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Is Capitalism “a Thing”?


Matthew Dimick (@mddimick) is Professor of Law at the University at Buffalo School of Law. 

In his recent blog post on LPE and legal theory, Sam Moyn identifies a number of questions about which the LPE movement has been, in his view, unreasonably coy. One way to respond to this charge is, of course, to deny that LPE needs settled answers to such questions. In this post, however, I will take a novel approach, which is to answer what I see as two of the most important questions he poses: “Is there such a thing as the ‘capitalism’ that we attack most consistently; if so, what is our theory of it?”

On this particular issue, Moyn himself has put forward one answer: there is not. According to Moyn, capitalism and the ills it is said to generate are nothing more than a contingent jumble of various legal rules and regulations. In fact, “capitalism” is merely a “term of abuse,” to which David Ricardo, Karl Marx, and other nineteenth-century thinkers attempted to attribute “general laws.” But, Moyn insists, there is no “natural law of capitalism” that generates inequality with “inexorable” necessity. Instead, “there are only legal and more broadly political arrangements in which inequality improves or — in our case — worsens.” As will become clear in what follows, I disagree with this assessment, and in articulating this disagreement, I hope to clarify whether, and in what sense, LPE needs a theory (or theories).

What is Capitalism?

For Karl Marx, capital is the present investment of money into commodities—labor power, raw material, capital goods—in order to generate more money in the future. Because the process begins and ends with the same thing—money—there is no point to it unless the advance of money produces an increase. Capital thus has no other purpose than the accumulation of more money. To be precise, we can say capitalism is a society subordinated to the process of capital accumulation.

If that sounds absurd, that’s because it is. When capital is understood as the ceaseless accumulation of money—full stop—the miseries it produces no longer look like random accidents. Capital is not “the market,” free or regulated. It is, in fact, the inversion of the market: the putative ends of the market, the satisfaction of human wants and needs, instead become a means to the end of accumulating capital. The satisfaction of needs happens as a by-product, only insofar as it meets the criterion of profit maximization. From that perspective, inequality, crisis, imperialism, environmental degradation, etc., are far more consistent with the logic of capital than conventionally understood.

Marx argued that the accumulation of capital causes these miseries. His explanation for inequality should sound familiar to contemporary ears. The compulsion to maximize profits leads firms to automate: to replace workers with productivity-increasing, cost-cutting, labor-saving machines, which reduce demand for labor, lower wages, and increase profits. The negative consequences of capital, such as inequality, are an important part of Marx’s critique. But it is just as important to understand the intrinsic absurdity of making society subordinate to the accumulation of money.

Marx’s conception of capitalism is historically specific—you could even say contingent. Capitalism is not a consequence of ineluctable laws of nature, human or otherwise, but a fortuitous convergence of a peculiar constellation of social relations and institutions. Most of human history has not been dominated by capital. Ruling classes of the past, such as roman patricians or medieval barons, had very different goals. They favored self-sufficiency over specialization, conspicuous consumption over delayed gratification. Roman slaves were provided for without market mediation in the household of the pater familias. Medieval serfs had direct access to their means of consumption, again unmediated by the market. All of these actors participated in the market, sometimes extensively, but as a means for further consumption, not for the end-goal of money; and participation in the market was not the universal obligation it is today.

Like the market, capital has always been around, but only in the interstices: medieval merchants who bought cheap and sold dear, or usurers who lent money on a promise of a greater return. The universalization of exchange, the separation of the producers from their means of subsistence, and the obligation that virtually all of production satisfy the profit criterion are novel and distinct features of modern society.

To get a further grip on what capital is, it can help to say what it is not. Capital is not saving. Saving is deferred consumption, but the capitalist continues to accumulate capital even after their wants have been more than satisfied and even as life’s hourglass runs out. Capitalism is not greed or material self-interest. Capitalists accumulate under compulsion from the market, however perfectly or imperfectly competitive. Firms that don’t accumulate go out of business, regardless of the motives or intents of their owners and managers. Capitalism is not economic inequality. Capitalism may be very good at generating inequality, but capitalism is not the only form of economic inequality.

