Rethinking Economics Geneva Workshops

Plan

1. Capitalism: debated definitions
   • What is capitalism for you ?
   • Standard definitions of capitalism
   • Conceptualizing capitalism
   • Liberal vs political capitalism
2. Analyzing capitalism
   • Marxist approaches
   • Comparative capitalism
   • Régulation approach
   • Post-Keynesian approaches

Standard definitions: mainstream macroeconomics

Followed by a definition of central planning and (of course) some normative views:

“Under central planning, production takes place in state-owned enterprises, and resources are allocated to different sectors according to the decisions of planning bureaucrats. There was no incentive for people to take the risk of introducing new products, services or methods of production since they would not reap the rewards if the venture was successful. The potential for large gains from innovation in a capitalist economy was absent in a planned economy. There was also no penalty for failure.” (Carlin and Soskice 2015, p.264)

A new Spirit ?

For Max Weber, (modern) capitalism is different from other economic systems because of:

1. The existence of a disciplined labour force, which is rationally organized and formally/legally free
2. A regularized investment of capital

• The existence and diffusion of capitalism was helped by the existence of a “protestant ethic” which favored behaviors benefiting a capitalistic system

A specific way to extract surplus value ?

Marx almost never used the word capitalism per se, but words such as “capitalist mode of production” or “capitalist production”.

• In marxian perspective, capitalism is a particular mode of production, defined as an economic system based on a specific way to extract surplus-value.

• What makes the capitalist mode of production “capitalism” is extraction of surplus value in the form of profit, with a separation between the workers, which are (in appearance) legally and formally free, from the means of production owned by another social group.

Régulation Theory

“There are two features of capitalism, which differ markedly from other modes of production. Firstly, the domination of a market relationship— to the point where a price is even fixed for non-commodities—contrasts with other modes of the distribution of wealth. Secondly and more importantly, the social relations of production are characterized by the capital–labor conflict. The proletarians with no access to capital are forced to sell their labor-power to “Mr. Moneybags”, the capitalist. Under the veil of an apparent exchange relationship (labor for wages) labor is actually exploited by capital, in the sense that the value created by the wage earners is greater than the value of the reproduction of their labor-power” Robert Boyer, Political Economy of Capitalisms (2022), p.38

Ernest Mandel’s view

In its introduction to Marx’s capital, Mandel gives a fair overview of what capitalism is about:

“Capitalism […] is a specific relation between wage-labour and capital, a social organization in which social labour is fragmented into firms independent of each other, which take independent decisions about investment, prices and forms of financing growth, which compete with each other for shares of markets and profits […] and which therefore buy and exploit wage-labour under specific economic conditions, compulsions and constraints” (p.58)

The “M-definition”

According to Hodgson, Marx’s definition of capitalism contains the following points:

The contribution of Schumpeter

According to Hodgson, the marxist definition omits an important point stressed by Schumpeter: the crucial role of money markets, finance and money which underlie capitalism

Hodgson thus adds a 6th point:

• A developed financial system with banking institutions, the widespread use of credit with property as collateral, and the selling of debt (Hodgson 2015, p.256)

Milanovic’s definition (2019)

“System where most production is carried out with privately owned means of production of production, capital hires legally free labor, and coordination is decentralized. […] Most investment decisions are made by private companies or individual entrepreneurs” (p.15)

3 Criteria, which have the advantage of being measurable (1) Most production carried privately; (2) capital hires legally free labor; (3) investment decisions are in majority decentralized and carried by entrepreneurs

From capitalism to capitalisms: concluding activity

• As a concluding activity, I propose that we read an interesting passage from Milanovic’s Capitalism, Alone (2019)

• Read pages 91-98 (Key features of political capitalism). Download the text here for the french version

• If you are fast, you can also have a look at the parts on liberal meritocratic capitalism

• What are the differences between political capitalism and the definition of capitalism we have seen ?

• What are the key features of political capitalism ?

• What do you think about this dual typology of capitalism (liberal meritocratic vs political capitalism) ?