The Twisted DNA of Capitalism: Introduction

Introducing a Three Part Series

A Mundane Conversation

I was recently privy to a conversation between two business owners. Good people. Good bosses to their employees. They were having dinner. A mundane conversation over appetizers.

The conversation included this transaction.

First person: I think I’m getting to the point where I have to fire someone. The last time I fired someone everyone else fell in line for quite some time. Now they are starting to slack.

Second person: What you should do is fire someone and write two more people up. That should get their attention.

This conversation wasn’t offered in a sinister way. There were no curly mustached villains wringing their bony hands waiting for the opportunity to cause pain and suffering in the world. These were two people, having dinner, discussing the goings-on of their lives, thinking that what they were talking about was a perfectly normal and natural conversation.

The sinister part is that they were right. In our society it is perfectly natural for bosses to bemoan the sloth of their employees. It is perfectly natural to immediately strategize coercive means to get those employees “back in line.” If asked, neither individual would even recognize that the theme of their conversation was coercive or malign in any way. It was business. They were talking about nothing more than standard management practice. How else can an employer get their employees to do what they want them to do without a little kick in the ass every once in a while?

Talking about firing an employee, not a specific employee, but a generalized employee, for the sake of reinforcing authority, however, is not natural. This is not an innate quality of humanity. Rather, it is the phenotype woven into the DNA of capitalism. Furthermore, this DNA is infused into the rest of our culture as capitalism has become foundational to how we understand not just our market, but humanity itself.

This conversation testifies to the fundamental conflict of capitalist interaction between the employer and the employed. Capitalism is about incentives. Responding to incentives is a human quality. Capitalism, however, twists the incentives in such a way as to make some kind of coercive structure necessary. In Marxist terms, capitalism generates an inherent conflict regardless of the moral qualities of its participants.

In a capitalist system, it is in the owner’s self-interest to demand maximum productivity from her workers while, at the same time, paying the workers the least she can get away with. That’s because the difference between the worker’s productivity and remuneration is the surplus value by which the employer makes a profit.

This surplus value also represents the level by which the employee is being exploited. Even without a background in Marxist analysis, the worker understands that it is in his best interest to do the least amount of work while at the same time demanding the most remuneration they can from the employer.

There. Automatically, the business owner and her employees are at odds. This conflict has nothing to do with the greed of the employer, the sloth of the employee, or any other deadly sin. The conflict is inherent in capitalism itself. A moral boss may pay her employees what she considers a fair wage, maybe even more than other such bosses pay, but she cannot pay her employees the real value of their labor. If she did, she would go out of business. Her employees may be above average workers, but not owning the business, and not able to control their market fate equates to a certain amount of alienation no matter how relatively well remunerated. Neither, no matter how well intentioned, can escape the exploitative nature of capitalism.

Furthermore, since capitalism and the rules of the capitalist market, are so insinuated into our culture, it is almost impossible to see such a conflict as anything other than just the inherent conflicts of human nature. It is in the nature of the boss to be greedy. It is in the nature of the worker to be slothful. In sociological terms, capitalism reifies this social construct as an inescapable aspect of human nature for which there is nothing one can do.

There may be substance to this argument. It may be that such a relationship is influenced by something elemental to the human nature of employers and employees. Human nature, however, is inextricably bound to its social circumstance. In other words, the best we can say is that this kind of relationship is perfectly natural…when in capitalist social arrangements. Other social arrangements may invoke greater alignment in natural responses.

A simple mental exercise will suffice as an illustration. Let’s say that the business owner and employer decided that she did not want a social relationship bound by the rules of hierarchical wage structures. Let’s say that when she “hired” someone to work for her business, instead of a wage or salary, the person she hired was brought on as a co-owner of the business. How does that change the incentive structure of the business and the nature of the boss/worker relationship?

Now, instead of a wage by which the employer and employee can only be at odds with each other, they both benefit from the gains of the business. It doesn’t have to be a fifty-fifty split. Regardless of the agreed upon ratio of benefit, as the business grows, as efficiencies improve, both the employer and the employee benefit. In such an arrangement, incentives are aligned. The employee is now rewarded for maximizing productivity, because that productivity translates into a higher return. The employee no longer has an incentive to, say, use too many paper towels (a common complaint among bosses is how much resources the employees use) because purchasing paper towels is now a cost for both the employee and the employer.

