The Truth about American Capitalism

The thoughts and ideas in this page are not original. Most of them have been borrowed from various writers and political commentators I have read, or speakers I have heard.

Also before you proceed. I would like to mention that if I do not think much of capitalism, I think even less of communism and not much of socialism (as it has been practiced in various countries). But merely because other systems have not worked, it does not mean we should not examine capitalism critically and look for other viable alternatives. If nothing else, we should at least recognize capitalism for what it is - a predatory economic system based on greed and selfishness, rather than think of it as God's gift to mankind as it is often made out to be.

Please mail any comments or criticisms to the email address at the bottom of this page. Criticisms especially will be greatly appreciated. This page will be updated in response.


The American Caste System

America society has historically been divided into the propertied class and the non-propertied class. With a little bit of luck, there was always the opportunity for a member of the non-propertied class to work hard and eventually join the other class and even retire comfortably his savings. When capitalists like Henry Ford realized that if he did not pay his workers enough to afford his cars, the market for his products would be very limited, this American dream became accessible to many more people. Recently, however this dream has evaporated. The competition from cheap labor abroad as well as the availability of a world wide market for American products, has made it all but impossible for the non-propertied to enter the propertied class. Blue collar workers who could formerly relatively easily buy a home and enter the propertied class will no longer be able to do so in the new economy. Those in the service industry and the working poor can not afford to even think about it.

The classes have become so separated by the work they do, the company they keep and the neighbourhoods they live in, that they more and more resemble a caste system - a caste system determined by birth and circumstance rather than any other merit or qualification.

This 'caste system' consists of six basic castes - four working castes and two non-working ones:

The first Non-working Caste
The Working Castes
  1. Those who work primarily with their hands [Unskilled manual workers] - minimum wage, service industry (most of these are barely making it) .
  2. Those who work primarily with their hands [Skilled manual workers] - blue collar workers, trades people etc (many of these are insecure and constantly worried that they may fall into 1)
  3. Those who work primarily with their heads [White collar, mental workers] - office workers, engineers, first line supervisors, journalists, teachers, academicians, other professionals etc (many are struggling to get into 4, shocked when they fall into 1).
  4. Those who work primarily with their mouths [Management, verbal workers] - managers (middle and upper), newspaper/magazine editors, politicians, independent business owners, self-employed lawyers and doctors etc. These often imagine that they rule the world without acknowledging (or even realizing) that they have been bought and paid for the other non-working caste.
The Second Non-working Caste

The caste you become a member of is primarily determined by the caste of your parents. Sometimes with luck and hard work, you can climb into a caste higher than your parents', but this is becoming more difficult everyday. By the time you are in your late twenties, your caste has been determined for life. Most of the mobility that exists after that is between castes three and four. Members of three are the only ones who can move up in the caste hierarchy within their own lifetimes. (Professional sportsmen, musicians and other performers are of course rare exceptions).

This possibility of upward movement, is the main reason that group three which consists of the intelligentsia of society, helping to form public opinion and initiating changes in society, remains loyal to the system. (The other reason is of course, that they may even be thrown out of the one they are in, as occurred in the McCarthy days.) They are busy trying hard to get into the managing group and dream of the wealth and prestige that they would acquire by moving into that apparent ruling class and eventually into the actual source of power which is that of the capitalists. This last dream is as realistic as the dream of a ghetto kid of becoming part of the NBA - it is possible but highly unlikely.

As for the other castes, the very things that would help them to move up - affirmative action, student loans, affordable colleges are constantly under attack, making the caste system ever more difficult to break out of. Instead there are things like school vouchers, regressive taxes (especially payroll taxes), crime and drug infested neighbourhoods that ensure that the next generation will remain in the same caste or fall even further if that is possible.

If you are reading this web page you are unlikely to be a capitalist. Capitalists get other people to read such stuff for them. You are probably in groups 1 through 4 and very likely in group 3.


