On the irrationality of modern capitalism

Many on the left still seem to be trapped in the strange concept of ?human nature? as something solid, rigid and fixed. And to justify this ? rather having little to do with science ? approach they claim that in fact, ?human nature? is predisposed for socialism which many aspects of today?s capitalist decay show. Such a reasoning can only be described as utopian.


No matter what social and economic transformation in history we take it has never been based on any kind of shifts in human nature, but on conditions around the people, that is around the ?humans? and their ?nature?. And no matter how important the latter is it can hardly have any priority before the first. What we should be looking for is not socialist traits in human nature but processes within capitalism that exhaust its possibilities and render existing relations among human beings obsolete.

A social system is in essence a set of relationships among human beings. More precisely, power relationships. Ownership of capital is important not so much because it provides its owners a disproportionate amount of goods, but because it enables them to exert power over the non­owners, ?the proletariat? as classical Marxism calls them.

This is why

the question of ownership of the means of production

is probably the most important issue in revolutionary, socialist politics. In fact capitalism has developed probably all the tools and methods for social production within the existing forms and structures of business. Any large enterprise worth its name, has moved beyond the control of its owners; it is run by managers who plan its activities in much the same way that a business in a socialist society would be run.

The crucial difference lies in the objectives these managers try to achieve. In a capitalist context, they seek to maximize profits for the owners (although even this is being blurred as companies grow to monstrous proportions). In a socialist society these same managers could work as efficiently with different objectives: optimize the provision of goods required by society. They would use the same theoretical tools, the same methods but in a different context. They would probably be even more efficient since there will be no conflict between production of goods and production of profit.

Here are some examples of this conflict, of the

irrationality of today?s capitalism.

In the pre-war years an oligopoly was already developing in the light bulb manufacturing industry. An agreement between the manufacturing companies secured high prices and production levels. At one stage one of the companies put to the market a light bulb that features double the lifespan of the usual bulbs. Philips promptly complained that such an action would decrease sales to the detriment of all the producers. What was ?profitable? for the company was manifestly wasteful for society.

The next case I want to mention is the case of Panadol. Its success was assured by an aggressive advertising campaign whose costs raised the selling price to a few dollars while the production cost was not more than a few cents. Of course generic products of the same nature were not allowed to be produced for years, meaning that people were forced to buy the product at a price of a hundred or so times more than they needed to. This is still the case for most of today?s medicines. Their exorbitant prices are not in correspondence with their production costs, they are expensive simply because, under capitalism, the pharmaceutical companies have to recoup their research costs, thus denying the world of life saving cheap medicines in order to make profits.

A similar picture is seen in the music industry. As piracy has shown, one could have best quality music, films or software for the price of a blank CD or DVD. The inability of capitalism to provide a rational way of distributing music while at the same time securing the rights of artists and, most importantly, record companies, has led the producers of CD and DVD players to spend years of research, costing billions of dollars, to introduce technology in their gadgets that prevents copying discs. Most of this technology reduces at the same time the quality of music. The only thing they succeeded was to push piracy to the internet and the development of the new technology of MP3s, more or less destroying the traditional music industry based on CD and DVDs. The piracy war is now raging on the Internet with no solution on the horizon.

Another scandal is to be found in the software industry. Having cheap software for everybody is the easiest thing these days. Today?s companies have to buy software costing thousands of euros, and some of them have to buy this software several times over, when they could get it for free. Again, it is the basic research cost that has to be recouped that drives up the price. Consequently, huge amounts of money are spent on research to combat piracy, further reducing the overall efficiency of the capitalist mode of production.

The good old slogan of nationalizing the commanding heights of the economy is a very potent one and can still serve us well.

The point I am trying to make is that

we don?t have to invent the wheel again.

All these structures are there for the taking. The basic issue remains the taking over of ownership of the means of production. By changing owners, all these companies can switch from producing for the sake of profit to producing for the sake of the common good. A change in ownership inverts the power relationships, makes planning possible. Planning not in the sense of detailed directives on every aspect of production, but planning of a general nature that directs production towards the real needs of society. The good old slogan of nationalizing the commanding heights of the economy is a very potent one and can still serve us well. The problem with it was that it became stylized, it was used as a ritualistic chant rather than as a vibrant and living demand, adjusted and streamlined for specific needs of specific times.


P.S. In this context, it is worth narrating another weird story of modern capitalism. The unification of Germany was in fact a takeover of East Germany by the West. The totality of West German laws and market practices were imposed overnight in a society run by central planning. One of the first tasks the new rulers had to perform was the break-up of the huge public enterprises. Most of them were old, with obsolete machinery and technology and all they did was to bankrupt them and provide the money to close them down. In the energy sector, however, they were faced with a different problem. Under the central planning of the old state production and distribution of electricity were managed separately, with the national grid joined at various points to the wider grid of Eastern Europe. This contrasted with the West German practice of integrated production and distribution under common management. The West German model was, of course, imposed. Some twenty years later, western thinking on production and distribution of electricity changed. The new realities of the diversification of energy sources, of trans-national grids and all European integration of energy distribution led to the separation of production from distribution of electricity. Despite the fact that this separation was imposed as part of the privatization of electricity in most countries, it was perfectly in line with the central planning philosophy of the old East German state.

