Two Essays on Contemporary Capitalism

These essays were written as part of my final undergraduate examination on the module ‘Global Capitalism’ at Cambridge University. They scored 77%, a starred First.

In what ways can state regulation be considered fundamental to modern capitalism?

State regulation is fundamental to modern capitalism in three ways. First, the apparent attempts by neoliberals to shrink the size of the regulatory state is belied by the expansion of regulatory processes to facilitate privatisation and marketisation. Second, this process is coupled with an expansion of the carceral state, with police powers used to enforce property rights and discipline subjects excluded from market society, as well as the direct expropriation of value from unfree (disproportionately racialised) prison populations. Third, these two contemporary processes can be rooted further in the mutual constitution of state and markets as an essential feature of capitalist social relations tout court. Before we examine these, however, we should first note the conventional assumption of the opposition between state regulatory-coercive power and the market, noting the historical shifts in the relations between these two putatively external entities culminating in neoliberalism.

Central to the conventional understanding of capitalism is that it is, largely, a system of laissez-faire organisation: markets, and the private capitals that compete within them, constitute a process of free exchange, which can be counterposed to government intervention and regulation. Classical liberals often restricted the role of the state to a ‘nightwatchman’, its coercive powers existing to enforce contracts, settle disputes, and maintain law and order. In the post-war period, the laissez-faire regime of the 19th century, defined by next to no government regulation and state provision, was displaced by substantive welfare states, high tax rates, and stringent environmental and labour regulation, alongside an increase in the power of labour as a countervailing force through corporatist bargaining. With the collapse of Keynesianism in the fiscal crisis of the 1970s, this was displaced by a new market-state relation — neoliberalism — whose key tenets are privatisation, ‘deregulation’, low-tax rates, and so on. Thus, while capitalism can be considered broadly a system of economic self-organisation as spontaneous competitive exchange, different historical regimes bring with them recalibrations of the state-market relation, with the state becoming more or less interventionist or regulatory, so to speak. In any case, the basic antinomy — state as coercive, regulatory; markets as free, spontaneous — remains; it is only the balance that shifts.

My proposition is that this antinomy mistakes how state regulation is in fact fundamental to modern capitalism, in three senses. First, despite the ideological position, easily encapsulated in Friedman’s ‘markets good, states bad,’ neoliberalism has in fact coincided with a vast increase in regulatory and administrative bodies. Levi-Faur argues, following Power, that this has metastasized into a polycentric ‘audit society’, in which regulation occurs not only through the state, but also private enterprises and NGOs themselves in various forms of auditing and self-regulation. Privatisations prove an interesting case in point: what is assumed to shrink the size of the regulatory state actually has an opposite effect, since previously internal relations between actors become externalised in a complex web of contractual relations. Here, discrete private enterprises compete for state contracts, a tendering process which itself needs regulatory oversight and legal enforcement, with the winner then needing regulating as a ‘public good’ or ‘natural monopoly’, the private-interest being (nominally) wrapped back into the public through regulatory oversight. Tombs thus argues that neoliberalism should not be considered a process of deregulation but re-regulation. Letting the market loose — like, for instance, permitting stock-buybacks — actually requires making new regulations, as Reagan did in 1982 with rule 10b-18. Marketisation — where public services are not privatised but restructured according to mechanisms approximating competitive price-systems, as in the NHS and educational system in Britain — proves another useful case. Animated by a particular understanding of efficiency derived from the ‘government failure’ approach, in which subjecting public bureaucracies to market-like incentives will solve epistemic deficiencies and principal-agent problems, such processes end up smothering the actors in thickets of regulatory procedures. As such, while neoliberalism wields an ideological self-understanding as liberating market agents from state intervention, ‘actually existing neoliberalism’ (Cahill) in fact requires the expansion of state power so as to facilitate accumulation in previously non-market spheres (privatisation), and to generate and discipline ‘entrepreneurial selves’ through the imposition of pseudo-market-logics in public services (marketisation).