Finally, capital is not understood in terms of a distinct bundle of “property rights.” Many CLS and LPE scholars have made hay out of the traditional Marxist conception of capitalism as the private ownership of the means of production. As Duncan Kennedy’s argument goes, for example, private property is just a “bundle of rights” with no stable “core.” There is, therefore, no such thing as capitalism; really-existing economies are just a “mushy continuum” between capitalist principles and non-capitalist ones. But Marx thinks no different; otherwise, something other than capitalism wouldn’t be possible. Depsite this post’s title, capital is not a thing in the sense of a physical, tangible object: as Marx wrote, “[C]apital is not a thing, it is a definite social relation of production pertaining to a particular historical social formation.”

This CLS/LPE insight expresses an important truth: property is social, conventional, variable. However, this same CLS/LPE insight turns into a liability when deployed as reductionism. The fact that “there is a multitude of ways to legally institutionalize a market,” as Moyn observes, does not show that legal institutions are the best way to understand the causal salience of capital accumulation. In fact, it proves just the opposite. Because, across these many different arrangements, money is still used to accumulate more money, capitalism cannot be understood merely as a set of legal institutions. It would be awkward, for example, to explain why capital accumulation leads to automation and thence to inequality only in terms of “legal arrangements.” Although much current law facilitates and even subsidizes such activity, some of these rules are inessential. Moreover, no particular law specifically forbids or requires it, and automation has occurred under a dazzlingly wide range of legal institutions, in vastly different times and places. To borrow an ugly phrase from the philosophy of science, capitalism is “multiply realizable” through a wide variety of legal institutions. The CLS rejection of capitalism is a classic case of conflating levels of abstraction. The legal constitution of capital is necessary but insufficient to understand how it works—or, more to the point, how it doesn’t work.

What Sort of Theory Is This?

Now that we have some conception of what capitalism is, what sort of theory of capitalism is it?

Against the common perception, as expressed by Moyn, Marx’s theory of capitalism is not one of “general laws,” at least not as that term is conventionally understood. “General Laws” are laws in that they identify effects following causes with empirical regularity, and they are general insofar as they privilege the universal over the particular: effects always follow causes, independent of time or place. Their universality appeals to their naturalness, as solid and unchanging facts, independent of human convention or institution.

General laws are curious things, though. Causes are always multiple. Some of these causes look more like conditions, such as the oxygen required for the match to start a fire. Yet, the distinction between conditions and causes is dubious; the oxygen is just as necessary for the fire as the match. Even the most ideal general laws, such as Newton’s laws of motion, only hold under certain specified conditions: they do not, for instance, apply to objects at very high speed or with very large mass. So, even general, natural laws have their contingency.

Likewise, even the most contingent, conventional explanations have some necessity. Social life would scarcely be possible without it. The presumption that legal rules are useful instruments of social change would be gravely misplaced if this wasn’t the case. We wouldn’t enact minimum wage legislation if we didn’t expect its enforcement, threatened or actual, to have any causal efficacy. So, even contingent, social laws have their necessity.

Marx is not committed to general laws in the naturalistic sense. Quite the opposite. For example, he reproaches the political economists for treating the long-term movement of wages as a “natural law of population.” He writes, “The law of capitalist accumulation, mystified by the economists into a supposed law of nature, in fact” expresses an inverse social relationship between profits and wages. He is clear that capitalism’s tendency toward inequality is—like any theoretical statement, high or low—necessarily abstract, and “is modified in its working by many circumstances.” Capitalism’s “laws” are only those tendencies that obtain under particular, historical circumstances. Marx does not understand economy or society as an accidental collection of individuals standing helpless before impersonal natural laws. He is more interested in showing why their impersonal—objective and lawlike—appearance is constantly confused with nature rather than seen as what they truly are, which is social and contingent. This view is profoundly skeptical of a mechanical and “scientistic” image of society, one to be managed by knowledge workers and technocrats.

The crisis of the 1970s and the ensuing neoliberal reaction shows why something more than legal institutions is necessary for social and legal analysis. If, as Moyn observes, “capitalism’s alleged law of necessarily increasing inequality was one made to be broken,” why haven’t we fixed inequality yet? Why does inequality still haunt us? Post-WWII politicians and their (then) new high-priests of social science, the economists, thought they had solved the problems of inequality and crisis. Why have they returned? Certainly, the rise of neoliberalism can be described in terms of “changes in legal ideology, legal rules, and legal outcomes,” all in the service of powerful economic interests. But if the “transition to the ‘neoliberal’ moment” is a story just about legal change, that would be a very poor explanation. It certainly is a story about shifting legal arrangements, but it is also about the ceaseless drive to accumulate money.