Capitalism and Democracy

It is not clear when in history the confusion between capitalism and democracy started. It has been suggested by some that there was a deliberate decision after World War II to use terms like the 'free world', the 'free market', 'free enterprise' in order to imply that all these were synonymous with freedom and a democratically elected government. This has become so pervasive in the US that many people very likely think that a capitalistic state means a democratic one. If they don't believe that, they are at least led to think that capitalism is a prerequisite for democracy. The truth is that capitalism manages quite well (maybe even better) under non-democratic governments.

All that capitalists want is that the state allows them to invest their wealth where they please and retain the additional the wealth generated from the labor of others. Whether the labor force (which is really most of the population) has a voice in the affairs of the state is besides the point. Capitalists and fascists are very comfortable bedfellows. Also to say that capitalism is a prerequisite for democracy, assumes that the only alternatives are failed ones like communism or state socialism. Other alternatives like employee owned and controlled corporations receive scant consideration if any.


Capitalists and Entrepreneurs

Similar to the confusion about capitalism and democracy, is the myth that all capitalists (or at least most of them) are entrepreneurs - constantly starting new ventures, taking major risks, helping the economy to grow and generally raising the standard of everyone else. The truth is very few capitalists are entrepreneurs who start their own enterprises.

Most entrepreneurs are not very rich and usually start with just an idea and after sinking most of their savings in it, struggle to find funds from venture capitalists to make their idea into a business (in return handing these non-working partners a share in the new company). After the business becomes successful, the entrepreneur usually joins the ranks of the capitalists - any new ideas, products are usually those of his employees. His work hours are sometimes (not always) as long as before, but his income is disproportionate to his efforts and mostly from his equity in the company. If his former entrepreneurial spirit still exists, he may attempt to start another one with a fresh idea but usually prefers to expand his company by acquisitions. The capitalist is too comfortable to start a entirely new business, he would much rather acquire existing businesses or expand his business geographically or in similar fields (this principally through the efforts of his employees).

An excellent illustration is Steven Jobs. When he started Apple (in a garage), he was a entrepreneur not a capitalist. When he started Next Inc. with some of his wealth (mainly because he was removed from Apple), he tried a second time as entrepreneur/capitalist. However, when he bought Pixar(after Next failed to succeed) for ten million dollars (according to newspaper reports for 'a song'), he was being a pure capitalist. Most of the billion dollars he made when Pixar went public ( a several hundred percent profit), was 'unearned'.

The seasoned capitalist seldom puts all (or most of) his money in one risky venture. (The worker who risks the loss of a job when joining a new company is taking a far greater risk, since he has neither independent wealth to fall back on, nor the certainty of getting another job immediately, or even soon). The small business man who owns and operates a family run business is no capitalist, he is a worker like the rest of us, though he may be self-employed.


Capitalists and Altruists

The idea that the capitalist is really an altruist who makes his wealth available to society out of the sheer generosity of his heart, is so laughable that ordinarily it would not even need to be refuted. But this relatively new myth has been so successfully propagated by the minions of the capitalist that it needs to be mentioned. The only motive the capitalist has or has ever had was the accumulation of more capital and perhaps the exercise of power.

Capital knows no loyalties (local or national), the goal of all businesses is the making of the highest profits at the lowest cost to the owner (the cost to the consumer or to the state which may be providing a subsidy is never an object). The environment, the community, the health and safety of workers are only considered when it is required by government regulations.

Even the charitable foundations created or donations made, are for tax purposes or to create an image of a philanthropist after having ruthlessly destroyed or dominated a particular section of the society or some industry (as the foundations created by the Rockefeller family). Of course, some capitalists are decent human beings, but the system promotes the rise of the most 'ruthless, cunning, avaricious, self-seeking, lacking in sympathy and compassion'.