The second reason why state regulation is fundamental to modern capitalism is in the role of police or coercive power in constituting and protecting market processes. Historically, police in Britain were necessary to discipline the new urban workforce, violently shunted from common land. Without direct access to subsistence, and without stable employment, people were then vulnerable to a form of deprivation previously not experienced, which led to various forms of ‘criminal’ activity. Contemporarily, Harcourt notes how neoliberalism — once again, supposedly an order of the small state — has coincided with a remarkable increase in the US prison population. While this is, at least in meso terms, the result of numerous policy decisions (three strike rule, war on drugs, etc), it is also a complement to a system of wide inequality, poverty, and social dislocation. Indeed, the privatisation of the US prison system is also directly related to this: the incentives in place with for-profit bodies thus align with (and encourage) an expansion of the carceral state. And further, huge amounts of value are to this day expropriated from the (disproportionately non-white) prison population in a form of de-facto slavery. As Cahill argues, this is paralleled by a strengthening of coercive power against unions, codified in Thatcher’s anti-trade union legislation and present in the notorious episodes of strike breaking on both sides of the Atlantic in the final years of the post-war settlement. Thus, the state regulates market processes by subduing explicit (unions and strike activity) and implicit challenges (the ‘vagabonds’; the poor excluded from the social contract) to the market-order, enforcing the contingent regime of capitalist social relations; while the penal system in general is also a powerful source of value for capital in privatisation and unfree inmate labour.

Finally, these two processes — state regulation as facilitating privatisation and marketisation, and state regulation as coercive protection of market-society and expropriation of unfree labour — are embedded in the more general fact that capitalist social relations are constituted by state regulatory power. In the first case, one of Marx’s core impulses in his critique of political economy was to denaturalise the capitalist means of production, refusing the assumption of bourgeois economists that capitalism was a natural outgrowth of barter. Instead, his account of primitive accumulation in Capital detailed the violent prerequisites of wage-labour — as one of the central institutional pillars of capitalism — in the expropriation of the direct producer through state enclosures. In the second case, the state serves to underpin all corporate and market entities through the enforcement of private property rights; coercion therefore constitutes these putatively natural market entities. With institutionalist economics, the ‘bounded-rationality’ of human agents means that all forms of complex human behaviour — especially the sprawling markets of contemporary capitalism, unburdened by the limits of space-time — rely upon ‘rigid behavioural rules which allow and encourage them to ignore certain possible courses of action’, with such rules concretised in institutional and regulatory forms (Chang). This can further be seen with Polanyi. The Great Transformation is often read as giving support to the antinomy between markets and states, arguing that the growth of capitalism is one of ‘disembedding’ economic activity from its social base, commodification expanding inexorably. But Fred Block argues there is another Polanyi, present in his ‘The Economy as Instituted Process’, that views ‘embeddedness as a methodological principle’ (Gemici), with the economy always ‘enmeshed in institutions, economic and noneconomic’ (Polanyi). In a similar way to Marx, the point here is that there is no single natural organising logic to the economy, which emerges independently of regulatory action; rather, economic forms are always constituted by institutional norms, codes, incentives, and prohibitions.

Thus, state regulation is not counterposed to modern capitalism, an external process intervening in it, but in fact is fundamental to, constitutive of, it. Neoliberalism, despite what it says of itself, is not a process of ‘disembedding’ markets from states, but in fact presupposes an extension of state power to impose the logic of the catalaxy on more and more spheres of social and economic life. Alongside this proliferation of regulation through privatisation and marketisation lies the carceral state, defending the market order and extracting value. More generally, capitalism depends on institutional and regulatory arrangements with enforce property rights and stipulate norms of action. If state regulation is constitutive of economic processes, then, the question is not how much or how little regulation, but of what kind; what kind of economic system do we wish to generate, normalise, and enforce, and to what ends and purposes.

Is society splitting “more and more into two great hostile camps” (Marx and Engels 1847–48), or are economic divides more complicated than that? How so?

