CAPITALISM AND COMMUNISM
M.A.R. PHIRI
July, 2022
Definition of Capitalism
• “Capitalism” is conventionally defined along economic terms
such as the following:
• An economic system in which the means of production and
distribution are privately or corporately owned and development
is proportionate to the accumulation and reinvestment of profits
gained in a free market.
• Source: Dictionary.com
• This is an example of a definition by non-essentials – non-
political
Definition of Capitalism
• An essential of capitalism is a political definition:
• Capitalism is a social system based on the principle of
individual rights.
• Source: Capitalism.com
• In order to have an economic system in which “production and
distribution are privately or corporately owned”, you must have
individual rights and specifically property rights.
Key Features of a Capitalist
System
• Based on a consumer culture, a capitalist system is
characterized by consumers controlling supply and demand
through their purchasing power.
• Private ownership of land is the norm
• Private ownership of production resources (capital, labour, etc.)
• Free markets wherein buyers and sellers network
• Labourers having a right to seek their own interest, in other
words, a right to their own labour (Hence existence of Labour
Unions)
Key Features of a Capitalist
System
• In an ideal capitalist system, competition between
entrepreneurs and businesses imposes some regulation on the
economic system.
• Whether the capitalist system is advantageous to an individual
depends greatly on where in the hierarchy of the system the
individual stands.
• For example, business owners, investors, workers, and
consumers all benefit or suffer from the system in different
ways.
Advantages of Capitalism on the
Economic System
• It promotes individualism and innovations. Hard work is the
only way to advance, and as a result people are incentivized to
use their skills to earn a living rather than wait for someone to
provide for them.
• By placing this premium on hard work, a capitalist society is
also better equipped to handle competition from external
sources
• Markets work through bringing together buyers and sellers,
who through the guidance of supply and demand drive the
system to function efficiently. (Efficient allocation of scarce
resources)
Advantages of Capitalism on the
Economic System
• Because there is typically no guarantee of government support,
companies must adjust their supply to consumer demand,
which results in a more efficient economy.
• Capitalist system is better than any other alternatives. For
example, government controlled economies are often marked
by “corruption”, lack of incentives (and) poor information.
• Government only provides the policy or regulatory frameworks
within which businesses have to be carried out.
Disadvantages of Capitalism on the
Economic System
• Income inequality: Because the capitalist system
compensates people based on the work that they are able to
do, and does not give all work the same value, serious income
inequalities arise.
• Overproduction: How?
Capitalist economies tend to be more efficient, meaning that
greater number of goods are produced.
The income disparities means that a low-paid factory worker
can create many more goods than he or she would be able to
purchase
Disadvantages of Capitalism on
the Economic System
Additionally, because decisions on what to produce are made
based on profitability, items that are necessary but don’t make
money may not be produced in sufficient quantity.
• Lower Employment Rates: In a capitalist economy, there is
little drive to make sure that everyone has a job. Employment
is based on need and the contribution to the industry. This
worsens income inequalities
• No Guarantee of Welfare: Because business owners are
motivated by the desire to make money, it’s to their advantage
to ensure that their workers are paid as little as possible.
Disadvantages of Capitalism on
the Economic System
• There is little concern about meeting the basic needs of:
food, housing, health care and other necessities --- no
consideration for education, entertainment or luxury goods.
DEFINITION OF COMMUNISM
• It is an economic and social system in which all (or nearly all)
property and resources are collectively owned by a classless
society and not by individual citizens.
• Based on the 1848 publication, ‘Communist Manifesto’ by the
German political philosopher, Karl Marx (1818 – 1883), and his
close associate Friedrich Engels (1820 – 1895), it is envisaged
common ownership of all land and capital and withering away
of coercive power of the state.
• Karl Marx is known for this definition of communism. His
theories are known as Marxism and there is no one definition.
Marx believed that society should be structured on common
ownership and means of production
COMMUNISM
• In such a society, social relations were to be regulated on the
fairest of all principles: from each according to his ability, to
each according to his needs.
• Differences between manual and intellectual labour and
between rural and urban life were to disappear, opening up the
way for unlimited development of human potential.
• In view of the above, there has never been a truly communist
state although the Soviet Union of the past and China, Cuba,
and North Korea of today stake their claims.
• The basic idea of true communism was that no one person
owned anything.
COMMUNISM
• That everything belonged to everyone and everyone would
work for the good of all.
• Each person would do the job he was best at and everyone
would have the same food, clothes, shelter and such as
everyone else.
• Nominally everyone owns everything, but one group gets more
benefits because as leaders they have more needs.
• The soviets were Coercive Communists, but instead of people
sharing ownership, the ownership was placed in the hands of
the state, which consisted of the Party members (Communist)
COMMUNISM
• The people existed to serve the state and were not part of the
ownership except in name, as a fiction to keep them from
revolting.
