The horizon is not so far as we can see, but as far as we can imagine

Problems of Capitalism: Power Accumulation

Capitalism has a lot of problems, a lot of ways it can go wrong. But power accumulation is baked in. Capitalism is the centralization of capital in a few private hands. This is justified in the ideological literature (mostly economics), because it allows for scale, and thus economies of scale, and allows for development. If capital doesn’t accumulate in a few hands it is hard to build factories, huge mines, and so on. (This is the theory, there are obviously other ways to do large scale tasks.)

Now, power accumulation is a problem in all systems. You need some to get things done, but doing too much always leads to dysfunction.

In capitalism, money controls capital (labor, land, resources, etc.). That’s what makes it different from communism, feudalism, despotism, or centralized monarchy. This is so true that the pre-conditions for capitalism include being able to buy labor and land and resources with money. This is because in, say, feudalism, you can’t — in feudalism, people mostly aren’t for hire, land is controlled by nobility and clergy, and free farmers who don’t (and in many cases can’t) sell much.

Money, in a capitalist system, is power. Power is the ability to decide what other people do. At the lowest level, this is known as demand. If you buy a chicken, it sends a signal to someone to keep producing chickens. If more chickens are bought, it says “breed more chickens.” If you’re an ordinary individual, you have this power only in aggregate.

The more money you have, the more demand you control, but you also gain the ability to not just signal; you can rent people to work for you, and they’ll do what you say.

At a certain point, you gain political power because you can hire people to influence politicians, or give them things they want, or help them get elected, and pretty soon they tend to do what you want.

The problem is that capitalism is a money accumulation system. Unless the tendency is carefully checked, money flows to the top, and so does power. Whatever secondary system is in control, be it representational democracy or the CCP, they stop making decisions based on democratic or party principles and start making them based on money.

But capitalism, to the extent it works, works because of good price signaling and semi-competitive markets. For markets to deliver, no one must have market power except a government which is acting out of motives other than profit motives.

Competitive markets are dynamic: it’s hard to keep your money over the long term, let alone for you children and grandchildren, who did nothing to deserve it, to keep it.

So capitalists on winning want to change the rules so that markets aren’t competitive.

They also want to expand capitalism into areas it should not control: roughly anything that is a natural monopoly (all of which should be run by government) or a fundamental welfare service (health, education, etc…) or which runs better when vastly dispersed.

So capitalism becomes a cancer: not only does it grow further than it should, it destroys the proper functioning of markets and of anything else it takes over which should never be part of capitalism.

The further effect is a fairly simple mechanical one: the more money is concentrated, the weaker is demand for non-luxury, non-investment goods. Back in the 2010s people were crowing about how low inflation was, but it wasn’t: the price of arts, collectibles, yachts, real-estate and so on soared: all the things rich people want. This causes general demand collapses which lead to recessions and eventually depressions.

They also distort price signals so that what the majority of the population wants and needs is under-produced and what the elites want are over-produced.

So the general rule for capitalism is that the rich have to be kept poor, which is a specific instance of the general rule across all society types that the powerful must be kept weak if the people are to prosper.

JFK was the first post-war break: he dropped high marginal tax rates significantly. Estate, income and capital gains taxes all need to be quite high on those with the most.

As for oganizations, the corporate socialists are more or less correct. We organized control in the wrong ways: large businesses must be controlled either by their employees or by their customers, or perhaps both, with the community  also having some control and a veto over destructive actions. Small business are fine in the control of a single person, large ones are not. We’ve proved that over and over again.

Every good thing about capitalism is based on keeping markets relatively competitive and keeping capitalism out of the parts of the economy it shouldn’t control (about 60% of it.) And doing that means keeping the rich poor and weak.

Folks, it’s your donations and subscriptions which make it possible for me to keep writing (since I need to eat and pay rent and the cost of both have skyrocketed) so please (if you aren’t struggling) DONATE or SUBSCRIBE.


The Essential Political Skill For Ordinary People


The Supreme Stupidity of the “End of History” And Its Consequences


  1. fair game

    You need to much more clearly define the word “rich” and who exactly falls into that camp – and who are fellow travelers, etc.

    Chris Hedges will speak disparagingly about the aristocracy that RFK Jr comes from. But Hedges himself lives in beautiful Princeton, NJ. He is richer than most people on earth.

    When the revolution comes, is Chris Hedges fair game?

    While many of your readers, Ian, are in fact economically “poor” and left behind, many are not.

    Where is the line?

  2. Willy

    I like the idea of capitalism as a cancer. Or as a virus. Most human things are self-limiting but greed doesn’t have internal limits. Greedy people don’t know when to quit. Something external has to keep greed from consuming others and eventually itself.

    Sure, competition works, for a while. We keep our power-crazed alphas focused on overcoming each other instead of with conquering nations. But did Uncle Milton have a plan for after all the competition had been eliminated?

    Maybe “rich” should be defined by what was generally considered to be rich during those periods when general mass approvals for national (in developed nations) politicians and institutions were at their peak. Honest peak approval and not the Dear Leader kind. That might at least be a reasonable starting point for coming up with some kind of formula.