Themistokles DEMETRIOU

8 thoughts on “On the irrationality of modern capitalism”

  1. I want to clarify my position on human nature and on peer-production. I agree with Themos that human nature is not solid or fixed. It is closely linked to the culture and class structure of the society one lives in. The point I wanted to make is that peer-production contradicts the capitalist view of human nature, which is solid, rigid and fixed.

    One of the cornerstones of classical liberal economics is the so-called homo economicus: man is selfish and thinks rational in order to obtain the maximum results with the minimum of efforts. Economists see capitalism as a natural system that correspondents with human nature. Communism is marvelous in theory, but it doesn’t work in practice because of human nature. Men are lazy and need institutions to socialize and laws, rules and repression to behave.

    This view has off course been contradicted many times by socialist theory and practices of human collaboration and solidarity, but with the development of peer-production under capitalism, there is something new going on, which couldn?t have been analyzed 20 years ago because it did not exist! There is a proto-mode of production developing under capitalism that is based on collaboration, not on completion, and which is more productive than the capitalist mode of production (or production under a planned economy for that matter).

    To quote Michel Bauwens on this issue:

    The emergence of distributed networks, defined by capacity of agents to freely determine their actions and relations, and of the internet and the social web in particular, have created a new set of technological affordances creating a broad range of open knowledge and open design communities functioning according to a ?peer to peer? social logic. These communities have set in motion a new set of social processes for the creation of value, which we could summarize as peer production (the ability to produce in common), peer governance (the capacity to self- organize) and peer property (the capacity to make common production universally available). The social web has created the possibility to create complex social services, and ?productive systems?, through the global coordination and scaling of small group processes of mass participation, moving them from the periphery of social life to its very center.

    So, what peer production of software code (Linux), knowledge (Wikipedia) and design (WikiSpeed) shows, is not that humans are predestined for socialism, but that the capitalist view of human nature — based on the selfish homo economicus — is wrong. But this is not the main point. The main point is that peer-production is hyper productive because it is passionate production, based on intrinsic motivation. It has all the potential to become the mode of production of a post-capitalist (or socialist) society. On this issue, I think that it might be better to change our vocabulary, because socialist jargon can be a turn-off for many young (knowledge) workers, especially in Eastern Europe.

    In peer-production, people contribute to a commons not because they are getting paid, but because they like to do it, they want to solve a problem, and they want to contribute to the community or to society in general. But they can also have selfish reasons: perhaps they just want to show off, or want to become famous or use their contributions to the commons as a sort of ?portfolio? to get a better job in the private sector. It does not matter. What matters is that they contribute to a commons that is beneficial for all.

    I think that the question of peer-production and the commons is crucial to understand what?s going on today and how society can be reorganised following this new paradigm. There are tons of material on this subject on the website of the P2P Foundation http://p2pfoundation.net

    There is also an interesting debate on P2P on the website of Z-magazine, between Michel Bauwens and Michael Albert (Parecon). I strongly recommend reading it because I think it clarifies a lot.


  2. Jean’s reply clarifies for one that he does not base his argument on a ‘socialist’ human nature and sees peer production as a negation of capitalist assertions that ‘human nature’ is custom made for capitalism. I have no quarrel with that. What I am more skeptical about is whether peer production will be the dominant paradigm of communist production.

    Peer production is social production that has arisen within capitalism and no doubt has the potential of continuing in a socialist society. It is not however the only kind of social production that exist in capitalism: every capitalist enterprise is based on social production in the sense that people cooperate to produce. The social nature of production comes of course into conflict with the private appropriation of the product – something that doesn’t happen in Linux or Wikipedia. Thus, we have on the one hand 99.99% of production based on the capitalist mode and a tiny minority on peer production. It is highly unlikely that peer production would spread to other spheres fast enough to transform capitalism into socialism. A revolution that would resolve the contradiction by removing private appropriation is needed.

    The other issue that I feel uncomfortable with Jean’s reply is his proposal ‘that it might be better to change our vocabulary, because socialist jargon can be a turn-off for many young (knowledge) workers, especially in Eastern Europe’.
    Changing a ‘vocabulary’ is ok as long as we are not alienating ourselves from the classic texts and previous theoretical work. It is true that we should get rid of the stilted language that plagued revolutionaries for the past fifty or so years and use simple language instead of parroting Marx, Engels, Lenin or Trotsky. This however need not abandon either the concepts or the methods that can still be used to explain the workings of our society and offer guidance for our actions. Such a language need not be a ‘turn-off’ for anybody provided it has something relevant to say and is not a rehash of cliches and prophesies of doom.

    Themistokles Demetriou

  3. “Thus, we have on the one hand 99.99% of production based on the capitalist mode and a tiny minority on peer production.”

    I am very curious where this figure comes from…

    • Just a guess… it doesn’t matter if it is 99.99% or 99% or 90%. The argument still stands.


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