CHAPTER 1

The System: Capitalism

History suggests that capitalism is a necessary conditionfor political freedom.

—Milton Friedman

There must be something rotten in the very core ofa social system which increases its wealth withoutdiminishing its misery.

—Karl Marx, New York Daily Tribune, 1859

There are forty million poor people here, and oneday we must ask the question, "Why are there fortymillion poor people in America?" And when you beginto ask that question, you are raising a question aboutthe economic system, about a broader distribution ofwealth. When you ask that question, you begin toquestion the capitalistic economy. And I'm simplysaying that more and more, we've got to begin to askquestions about the whole society ... And you see, myfriends, when you deal with this you begin to ask thequestion, "Who owns the oil?" You begin to ask thequestion, "Who owns the iron ore?" You begin to askthe question, "Why is it that people have to pay waterbills in a world that's two-thirds water?" These arewords that must be said.

—Martin Luther King Jr.

In 1948, when I was ten years old, exploring the streets of downtownOakland, California, I was shocked to see a man sprawled outfacedown on the sidewalk. The populace passed by him, not payingany attention. Now, many years later, the homeless are common inthe streets of Oakland as well as most of our major cities, and inthe Oakland hills, where the rich live, the new houses are gettingbigger. We have more homeless and bigger houses, and our prisonsare overflowing. What happened? I believe the answer to thesequestions and others that involve inequality can be found throughan understanding (that I call a class analysis) of our economic/socialsystem—capitalism.

Capitalism is the dominant economy in our world. It beganto develop in Europe in the late Middle Ages within the previousmode of production, feudalism: an agricultural structure where serfsprovided labor and military service to a lord in return for the use ofhis land. In the late Middle Ages, capitalism established a marketthrough the use of the very few workers who were not tied to theland as the serfs but who became tied through the wage system to thegrowing class of owners, called capitalists, who owned the factories,workplaces, and raw materials.

For the purpose of this book, I will reduce the numerousinterpretations of capitalism to two: the mainstream and the classanalysis. Although both perspectives describe the same system, theyfocus on different aspects of it, as you will see in the slight variationsof the following definitions. The mainstream approach looks atcapitalism from the top down, from the perspective of the winners:the owners, the bosses, and the heads of corporations who control themajority of wealth and power. This is the view that you are probablyfamiliar with since most of the institutions in our society—themedia, education, government, and business—promote it.

Class analysis looks at the capitalist system from the bottom up,from the perspective of the grass roots: of those who do the work,who are the poorest, and, at the same time, who are made invisibleby the capitalist-controlled institutions of society (the newspapers,media, corporations, and educational systems).

For example: The mainstream perspective doesn't look uponclass as a key feature of the capitalist system (other than includingworkers' wages in the costs of production). Look in any newspaperand check out the business section. Then look at the labor section.Oops, there is none! In contrast to the mainstream perspective, classanalysis sees class as fundamental, as the motor of capitalism, butthis perspective is only found in some alternative media.

The mainstream definition concentrates on the following: (1) privateownership and private decisions, (2) the competitive free markets,and (3) economics in the narrow sense—linking people with things(the focus is on products, profit, and growth). It is based on theassumptions that we are naturally competitive, greedy, and isolated.Most people who don't concern themselves with the way capitalismworks or who see the capitalist system as natural, implicitly agreewith this view of human nature. Do you? (Lots of people disagreewith this view of human nature, but they are forced to act dailyas isolated, competitive, greedy individuals in order to survivecapitalism.)

In their praise of capitalism, mainstream advocates argue thatit is the greatest arrangement for producing wealth. It has liftedmillions from the hopeless lives of peasants into the modern officebuildings and apartments of industrialized nations.

Mainstream advocates also argue that capitalism is based on theprotection of the individual's right to life, liberty, and the pursuitof happiness. Free markets are founded on the individual's right topursue a career, trade the products of his or her effort, and enjoy thewealth he or she has earned, without having to seek permission fromothers. Capitalism doesn't just make people wealthy; it affirms thefreedom of the individual.

The top-down view misses the experience of those on the bottom.While this view sings the praises of the freedom of the individual,it ignores the fact that a small minority (capitalists) benefits whilethe rest of humanity suffers from war, racism, sexism, starvation,poverty, ill health, pollution, ecological catastrophe, and so on.

The class analysis definition concentrates on the following:...