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ESSENCE OF CAPITALISM
origins of our future
This sprawl of household
commodities was supported by so many white goods and electrical gadgets
that by the 1950s ‘the average American home’ was pictured ‘as a
the time, English novelist and social critic, J. B. Priestley, coined
‘Admass’ as his short-hand for:
Essence of Capitalism sorts through
Priestley’s tumble of causes and effects to connect the transformation
of everyday life with the concentration of control and the expansion of
The stories told
throughout The Essence of Capitalism
are also the origins of our future which we must make in circumstances not
entirely of our choosing. Monopolisers and marketeers limit our options.
We cannot wish ourselves back to the era of corner stores. Many processes
of capital accumulation are irreversible. Moreover, capital must go on
expanding in order to survive, which is why its sustainable development is
antipathetic to every ecological equilibrium.
The captains of industry
have more choices than their employees but even the most powerful
executives retain their power only when their decisions coincide with the
logic of capital growth. That condition overrides any good intent. A
Coca-Cola lawyer, who was also a Papal Knight, wrote to The Company’s
chairman about a mutual acquaintance whose death bed he had visited:
That dying friend knew
what kept a man a capitalist. So did the international currency speculator
George Soros when he observed early in 1999 that:
Had Soros behaved
otherwise, his fortunes would have been taken from him by capitalists who
had not tired of ‘the restless never-ending process of profit-making’.
Nestle chief, Helmut Maucher, underscored the point: ‘I am not against
culture and ethics but we cannot live on that’.
Instead, every firm feeds on three kinds of expropriation: of natural
resources; of the values added by physical and mental effort to those raw
materials and to the products made from them; and by besting rival
corporations engaged in the other two.
essence of capitalism offers a short history
of the long twentieth century, from the 1870s to the present, as a
precondition for understanding the world we face. By setting out the
structures of monopolising capitals, the book’s thematic analysis
provides a means to comprehend the dynamics concealed by the blizzard of
scraps called ‘the news’. The economic anthropologist, Karl Polanyi,
described the victory of the market over society in the middle of the
nineteenth century as the great transformation, the title of his 1944
masterwork. The processes set in motion by that upheaval provided the
foundations for a second great transformation beginning in the 1870s. The
contrasts are clear: war moved from occasional eruption to perpetual
dynamic; a few corporations marginalised the multitude of family
businesses; the state and corporations brought an end to the first episode
of free-trade; the visible hand of marketeers sidelined price competition
as the sales effort burgeoned; and consumer sovereignty was redefined to
match the needs of capital. Surpluses replaced scarcity for many in the
First World while starvation supplanted sufficiency through swathes of the
More of the world’s
population and resources became subject to the corporatised market: ‘the
control of the economic system by the market’, Polanyi stressed ‘means
no less than the running of society as an adjunct to the market. Instead
of economy being embedded in social relations, social relations are
embedded in the economic system’.
Whereas the Emperor’s writ once stopped at the village gate, most of
what goes on in society today is related to the expansion of capital.
Businesses have taken over the replenishment of our capacity to labour
through their provision of food, drink and leisure, offering KFC in place
of pot-roast chicken, Sprite not home-made lemonade, videos instead of
transformation had been led by English experiences of science-based
farming and the factory system, powered by water, horses and steam, and
financed through the joint-stock company. The second wave since the 1870s
has been carried forward by the American System of mass manufacturing,
organised through oligopolies and excited by the merger of advertising
The essence of
capitalism is capital’s need to expand. That drive exists because of the
relationships between competing capitals and between capital and labour.
To survive against those two pressures, each firm must reduce the unit
cost of production, which leads to producing ever more. Because the extra
must be sold if a profit is to be earned, mass marketing is the companion
of mass manufacture. The essence of capitalism is not internal to capital
but operates through its links to human and natural resources.
My treatment of global
developments since the 1870s can be introduced by sketching developments
in my own understanding. In writing Australia’s Media Monopolies, I proposed two reasons for taking
advertising as the key link between capitalism and the mass media. First,
advertising stimulates the demand for commodities. Secondly, advertisers
package audiences to sell to retailers. In attempting to revise Australia’s
Media Monopolies, I recognised that the mass media were only a
delivery system for one element within the sales effort. Far from
advertising’s being the key link, it is only ‘a tiny, tiny part of
I came to see mass marketing as a matrix connecting production with
consumption through retail credit (hire purchase and cards), merchandising
(department and chain stores), and the movement of goods (air freight) or
of consumers (drive-ins).
To chart these circuits,
I attached my analysis to one of the products being promoted: Coca-Cola.
The Company and its beverages offer gilded threads through the labyrinth
of marketing, monopolising and management. The Coca-Cola Company is not a
template for every corporation. No such ideal type can exist. Coca-Cola
becomes typical whenever its opportunities and obstacles overlap with
those of all other businesses. That is why to know only Coca-Cola is not
to know even Coca-Cola; and why my investigations tracked across a variety
of firms. Many of the comparisons are with other mass marketeers,
including Gillette, McDonald’s, Proctor & Gamble, Rowntrees and
Sears. Reference is also made to heavier manufacturers, General Electric,
General Motors and Standard Oil; to financiers such as the House of
Morgan; and to knowledge managers, IBM and Microsoft. The context helps us
to distinguish the forces that impinge on all firms from the practices
peculiar to Coca-Cola.