• As a system of government and economy, it was a total failure
Union of Soviet Socialist Republic
The Political Philosophy of Adam
Smith:
ADVANTAGES OF COMMUNISM
• Communism offers a platform on which all policies that affect
the community are openly discussed and implemented fast.
• It provides equal opportunity. Since all the major factors of
production are controlled, everyone has an equal opportunity to
excel.
• Communism offers even distribution of wealth. Not one area
develops at the expense of other areas. This is attained through
a community’s participation where each member has a role to
play.
ADVANTAGES OF COMMUNISM
• Communism abolishes class system, offering each individual
a chance to be heard on any matter affecting a people. This
results in an open society where there is no any kind of
oppression.
• Independence. Communism affords all their independence.
No one is restricted from doing what he/she believes he/she
can do best. Everyone has the freedom to do what he/she
wants so long as the larger community is not negatively
affected.
DISADVANTAGES OF
COMMUNISM
• The most important disadvantage is that people don’t have an
incentive to work hard. If you know that you would only get a
specific amount of food, you would hardly try to work harder.
• The government owns all the businesses and properties (the
means of production).
• Consumers’ needs are not taken into consideration.
• Productivity and efficiency is difficult to achieve without profit
motive for workers.
Marx’s Class Theory
• According to Karl Marx, all history is the history of class conflict
• Different periods in the history of mankind are characterized by
an oppressed class seizing power and defeating an oppressor
class.
• When this happens, the previously oppressed becomes a new
oppressor, even as social relations undergo significant
changes.
• In Marx's understanding, a class is a social position that many
individuals have that defines both their labor and physical
subsistence.
Marx’s Class Theory
• Analysis of class divisions and struggles (conflict) is especially
important in developing an understanding of the nature of
capitalism.
• For Marx, classes are defined and structured by the relations
concerning:
Work and labour, and
Ownership or possession of property and means of production
• These economic factors more fully govern social relationships
in capitalism than they did in earlier societies.
Classes in Capitalism
• The main classes in capitalism are: bourgeoisie and the
proletariat.
• However, other classes such as landlords, petty bourgeoisie,
peasants and lumpen proletariat also exist,
• But these are not primary in terms of the dynamics of
capitalism.
Classes in Capitalism
A. Bourgeoisie:
• The bourgeoisie or capitalists are the owners of capital,
purchasing and exploiting labour power.
• This is done by using the surplus value from employment of
this labour power to accumulate or expand their capital.
• Or the bourgeoisie is defined by purchasing the labor of
others and using that purchased labor as a route for profit.
• In other words, the bourgeoisie are the owners of the means
of production used by labor.
Bourgeoisie cont’d:
• They own, for instance, factories and then pay workers to labor
there. The profits of that factory go to the owner of the factory
• It is the ownership of capital and its use to exploit labour and
expand capital that is key here.
• Being wealthy is, in itself, not sufficient to make one a capitalist
(e.g. managers in the state sector or landlords)
• What is necessary is the active role of using this wealth to
make it self-expansive through employment and exploitation of
labour.
B. Proletariat
• The proletariat are owners of labour power (ability to work), and
mere owners of labour power, with no other resources than the
ability to work with their hands, bodies and minds.
• Since these workers have no property, in order to survive and
obtain an income for themselves and their families, they must
find employment work for an employer (a capitalist)
• This means working for a capitalist-employer in an exploitative
social relationship.
• This exploitative work relationship recreates or reproduces itself
continually.
Proletariat Cont’d
• If the capitalist-employer is to make profits and accumulate
capital, wages must be kept low.
• This means that the proletariat is exploited, with the surplus
time (above that required for creating subsistence) worked by
the worker creating surplus products.
• While the worker produces, the products created by this labour
are taken and sold by the capitalist – thus producing surplus
value or profit for the capitalist but poverty for the workers.
• This happens each day of labour processes, preventing
workers from gaining ownership of property and recreating the
conditions for further exploitation.
Class Conflict
• While the relationship between workers and capitalists, or
between labour and capital may appear to be no more than
an economic relationship of equals meeting equals in the
labour market, Marx shows how it is an exploitative social
relationship.
• Not only is it exploitative, it is contradictory, with the interests
of the two partners in relationship being directly opposed to
each other.
• Although at the same time, the two opposed interests are also
partners in the sense that both capital and labour are required
in production and an exploitative relationship means an
exploiter and someone being exploited.
Class Conflict Cont’d
• This relationship is further contradictory in that it is not just two
sets of interests, but there is no resolution of the capital-labour
contradiction within the organization of capitalism as a system.
• The contradictory relationship has class conflict built into it, and
leads to periodic bursts of strikes, crises, political struggles, and
ultimately to the overthrow of bourgeois rule by the proletariat.
• Class conflict of this sort results in historical change and is the
motive force in the history of capitalism.