Capitalists and Stockholders

The argument often made today is that corporate stocks are so widely held today, especially by middle class Americans, that the owners of American corporations are really ordinary citizens. This argument is often used when a capital gains tax cut is proposed, implying that the main beneficiaries are not the rich and powerful.

Though it is true that ownership of stock is now very common among ordinary men, the control of corporations is still in the hands capitalists and their hired management. The individual small stockholder rarely has much say in the business operations of the corporation. Sometimes he owns the stock through a mutual fund company, in which case he does not even control his ownership of the stock. Often he is the last one to know about adverse financial news and the one who loses the most. In any case the income he derives from the stock is never his primary source of income. He would gladly give up his stock earnings for higher wages or a more secure job.

The idea that capitalism is these days really the domain of the common man is really a red herring put forth by the capitalist caste who take great pains to maintain a low profile. In any case this ownership of stocks is limited to groups 3 and 4 and rarely reaches the rest.


Capitalism and Imperialism

The less said about this the better, since it always ruffles many nationalistic (or, as they would have you believe, patriotic) feathers. Suffice to say that though there was imperialism before capitalism, it never reached the rapacious zeal with which capitalists, these days, devour the natural resources of the weaker nation, exploit its labor at subsistence (or below) wages, destroy its traditional industries or agriculture base and impoverish and decimate any indigenous peoples (if they are any left), all with the help of the U.S. government.


Employers and Employees

The relationship between employer and employees is really no better than has always been between lord/serf in a feudal society, master/slave in ancient times (or America in the last century) or landlord/tenant farmer in an agricultural society. That the conditions of employees (at least in the US) is better today than serfs and slaves is no thanks to capitalism. Those are merely hard won gains made due to establishment of democratic institutions, won through struggles by social activists, civil rights workers and labor unions. (A quick review of employees' conditions in some non-democratic capitalist states like Guatemala can tell the difference).

However, be that as it may, the very relationship of employer-employee or owner-worker is dehumanizing, undemocratic, even unnatural. It is difficult to understand how people, who so easily accept democracy and political freedom, a natural human right, as important and necessary in society at large, see no harm in the autocratic and dictatorial way corporations or even smaller businesses are run. The idea is that if the worker does not like the way he is treated, he can always leave and work someplace else. As if getting another equivalent or better job is that easy for most workers.

However many Japanese-style workers councils an employer sets up, the very imperatives of capitalism - to make the highest return on the employers investment, will never allow the relationship between employer and employee to be anything other than that of a owner to a machine, a profit producing resource. In this sense, it is even worse than that of a lord and his serf, where there was a relationship that may have lasted generations, a relationship not easily broken by a change in market conditions. The only new freedom the modern employee has, is to leave and choose another master if he can find one. That is the freedom, as they say, to starve.


Capitalism and Conspiracy Theories

Any talk of the true nature of capitalists and the economic and social system they promote, is often dismissed as a fanciful conspiracy theory. Even liberal thinkers scoff at the idea that the U.S. economy (and in turn the world economy) is run by a relatively small group of owners essentially for their own benefit rather than that of the population at large. The idea that this same group also controls many of the branches of government (including the national security apparatus - NSA, CIA, FBI, the Pentagon) is of course dismissed as ridiculous. Though there are many conspiracy theories that are quite hard to swallow, the capitalist caste not so much controls the government and economy from the outside, but that they are invariable in leadership positions in everyone of these institutions.

The capitalists did not all meet in a large dark room to come up with a strategy to control the world. However, they all come from a similar background with similar goals and ideologies. With the use of their money and the power that goes with it, they have successfully marginalized any opposing points of view and ensured that the people with these views not only are not allowed to gain any significant position within these institutions, but that their views are rarely (if ever) heard via any form of mass media.