Although each chapter
will traverse one feature of capitalism, the world of getting and spending
is never as neat as a contents page. Some topics must reappear,
franchising, for instance, is the subject of chapter five but returns in
the chapter on monopoly competition.
One deals with the organisation of capital, connecting the
nation-market-state and the
invention of the corporation with the geographical extension of trade. It
reviews the training of managers and their relationship to owners.
second part sets out the workings of capital by taking up the
management of investment by financiers and accountants. Franchising is
examined as a device to fund expansion by garnering other people’s
Three looks at the means by which oligopolisation has become
the norm, beginning with the swell of monopolisers in the late nineteenth
century and moving to the recent tidal wave of mergers and acquisitions.
We see why anti-trust actions have done little more than streamline this
concentration. Because competition has been intensified, not eliminated,
the phrase ‘monopolising capitals’ is preferred when describing this
dominance of oligopolies. (Should the book be called ‘The essence of
monopolising capitals’?) The nature of competition within a system of
oligopolised industries is explored through price discrimination, price
fixing and price cutting.
fourth part surveys mass marketing and
asks what is a market? and when did it become
dominant? The ability of firms to manage demand as well as supply explains
why capital can use marketing to absorb overproduction. To that end,
advertisements debase information, thereby undermining consumer
sovereignty. Advertising is the best known yet least effective element in
the sales effort. Its achievement is not selling one brand over another
but in stimulating total demand by encouraging debt. Attention is drawn to
how brands contribute to oligopoly power. Monopolising is monitored around
the planet by weaving overseas sales and investments by US firms into the
rise of the USA as a global power. By responding to changes in both
production and selling through the pursuit of worldwide niches,
globalisation is adding enzymes to a process until recently called
Five is the crux of the book because the reproduction and
control of the workforce is the pre-requisite for capital’s expansion.
An experience of the steel-master Andrew Carnegie has lasting and
universal significance. In 1856, the 21-year old Carnegie was amazed by
his earliest dividend cheque
which, as he reminisced, was ‘the
first penny of revenue … that I had not worked for with the sweat
of my brow’.
Not for the last time, other
workers had done that for him, as they still do
for all shareholders. For that to happen, the workforce must be organised
for production and disorganised for struggle. The relatively low labour
costs at Coca-Cola have not exempted The Company from union-busting,
whether in Georgia or Guatemala. Because capital must go faster or falter,
every aspect of life is accelerating. The obsession with time derives from
the purchase of labour power for a given period during which managers must
maximise returns on the price paid in wages and conditions.
final part joins the debate over what constitutes human nature.
An investigation into human needs sidelines explanations in terms of
physiological or social drives in favour of capital-induced ones. The ways
in which capital alters needs are explored through how corporations shape
our taste in fluids, and by showing how sweeteners have come to occupy
their place in Western diets. The book closes with reflections on the
prospects for nature under the rule of capital. The genetic manipulation
by corporations such as Monsanto is pondered to see whether what Polanyi
called ‘the juggernaut, development’ can be turned.
Asked why the great
transformation has turned everyday life inside out, common sense voices
two cliches. The first reaches back to original sin to lament greed and
laziness as no more than one can expect from human nature with its selfish
gene. The second conventional wisdom puts the responsibility on to
technology as a perpetual motion machine, largely beyond human control.
The answers offered below treat human nature and technologies as supports
for the prime mover of capital accumulation. That explanation leads into
economics, from which experts have scared the public away by jargon and
algebra. Descriptive economics lets us understand how we got where are
now, where the capitalist system is headed, and what we can do to redress
its social inequalities and environmental plunder. Without an
understanding of capitalism’s dynamic, reform projects must misfire.
This book is not a manifesto of what should be done. Rather, it is a
reminder of what we are up against. Thus equipped, our effort to avert
catastrophe will become even more productive.
 A. K. Cairncross, ‘Economic Schizophrenia’, Scottish Journal of Political Economy, 5 (1), February 1958, p. 17.
 J. B. Priestley, Journey Down a Rainbow, Heinemann-Cresset, London, 1955, p. 51.
 Spalding to RWW, MS10/259/11.
 New York Review of Books, 14 January 1999, p. 40.
 Karl Marx, Capital, I, Foreign Language Publishing House, Moscow, 1958, pp. 152-3.
 Management Today, March 1993, p. 56.
 Karl Polanyi, The Great Transformation, Beacon, Boston, 1957 edition, p. 57.
 Beverage World, July 1999, p. 62.
 Quoted Harvey C. Livesay, Andrew Carnegie, Little, Brown, London, 1975, p. 46.