Beginning in the 1960s, the economies of the developed countries entered into a profound crisis, made more so as the previously reliable technocratic tools of Keynesianism faltered. At the center of this deep crisis, many have argued, was a crisis in profitability—a breakdown in the process of capital accumulation. In those crisis circumstances, one can be forgiven for thinking that a return to market ordering, a reduction in taxes, and a loosening of the administrative state were necessary answers to the malaise. Furthermore, one cannot describe neoliberalism’s ideological success as a simple matter of “legitimation,” unless you accept an astonishing amount of omniscience on the part of “the elite” and an equally unflattering amount of gullibility on the part of “the people.” Only with the lazy virtue of hindsight can we see that the neoliberal revolution was a boon only for those born with a silver spoon in their mouth. At the same time, I lack a legal technician’s confidence to say that dramatic and inequitable legal changes were not also necessary to restore the profitability required to revive the specifically capitalist economy of the 1970s in everyone’s interests. Such are the contradictions of capitalism.

I’m convinced this is a better way to understand our current predicament than the alternative. Moyn encourages us to eschew the detour of capitalism and view all economic arrangements as “only legal and more broadly political arrangements in which inequality improves or — in our case — worsens.” But why have such faith in the law’s efficacy to remedy (or exacerbate) inequality? Is it because we believe that humans, independent of place or time—as a general matter, as a law of nature—seek pleasure and avoid pain so that the announcement of legal rules backed by coercive sanctions can guide human behavior in predictable and felicitous ways? And why think that any form of economic organization can be expressed better in terms of “legal arrangements” rather than with concepts such as capital or capitalism? As we saw in Kennedy’s version, the decomposition of capitalism into allegedly more fundamental statements about legal rules obliterates any distinction between forms of economic organization. Like the claim about general laws of human behavior, the notion that economies anywhere, at any time, can be best expressed in terms of legal institutions is an astonishingly general claim. From this vantage point, it appears that Marx is the theorist of historical contingency, Moyn the theorist of “general laws.”

The Theory We Need

Whether Moyn actually sees himself as a theorist of general laws is not the point. He clearly stakes his claim to contingency and institutional detail. But I think that Moyn can only make that claim because his general theoretical priors are buried as unarticulated assumptions. And that is the point. Failing to make assumptions explicit is a guaranteed way to mistake that which is historically specific for something naturally universal.

There is a great deal of irony in Moyn’s position. By emphasizing legal contingency, Moyn ends up embracing what might be called “generalized economy.” He denies any degree of specificity to capitalism, observing that capitalism “only later acquir[ed] the aura of a stable entity or ‘system’ that could come into being or (its opponents hoped) pass away.” Marx’s whole point, in contrast, was to lay bare the differentia specifica of capitalism. To deny the existence of capitalism is therefore to naturalize the economy as fundamentally undifferentiated—if not as the timeless study of the allocation of scare resources or of how individuals make choices, to use two generalizing discourses of modern “economic science,” then as something as equally timeless as the legal institutionalization of economic practice.

Of course, one can still make different economic arrangements that can be meaningfully evaluated in terms of “better” and “worse”—in terms of economic inequality, for instance. But inequality is a general category, and can be used to describe an extraordinarily wide range of economies, the slavery of antiquity and the serfdom of medieval Europe just as much as contemporary capitalism. If Marx is right, by confusing capital with generalized economy, one is left, at best, with managing symptoms (inequality) rather than coming to grips with the disease itself (the accumulation of capital). The practical stakes are indeed significant. This undermines Moyn’s claim to be in favor of contingency, variability, and social change.

In the end, I therefore arrive near Ntina Tzouvala’s conclusion: one cannot not do theory. The choice between theory and pragmatism, or “high” theory and theoretical quietism, is a false one. The choice, in fact, is between the conscious articulation of our theoretical assumptions or their unconscious smuggling in as presumed facts of nature or general economy. It’s always better to avoid the latter danger.