For Marx and Engels, capitalism is fundamentally a class society bifurcated along the lines of the bourgeoisie — who own and live off capital — and the proletariat — who must sell their labour to capitalists to survive, with their conflictual interests only intensifying with the development of capitalism. With hindsight, we can see that class divides are more complicated than that. First, the expansion of this dichotomised class schema by Erik Olin Wright is able to factor in further ‘contradictory class locations’; second, the work of Weber allows us to see conflicts between other market locations; and third, certain configurations of class power relations may enable temporary alliances. Despite these qualifications, however, the fundamental divide that Marx and Engels theorised remains central, with such factors only elaborations.

To begin, Marx and Engels offered an account of capitalism as a society divided by class relations. Class here designates one’s relationship to the means of production, with the bourgeoisie defined by the ownership and control of capital, and the proletariat defined by their exclusion from it and attendant dependence on the wage-relation. Capital, as a process of expansionary circulation, presupposes such a class division: for the cycle of M-C-M to end in M’, it requires there to be a ‘commodity whose use-value possesses the peculiar property of being a source of value’, with this commodity being labour-power. Capital’s augmentation thus depends on the extraction of surplus-value from a class of dependent labourers, who are such because of the historical process of enclosures that cleaved peasants from the means of subsistence in common land. The interests of the proletariat and the bourgeoisie is moreover defined by what E.O. Wright calls the ‘inverse interdependent welfare’ principle: because labour-power is a cost for capitalists, and because the fundamental imperative of capital production is maximising profits, this therefore creates a structural tendency toward the reduction of costs, i.e., paying workers less, or increasing working hours, or decreasing working-conditions. For Marx, the development of capitalism was defined by an intensification of this tendency, such that the increasing immiseration of the working-class would prime them for revolution, the antagonism between the two camps sharpening. Before we move on to problematising this account, we should first note however that Marx himself did sometimes offer a more complicated picture. In The Eighteenth Brumaire of Louis Bonaparte (1852), for instance, Marx provided a conjunctural account of class fractions and intermediary class locations — with landowners, financiers, industrialists, the peasantry and the petty bourgeoisie — as possessing somewhat differential interests, linked to their specific and complex location with the economy. Here, then, while Marx no doubt maintained the centrality of the capital-labour class structure, and indeed the importance of relation to means of production specified therein, he did also understand that classes were not simple homogenous entities acting in rational unison, but rather were internally divided and often guided by non-rational impulses.

We can now move to problematising this account. First, Erik Olin Wright offered an expanded class typology that adds to the axis of relation to the means of production two further ones — relation to authority within production, and the possession of skills or expertise — that allows us to theorise ‘contradictory class locations.’ Consider the role of middle managers: here, agents possess ‘delegated class powers of domination’. Wright emphasises that the Marxian concept of class presupposes an account of domination as a necessary component of exploitation, with labour-power controlled by capital in the hierarchical production process of the ‘hidden abode.’ Middle-managers therefore exercise such domination over subordinates, while also being dominated by their superiors (executives, shareholders). Moreover, because of their important strategic position within the production process, they often lay claim to a greater share of the surplus, hence occupying a ‘privileged appropriation location.’ Consider now skilled workers: Wright argues that, because of the scarcity of skills enabled by qualification regimes, such workers are able to command more market-value for their labour, thus also occupying a ‘privileged appropriation location’ and laying claim to a greater share of surplus above costs of reproduction of labour-power. And indeed, the complexity of their skills also often allows them freedom from the kind of punitive surveillance and direct domination experience by unskilled labourers (think of Amazon warehouse employees), thus providing them with more autonomy. Skilled labour is also useful for considering historical changes: despite claims that we are ‘all middle-class now’, the contemporary labour market is defined by a bifurcation between skilled laborers and deskilled service workers, for instance in the gig-economy (Deliveroo, Uber). While technically workers, then, the interests of skilled labourers or middle-managers may be more in line with the bourgeoisie. Nonetheless, Wright concludes that these other positions are not repudiations of the Marxian capital-labour conflict, but precisely draw their specific character from it, with the two further relational axes connecting to questions over the distribution of surplus and exercise of domination already present in Marxian account.

