Capitalism is defined by its classical economists in the intellectual heritage of Adam Smith. For Adam Smith, the individual agents of production and trade are organized by the invisible hand of the market. Goods and services are distributed according to supply and demand, and the market distributes its resources at the highest possible benefit and lowest possible cost. This leads to specialization and ultimately efficiency, which functions as the ultimate end of capitalism. The essential moral logic of capitalism is that market efficiency is an effective proxy and metric for the platonic Good.
Marx’s focuses especially on the relationships of labor. For Marx, capitalism is marked by a bourgeoisie class who own the means of production (capital, factories, land, resources, finance) and a proletariat class employed as labor. In economic terms, laborers are paid at their marginal product, while their surplus is extracted as profit by the firm (the capitalists, the bourgeoisie).
Profits can be pocketed or invested by firm shareholders. The perpetual investment of profits leads to an accumulation of capital, which leads to more profits, creating exponential growth. According to economic theory, this positive feedback should stop when the cost of owning existing capital equals the profits from acquiring new capital. However, this boundary is continuously pushed out by advances in technology. Marx points out that investments in capital and growth necessarily come at the cost of worker wages and welfare.
According to an economic model called the Kuznets curve, both inequality and environmental quality are improved by economic growth. Consumer preferences for environmental quality are correlated with higher incomes, and economic wealth enables the luxury of funding environmental restoration. Sachs pointed out that this is an illusion, however, premised on an exercise of neocolonial ecological power. Pollutive and extractive industries have been outsourced from the world’s wealthy nations and centralized in the global South. The resource footprint per capita in the wealthy nations rises with the GDP, and the attending environmental damage is invisible in these countries because although it occurs, it occurs elsewhere.
In theory, capitalism allocates a smaller role for government than any system before it. This empowers businesses. Banks are a notable example.
Although it is true that businesses are very empowered today, the smallness of government is a myth. Lang points out over and over that neoliberal capitalism is only possible under very particular exercises of state power. The freedom from government intervention guaranteed in a neoliberal state is secured only for the consumer and the producer, and the resulting economic activity in turn supports and reinforces the power of the state. This is telling because it reminds us that we cannot understand capitalism on its own theoretical terms. Its implementation not only deviates from classical economics but is constituted in a complex world where any social system seems to necessarily violate and erase others. Marx would argue that the imperial nature of neoliberalism is intrinsic to capitalism.
“Globalists assign to ‘The Market’ a ‘comprehensive wisdom that only the gods have known…. It has risen above the demigods and chthonic spirits to become today’s First Cause.’ Of course, the divine attributes of ‘The Market’ are not always completely evident to mortals but must be trusted and affirmed by neoliberal faith.” – Steger
Adam Smith’s economic theory arose during the Enlightenment, and like many modern texts, reproduced Church theology in secular terms. The invisible hand of the market is, of course, God’s. It apportions wealth according to virtue: the lazy are punished and the meritorious and hard-working are rewarded. And so because capitalism was the only system to manifest God’s justice, it had to be shared with the world. Informing our own time, the discourses and institutions of neoliberalism function in the same way as the discourses and institutions of Manifest Destiny. Colonialism and neocolonialism share the same divine mandate.