THE ESSENCE OF CAPITALISM
The origins of our future
by
Humphrey McQueen

Introduction

The origins of our future
At an owner-operated drug store in Atlanta in 1886, a soda-fountain proprietor sold the world’s first Coca-Cola by pouring syrup from a bottle before topping the glass up with soda water. Today, Coca-Cola concentrate is distributed worldwide to be consumed from billions of cans, bottles and cups made with materials unknown in the 1880s. When that first Coca-Cola was drunk, bread was often baked at home with ingredients purchased from a store-keeper who weighed flour into the newly invented paper bag. Our daily loaf is now sliced, packaged in plastic, and branded by one transnational corporation to be sold through supermarkets owned by another. Soap was cut from unmarked slabs. Now both sides of the shopping aisles are stacked with brand-name cleaning products, marketed by global giants such as Proctor & Gamble.

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 small factory’.[1]At the time, English novelist and social critic, J. B. Priestley, coined ‘Admass’ as his short-hand for:

the whole system of an increasing productivity, plus inflation, plus a rising standard of material living, plus high-pressure advertising and salesmanship, plus mass communications, plus cultural democracy and the creation of the mass mind, the mass man.[2]

The 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 capital.

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:

He is a believing Christian, knows that his soul will live on forever but there seems to stop. In his conversations it is apparent that he is much more interested in The Coca-Cola Company and the Trust Company of Georgia than in preparation for a future life.[3]

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:

If I allowed moral considerations to influence my investment decisions, it would render me an unsuccessful competitor. And it would not in any way influence the outcome because there would be someone else to take my place at only a marginally different price.[4]

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’.[5] Nestle chief, Helmut Maucher, underscored the point: ‘I am not against culture and ethics but we cannot live on that’.[6] 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.

The 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 Third.

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’.[7] 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 parlour games.

Polanyi’s great 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 with entertainment.

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 marketing’.[8] 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.

Part 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.

The 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 money.

Part 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.

The 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 imperialism.

Part 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’.[9] 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.

The 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.