Those who still have difficulty believing in the power and reach of capitalists without the existence of a national or international conspiracy should try thinking of some analogies - for instance there is no denying the existence of racism in this country, even though all racists are not part of a single conspiracy. The racists in the country did not all come together in some sinister,dark room. However, even if the racists have different individual targets (some hate Jews, other hate Arabs, many hate blacks), their outlook on life and how it should be is amazingly similar. Similarly, though capitalists may have different individual goals (those in the trucking business like low gas prices, those in the oil business like high ones), they are of a kindred spirit, and have pretty much the same idea of how the spoils of this world should be divided. Of course, just like organizations that cater to racists, there is no dearth of networking groups where members of the capitalist class can meet and discuss issues - the Business Council, the Committee for Economic Development, the Council on Foreign Relations, the Bilderberg Group, the Trilateral Commission to name a few.


Alternative to Capitalism

Whenever someone mentions an alternative to capitalism, Americans seem to only see communism with a party boss ruling an inefficient, sluggish workforce making unneeded low quality products, ready to send anyone who raises his head to some distant concentration camp. Regardless of whether this scenario was ever true in former communist Russia, this is hardly the only alternative that has ever been proposed. Systems like anarchism (this is really not as bad as it made out to be by both capitalists and communists) are rarely presented to ordinary people. Collectivism also does not automatically imply a totalitarian state with state ownership of all property. As mentioned before, lack of capitalism also need not lead to loss of democracy.

Any way, the last thing this country needs is another "ism" to compete with capitalism or the other well known "isms". Naming such a system invariably leads to the use of code-words etc to discredit it by vested interests in the status quo. It goes without saying, of course, that the principles of democracy (which, as stated before, are independent of capitalism) like free, fair and regular elections, freedom of expression and movement, right to private property etc etc should be preserved under any such system.

The simplest (may be even simplistic) way to see the difference between capitalism, communism and a better alternative would be to put it in the same terms in which communism (as the Marxist ideal rather than the Stalinist abomination) is usually thought of:

To achieve the first part we need to ensure the following:

To achieve the second part we need:

As can be seen the most important part of this is the idea of making the work-place a democratic one where all workers (including managers some of whom are often the hardest workers of all) participate in all aspects of the enterprise (especially financial ones).

This kind of 'corporate' structure does not mean a business run by committees of workers any more than democracy means a nation ruled by committees of lay citizens. Democracy in the work-place means 'management' is answerable to employees before anyone else (board of directors, major shareholders or any other absentee owners). To ensure this, employees need to be able to control compensation for management as well as change(demote) managers if a significant majority sees need for such a step. Managers will be appointed by upper management and be able to direct and discipline individual workers as before. However, workers as a group will now evaluate, reward or remove individual managers. Major decisions like sale of the business (change in the same absentee owners) should be decided directly by the employees (by referendum where the employees have an option to buy the business at a substantial discount).

All the above steps can be taken by passing appropriate legislation, but none of it can be successful without solidarity among the different types of workers. Solidarity between mental workers and manual workers has always been lacking in the US. Professional employees have been only too happy to benefit from the struggles of blue collar unions (like the 40 hour work-week, paid health insurance etc), but have always looked upon unionized labor with disdain and a sense of superiority. These mental workers (group 3) have to recognize that they are in same boat as the skilled manual workers (group 2) and need to work together to achieve common goals. Both groups of course, have to feel the same way about unskilled workers (group 4), the most neglected and unrepresented workers of all..

This does not really address the special problems of children, the elderly, the disabled and minorities. But only when the needs of the majority of the population (the work-force) are met in a fair and equitable fashion, will this majority be willing to consider the special needs of those even less fortunate.

For further discussion on this alternative please go here


Private Property and Public Property

.... still under construction...

Human Rights and Human Needs

.... still under construction...

Justice and Peace

.... still under construction...

Questions & Answers

Here are answers to a few of the comments I have received over the last few months regarding this web page:



Mail comments, criticisms to DGude

Date of first composition: January 27, 1996
Date of most recent revision: November 17, 1996

Copyright © 1996 by D. Gude. Permission is granted for use and reproduction of this and attached documents. Also see Copyleft.