  3. Purple Library Guy

    @fair game I think the answer to your question was fairly clearly given in the original post–if not quite in so many words, at any rate the issues were stated in such a way that the inference is really obvious.
    Mr. Welsh was talking about capitalism and capital, about ability to hire people’s labour (including that of lobbyists with which to influence the political system). If you don’t and can’t do that, you’re not who he’s talking about. So, if you have an upper middle class job and can live in a pleasant neighborhood in a nice house, you are still selling your labour to the people in control of society. The issue here is not a moral, ascetic one where people who live well are bad; it is a structural one about how society is set up.

  4. GlassHammer

    “Capitalism is the centralization of capital in a few private hands. This is justified in the ideological literature (mostly economics), because it allows for scale”

    When I was taught ECON “surplus creation” was the justification for the entire system because of the benefits of having a “surplus” provides. Scale via capital accumulation was just the means to achieving that goal. Prior to this system consistent surplus creation wasn’t very achieveable and expanding surplus creation even less so.

    So if you upturn this system you will get less scale and capital accumulation but… you are going to lose much of the surplus. If you want to see that in action just look at countries where the surplus barely goes to.

  5. Purple Library Guy

    One amusing thing about the whole “economies of scale” justification is that it entirely contradicts the “efficient markets” justification. The basic neoclassical “efficient markets” model assumes, and requires in order for the math to work, an infinite number of small firms, kept that way by the existence of DIMINISHING returns to scale. That is, it says every unit made by a firm costs MORE than the previous one, so if one firm makes too much stuff their output gets too expensive and so a smaller firm or firms will come along and outcompete them. Yes, it’s utterly absurd–and it’s just one of the absurd things you have to believe before breakfast in order to pretend efficient markets could work.

    I’d also like to note that although our current big fear is concentrated monopoly power, capitalist competition has its problems too. Competing capitalists try to–almost have to–make money by squeezing wages and exploiting externalities. So you get things like sweatshops, environmental destruction, climate change, people blown up in coal mines, all that.

  6. VietnamVet

    For the first 55 million years, primates were solar powered. Deriving energy from eating other living things that used photosynthesis to store the sun’s energy. Mostly humans are secondary tier consumers eating fruits and plants but became an apex predator when it learned to run, hunt and use tools to butcher meat. About 12,000 years ago mankind learned to grow and harvest plants and animal husbandry.

    Civilizations rose and fell until in England found a new source of energy, coal, a fossil fuel, which it developed. It is not a coincidence that this is when capital accumulated and industries were built. WWII was fought over petroleum. The West conquered the world. In the 1990s, the Russian worker’s “paradise” was overthrown by the state managers to satisfy their greed and became wealthy too like the western private-jet set.

    Western Capitalism has ended with the rise of BRICS and its merger with Persian Gulf oil producers. The question is if the once world ruling North Americans will be satisfied with 25% of the global fossil fuel energy supply. The astonishing increase in propaganda, lies, entropy, and pollution make the current new oligarchical world unsustainable. For example, the coronavirus pandemic was declared ended last year everywhere including China even though the virus is still endemic and evolving variants. 2024 will be the last national election in the USA unless there is a new Reformation. An Armistice needs signed to end WWIII and a DMZ built between NATO and Russia.

    The only chance for peace is the return to the rule of law, sovereign nations, democracy, public education, and equality. Basically, a future of renewable electrical rail transportation, sustainable industry, and family farms — a no growth human population — the rebirth of the Great Society.

  7. StewartM

    Fair game

    Where is the line?

    How about the point where one is rich enough to distort the democratic process? I once posted that the starting point for the 1 % is a net worth of $11 million dollars. If all that net worth was liquid, $11 million would generate up to $440,000 a year which by any standard is a very comfortable, though not ‘lavish’ lifestyle.

    By contrast, just a few hundred people own more wealth than half of Americans. These people are rich enough to not only buy politicians and distort democracy, but rich enough to commit crimes and (probably) if not too open and egregious escape the consequences. If the wealth of these were limited to, say, even a few tens of millions, they could live comfortably easily off the returns and never exhaust the principle, and yet leave more ‘stuff’ for others who are in genuine need to have.

    And please, don’t talk about incentives. People who do this always talk about how we must punish (‘discipline’) the poor and labor while we have to ‘reward’ the capitalist class. Well, if punishment works so well, why not punish the capitalist class to work harder? If rewards work so well, why not reward the poors? Anyone who is familiar with the notion of ‘diminishing marginal returns’ from Econ 101 should know it’s the starving person who will put forth more effort a meal than the one who is fat and stuffed.

    Ergo, we should have the greatest rewards proportionately for those at the bottom rungs, which taper off as one climbs the ladder. Sports leagues understand this well, which is why they give the teams with the worst records the previous year the first choices in obtaining new young talent.

  8. StewartM


    Competing capitalists try to–almost have to–make money by squeezing wages and exploiting externalities.