Second, Max Weber’s account of class is also useful in problematising an overly simplistic account of class, highlighting not conflicts within production — as the Marxian account does — but conflicts between and over market positions. As Wright explicates, it focuses on how legal, economic, and cultural exclusion by superior classes can hoard opportunities and create a process of ‘social closure.’ Important in this respect is the divisions between the middle-class, ‘defined by mechanisms of exclusion over the acquisition of education and skills’, and the working-class, ‘defined by their exclusion from both higher educational credentials and capital.’ Thus, various forms of ‘accreditation and licensing’ through schooling create a legal barrier to access certain market positions, like skilled labourers, which thus provides those actors with a market advantage. Weber’s account therefore places greater emphasis on the kind of divisions between middle- and lower-classes, and the legal mechanisms through which the former advantages are maintained, than an account which only emphasises broad divisions between labour and capital. Nonetheless, insofar as it also considers private property relations an incredibly powerful form of ‘social closure’, which excludes workers and the wider community from control over productive assets, it can serve to compliment the initial Marxian emphasis, filling in the potential conflicts between skilled and unskilled labourers identified by Wright above.

Third, I want to consider how the antagonistic interests of labour and capital may be temporarily diffused depending on the balance of power in society, illuminating some of the shifts in class relations from the Fordist consensus to the neoliberal period. While capital does indeed have a structural imperative to maximise profits, and while this often does come at the expense of workers pay and conditions, it needn’t necessarily do so. One of the central tenets of the Marxian account is that class interests are complex and beset by internal contradictions. Capital at once seeks to maximise profits but also effectively reproduce labour-power and maintain loyalty and cooperation; and the proletariat wish to resist subordination and exploitation while also being materially tied to the capital unit they are employed by, thus dependent (in some sense) on its success and longevity. This enables a ‘potential terrain of compromise and consensus’ (Littler & Salaman), such that cooperation through trade-union structures or co-determination mechanisms might solicit greater productivity — with labour more willing to cooperate and capital moving to invest in technology rather than cut labour-costs — and thus increased profits. Indeed, the Fordist regime of intensive accumulation pivoted on the coupling between mass consumption, enabled by the wage-bargaining of strong trade-unions, and mass production through investments in technological productivity. But this was only a temporary alliance, itself the product of the class struggle triggered by the breakdown of the prior ‘laissez-faire’ regime, and broke down with the exhaustion of productive capacity and inflationary shock of the 1970s. Declining profits and decreasing power of the capitalist class against an increasing militant unionism therefore reignited class struggle, which was resolved from the right with the neoliberal offensive. With the rapid growth in inequality and proletarianization occurring afterward, the equalising tendencies of the Keynesian compromise now appear to be more of an aberration, the product of a very particular balance of forces impacted by WW2 and the threat of communism.

Beginning with Marx and Engels account of class divisions, I have problematised an overly dichotomised understanding by emphasising, a) Marx’s own complexification with class fractions, b) Wright’s expanded class typology, c) Webers’ opportunity-hoarding approach, and d) an account of potential class compromise as product of shifts in balance of forces. While a simple dichotomy is incorrect, such elaborations do not contradict the fundamental emphasis on the control of capital and extraction of surplus indicated by the Marxian account of class. Contradictory class locations are defined in relation to these; Weber’s emphasis on legal exclusions includes private property rights, while his emphasis on middle- and working-class conflicts is useful to fill in the dynamics of class fractions; and while countervailing forces may be able to institute some compromise by exploiting the internal contradictions of class interests, it remains that the antagonistic power and accumulation dynamics indicated by the Marxian account remain crucial in understanding dynamics of class conflict and change in productive relations through historical periods.



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Trey Taylor

Trey Taylor


22. BA Political Theory and Sociology, Cambridge University. Currently studying an MA in Philosophy and Contemporary Critical Theory at Kingston University.