Unrestricted Capitalism
So you want to make a bad example of capitalism. Well, use the things I have hinted at above.
Bourgeoisie use their money to manipulate whatever government is in charge
There are little to no worker’s rights
Include them clearly busting any attempts at unions
Great monopolies in a single section of the market
Vertical integration, meaning the company owns all supplies that the final product also depends on
These will drive home that capitalism is running rampant (Anne: And thus the revolution is finally born!). These are quite common in the cyberpunk genre… probably just a coincidence!
Summa Summarum
I hope in all of this, I have hammered in what capitalism is, and that it is distinct from the free market. They are not one and the same! Capitalism is a natural development in a society’s evolution through time. It has played a major role in the development of technology and progress. Without it, the human Industrial Revolution would likely never have happened. It is, however, not perfect, but which system is? If you want to do the good version, you have seen what is needed; if you want to do bad, or evolution toward it, you have that here, too.
With that, I bid you all adieu, imma go and take cover now. Anne, you may now go at it. 🫣
(Anne: Finally! VIVE LA RÉVOLUTION!)
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