    I don’t think of this as a problem of scale, but a problem of ownership/control. When the investor class (i.e., the capitalist class) are in charge, you’re right, that’s what they do. If the large firm is controlled by workers and/or customers (best maybe a combination of both) they would not want to maximize profit by cutting their own pay and trash their own homes, as this would cost them more to fix than the whatever they get from their owning/controlling the firm as small shareholders.

    So the root of this evil is a class of large investors (capitalists) who rely on income from investments far more than they do any other source. Even someone with investments but the bulk of their income comes from other sources (wages, SS, pension, etc) will not want to cut their own pay and trash their own neighborhood just to maximize a fraction of their income.

    I do admit, however, that trashing someone else’s neighborhood could be a problem (i.e., downstream air or water pollution). However even here I’d suspect that most ordinary people are not sociopaths to the same degree our capitalist leadership class are.

  9. anon y'mouse

    i doubt the human being “learned” to eat meat. in all likelihood, we are derived from mammals who had already been ominivores.

    this fantasy of “going back to no meat” ends as soon as you end up in the hospital with significant third degree burns, or any serious injury requiring rebuilding of structures.

    and yes, it pains me to say that. i was a vegetarian for nearly 30 years. but unable to properly obtain sufficient nutrition and now unable to stomach that many grains/beans (or carbs overall) in the diet.

    we’re also never going back to the nonexistent fantasy of the lion lying down with the lamb and being able to talk to the animals.

  10. Ian Welsh

    Vegetarianism (which allows eating eggs, butter, etc…) is far more viable than veganism. Veganism is possible for some periods with careful supplementation, but problematic when you need certain types of healing. I know what alternative doctor who won’t take patients with some problems if they won’t eat at least some meat, and he’s a Buddhist who is vegetarian. Likewise I know more than one person who had chronic health problems which were only solved by introducing some meat back into their diet (or fish.)

    It is worth pointing out that some populations have genetic changes that make vegetarianism a lot easier, in the same way that a lot of Europeans and certain Africans (like the Masai) have genes which make drinking milk healthy, though it’s harmful for those without.

    The case for vegetarianism and veganism is moral, based on how we treat the animals we eat. Even if we treated them well, a moral case for eating less meat is certainly viable: animals do have feelings and we are killing them and animals who know they are going to die show distress.

    In climate change less meat makes sense, no meat doesn’t, because there is a lot of land which is not suitable for agriculture but is suitable for pasturage, and which does well when pastured correctly.

  11. anon y'mouse

    “no meat” will never make sense for the human animal that needs long term health.

    your points about the distress of animals was why i ended meat eating upon returning from my relative’s cattle ranch at 13 (also, i had been raised partially with hindus in the extended family and learned to adapt to only chicken).

    we need to stop thinking we can give up what makes us physically healthy.

    i would have to eat nonstop beans, grains and probably still cheese and still be unhealthy (pre-diabetic) at this point in my life, as well as unable to eat enough to get sufficient protein (protein requirements as set by things like the USDA are for barely existing, and the doctors I listen to say the older and/or more sedentary one becomes, the more one’s needs for protein to activate and recharge the muscle and prevent complete atrophy is the equiv. of what many body builders consume). when i was younger and had the hormonal/biological advantage of not being technically “in decline” i could subsist on ovo-lacto vegetarianism and was “smart” about it, regardless my love of pastry, and still ended up with vitamin deficiencies.

    so we need to decide what we need to keep us healthy and try to do that as sustainably and humanely as possible. not enshrine fake beliefs that the human being can live without consuming other living beings. yeah, i don’t like it either. i had to have a really “come to Jesus” year with myself about it and the options were to perish slowly and miserably or try to live healthfully and just take the hit that I am responsible for killing things. since i outgrew suicidality a long while back, i opted for the latter. if other people want to make the other choice, let them. and yes, for some people of some lineages, or even just living in some other climates with other activity levels, they may be able to get away with more “meatless” living.

    in one particular nutrition book i read, the author pointed out that the only culture/civ that engaged in almost pure meatlessness over multiple generations has a tendency towards genetic and health issues, and that there were pretty much no absolutely meatless civilizations in ancient times. if i dig the book out again, i will track down the footnote.

    we need to cope with what we are and try to do that instead of trying to become something else, unless you want to place the human race into the hands of the genetic scientists. i do not expect my housecats to ever take up meatlessness (yes, i know we are not pure obligate predators, or other animals like the cute and cuddly penguin, any whale–krill are alive beings as well). in fact, our omnivorousness probably is one of the primary things leading to us being able to conquer the entire world, although penguins live in the Antarctic much more easily than we can.

    i know already all of the humane arguments. i made my choice to violate my own ethics to live as well as i can do for my remaining time. you (not you particularly, “you” the readers)may make a different choice, but don’t say you weren’t warned about the potential for negative health consequences.

    this is another reason i advocate people to choose childlessness and for our population to try to significantly lower itself non-coercively and with a non-eugenic, anti-genocidal or “race” inflected ideology. a million people eating wildlife is a lot easier to take than 8+ billion.

Powered by WordPress & Theme by Anders Norén