Such a system is called socialism [note 1].

And because it is socialism, it’s bad.

A common refrain that I hear from business owners when confronted with such a proposal and its obvious benefits is, “why would I do that? I started the business. I took the risk. Now you want me to share ownership with a total stranger? Why should he get to benefit like I do?”

Well, because it’s a more sensible, efficient and just system that benefits everybody. That’s why. By aligning interests and incentives and addressing worker alienation, this system resolves the innate conflicts and mitigates the costs associated with such dichotomies. Most immediately, when you fire someone to get everyone else in line, you lose that employee’s experience, training and potential. Training another is costly. More broadly, however, research suggests that coercion and even rewards is an ineffective way to maximize worker productivity.

The DNA of Capitalism: Dehumanized Rationalism, Slavery and Disease

This overheard conversation sparked a train of thought about how capitalism shapes our understanding of the world, of human relationships, beyond our market institutions. Capitalism is woven into our culture, from the way our society is constructed to the way we interact with our most intimate family and peers. We tend to see our social institutions and interactions in terms of exchange, returns, investments and, even more destructive, deserving and undeserving. How did this happen? How did a market innovation, with all of its flaws, become so integrated into our collective consciousness that two people can smile and contemplate life altering, dehumanizing coercion over salad and soup without so much as a second thought?

This train of thought brought me through some pretty dark historical neighborhoods. The journey turned out to be more complicated than a simple blog post [note 2]. So this post serves as the introduction to a three part series on the Mad Sociologist Blog that I’m calling The DNA of Capitalism. This series will explore the three core elements that are foundational to capitalism and, consequently, disproportionately influential in how those in capitalist societies understand their world. To do so, we’ll have to develop a historical narrative for how modern capitalism evolved. Where did it come from? Why did it succeed over other systems? How do the initial interactions that became modern capitalism shape its contemporary manifestation.

The first building block in the DNA of Capitalism is the foundation on which the other two rest–the axis of the molecule. It is Dehumanized Rationalism, or the singular pursuit of efficiencies regardless of the human costs. On this foundation are the two main supports in the superstructure of capitalism, the two walls of the double helix to extend the metaphor. Namely, capitalism depends on the supporting role of Slavery, and Disease to remain integrated. Each will be elaborated in their own post.

The goal is to understand how human interactions and social structures are distorted by Dehumanized Rationalism, Slavery, and Disease so we can see beyond the constraints of capitalism. As it stands, a great deal of political capital is expended in trying to identify the factors that ruin capitalism, that make it unjust. Our political discourse revolves around the assumption that capitalism is a sound system with some perfectly normal bugs that need to be worked out. We try to develop strategies to make capitalism more just, more ethical. We blame the greedy capitalists or the millionaires and billionaires. We come up with state supported schemes to redistribute the wealth more fairly, to provide for a social safety net. We try to find ways of mitigating the toxic elements of capitalism.

All of these approaches to humanizing capitalism are doomed to fail. The thesis of this series is that capitalism is, at its core, unjust. Even the most morally upright capitalist must submit to rationalism, slavery, and disease if she is to succeed as a capitalist. She can do no other. By the end of this series, this argument will be met. Those who benefit from capitalism, including most of you reading this post to some measure, benefit from this wicked triad. And make no mistake, for every beneficiary, there is a victim.

It is the intent of this exploration to look more closely at this triad and to make clear the twisted incentives of the DNA of Capitalism.

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NOTE 1: It’s difficult to point to any particular idea as being central to socialism. Socialism is an umbrella term that incorporates a number of critiques and proposed alternatives to capitalism. This thought experiment is derived some from syndicalism, but is mostly informed by Dr. Richard Wolff’s elaboration of the cooperative enterprise.

NOTE 2: My younger peers are always telling me that my posts are too long. Nobody is going to read a two-thousand word blog post. Well, I disagree, but I see this series as going a bit beyond even that. After all, the introduction is over fourteen hundred words. So I’m dividing it up.